Cover and table of contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________

FORM 10-Q

☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

OR

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-36609

NORTHERN TRUST CORPORATION

(Exact name of registrant as specified in its charter)

Delaware			36-2723087
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

50 South LaSalle Street						60603
Chicago,			Illinois			(Zip Code)
(Address of principal executive offices)

Registrant’s telephone number, including area code: (312) 630-6000

____________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class			Trading Symbol			Name of each exchange on which registered
Common Stock, $1.66 2/3 Par Value			NTRS			The NASDAQ Stock Market LLC
Depositary Shares, each representing 1/1,000th interest in a share of Series E Non-Cumulative Perpetual Preferred Stock			NTRSO			The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer			x			Accelerated filer			¨
Non-accelerated filer			¨			Smaller reporting company			☐
						Emerging growth company			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

At September 30, 2021, 207,661,247 shares of common stock, $1.66 2/3 par value, were outstanding.

NORTHERN TRUST CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021

TABLE OF CONTENTS

			Page
Consolidated Financial Highlights (unaudited)			1
Part I – Financial Information
Items 2 and 3: Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk			3
Item 1: Consolidated Financial Statements (unaudited)			35
Consolidated Balance Sheets			35
Consolidated Statements of Income			36
Consolidated Statements of Comprehensive Income			36
Consolidated Statements of Changes in Stockholders’ Equity			37
Consolidated Statements of Cash Flows			39
Notes to Consolidated Financial Statements			40
Item 4: Controls and Procedures			87
Part II – Other Information
Item 1: Legal Proceedings			88
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds			88
Item 6: Exhibits			88
Signatures			89

i

CONSOLIDATED FINANCIAL HIGHLIGHTS

(UNAUDITED)

			THREE MONTHS ENDED SEPTEMBER 30,									NINE MONTHS ENDED SEPTEMBER 30,
CONDENSED INCOME STATEMENTS ($ In Millions)			2021			2020			% CHANGE(1)			2021			2020			% CHANGE(1)
Noninterest Income			$	1,287.4		$	1,156.5		11		%	$	3,775.4		$	3,470.1		9		%
Net Interest Income			346.4			328.6			5			1,022.1			1,108.8			(8)
Total Revenue			1,633.8			1,485.1			10			4,797.5			4,578.9			5
Provision for Credit Losses			(13.0)			0.5			N/M			(70.0)			127.5			N/M
Noninterest Expense			1,128.7			1,094.7			3			3,367.0			3,197.2			5
Income before Income Taxes			518.1			389.9			33			1,500.5			1,254.2			20
Provision for Income Taxes			122.4			95.4			28			361.6			285.8			27
Net Income			$	395.7		$	294.5		34		%	$	1,138.9		$	968.4		18		%

PER COMMON SHARE
Net Income — Basic			$	1.81		$	1.32		37		%	$	5.24		$	4.35		21		%
— Diluted			1.80			1.32			37			5.22			4.34			20
Cash Dividends Declared Per Common Share			0.70			0.70			—			2.10			2.10			—
Book Value — End of Period (EOP)			53.04			51.38			3			53.04			51.38			3
Market Price — EOP			107.81			77.97			38			107.81			77.97			38

SELECTED BALANCE SHEET DATA ($ In Millions)			SEPTEMBER 30, 2021			DECEMBER 31, 2020			% CHANGE(1)
End of Period:
Total Assets			$	169,085.7		$	170,003.9		(1)		%
Earning Assets			155,897.4			158,531.6			(2)
Deposits			141,924.6			143,878.0			(1)
Stockholders’ Equity			11,898.8			11,688.3			2

			THREE MONTHS ENDED SEPTEMBER 30,									NINE MONTHS ENDED SEPTEMBER 30,
			2021			2020			% CHANGE(1)			2021			2020			% CHANGE(1)
Average Balances:
Total Assets			$	156,452.8		$	140,925.4		11		%	$	154,681.3		$	134,645.2		15		%
Earning Assets			143,953.4			129,368.0			11			142,201.1			121,748.2			17
Deposits			129,795.4			112,844.7			15			128,082.2			106,290.9			21
Stockholders’ Equity			11,852.9			11,402.9			4			11,648.2			11,078.3			5

CLIENT ASSETS ($ In Billions)			SEPTEMBER 30, 2021			DECEMBER 31, 2020			% CHANGE(1)
Assets Under Custody/Administration(2)			$	15,776.2		$	14,532.5		9		%
Assets Under Custody			12,246.5			11,262.8			9
Assets Under Management			1,532.4			1,405.3			9

N/M - Not meaningful

(1) Percentage calculations are based on actual balances rather than the rounded amounts presented in the Consolidated Financial Highlights.

(2) For the purposes of disclosing Assets Under Custody/Administration, to the extent that both custody and administration services are provided, the value of the assets is included only once in this amount.

SELECTED RATIOS AND METRICS

			THREE MONTHS ENDED SEPTEMBER 30,						NINE MONTHS ENDED SEPTEMBER 30,
			2021			2020			2021			2020
Financial Ratios:
Return on Average Common Equity			13.7		%	10.5		%	13.7		%	12.0		%
Return on Average Assets			1.00			0.83			0.98			0.96
Dividend Payout Ratio			38.9			53.0			40.2			48.4
Net Interest Margin(1)			0.98			1.03			0.99			1.24

			SEPTEMBER 30, 2021						DECEMBER 31, 2020
			STANDARDIZED APPROACH			ADVANCED APPROACH			STANDARDIZED APPROACH			ADVANCED APPROACH			WELL-CAPITALIZED RATIOS			MINIMUM CAPITAL RATIOS
Capital Ratios:
Northern Trust Corporation
Common Equity Tier 1 Capital			11.9		%	13.0		%	12.8		%	13.4		%	N/A			4.5		%
Tier 1 Capital			12.9			14.1			13.9			14.5			6.0			6.0
Total Capital			14.3			15.4			15.6			15.9			10.0			8.0
Tier 1 Leverage			7.1			7.1			7.6			7.6			N/A			4.0
Supplementary Leverage			N/A			8.4			N/A			8.6			N/A			3.0
The Northern Trust Company
Common Equity Tier 1 Capital			12.5		%	13.8		%	13.0		%	13.8		%	6.5		%	4.5		%
Tier 1 Capital			12.5			13.8			13.0			13.8			8.0			6.0
Total Capital			13.7			14.9			14.5			15.0			10.0			8.0
Tier 1 Leverage			6.8			6.8			7.0			7.0			5.0			4.0
Supplementary Leverage			N/A			8.1			N/A			7.7			3.0			3.0

(1) Net interest margin is presented on a fully taxable equivalent (FTE) basis, a non-generally accepted accounting principle (GAAP) financial measure that facilitates the analysis of asset yields. The net interest margin on a GAAP basis and a reconciliation of net interest income on a GAAP basis to net interest income on an FTE basis are presented on page 32.

PART I – FINANCIAL INFORMATION

Items 2. and 3. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures about Market Risk

The following is management’s discussion and analysis of the financial condition and results of operations (MD&A) of Northern Trust Corporation (Corporation) for the third quarter of 2021. The following should be read in conjunction with the consolidated financial statements and related footnotes included in this report as well as the Annual Report on Form 10-K for the year ended December 31, 2020. Investors also should read the section entitled “Forward-Looking Statements.”

THIRD QUARTER CONSOLIDATED RESULTS OF OPERATIONS

General

The Corporation is a leading provider of wealth management, asset servicing, asset management and banking solutions to corporations, institutions, families and individuals. The Corporation focuses on managing and servicing client assets through its two client-focused reporting segments: Corporate & Institutional Services (C&IS) and Wealth Management. Asset management and related services are provided to C&IS and Wealth Management clients primarily by the Asset Management business. Except where the context requires otherwise, the terms “Northern Trust,” “we,” “us,” “our,” “its,” or similar terms mean the Corporation and its subsidiaries on a consolidated basis.

COVID-19 Pandemic

During the COVID-19 pandemic, Northern Trust has remained focused on the health and well-being of its workforce, meeting its clients’ needs and supporting its communities. The majority of Northern Trust’s workforce continues to work remotely and the Corporation continues to adjust its response to the pandemic as needed. The timing of any return to the office (RTO) will be driven by the operational, business, and client needs of each location, and will be guided by health and safety guidelines. Given the recent trend of the virus, a broader RTO that had been planned for the third quarter of 2021 has been delayed indefinitely.

During the pandemic, Northern Trust offered assistance to affected clients by lending under a government lending program and providing payment deferrals. In addition, there have been two forms of relief provided to lenders exempting certain loan modifications which would otherwise be classified as troubled debt restructuring from such classification. Northern Trust elected to apply each of these forms of relief, when applicable, in providing borrowers with qualifying loan modifications, including payment deferrals, in response to the COVID-19 pandemic. Both of these assistance measures have declined since the start of the pandemic. For further information, please refer to Note 6 — Loans and Leases to the consolidated financial statements provided in Item 1. Consolidated Financial Statements (unaudited).

Overview of Financial Results

Net Income per diluted common share increased in the current quarter to $1.80 from $1.32 in the third quarter of 2020. Net Income increased $101.2 million, or 34%, to $395.7 million in the current quarter from $294.5 million in the prior-year quarter. Annualized return on average common equity was 13.7% in the current quarter and 10.5% in the prior-year quarter. The annualized return on average assets was 1.00% in the current quarter as compared to 0.83% in the prior-year quarter.

Revenue increased $148.7 million, or 10%, to $1.63 billion in the current quarter from $1.49 billion in the prior-year quarter.

Trust, Investment and Other Servicing Fees increased $107.2 million, or 11%, from $1.00 billion in the prior-year quarter to $1.11 billion in the current quarter, primarily due to favorable markets, new business, and favorable currency translation, partially offset by higher money market mutual fund fee waivers.

Other Noninterest Income increased $23.7 million, or 16%, from $152.7 million in the prior-year quarter to $176.4 million in the current quarter, primarily reflecting higher Security Commissions and Trading Income and Other Operating Income.

Net Interest Income increased $17.8 million, or 5%, to $346.4 million in the current quarter as compared to $328.6 million in the prior-year quarter, primarily due to higher average earning assets, partially offset by a lower net interest margin.

There was a $13.0 million release of credit reserves in the current quarter, as compared to a provision of $0.5 million in the prior-year quarter. The current quarter release of credit reserves was primarily due to a decrease in the reserve evaluated on a collective basis, which relates to pooled financial assets sharing similar risk characteristics. The decrease in the collective basis reserve was driven by continued improvements in projected economic conditions and portfolio credit quality, partially offset by portfolio growth. Decreases in the collective basis reserve were primarily in the commercial and institutional and commercial real estate portfolios.

Noninterest Expense increased $34.0 million, or 3%, from $1.09 billion in the prior-year quarter to $1.13 billion in the current quarter, primarily attributable to higher Compensation, Outside Services, Equipment and Software expense, and Employee Benefits, offset by lower Other Operating Expense.

THIRD QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)

Overview of Financial Results (continued)

The Provision for Income Taxes in the current quarter totaled $122.4 million, representing an effective tax rate of 23.6%. The Provision for Income Taxes in the prior-year quarter totaled $95.4 million, representing an effective tax rate of 24.5%. The effective tax rate decreased compared to the prior-year quarter primarily due to an increase in allocated tax credits related to community development projects and a lower net tax impact from international operations.

Trust, Investment and Other Servicing Fees

Trust, Investment and Other Servicing Fees are based primarily on the market value of assets held in custody, managed or serviced; the volume of transactions; securities lending volume and spreads; and fees for other services rendered. Certain market value calculations on which fees are based are performed on a monthly or quarterly basis in arrears. Low-interest-rate environments have historically had a negative impact on fees earned on certain products. Beginning in the second quarter of 2020, the Corporation began to waive a portion of certain fees associated with money market mutual funds due to the low-interest-rate environment. Northern Trust voluntarily waived $76.7 million and $5.4 million of money market mutual fund fees for the three months ended September 30, 2021 and 2020, respectively. These fee waivers, which are impacted by the level of yields earned and account balances in certain funds, are expected to continue in the current low-interest-rate environment as the yields in these funds remain insufficient to pay the stated fees associated with such funds. This is expected to adversely impact Trust, Investment and Other Servicing Fees within the C&IS and Wealth Management reporting segments.

The components of Trust, Investment and Other Servicing Fees are provided below.

TABLE 1: TRUST, INVESTMENT AND OTHER SERVICING FEES

			THREE MONTHS ENDED SEPTEMBER 30,
($ In Millions)			2021			2020			CHANGE
C&IS Trust, Investment and Other Servicing Fees
Custody and Fund Administration			$	460.2		$	395.0		$	65.2		17		%
Investment Management			113.6			136.8			(23.2)			(17)
Securities Lending			20.2			19.7			0.5			2
Other			36.2			33.4			2.8			8
Total C&IS Trust, Investment and Other Servicing Fees			$	630.2		$	584.9		$	45.3		8		%
Wealth Management Trust, Investment and Other Servicing Fees
Central			$	178.8		$	151.1		$	27.7		18		%
East			130.2			110.9			19.3			17
West			97.0			84.7			12.3			15
Global Family Office			74.8			72.2			2.6			4
Total Wealth Management Trust, Investment and Other Servicing Fees			$	480.8		$	418.9		$	61.9		15		%
Total Consolidated Trust, Investment and Other Servicing Fees			$	1,111.0		$	1,003.8		$	107.2		11		%

Corporate & Institutional Services

Custody and Fund Administration fees, the largest component of C&IS fees, are driven primarily by values of client assets under custody/administration (AUC/A), transaction volumes and the number of accounts. The asset values used to calculate these fees vary depending on the individual fee arrangements negotiated with each client. Custody fees related to asset values are client-specific and are priced based on month-end market values, quarter-end market values, or the average of month-end market values for the quarter. The fund administration fees that are asset-value-related are priced using month-end, quarter-end, or average daily balances. Investment Management fees are based generally on market values of client assets under management throughout the period. Typically, the asset values used to calculate fee revenue are based on a one-month or one-quarter lag.

Custody and Fund Administration fees increased from the prior-year quarter, primarily due to favorable markets and new business. Investment Management fees decreased from the prior-year quarter, primarily due to higher money market mutual fund fee waivers, partially offset by favorable markets and new business.

Wealth Management

Wealth Management fee income is calculated primarily based on market values and is impacted by both one-month and one-quarter lagged asset values. Fee income in the regions (Central, East and West) increased from the prior-year quarter, primarily due to favorable markets and new business, partially offset by higher money market mutual fund fee waivers. Global Family Office fee income increased from the prior-year quarter, primarily due to favorable markets and new business, partially offset by higher money market mutual fund fee waivers.

THIRD QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)

Trust, Investment and Other Servicing Fees (continued)

Market Indices

The following tables present selected market indices and the percentage changes year over year to provide context regarding equity and fixed income market impacts on the Corporation’s results.

TABLE 2: EQUITY MARKET INDICES

			DAILY AVERAGES									PERIOD-END
			THREE MONTHS ENDED SEPTEMBER 30,									AS OF SEPTEMBER 30,
			2021			2020			CHANGE			2021			2020			CHANGE
S&P 500			4,420			3,316			33		%	4,308			3,363			28		%
MSCI EAFE (U.S. dollars)			2,337			1,871			25			2,281			1,855			23
MSCI EAFE (local currency)			1,326			1,068			24			1,315			1,057			24

TABLE 3: FIXED INCOME MARKET INDICES

			AS OF SEPTEMBER 30,
			2021			2020			CHANGE
Barclays Capital U.S. Aggregate Bond Index			2,355			2,376			(1)		%
Barclays Capital Global Aggregate Bond Index			536			541			(1)

Client Assets

As noted above, AUC/A and assets under management are two of the primary drivers of our Trust, Investment and Other Servicing Fees. For the purposes of disclosing AUC/A, to the extent that both custody and administration services are provided, the value of the assets is included only once in this amount. The following table presents AUC/A by reporting segment.

TABLE 4: ASSETS UNDER CUSTODY / ADMINISTRATION BY REPORTING SEGMENT

			SEPTEMBER 30, 2021			JUNE 30, 2021			SEPTEMBER 30, 2020			CHANGE Q3-21/Q2-21			CHANGE Q3-21/Q3-20
($ In Billions)
Corporate & Institutional Services			$	14,800.2		$	14,754.1		$	12,263.2		—		%	21		%
Wealth Management			976.0			973.0			814.4			—			20
Total Assets Under Custody / Administration			$	15,776.2		$	15,727.1		$	13,077.6		—		%	21		%

The following table presents Northern Trust’s assets under custody, a component of AUC/A, by reporting segment.

TABLE 5: ASSETS UNDER CUSTODY BY REPORTING SEGMENT

			SEPTEMBER 30, 2021			JUNE 30, 2021			SEPTEMBER 30, 2020			CHANGE Q3-21/Q2-21			CHANGE Q3-21/Q3-20
($ In Billions)
Corporate & Institutional Services			$	11,283.6		$	11,260.8		$	9,312.2		—		%	21		%
Wealth Management			962.9			967.8			810.4			—			19
Total Assets Under Custody			$	12,246.5		$	12,228.6		$	10,122.6		—		%	21		%

Consolidated assets under custody increased from the prior quarter, primarily reflecting the impact of net inflows and favorable markets, partially offset by unfavorable currency translation. Consolidated assets under custody increased compared to the prior-year quarter, primarily reflecting the impact of favorable markets, net inflows and favorable currency translation.

The following table presents the allocation of Northern Trust’s custodied assets by reporting segment.

TABLE 6: ALLOCATION OF ASSETS UNDER CUSTODY

			SEPTEMBER 30, 2021									JUNE 30, 2021									SEPTEMBER 30, 2020
			C&IS			WM			TOTAL			C&IS			WM			TOTAL			C&IS			WM			TOTAL
Equities			47		%	62		%	48		%	47		%	64		%	48		%	44		%	60		%	44		%
Fixed Income Securities			35			14			33			35			14			33			37			16			36
Cash and Other Assets			16			24			17			16			22			17			17			24			18
Securities Lending Collateral			2			—			2			2			—			2			2			—			2

The following table presents Northern Trust’s assets under custody by investment type.

THIRD QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)

Trust, Investment and Other Servicing Fees (continued)

TABLE 7: ASSETS UNDER CUSTODY BY INVESTMENT TYPE

($ In Billions)			SEPTEMBER 30, 2021			JUNE 30, 2021			SEPTEMBER 30, 2020			CHANGE Q3-21/Q2-21			CHANGE Q3-21/Q3-20
Equities			$	5,899.5		$	5,951.0		$	4,532.2		(1)		%	30		%
Fixed Income Securities			4,046.5			4,029.6			3,614.6			—			12
Cash and Other Assets			2,092.4			2,048.7			1,802.9			2			16
Securities Lending Collateral			208.1			199.3			172.9			4			20
Total Assets Under Custody			$	12,246.5		$	12,228.6		$	10,122.6		—		%	21		%

The following table presents Northern Trust’s assets under management by reporting segment.

TABLE 8: ASSETS UNDER MANAGEMENT BY REPORTING SEGMENT

			SEPTEMBER 30, 2021			JUNE 30, 2021			SEPTEMBER 30, 2020			CHANGE Q3-21/Q2-21			CHANGE Q3-21/Q3-20
($ In Billions)
Corporate & Institutional Services			$	1,159.5		$	1,168.3		$	993.2		(1)		%	17		%
Wealth Management			372.9			371.1			318.5			—			17
Total Assets Under Management			$	1,532.4		$	1,539.4		$	1,311.7		—		%	17		%

Consolidated assets under management decreased compared to the prior quarter, primarily reflecting unfavorable markets and currency translation, partially offset by net inflows. Consolidated assets under management increased compared to the prior-year quarter, primarily reflecting favorable markets and net inflows.

The following table presents the allocation of Northern Trust’s assets under management by reporting segment.

TABLE 9: ALLOCATION OF ASSETS UNDER MANAGEMENT

			SEPTEMBER 30, 2021									JUNE 30, 2021									SEPTEMBER 30, 2020
			C&IS			WM			TOTAL			C&IS			WM			TOTAL			C&IS			WM			TOTAL
Equities			51		%	57		%	53		%	53		%	57		%	54		%	50		%	49		%	50		%
Fixed Income Securities			11			22			14			11			22			14			12			26			15
Cash and Other Assets			20			21			19			19			21			19			21			25			22
Securities Lending Collateral			18			—			14			17			—			13			17			—			13

The following table presents Northern Trust’s assets under management by investment type.

TABLE 10: ASSETS UNDER MANAGEMENT BY INVESTMENT TYPE

($ In Billions)			SEPTEMBER 30, 2021			JUNE 30, 2021			SEPTEMBER 30, 2020			CHANGE Q3-21/Q2-21			CHANGE Q3-21/Q3-20
Equities			$	806.4		$	827.8		$	648.8		(3)		%	24		%
Fixed Income Securities			210.6			214.9			201.6			(2)			4
Cash and Other Assets			307.3			297.4			288.4			3			7
Securities Lending Collateral			208.1			199.3			172.9			4			20
Total Assets Under Management			$	1,532.4		$	1,539.4		$	1,311.7		—		%	17		%

THIRD QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)

Trust, Investment and Other Servicing Fees (continued)

The following table presents activity in consolidated assets under management by product.

TABLE 11: ACTIVITY IN CONSOLIDATED ASSETS UNDER MANAGEMENT BY PRODUCT

						THREE MONTHS ENDED
($ In Billions)						SEPTEMBER 30, 2021			JUNE 30, 2021			MARCH 31, 2021			DECEMBER 31, 2020			SEPTEMBER 30, 2020
Beginning Balance of AUM						$	1,539.4		$	1,449.1		$	1,405.3		$	1,311.7		$	1,257.8
Inflows by Product
			Equities			82.0			72.0			84.2			52.0			42.6
			Fixed Income			16.7			13.1			15.3			18.7			16.4
			Cash and Other Assets			183.5			197.2			165.6			188.5			189.9
			Securities Lending Collateral			71.2			64.0			74.1			64.2			57.2
Total Inflows						353.4			346.3			339.2			323.4			306.1
Outflows by Product
			Equities			(102.1)			(72.9)			(88.4)			(58.1)			(48.3)
			Fixed Income			(15.6)			(10.6)			(14.8)			(17.5)			(13.9)
			Cash and Other Assets			(170.5)			(184.9)			(163.9)			(203.0)			(195.3)
			Securities Lending Collateral			(62.4)			(65.8)			(59.8)			(50.2)			(50.0)
Total Outflows						(350.6)			(334.2)			(326.9)			(328.8)			(307.5)
Net Inflows (Outflows)						2.8			12.1			12.3			(5.4)			(1.4)
Market Performance, Currency & Other
			Market Performance & Other			(5.9)			76.7			37.2			91.0			51.4
			Currency			(3.9)			1.5			(5.7)			8.0			3.9
Total Market Performance, Currency & Other						(9.8)			78.2			31.5			99.0			55.3
Ending Balance of AUM						$	1,532.4		$	1,539.4		$	1,449.1		$	1,405.3		$	1,311.7

Other Noninterest Income

The components of noninterest income are provided below.

TABLE 12: OTHER NONINTEREST INCOME

			THREE MONTHS ENDED SEPTEMBER 30,
($ In Millions)			2021			2020			CHANGE
Foreign Exchange Trading Income			$	66.4		$	61.6		$	4.8		8		%
Treasury Management Fees			11.2			11.6			(0.4)			(3)
Security Commissions and Trading Income			36.5			26.0			10.5			40
Other Operating Income			62.3			53.5			8.8			17
Investment Security Gains, net			—			—			—			N/M
Total Other Noninterest Income			$	176.4		$	152.7		$	23.7		16		%

Foreign Exchange Trading Income increased compared to the prior-year quarter primarily due to higher client volumes.

Securities Commissions and Trading Income increased compared to the prior-year quarter primarily due to higher revenue from interest rate swaps and core brokerage.

Other Operating Income increased compared to the prior-year quarter, primarily driven by distributions from investments in community development projects and higher banking and credit-related service charges, partially offset by lower miscellaneous income. The lower miscellaneous income was primarily associated with a market value decrease in the supplemental compensation plans, which also resulted in a related decrease in supplemental compensation plan expense reported in Other Operating Expense. Please refer to Note 16 — Other Operating Income to the consolidated financial statements provided in Item 1. Consolidated Financial Statements (unaudited) for further detail.

THIRD QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)

Net Interest Income

Net Interest Income is defined as the total of Interest Income and amortized fees on earning assets, less Interest Expense on deposits and borrowed funds, adjusted for the impact of interest-related hedging activity. Earning assets—including Federal Funds Sold, Securities Purchased under Agreements to Resell, Interest-Bearing Due From Banks, Federal Reserve and Other Central Bank Deposits and Other, Securities, and Loans and Leases—are financed by a large base of interest-bearing funds that include client deposits, short-term borrowings, Senior Notes and Long-Term Debt. Short-term borrowings include Federal Funds Purchased, Securities Sold Under Agreements to Repurchase, and Other Borrowings. Earning assets are also funded by noninterest-related funds, which include demand deposits and stockholders’ equity. Net Interest Income is subject to variations in the level and mix of earning assets and interest-bearing funds and their relative sensitivity to interest rates. In addition, the levels of nonaccruing assets and client compensating deposit balances used to pay for services impact Net Interest Income.

Net interest margin is the difference between what we earn on our assets and what we pay for deposits and other sources of funding. The direction and level of interest rates are important factors in our earnings. Net interest margin is calculated by dividing annualized Net Interest Income by average interest-earning assets.

Net Interest Income stated on a fully taxable equivalent (FTE) basis is a non-generally accepted accounting principle (GAAP) financial measure that facilitates the analysis of asset yields. Management believes an FTE presentation provides a clearer indication of net interest margins for comparative purposes. When adjusted to an FTE basis, yields on taxable, nontaxable, and partially taxable assets are comparable; however, the adjustment to an FTE basis has no impact on Net Income. A reconciliation of Net Interest Income on a GAAP basis to Net Interest Income on an FTE basis is provided on page 32.

THIRD QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)

Net Interest Income (continued)

The following tables present an analysis of average daily balances and interest rates affecting Net Interest Income and an analysis of Net Interest Income changes.

TABLE 13: AVERAGE CONSOLIDATED BALANCE SHEETS WITH ANALYSIS OF NET INTEREST INCOME

(INTEREST AND RATE ON A FULLY TAXABLE EQUIVALENT BASIS)			THIRD QUARTER
2021									2020
($ In Millions)			INTEREST			AVERAGE BALANCE			AVERAGE RATE**(6)**			INTEREST			AVERAGE BALANCE			AVERAGE RATE**(6)**
Interest-Earning Assets
Federal Reserve and Other Central Bank Deposits and Other(1)			$	4.2		$	40,540.6		0.04		%	$	1.8		$	31,602.3		0.02		%
Interest-Bearing Due from and Deposits with Banks(2)			1.9			5,165.4			0.15			2.7			4,816.1			0.23
Federal Funds Sold			—			0.1			0.41			—			2.5			0.43
Securities Purchased under Agreements to Resell			0.8			840.9			0.38			0.9			1,789.8			0.21
Securities
U.S. Government			6.8			2,669.3			1.01			13.2			4,290.9			1.23
Obligations of States and Political Subdivisions			18.1			3,691.0			1.96			12.3			2,319.3			2.12
Government Sponsored Agency			70.3			24,414.0			1.14			88.5			24,027.6			1.46
Other(3)			78.2			28,221.4			1.10			76.0			27,434.3			1.10
Total Securities			173.4			58,995.7			1.17			190.0			58,072.1			1.30
Loans and Leases(4)			181.7			38,410.7			1.87			167.9			33,085.2			2.02
Total Interest-Earning Assets			362.0			143,953.4			1.00			363.3			129,368.0			1.12
Cash and Due from Banks and Other Central Bank Deposits(5)			—			2,011.5			—			—			2,293.3			—
Other Noninterest-Earning Assets			—			10,487.9			—			—			9,264.1			—
Total Assets			$	—		$	156,452.8		—		%	$	—		$	140,925.4		—		%
Average Source of Funds
Deposits
Savings, Money Market and Other			$	3.0		$	28,472.3		0.04		%	$	5.6		$	24,305.4		0.09		%
Savings Certificates and Other Time			1.2			870.9			0.53			4.0			1,502.1			1.07
Non-U.S. Offices — Interest-Bearing			(20.5)			70,210.8			(0.12)			(13.1)			61,834.9			(0.08)
Total Interest-Bearing Deposits			(16.3)			99,554.0			(0.07)			(3.5)			87,642.4			(0.02)
Federal Funds Purchased			—			165.8			0.09			0.1			275.6			0.04
Securities Sold under Agreements to Repurchase			0.1			293.0			0.06			—			185.3			0.04
Other Borrowings			3.6			5,526.8			0.26			5.0			6,167.8			0.32
Senior Notes			11.7			2,840.7			1.64			19.1			3,666.3			2.08
Long-Term Debt			5.3			1,166.2			1.79			5.7			1,199.0			1.91
Floating Rate Capital Debt			0.5			277.8			0.75			0.4			277.7			0.64
Total Interest-Related Funds			4.9			109,824.3			0.02			26.8			99,414.1			0.11
Interest Rate Spread			—			—			0.98			—			—			1.01
Demand and Other Noninterest-Bearing Deposits			—			30,241.4			—			—			25,202.3			—
Other Noninterest-Bearing Liabilities			—			4,534.2			—			—			4,906.1			—
Stockholders’ Equity			—			11,852.9			—			—			11,402.9			—
Total Liabilities and Stockholders’ Equity			$	—		$	156,452.8		—		%	$	—		$	140,925.4		—		%
Net Interest Income/Margin (FTE Adjusted)			$	357.1		$	—		0.98		%	$	336.5		$	—		1.03		%
Net Interest Income/Margin (Unadjusted)			$	346.4		$	—		0.95		%	$	328.6		$	—		1.01		%

(1)Federal Reserve and Other Central Bank Deposits and Other includes collateral deposits with certain securities depositories and clearing houses, which are classified in Other Assets on the consolidated balance sheets.

(2)Interest-Bearing Due from and Deposits with Banks includes the interest-bearing component of Cash and Due from Banks and Interest-Bearing Deposits with Banks as presented on the consolidated balance sheets.

(3)Other securities include certain community development investments and Federal Home Loan Bank and Federal Reserve stock, which are classified in Other Assets on the consolidated balance sheets.

(4)Average balances include nonaccrual loans. Lease financing receivable balances are reduced by deferred income.

(5)Cash and Due from Banks and Other Central Bank Deposits includes the noninterest-bearing component of Federal Reserve and Other Central Bank Deposits on the consolidated balance sheets.

(6)Rate calculations are based on actual balances rather than the rounded amounts presented in the Average Consolidated Balance Sheets with Analysis of Net Interest Income.

THIRD QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)

Net Interest Income (continued)

TABLE 14: ANALYSIS OF NET INTEREST INCOME CHANGES DUE TO VOLUME AND RATE**(1)**

(INTEREST AND RATE ON A FULLY TAXABLE EQUIVALENT BASIS)			THREE MONTHS ENDED SEPTEMBER 30, 2021/2020
			CHANGE DUE TO
(In Millions)			AVERAGE BALANCE			AVERAGE RATE			NET (DECREASE) INCREASE
Increase (Decrease) in Net Interest Income (FTE)
Federal Reserve and Other Central Bank Deposits and Other			$	0.6		$	1.8		$	2.4
Interest-Bearing Due from and Deposits with Banks			0.2			(1.0)			(0.8)
Federal Funds Sold			—			—			—
Securities Purchased under Agreements to Resell			(0.7)			0.6			(0.1)
Securities
U.S. Government			(4.3)			(2.1)			(6.4)
Obligations of States and Political Subdivisions			6.8			(1.0)			5.8
Government Sponsored Agency			1.4			(19.6)			(18.2)
Other			(0.8)			3.0			2.2
Total Securities			3.1			(19.7)			(16.6)
Loans and Leases			36.3			(22.5)			13.8
Total Interest Income			$	39.5		$	(40.8)		$	(1.3)
Interest-Bearing Deposits
Savings, Money Market and Other			$	0.8		$	(3.4)		$	(2.6)
Savings Certificates and Other Time			0.1			(2.9)			(2.8)
Non-U.S. Offices - Interest-Bearing			(1.6)			(5.8)			(7.4)
Total Interest-Bearing Deposits			(0.7)			(12.1)			(12.8)
Federal Funds Purchased			—			(0.1)			(0.1)
Securities Sold under Agreements to Repurchase			0.1			—			0.1
Other Borrowings			(0.5)			(0.9)			(1.4)
Senior Notes			(3.8)			(3.6)			(7.4)
Long-Term Debt			7.2			(7.6)			(0.4)
Floating Rate Capital Debt			—			0.1			0.1
Total Interest Expense			$	2.3		$	(24.2)		$	(21.9)
Increase (Decrease) in Net Interest Income (FTE)			$	37.2		$	(16.6)		$	20.6

(1)Changes not due solely to average balance changes or rate changes are allocated proportionately to average balance and rate based on their relative absolute magnitudes.

Notes: Net Interest Income (FTE Adjusted), a non-GAAP financial measure, includes adjustments to a fully taxable equivalent basis for loans and securities. The adjustments are based on a federal income tax rate of 21.0%, where the rate is adjusted for applicable state income taxes, net of related federal tax benefit. Total taxable equivalent interest adjustments amounted to $10.7 million and $7.9 million for the three months ended September 30, 2021 and 2020, respectively. A reconciliation of Net Interest Income and net interest margin on a GAAP basis to Net Interest Income and net interest margin on an FTE basis (each of which is a non-GAAP financial measure) is provided on page 32. Net interest margin is calculated by dividing annualized Net Interest Income by average interest-earning assets.

Interest revenue on cash collateral positions is reported above in Interest-Bearing Due from and Deposits with Banks and in Loans and Leases. Interest Expense on cash collateral positions is reported above in Non-U.S. Offices Interest-Bearing Deposits. Related cash collateral received from and deposited with derivative counterparties is recorded net of the associated derivative contract in Other Assets and Other Liabilities, respectively.

Net Interest Income, stated on a FTE basis, increased from the prior-year quarter, primarily due to higher average earning assets, partially offset by a lower net interest margin. Average earning assets increased from the prior-year quarter, primarily due to higher levels of short-term interest-bearing deposits with banks and loans. Funding of the balance sheet reflected higher levels of client deposits.

The net interest margin on an FTE basis decreased from the prior-year quarter, primarily driven by lower average interest rates, partially offset by favorable balance sheet volume and mix shift. Low levels of market interest rates are expected to continue to impact our net interest income.

Federal Reserve and Other Central Bank Deposits and Other averaged $40.5 billion and increased $8.9 billion, or 28%, from $31.6 billion in the prior-year quarter, resulting from significant deposit inflows. The higher level of client deposits were primarily placed with the Federal Reserve and other central banks and in loans. Average Securities were $59.0 billion and increased $923.6 million, or 2%, from $58.1 billion, in the prior-year quarter and include certain community development investments, Federal Home Loan Bank stock, and Federal Reserve stock of $936.9 million, $160.1 million and $70.0 million, respectively, which are recorded in Other Assets on the consolidated balance sheets. Average taxable Securities were $56.4 billion in the current quarter and $52.8 billion in the prior-year quarter. Average nontaxable Securities, which represent securities that are primarily exempt from U.S. federal and state income taxes, were $2.6 billion in the current quarter and

THIRD QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)

Net Interest Income (continued)

$5.2 billion in the prior-year quarter. Interest-Bearing Due from and Deposits with Banks averaged $5.2 billion in the current quarter and $4.8 billion in the prior-year quarter.

Loans and Leases averaged $38.4 billion and increased $5.3 billion, or 16%, from $33.1 billion in the prior-year quarter, primarily reflecting higher levels of private client, commercial real estate, commercial and institutional, non-U.S., and residential real estate loans. Private client loans averaged $14.5 billion and increased $2.8 billion, or 23%, from $11.7 billion for the prior-year quarter. Commercial real estate loans averaged $4.1 billion and increased $795.2 million, or 24%, from $3.3 billion for the prior-year quarter. Commercial and institutional loans averaged $10.8 billion and increased $766.0 million, or 8%, from $10.0 billion for the prior-year quarter. Non-U.S. loans averaged $2.4 billion and increased $764.7 million or 46%, from $1.7 billion for the prior-year quarter. Residential real estate loans averaged $6.2 billion and increased $75.4 million, or 1%, from $6.1 billion for the prior-year quarter.

Northern Trust utilizes a diverse mix of funding sources. Average Interest-Bearing Deposits increased $12.0 billion, or 14%, to an average of $99.6 billion in the current quarter from $87.6 billion in the prior-year quarter. Other Average Interest-Related Funds decreased $1.5 billion, or 13%, to an average of $10.3 billion in the current quarter from $11.8 billion in the prior-year quarter. The balances within short-term borrowing classifications vary based on funding requirements and strategies, interest rate levels, changes in the volume of lower-cost deposit sources, and the availability of collateral to secure these borrowings. Average net noninterest-related funds increased $4.1 billion, or 14%, to $34.1 billion in the current quarter from $30.0 billion in the prior-year quarter, primarily resulting from higher levels of Demand and Other Noninterest-Bearing Deposits.

Interest expense for Interest-Bearing Deposits in the current quarter was driven by low and negative interest rates for Non-U.S. Offices Interest-Bearing Deposits and low interest rates on domestic Interest-Bearing Deposits. Average Non-U.S. Offices Interest-Bearing Deposits comprised 71% of total average Interest-Bearing Deposits for the three months ended September 30, 2021.

Provision for Credit Losses

There was a $13.0 million release of credit reserves in the current quarter, as compared to a provision of $0.5 million in the prior-year quarter. The release of credit reserves in the current quarter was primarily due to a decrease in the reserve evaluated on a collective basis, which relates to pooled financial assets sharing similar risk characteristics. The decrease in the collective basis reserve was driven by continued improvements in projected economic conditions and portfolio credit quality, partially offset by portfolio growth. Decreases in the collective basis reserve were primarily in the commercial and institutional and commercial real estate portfolios.

The provision in the prior-year quarter was primarily due to an increase in the reserve evaluated on a collective basis driven by projected economic conditions at the time, resulting from the ongoing COVID-19 pandemic and related market and economic impacts, with increases in the private client, commercial real estate, and residential real estate portfolios, partially offset by a decrease in the commercial and institutional portfolio. The overall increase in the reserve on a collective basis was partially offset by a decrease in the reserve associated with loans evaluated on an individual basis.

Net recoveries in the current quarter were $1.1 million, reflecting $1.1 million of recoveries and de minimis charge-offs. The prior-year quarter included $0.4 million of net recoveries, reflecting $1.2 million of recoveries and $0.8 million of charge-offs. Nonaccrual assets of $141.2 million increased $42.3 million, or 43%, from $98.9 million at the end of the prior-year quarter.

Noninterest Expense

The components of Noninterest Expense are provided in the following table.

TABLE 15: NONINTEREST EXPENSE

			THREE MONTHS ENDED SEPTEMBER 30,
($ In Millions)			2021			2020			CHANGE
Compensation			$	496.0		$	461.7		$	34.3		7		%
Employee Benefits			101.7			97.5			4.2			4
Outside Services			210.7			186.0			24.7			13
Equipment and Software			185.2			170.7			14.5			8
Occupancy			53.9			51.8			2.1			4
Other Operating Expense			81.2			127.0			(45.8)			(36)
Total Noninterest Expense			$	1,128.7		$	1,094.7		$	34.0		3		%

Compensation expense, the largest component of Noninterest Expense, increased compared to the prior-year quarter, primarily due to higher incentives.

THIRD QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)

Noninterest Expense (continued)

Employee Benefits expense increased compared to the prior-year quarter, primarily due to a pension settlement charge in the current quarter and higher medical costs.

Outside Services expense increased compared to the prior-year quarter, primarily due to higher third-party advisory fees, technical services costs and sub-custodian expenses.

Equipment and Software expense increased compared to the prior-year quarter, primarily due to higher software support and rental costs and higher amortization.

Other Operating Expense decreased compared to the prior-year quarter, primarily due to lower charges associated with account servicing activities and a decline in other miscellaneous expenses, including lower supplemental compensation plan expense. The lower supplemental compensation plan expense resulted in a related decrease in miscellaneous income reported in noninterest income. The account servicing activities in the prior-year quarter included a $43.4 million charge related to a corporate action processing error. Please refer to Note 17 — Other Operating Expense to the consolidated financial statements provided in Item 1. Consolidated Financial Statements (unaudited) for further detail.

Provision for Income Taxes

Income tax expense for the three months ended September 30, 2021 was $122.4 million, representing an effective tax rate of 23.6%, compared to $95.4 million in the prior-year quarter, representing an effective tax rate of 24.5%.

The effective tax rate decreased compared to the prior-year quarter primarily due to an increase in allocated tax credits related to community development projects and a lower net tax impact from international operations.

NINE-MONTH CONSOLIDATED RESULTS OF OPERATIONS

Overview of Financial Results

Net Income per diluted common share increased in the current period to $5.22 from $4.34 in the comparable prior-year period. Net income increased $170.5 million, or 18%, to $1.14 billion in the current period from $968.4 million in the prior-year period. Annualized return on average common equity was 13.7% in the current period and 12.0% in the prior-year period. The annualized return on average assets was 0.98% in the current period compared to 0.96% in the prior-year period.

Revenue for the nine months ended September 30, 2021 increased $218.6 million, or 5%, from $4.58 billion in the prior-year period to $4.80 billion in the current period.

Trust, Investment and Other Servicing Fees increased $281.2 million, or 9%, from $2.97 billion in the prior-year period to $3.25 billion in the current period, primarily driven by favorable markets, new business, and currency translation, partially offset by higher money market mutual fund fee waivers.

Other Noninterest Income increased $24.1 million, or 5% from $501.2 million in the prior-year period to $525.3 million in the current period, primarily driven by higher Other Operating Income and Security Commissions and Trading Income, partially offset by lower Foreign Exchange Trading Income.

Net Interest Income decreased $86.7 million, or 8%, to $1.02 billion in the current period from $1.11 billion in the prior-year period, primarily due to lower average interest rates, partially offset by an increase in average earning assets.

There was a $70.0 million release of credit reserves in the current period, as compared to a provision of $127.5 million in the prior-year period.

Noninterest Expense increased $169.8 million, or 5%, from $3.20 billion in the prior-year period to $3.37 billion in the current period, primarily attributable to higher Compensation, Outside Services, Equipment and Software expense and Employee Benefits, partially offset by lower Other Operating Expense and Occupancy.

The Provision for Income Taxes for the nine months ended September 30, 2021 totaled $361.6 million, representing an effective tax rate of 24.1%. The Provision for Income Taxes for the nine months ended September 30, 2020 totaled $285.8 million, representing an effective tax rate of 22.8%. The effective tax rate increased compared to the prior-year period primarily due to lower tax benefits related to share-based compensation, the deferred tax impact of the enacted increase in the UK statutory tax rate, and a prior-year-period tax benefit from dispositions of leveraged leases.

NINE-MONTH CONSOLIDATED RESULTS OF OPERATIONS (continued)

Trust, Investment and Other Servicing Fees

Beginning in the second quarter of 2020, the Corporation began to waive a portion of certain fees associated with money market mutual funds due to the low-interest-rate environment. Northern Trust voluntarily waived $206.7 million and $5.7 million of money market mutual fund fees for the nine months ended September 30, 2021 and 2020, respectively. These fee waivers, which are impacted by the level of yields earned and account balances in certain funds, are expected to continue in the current low-interest-rate environment as the yields in these funds remain insufficient to pay the stated fees associated with such funds. This is expected to adversely impact Trust, Investment and Other Servicing Fees within the C&IS and Wealth Management reporting segments.

The components of Trust, Investment and Other Servicing Fees are provided in the table below.

TABLE 16: TRUST, INVESTMENT AND OTHER SERVICING FEES

			NINE MONTHS ENDED SEPTEMBER 30,
($ In Millions)			2021			2020			CHANGE
C&IS Trust, Investment and Other Servicing Fees
Custody and Fund Administration			$	1,361.1		$	1,166.2		$	194.9		17		%
Investment Management			330.2			386.0			(55.8)			(14)
Securities Lending			57.9			70.4			(12.5)			(18)
Other			113.0			102.9			10.1			10
Total C&IS Trust, Investment and Other Servicing Fees			$	1,862.2		$	1,725.5		$	136.7		8		%
Wealth Management Trust, Investment and Other Servicing Fees
Central			$	517.3		$	452.6		$	64.7		14		%
East			376.4			326.6			49.8			15
West			281.6			251.7			29.9			12
Global Family Office			212.6			212.5			0.1			—
Total Wealth Management Trust, Investment and Other Servicing Fees			$	1,387.9		$	1,243.4		$	144.5		12		%
Total Consolidated Trust, Investment and Other Servicing Fees			$	3,250.1		$	2,968.9		$	281.2		9		%

Corporate & Institutional Services

Custody and Fund Administration fees, the largest component of C&IS fees, increased primarily driven by favorable markets, new business, and favorable currency translation. Investment Management fees decreased primarily due to higher money market mutual fund fee waivers, partially offset by favorable markets and new business. Securities Lending fees decreased primarily driven by lower spreads, partially offset by higher volumes.

Wealth Management

Fee income in the regions (Central, East and West) increased primarily due to favorable markets, partially offset by higher money market mutual fund fee waivers. Global Family Office fee income increased primarily due to favorable markets and new business, partially offset by higher money market mutual fund fee waivers.

NINE-MONTH CONSOLIDATED RESULTS OF OPERATIONS (continued)

Other Noninterest Income

The components of other noninterest income are provided in the following table.

TABLE 17: OTHER NONINTEREST INCOME

			NINE MONTHS ENDED SEPTEMBER 30,
($ In Millions)			2021			2020			CHANGE
Foreign Exchange Trading Income			$	215.7		$	221.8		$	(6.1)		(3)		%
Treasury Management Fees			33.7			34.0			(0.3)			(1)
Security Commissions and Trading Income			104.3			100.9			3.4			3
Other Operating Income			171.6			144.4			27.2			19
Investment Security Gains, net			—			0.1			(0.1)			N/M
Total Other Noninterest Income			$	525.3		$	501.2		$	24.1		5		%

Foreign Exchange Trading Income decreased from the prior-year period, primarily due to lower foreign exchange swap activity in Treasury.

Security Commissions and Trading Income increased from the prior-year period, primarily due to higher core brokerage revenue, partially offset by lower revenue from interest rate swaps.

Other Operating Income increased from the prior-year period, primarily due to higher banking and credit-related service charges, distributions from investments in community development projects, and higher miscellaneous income, partially offset by higher expenses for existing swap agreements related to Visa Inc. Class B common shares. The higher miscellaneous income was primarily associated with a market value increase in the supplemental compensation plans, which also resulted in a related increase in supplemental compensation plan expense in Other Operating Expense. Please refer to Note 16 — Other Operating Income to the consolidated financial statements provided in Item 1. Consolidated Financial Statements (unaudited) for further detail.

NINE-MONTH CONSOLIDATED RESULTS OF OPERATIONS (continued)

Net Interest Income

The following tables present an analysis of average balances and interest rate changes affecting Net Interest Income and an analysis of Net Interest Income changes.

TABLE 18: AVERAGE CONSOLIDATED BALANCE SHEETS WITH ANALYSIS OF NET INTEREST INCOME

(INTEREST AND RATE ON A FULLY TAXABLE EQUIVALENT BASIS)			NINE MONTHS ENDED SEPTEMBER 30,
2021									2020
($ In Millions)			INTEREST			AVERAGE BALANCE			AVERAGE RATE**(6)**			INTEREST			AVERAGE BALANCE			AVERAGE RATE(6)
Average Earning Assets
Federal Reserve and Other Central Bank Deposits and Other(1)			$	5.6		$	38,380.9		0.02		%	$	28.2		$	27,258.4		0.14		%
Interest-Bearing Due from and Deposits with Banks(2)			7.0			6,117.4			0.15			20.0			5,384.6			0.50
Federal Funds Sold			—			0.2			0.41			—			2.8			1.44
Securities Purchased under Agreements to Resell			2.7			1,131.9			0.32			3.1			1,148.1			0.36
Securities
U.S. Government			20.9			2,740.0			1.02			52.6			4,466.8			1.58
Obligations of States and Political Subdivisions			50.5			3,422.8			1.97			34.0			1,960.5			2.31
Government Sponsored Agency			227.3			24,592.8			1.24			321.6			23,598.8			1.82
Other(3)			228.9			29,501.7			1.04			245.5			24,294.2			1.35
Total Securities			527.6			60,257.3			1.17			653.7			54,320.3			1.61
Loans and Leases(4)			527.0			36,313.4			1.94			609.6			33,634.0			2.42
Total Earning Assets			1,069.9			142,201.1			1.01			1,314.6			121,748.2			1.44
Cash and Due from Banks and Other Central Bank Deposits(5)			—			2,340.6			—			—			2,659.8			—
Other Noninterest-Earning Assets			—			10,139.6			—			—			10,237.2			—
Total Assets			$	—		$	154,681.3		—		%	$	—		$	134,645.2		—		%
Average Source of Funds
Deposits
Savings, Money Market and Other			$	9.7		$	27,551.4		0.05		%	$	43.2		$	22,863.2		0.25		%
Savings Certificates and Other Time			3.8			897.6			0.56			13.6			1,289.3			1.41
Non-U.S. Offices — Interest-Bearing			(58.0)			69,246.6			(0.11)			(0.1)			59,997.0			—
Total Interest-Bearing Deposits			(44.5)			97,695.6			(0.06)			56.7			84,149.5			0.09
Federal Funds Purchased			(0.4)			254.7			(0.19)			2.1			1,121.3			0.24
Securities Sold under Agreements to Repurchase			0.1			204.5			0.05			1.0			229.9			0.58
Other Borrowings			10.3			5,137.8			0.27			40.6			6,540.8			0.83
Senior Notes			39.2			2,973.0			1.76			57.0			3,206.5			2.37
Long-Term Debt			15.9			1,171.2			1.81			21.1			1,188.7			2.38
Floating Rate Capital Debt			1.6			277.8			0.78			3.6			277.7			1.76
Total Interest-Related Funds			22.2			107,714.6			0.03			182.1			96,714.4			0.25
Interest Rate Spread			—			—			0.98			—			—			1.19
Demand and Other Noninterest-Bearing Deposits			—			30,386.6			—			—			22,141.4			—
Other Liabilities			—			4,931.9			—			—			4,711.1			—
Stockholders’ Equity			—			11,648.2			—			—			11,078.3			—
Total Liabilities and Stockholders’ Equity			$	—		$	154,681.3		—		%	$	—		$	134,645.2		—		%
Net Interest Income/Margin (FTE Adjusted)			$	1,047.7		$	—		0.99		%	$	1,132.5		$	—		1.24		%
Net Interest Income/Margin (Unadjusted)			$	1,022.1		$	—		0.96		%	$	1,108.8		$	—		1.22		%

(1)Federal Reserve and Other Central Bank Deposits and Other includes collateral deposits with certain securities depositories and clearing houses, which are classified in Other Assets on the consolidated balance sheets.

(2)Interest-Bearing Due from and Deposits with Banks includes the interest-bearing component of Cash and Due from Banks and Interest-Bearing Deposits with Banks as presented on the consolidated balance sheets.

(3)Other securities include certain community development investments and Federal Home Loan Bank and Federal Reserve stock, which are classified in Other Assets on the consolidated balance sheets.

(4)Average balances include nonaccrual loans. Lease financing receivable balances are reduced by deferred income.

(5)Cash and Due from Banks and Other Central Bank Deposits includes the noninterest-bearing component of Federal Reserve and Other Central Bank Deposits on the consolidated balance sheets.

(6)Rate calculations are based on actual balances rather than the rounded amounts presented in the Average Consolidated Balance Sheets with Analysis of Net Interest Income.

NINE-MONTH CONSOLIDATED RESULTS OF OPERATIONS (continued)

Net Interest Income (continued)

TABLE 19: ANALYSIS OF NET INTEREST INCOME CHANGES DUE TO VOLUME AND RATE**(1)**

(INTEREST AND RATE ON A FULLY TAXABLE EQUIVALENT BASIS)			NINE MONTHS ENDED SEPTEMBER 30, 2021/2020
			CHANGE DUE TO
(In Millions)			AVERAGE BALANCE			AVERAGE RATE			NET (DECREASE) INCREASE
Increase (Decrease) in Net Interest Income (FTE)
Federal Reserve and Other Central Bank Deposits and Other			$	8.5		$	(31.1)		$	(22.6)
Interest-Bearing Due from and Deposits with Banks			2.4			(15.4)			(13.0)
Federal Funds Sold			—			—			—
Securities Purchased under Agreements to Resell			—			(0.4)			(0.4)
Securities
U.S. Government			(16.5)			(15.2)			(31.7)
Obligations of States and Political Subdivisions			22.2			(5.7)			16.5
Government Sponsored Agency			12.9			(107.2)			(94.3)
Other			44.5			(61.1)			(16.6)
Total Securities			63.1			(189.2)			(126.1)
Loans and Leases			115.7			(198.3)			(82.6)
Total Interest Income			$	189.7		$	(434.4)		$	(244.7)
Interest-Bearing Deposits
Savings, Money Market and Other			$	7.1		$	(40.6)		$	(33.5)
Savings Certificates and Other Time			0.3			(10.1)			(9.8)
Non-U.S. Offices - Interest-Bearing			—			(57.9)			(57.9)
Total Interest-Bearing Deposits			7.4			(108.6)			(101.2)
Federal Funds Purchased			(0.8)			(1.7)			(2.5)
Securities Sold under Agreements to Repurchase			(0.1)			(0.8)			(0.9)
Other Borrowings			(7.3)			(23.0)			(30.3)
Senior Notes			(3.9)			(13.9)			(17.8)
Long-Term Debt			16.7			(21.9)			(5.2)
Floating Rate Capital Debt			—			(2.0)			(2.0)
Total Interest Expense			$	12.0		$	(171.9)		$	(159.9)
(Decrease) Increase in Net Interest Income (FTE)			$	177.7		$	(262.5)		$	(84.8)

(1) Changes not due solely to average balance changes or rate changes are allocated proportionately to average balance and rate based on their relative absolute magnitudes.

Notes: Net Interest Income (FTE Adjusted), a non-GAAP financial measure, includes adjustments to a fully taxable equivalent basis for loans and securities. The adjustments are based on a federal income tax rate of 21.0%, where the rate is adjusted for applicable state income taxes, net of related federal tax benefit. Total taxable equivalent interest adjustments amounted to $25.6 million and $23.7 million for the nine months ended September 30, 2021 and 2020, respectively. A reconciliation of net interest income and net interest margin on a GAAP basis to net interest income and net interest margin on an FTE basis (each of which is a non-GAAP financial measure) is provided on page 32. Net interest margin is calculated by dividing annualized net interest income by average interest-earning assets.

Interest revenue on cash collateral positions is reported above within Interest-Bearing Due from and Deposits with Banks and within Loans and Leases. Interest expense on cash collateral positions is reported above within Non-U.S. Offices Interest-Bearing Deposits. Related cash collateral received from and deposited with derivative counterparties is recorded net of the associated derivative contract within Other Assets and Other Liabilities, respectively.

Net Interest Income, stated on an FTE basis, decreased from the prior-year period, primarily due to lower average interest rates, partially offset by an increase in average earning assets. Average earning assets increased primarily due to higher levels of short-term interest-bearing deposits with banks, securities and loans. Funding of the balance sheet reflected higher levels of client deposits. Average non-U.S. offices interest-bearing deposits comprised 71% of total average interest-bearing deposits for the nine months ended September 30, 2021.

The net interest margin on an FTE basis decreased from the prior-year period, primarily due to lower average interest rates. Low levels of market interest rates are expected to continue to impact our net interest income.

Federal Reserve and Other Central Bank Deposits and Other averaged $38.4 billion and increased $11.1 billion, or 41%, from $27.3 billion in the prior-year period, resulting from significant deposit inflows. The higher level of client deposits were primarily placed with the Federal Reserve and other central banks and in the securities portfolio. Average Securities were $60.3 billion and increased $6.0 billion, or 11%, from $54.3 billion in the prior-year period and include certain community development investments, Federal Home Loan Bank stock, and Federal Reserve stock of $919.7 million, $172.1 million and $70.0 million, respectively, which are recorded in Other Assets on the consolidated balance sheets. Average taxable Securities were $57.1 billion in the current period and $48.9 billion in the prior-year period. Average nontaxable Securities, which represent securities that are primarily exempt from U.S. federal and state income taxes, were $3.1 billion in the current period and $5.4 billion in the prior-year period. Interest-Bearing Due from and Deposits with Banks averaged $6.1 billion in the current period and $5.4 billion in the prior-year period.

NINE-MONTH CONSOLIDATED RESULTS OF OPERATIONS (continued)

Net Interest Income (continued)

Loans and leases averaged $36.3 billion and increased $2.7 billion, or 8%, from $33.6 billion in the prior-year period, primarily reflecting higher levels of private client, commercial real estate, non-U.S., and residential real estate loans, partially offset by lower levels of commercial and institutional loans. Private client loans averaged $13.3 billion and increased $1.9 billion, or 16%, from $11.4 billion for the prior-year period. Commercial real estate loans averaged $3.9 billion and increased $681.0 million, or 21%, from $3.2 billion for the prior-year period. Non-U.S. loans averaged $2.5 billion and increased $449.9 million or 22% from $2.0 billion for the prior-year period. Residential real estate loans averaged $6.2 billion and increased $66.2 million, or 1%, from $6.1 billion for the prior-year period. Commercial and institutional loans averaged $10.2 billion and decreased $384.3 million, or 4%, from $10.5 billion for the prior-year period.

Northern Trust utilizes a diverse mix of funding sources. Average Interest-Bearing Deposits increased $13.6 billion, or 16%, to an average of $97.7 billion in the current period from $84.1 billion in the prior-year period. Other Average Interest-Related Funds decreased $2.6 billion, or 20%, to an average of $10.0 billion in the current period from $12.6 billion in the prior-year period. The balances within short-term borrowing classifications vary based on funding requirements and strategies, interest rate levels, changes in the volume of lower-cost deposit sources, and the availability of collateral to secure these borrowings. Average net noninterest-related funds increased $9.5 billion, or 38%, to $34.5 billion in the current period from $25.0 billion in the prior-year period primarily resulting from higher levels of Demand and Other Noninterest-Bearing Deposits.

Provision for Credit Losses

There was a $70.0 million release of credit reserves for the nine months ended September 30, 2021, as compared to a provision of $127.5 million in the prior-year period. The release of credit reserves was primarily due to a decrease in the reserve evaluated on a collective basis, which relates to pooled financial assets sharing similar risk characteristics. The decrease in the collective basis reserve was driven by continued improvements in projected economic conditions and portfolio credit quality, partially offset by portfolio growth.

The provision in the prior-year period was primarily due to an increase in the reserve evaluated on a collective basis driven by downgrades in the portfolio and current and projected economic conditions at the time, both resulting from the ongoing COVID-19 pandemic and related market and economic impacts, with the largest increases in the commercial and institutional and commercial real estate portfolios. In addition, a $13.7 million increase in the allowance for credit losses, with a corresponding cumulative effect adjustment to decrease retained earnings of $10.1 million, net of income taxes, was recorded on January 1, 2020 upon adoption of Accounting Standards Update (ASU) No. 2016-13, “Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments.”

Net recoveries in the current-year period totaled $5.2 million resulting from $0.4 million of charge-offs and $5.6 million of recoveries, compared to net recoveries of $2.3 million in the prior-year period resulting from $3.0 million of charge-offs and $5.3 million of recoveries.

Commercial real estate, residential real estate, and commercial and institutional loans accounted for 54%, 32%, and 14%, respectively, of total nonaccrual loans and leases at September 30, 2021. Residential real estate, commercial and institutional, and commercial real estate loans accounted for 65%, 31%, and 4%, respectively, of total nonaccrual loans and leases at September 30, 2020. For additional discussion of the allowance for credit losses, refer to the “Asset Quality” section beginning on page 23.

Noninterest Expense

The components of Noninterest Expense are provided in the following table.

TABLE 20: NONINTEREST EXPENSE

			NINE MONTHS ENDED SEPTEMBER 30,
($ In Millions)			2021			2020			CHANGE
Compensation			$	1,500.8		$	1,421.8		$	79.0		6		%
Employee Benefits			323.5			285.8			37.7			13
Outside Services			625.2			555.0			70.2			13
Equipment and Software			540.2			497.1			43.1			9
Occupancy			156.9			162.9			(6.0)			(4)
Other Operating Expense			220.4			274.6			(54.2)			(20)
Total Noninterest Expense			$	3,367.0		$	3,197.2		$	169.8		5		%

Compensation expense, the largest component of Noninterest Expense increased compared to the prior-year period, primarily due to higher cash-based incentives and salary expense.

NINE-MONTH CONSOLIDATED RESULTS OF OPERATIONS (continued)

Noninterest Expense (continued)

Employee Benefits expense increased compared to the prior-year period, primarily due to pension settlement charges, higher medical costs, and higher payroll taxes.

Outside Services expense increased compared to the prior-year period, primarily reflecting higher technical services costs, third-party advisory fees, and sub-custodian expenses.

Equipment and Software expense increased compared to the prior-year period, primarily due to higher software support costs and amortization.

Occupancy expense decreased compared to the prior-year period, primarily due to rent accelerations arising from workplace real estate strategies in the prior-year period.

Other Operating Expense decreased compared to the prior-year period, primarily due to lower charges associated with account servicing activities and a decline in other miscellaneous expenses, partially offset by higher supplemental compensation plan expense. The higher supplemental compensation plan expense resulted in a related increase in miscellaneous income reported in noninterest income. The account servicing activities in the prior-year period included a $43.4 million charge related to a corporate action processing error. Please refer to Note 17 — Other Operating Expense to the consolidated financial statements provided in Item 1. Consolidated Financial Statements (unaudited) for further detail.

Provision for Income Taxes

Income tax expense for the nine months ended September 30, 2021 was $361.6 million, representing an effective tax rate of 24.1%, compared to $285.8 million for the nine months ended September 30, 2020, representing an effective tax rate of 22.8%.

The effective tax rate increased compared to the prior-year period primarily due to lower tax benefits related to share-based compensation, the deferred tax impact of the enacted increase in the UK statutory tax rate, and a prior-year-period tax benefit from dispositions of leveraged leases.

REPORTING SEGMENTS

Northern Trust is organized around its two client-focused reporting segments: C&IS and Wealth Management. Asset management and related services are provided to C&IS and Wealth Management clients primarily by the Asset Management business. The revenue and expenses of Asset Management and certain other support functions are allocated fully to C&IS and Wealth Management.

Reporting segment financial information, presented on an internal management reporting basis, is determined by accounting systems used to allocate revenue and expense to each segment, and incorporates processes for allocating assets, liabilities, equity and the applicable interest income and expense utilizing a funds transfer pricing (FTP) methodology. Under the methodology, assets and liabilities receive a funding charge or credit that considers interest rate risk, liquidity risk, and other product characteristics on an instrument level.

Revenues, expenses and average assets are allocated to C&IS and Wealth Management, with the exception of non-recurring activities such as certain costs associated with acquisitions, divestitures, litigation, restructuring, and tax adjustments not directly attributable to a specific reporting segment.

Reporting segment results are subject to reclassification when organizational changes are made. The results are also subject to refinements in revenue and expense allocation methodologies, which are typically reflected on a prospective basis.

Effective January 1, 2021, Northern Trust implemented enhancements to its FTP methodology, including enhancements impacting the allocation of net interest income between C&IS and Wealth Management. These methodology enhancements affect the results of each of these reporting segments. Due to the lack of historical information, segment results for periods ended prior to January 1, 2021 have not been revised to reflect the methodology enhancements.

REPORTING SEGMENTS (continued)

The following table presents the earnings contributions and average assets of Northern Trust’s reporting segments for the three- and nine- month periods ended September 30, 2021 and 2020.

TABLE 21: RESULTS OF REPORTING SEGMENTS

($ In Millions)			CORPORATE & INSTITUTIONAL SERVICES						WEALTH MANAGEMENT						OTHER						TOTAL CONSOLIDATED
THREE MONTHS ENDED SEPTEMBER 30,			2021			2020			2021			2020			2021			2020			2021			2020
Noninterest Income
Trust, Investment and Other Servicing Fees			$	630.2		$	584.9		$	480.8		$	418.9		$	—		$	—		$	1,111.0		$	1,003.8
Foreign Exchange Trading Income			63.2			58.4			3.2			3.2			—			—			66.4			61.6
Other Noninterest Income			65.6			56.7			48.0			39.7			(3.6)			(5.3)			110.0			91.1
Total Noninterest Income			759.0			700.0			532.0			461.8			(3.6)			(5.3)			1,287.4			1,156.5
Net Interest Income(1)			158.9			139.9			198.2			196.6			—			—			357.1			336.5
Revenue(1)			917.9			839.9			730.2			658.4			(3.6)			(5.3)			1,644.5			1,493.0
Provision for Credit Losses			(6.9)			(19.2)			(6.1)			19.7			—			—			(13.0)			0.5
Noninterest Expense			716.6			707.3			410.9			386.3			1.2			1.1			1,128.7			1,094.7
Income before Income Taxes(1)			208.2			151.8			325.4			252.4			(4.8)			(6.4)			528.8			397.8
Provision for Income Taxes(1)			50.0			38.7			84.3			66.2			(1.2)			(1.6)			133.1			103.3
Net Income			$	158.2		$	113.1		$	241.1		$	186.2		$	(3.6)		$	(4.8)		$	395.7		$	294.5
Percentage of Consolidated Net Income			40		%	39		%	61		%	63		%	(1)		%	(2)		%	100		%	100		%
Average Assets			$	119,951.9		$	108,823.0		$	36,500.9		$	32,102.4		$	—		$	—		$	156,452.8		$	140,925.4

*(1)*Non-GAAP financial measures stated on a fully taxable equivalent basis (FTE). Total consolidated includes FTE adjustments of $10.7 million for 2021 and $7.9 million for 2020. A reconciliation of total consolidated revenue, Net Interest Income and net interest margin on a GAAP basis to revenue, Net Interest Income and net interest margin on an FTE basis, respectively, (each of which is a non-GAAP financial measure) is provided on page 32.

($ In Millions)			CORPORATE & INSTITUTIONAL SERVICES						WEALTH MANAGEMENT						OTHER						TOTAL CONSOLIDATED
NINE MONTHS ENDED SEPTEMBER 30,			2021			2020			2021			2020			2021			2020			2021			2020
Noninterest Income
Trust, Investment and Other Servicing Fees			$	1,862.2		$	1,725.5		$	1,387.9		$	1,243.4		$	—		$	—		$	3,250.1		$	2,968.9
Foreign Exchange Trading Income			205.6			211.8			10.1			10.0			—			—			215.7			221.8
Other Noninterest Income			194.8			167.5			130.5			122.9			(15.7)			(11.0)			309.6			279.4
Total Noninterest Income			2,262.6			2,104.8			1,528.5			1,376.3			(15.7)			(11.0)			3,775.4			3,470.1
Net Interest Income(1)			472.7			516.6			575.0			615.9			—			—			1,047.7			1,132.5
Revenue(1)			2,735.3			2,621.4			2,103.5			1,992.2			(15.7)			(11.0)			4,823.1			4,602.6
Provision for Credit Losses			(29.1)			35.3			(40.9)			92.2			—			—			(70.0)			127.5
Noninterest Expense			2,133.3			2,022.2			1,212.5			1,152.7			21.2			22.3			3,367.0			3,197.2
Income before Income Taxes(1)			631.1			563.9			931.9			747.3			(36.9)			(33.3)			1,526.1			1,277.9
Provision for Income Taxes(1)			153.1			129.9			243.3			187.9			(9.2)			(8.3)			387.2			309.5
Net Income			$	478.0		$	434.0		$	688.6		$	559.4		$	(27.7)		$	(25.0)		$	1,138.9		$	968.4
Percentage of Consolidated Net Income			42		%	45		%	60		%	58		%	(2)		%	(3)		%	100		%	100		%
Average Assets			$	119,859.4		$	102,902.3		$	34,821.9		$	31,742.9		$	—		$	—		$	154,681.3		$	134,645.2

(1) Non-GAAP financial measures stated on a fully taxable equivalent basis (FTE). Total consolidated includes FTE adjustments of $25.6 million for 2021 and $23.7 million for 2020. A reconciliation of total consolidated revenue, Net Interest Income and net interest margin on a GAAP basis to revenue, Net Interest Income and net interest margin on an FTE basis, respectively, (each of which is a non-GAAP financial measure) is provided on page 32.

REPORTING SEGMENTS (continued)

Corporate & Institutional Services

C&IS Net Income

For the quarter ended September 30, 2021, Net Income increased $45.1 million, or 40%, from the prior-year quarter, primarily reflecting higher Trust, Investment and Other Servicing Fees and Net Interest Income, partially offset by a lower release of credit reserves in the current quarter as compared to the prior-year quarter and an increase in the Provision for Income Taxes.

For the nine months ended September 30, 2021, Net Income increased $44.0 million, or 10%, from the prior-year period, primarily reflecting higher Trust, Investment and Other Servicing Fees, a release of credit reserves in the current period as compared to a provision in the prior-year period and higher Other Noninterest Income, partially offset by higher Noninterest Expense, lower Net Interest Income, and an increase in the Provision for Income Taxes.

C&IS Trust, Investment and Other Servicing Fees

For an explanation of C&IS Trust, Investment, and Other Servicing Fees, please see the “Trust, Investment and Other Servicing Fees” section within the Consolidated Results of Operations section of the MD&A.

C&IS Foreign Exchange Trading Income

For the quarter ended September 30, 2021, Foreign Exchange Trading Income increased $4.8 million, or 8%, from the prior-year quarter, primarily due to higher client volumes. For the nine months ended September 30, 2021, Foreign Exchange Trading Income decreased $6.2 million, or 3%, from the prior-year period, primarily due to lower foreign exchange swap activity.

C&IS Other Noninterest Income

For the quarter ended September 30, 2021, Other Noninterest Income increased $8.9 million, or 16%, from the prior-year quarter, primarily due to higher Security Commissions and Trading Income and Other Operating Income. For the nine months ended September 30, 2021, Other Noninterest Income increased $27.3 million, or 16%, from the prior-year period, primarily due to higher Other Operating Income.

C&IS Net Interest Income

For the quarter ended September 30, 2021, Net Interest Income stated on an FTE basis increased $19.0 million, or 14%, from the prior-year quarter and decreased $43.9 million, or 8%, from the prior-year period for the nine months ended September 30, 2021. The increase for the three months ended September 30, 2021 primarily reflected higher earning asset levels funded by higher deposit balances, partially offset by a slightly lower net interest margin. The decrease for the nine months ended September 30, 2021 primarily reflected decreasing short-term average interest rates, partially offset by higher earning asset levels. Average earning assets increased $10.4 billion to $110.1 billion in the current quarter from $99.7 billion in the prior-year quarter and increased $17.5 billion to $110.0 billion in the nine-month period ended September 30, 2021 from $92.5 billion in the prior-year period. The earning assets and funding sources in C&IS for the three and nine months ended September 30, 2021 consisted primarily of intercompany assets and of loans and non-U.S. custody-related interest-bearing deposits, respectively.

C&IS Provision for Credit Losses

For the quarter ended September 30, 2021, there was a $6.9 million release of credit reserves compared to a $19.2 million release of credit reserves in the prior-year quarter. For the nine months ended September 30, 2021, there was a $29.1 million release of credit reserves compared to a $35.3 million provision for credit losses in the prior-year period.

The release of credit reserves for the three and nine months ended September 30, 2021, was primarily due to a decrease in the reserve evaluated on a collective basis, which relates to pooled financial assets sharing similar risk characteristics. The decrease in the collective basis reserve was driven by continued improvements in projected economic conditions and portfolio credit quality.

C&IS Noninterest Expense

For the quarter ended September 30, 2021, Noninterest Expense, which includes the direct expense of the reporting segment, indirect expense allocations for product and operating support and indirect expense allocations for certain corporate support services, increased $9.3 million, or 1%, from the prior-year quarter, primarily due to higher incentives and outside services, partially offset by lower expense allocations.

For the nine months ended September 30, 2021, Noninterest Expense increased $111.1 million, or 5%, from the prior-year period, primarily reflecting higher expense allocations, compensation expense including incentives, and outside services expense.

REPORTING SEGMENTS (continued)

Wealth Management

Wealth Management Net Income

For the quarter ended September 30, 2021, Net Income increased $54.9 million, or 29%, from the prior-year quarter primarily due to higher Trust, Investment and Other Servicing Fees and a release of credit reserves in the current quarter as compared to a provision in the prior-year quarter, partially offset by higher Noninterest Expense and an increase in the Provision for Income Taxes.

For the nine months ended September 30, 2021, Net Income increased $129.2 million, or 23%, from the prior-year period primarily due to higher Trust, Investment and Other Servicing Fees and a release of credit reserves in the current period as compared to a provision in the prior-year period, partially offset by higher Noninterest Expense, an increase in the Provision for Income Taxes and lower Net Interest Income.

Wealth Management Trust, Investment and Other Servicing Fees

For an explanation of Wealth Management Trust, Investment and Other Servicing Fees, please see the “Trust, Investment and Other Servicing Fees” section within the Consolidated Results of Operations section of the MD&A.

Wealth Management Other Noninterest Income

For the quarter ended September 30, 2021, Other Noninterest Income increased $8.3 million, or 21%, from the prior-year quarter primarily due to an increase in security commissions and trading income. For the nine months ended September 30, 2021, Other Noninterest Income increased $7.6 million, or 6%, from the prior-year period, primarily due to higher allocations of certain noninterest income related to the business.

Wealth Management Net Interest Income

For the quarter ended September 30, 2021, Net Interest Income stated on an FTE basis increased $1.6 million, or 1%, from the prior-year quarter and decreased $40.9 million, or 7%, from the prior-year period for the nine months ended September 30, 2021. The increase for the three months ended September 30, 2021 was primarily due to higher loans and deposits balances, partially offset by lower average interest rates. The decrease for the nine months ended September 30, 2021 primarily reflected lower average interest rates, partially offset by higher deposit and loan balances. Average earning assets increased $4.1 billion to $33.8 billion in the current quarter from $29.7 billion in the prior-year quarter and increased $2.9 billion to $32.2 billion in the nine-month period ended September 30, 2021 from $29.3 billion in the prior-year period. Earning assets and funding sources for the three and nine months ended September 30, 2021 were primarily comprised of loans and domestic interest-bearing deposits, respectively.

Wealth Management Provision for Credit Losses

For the quarter ended September 30, 2021, there was a $6.1 million release of credit reserves compared to a $19.7 million provision for credit losses in the prior-year quarter. For the nine months ended September 30, 2021, there was a $40.9 million release of credit reserves compared to a $92.2 million provision for credit losses in the prior-year period.

The release of credit reserves for the three and nine months ended September 30, 2021, was primarily due to a decrease in the reserve evaluated on a collective basis, which relates to pooled financial assets sharing similar risk characteristics. The decrease in the collective basis reserve was driven by continued improvements in projected economic conditions and portfolio credit quality, partially offset by portfolio growth.

Wealth Management Noninterest Expense

For the quarter ended September 30, 2021, Noninterest Expense, which includes the direct expenses of the reporting segment, indirect expense allocations for product and operating support and indirect expense allocations for certain corporate support services, increased $24.6 million or 6% from the prior-year quarter, primarily reflecting higher incentives and expense allocations.

For the nine months ended September 30, 2021, Noninterest Expense increased $59.8 million, or 5%, from the prior-year period, primarily reflecting higher expense allocations, incentives, employee benefits, and outside services.

CONSOLIDATED BALANCE SHEETS

The following tables summarize selected consolidated balance sheet information.

TABLE 22: SELECT CONSOLIDATED BALANCE SHEET INFORMATION

($ In Billions)			SEPTEMBER 30, 2021			DECEMBER 31, 2020			CHANGE
Assets
Federal Reserve and Other Central Bank Deposits and Other(1)			$	50.0		$	55.4		$	(5.4)		(10)		%
Interest-Bearing Due from and Deposits with Banks(2)			5.3			6.6			(1.3)			(20)
Securities Purchased under Agreements to Resell			0.9			1.6			(0.7)			(45)
Total Securities(3)			60.3			61.1			(0.8)			(1)
Loans and Leases			39.4			33.8			5.6			17
Total Earning Assets			155.9			158.5			(2.6)			(2)
Total Assets			169.1			170.0			(0.9)			(1)
Liabilities and Stockholders' Equity
Total Interest-Bearing Deposits			99.7			100.8			(1.1)			(1)
Demand and Other Noninterest-Bearing Deposits			42.3			43.1			(0.8)			(2)
Federal Funds Purchased			—			0.3			(0.3)			N/M
Securities Sold under Agreements to Repurchase			0.6			—			0.6			N/M
Other Borrowings			5.6			4.0			1.6			40
Total Stockholders’ Equity			11.9			11.7			0.2			2

(1) Federal Reserve and Other Central Bank Deposits and Other includes collateral deposits with certain securities depositories and clearing houses for the purpose of presenting earning assets; such deposits are presented in Other Assets on the consolidated balance sheets.

(2) Interest-Bearing Due from and Deposits with Banks includes the interest-bearing component of Cash and Due from Banks and Interest-Bearing Deposits with Banks as presented on the consolidated balance sheets.

(3) Total Securities includes certain community development investments and Federal Home Loan Bank and Federal Reserve stock, which are classified in Other Assets on the consolidated balance sheets.

TABLE 23: SELECT AVERAGE CONSOLIDATED BALANCE SHEET INFORMATION

			THREE MONTHS ENDED SEPTEMBER 30,												NINE MONTHS ENDED SEPTEMBER 30,
($ In Billions)			2021			2020			CHANGE						2021			2020			CHANGE
Assets
Federal Reserve and Other Central Bank Deposits and Other(1)			$	40.5		$	31.6		$	8.9		28		%	$	38.4		$	27.3		$	11.1		41		%
Interest-Bearing Due from and Deposits with Banks(2)			5.2			4.8			0.4			7			6.1			5.4			0.7			14
Securities Purchased under Agreements to Resell			0.8			1.8			(1.0)			(53)			1.1			1.1			—			(1)
Total Securities(3)			59.0			58.1			0.9			2			60.3			54.3			6.0			11
Loans and Leases			38.4			33.1			5.3			16			36.3			33.6			2.7			8
Total Earning Assets			143.9			129.4			14.5			11			142.2			121.7			20.5			17
Total Assets			156.5			140.9			15.6			11			154.7			134.6			20.1			15
Liabilities and Stockholders' Equity
Total Interest-Bearing Deposits			99.6			87.6			12.0			14			97.7			84.1			13.6			16
Demand and Other Noninterest-Bearing Deposits			30.2			25.2			5.0			20			30.4			22.1			8.3			37
Federal Funds Purchased			0.2			0.3			(0.1)			(40)			0.3			1.1			(0.8)			(77)
Securities Sold under Agreements to Repurchase			0.3			0.2			0.1			58			0.2			0.2			—			(11)
Other Borrowings			5.5			6.1			(0.6)			(10)			5.1			6.6			(1.5)			(21)
Total Stockholders’ Equity			11.9			11.4			0.5			4			11.6			11.1			0.5			5

(1) Federal Reserve and Other Central Bank Deposits and Other includes collateral deposits with certain securities depositories and clearing houses for the purpose of presenting earning assets; such deposits are presented in Other Assets on the consolidated balance sheets.

(2) Interest-Bearing Due from and Deposits with Banks includes the interest-bearing component of Cash and Due from Banks and Interest-Bearing Deposits with Banks as presented on the consolidated balance sheets.

(3) Total Securities includes certain community development investments and Federal Home Loan Bank and Federal Reserve stock, which are classified in Other Assets on the consolidated balance sheets.

Average balances are considered to be a better measure of balance sheet trends, as period-end balances can be impacted by the timing of deposit and withdrawal activity involving large client balances. The current-quarter growth in the average consolidated balance sheet was primarily driven by higher customer deposit balances.

Short-Term Borrowings. Short-term borrowings includes Federal Funds Purchased, Securities Sold under Agreements to Repurchase, and Other Borrowings. Securities Sold under Agreements to Repurchase are accounted for as collateralized financings and recorded at the amounts at which the securities were sold plus accrued interest. To minimize any potential credit

CONSOLIDATED BALANCE SHEETS (continued)

risk associated with these transactions, the fair value of the securities sold is monitored, limits are set on exposure with counterparties, and the financial condition of counterparties is regularly assessed. Securities Sold under Agreements to Repurchase are held by the counterparty until the repurchase.

During the third quarter of 2021, Northern Trust became a Government Securities Division (GSD) netting and sponsoring member in the Fixed Income Clearing Corporation (FICC) sponsored member program. FICC, a wholly-owned subsidiary of The Depository Trust & Clearing Corporation, is a central counterparty and provides netting and settlement for the U.S. Government securities marketplace. Northern Trust nets securities sold under repurchase agreements against those purchased under resale agreements when FICC is the counterparty. See Note 5 - Securities Sold Under Agreements to Repurchase, Note 21 - Commitments and Contingent Liabilities and Note 23 - Offsetting of Assets and Liabilities to the consolidated financial statements provided in Item 1. Consolidated Financial Statements (unaudited) for additional information on our repurchase and reverse repurchase agreements.

Stockholders’ Equity. For the three months ended September 30, 2021, the increase in average Stockholders’ Equity was primarily attributable to Retained Earnings, partially offset by lower Accumulated Other Comprehensive Income (AOCI) and the repurchase of common stock pursuant to the Corporation’s share repurchase program. For the nine months ended September 30, 2021, the increase in average Stockholders’ Equity was primarily attributable to Retained Earnings and AOCI, partially offset by lower Additional Paid-in Capital and the repurchase of common stock pursuant to the Corporation’s share repurchase program.

During the three and nine months ended September 30, 2021, the Corporation declared cash dividends totaling $148.0 million and $447.1 million to common stockholders, and cash dividends totaling $16.2 million and $37.1 million to preferred stockholders, respectively.

On December 18, 2020, the Federal Reserve extended its capital distribution limits into the first quarter of 2021 with certain modifications, which included continuing to limit dividend payments and share repurchases based on recent income. During the first quarter of 2021, the Corporation restarted its share repurchase program in accordance with such limitations. On June 30, 2021, the additional capital distribution restrictions that were put in place in response to the COVID-19 pandemic expired.

For the three months ended September 30, 2021, the Corporation repurchased 859,587 shares of common stock, including 11,169 shares withheld related to share-based compensation, at a total cost of $100.0 million ($116.34 average price per share). For the nine months ended September 30, 2021, the Corporation repurchased 2,511,564 shares of common stock, including 378,346 shares withheld related to share-based compensation, at a total cost of $265.8 million ($105.84 average price per share).

ASSET QUALITY

Securities Portfolio

Northern Trust maintains a high quality debt securities portfolio. Debt securities not explicitly rated were grouped where possible under the credit rating of the issuer of the security.

The following tables provide the fair value of available for sale (AFS) debt securities and amortized cost of held to maturity (HTM) debt securities by credit rating.

TABLE 24: FAIR VALUE OF AVAILABLE FOR SALE DEBT SECURITIES BY CREDIT RATING

			AS OF SEPTEMBER 30, 2021
($ In Millions)			AAA			AA			A			BBB			NOT RATED			TOTAL
U.S. Government			$	2,550.2		$	—		$	—		$	—		$	—		$	2,550.2
Obligations of States and Political Subdivisions			1,167.6			2,582.5			—			—			—			3,750.1
Government Sponsored Agency			18,541.7			—			—			—			—			18,541.7
Non-U.S. Government			235.1			38.3			—			—			—			273.4
Corporate Debt			433.7			623.5			1,306.0			29.8			50.8			2,443.8
Covered Bonds			535.6			—			23.4			—			—			559.0
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			2,115.4			751.7			155.6			—			—			3,022.7
Other Asset-Backed			5,635.0			—			—			—			—			5,635.0
Commercial Mortgage-Backed			1,257.0			—			—			—			—			1,257.0
Total			$	32,471.3		$	3,996.0		$	1,485.0		$	29.8		$	50.8		$	38,032.9
Percent of Total			85		%	11		%	4		%	—		%	—		%	100		%

ASSET QUALITY (continued)

Securities Portfolio (continued)

			AS OF DECEMBER 31, 2020
($ In Millions)			AAA			AA			A			BBB			NOT RATED			TOTAL
U.S. Government			$	2,799.9		$	—		$	—		$	—		$	—		$	2,799.9
Obligations of States and Political Subdivisions			918.1			2,165.5			—			—			—			3,083.6
Government Sponsored Agency			24,956.7			—			—			—			—			24,956.7
Non-U.S. Government			669.8			38.8			5.4			—			—			714.0
Corporate Debt			426.3			790.0			1,123.5			—			199.8			2,539.6
Covered Bonds			453.3			—			24.9			—			74.9			553.1
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			1,622.0			566.0			157.8			—			—			2,345.8
Other Asset-Backed			3,947.5			—			—			—			50.0			3,997.5
Commercial Mortgage-Backed			1,031.8			—			—			—			—			1,031.8
Total			$	36,825.4		$	3,560.3		$	1,311.6		$	—		$	324.7		$	42,022.0
Percent of Total			88		%	8		%	3		%	—		%	1		%	100		%

As of September 30, 2021, the less than 1% of AFS debt securities not rated by Moody’s Investors Service, Standard and Poor’s or Fitch Ratings consisted of corporate debt securities.

As of December 31, 2020, the 1% of AFS debt securities not rated by Moody’s Investors Service, Standard and Poor’s or Fitch Ratings consisted of corporate debt, covered bonds, and other asset-backed securities.

TABLE 25: AMORTIZED COST OF HELD TO MATURITY DEBT SECURITIES BY CREDIT RATING

			AS OF SEPTEMBER 30, 2021
($ In Millions)			AAA			AA			A			BBB			NOT RATED			TOTAL
U.S. Government			$	111.0		$	—		$	—		$	—		$	—		$	111.0
Obligations of States and Political Subdivisions			—			1.0			—			—			—			1.0
Government Sponsored Agency			6,208.8			—			—			—			—			6,208.8
Non-U.S. Government			657.3			743.1			1,059.3			333.1			—			2,792.8
Corporate Debt			49.2			387.2			509.4			—			—			945.8
Covered Bonds			2,988.5			—			—			—			—			2,988.5
Certificates of Deposit			—			—			—			—			777.8			777.8
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			4,004.8			1,767.2			31.7			1.2			—			5,804.9
Other Asset-Backed			694.3			—			—			—			—			694.3
Other			—			—			—			—			472.9			472.9
Total			$	14,713.9		$	2,898.5		$	1,600.4		$	334.3		$	1,250.7		$	20,797.8
Percent of Total			71		%	14		%	8		%	2		%	5		%	100		%

			AS OF DECEMBER 31, 2020
(In Millions)			AAA			AA			A			BBB			NOT RATED			TOTAL
U.S. Government			$	90.0		$	—		$	—		$	—		$	—		$	90.0
Obligations of States and Political Subdivisions			—			1.0			—			1.1			—			2.1
Government Sponsored Agency			3.0			—			—			—			—			3.0
Non-U.S. Government			319.8			1,337.4			6,630.6			48.8			—			8,336.6
Corporate Debt			3.8			279.1			305.1			—			—			588.0
Covered Bonds			3,184.6			—			—			—			—			3,184.6
Certificates of Deposit			—			—			—			—			807.2			807.2
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			2,590.9			1,057.1			—			—			—			3,648.0
Other Asset-Backed			677.0			—			—			—			—			677.0
Other			—			—			—			—			454.6			454.6
Total			$	6,869.1		$	2,674.6		$	6,935.7		$	49.9		$	1,261.8		$	17,791.1
Percent of Total			39		%	15		%	39		%	—		%	7		%	100		%

As of September 30, 2021 and December 31, 2020, the 5% and 7%, respectively, of HTM debt securities not rated by Moody’s Investors Service, Standard and Poor’s or Fitch Ratings consisted of certificates of deposit with a remaining life of less than six months, as well as investments purchased by Northern Trust to fulfill its obligations under the Community Reinvestment Act

ASSET QUALITY (continued)

Securities Portfolio (continued)

(CRA). Northern Trust fulfills its obligations under the CRA by making qualified investments for purposes of supporting institutions and programs that benefit low-to-moderate income communities within Northern Trust’s market area.

Net unrealized gains within the investment securities portfolio totaled $186.4 million at September 30, 2021, compared to net unrealized gains of $872.6 million as of December 31, 2020. Net unrealized gains as of September 30, 2021 were comprised of $499.1 million and $312.7 million of gross unrealized gains and losses, respectively. Net unrealized gains as of December 31, 2020 were comprised of $981.9 million and $109.3 million of gross unrealized gains and losses, respectively.

As of September 30, 2021, the $38.0 billion AFS debt securities portfolio had unrealized losses of $90.9 million and $27.3 million related to government-sponsored agency and obligations of states and political subdivisions, respectively, which are primarily attributable to changes in market interest rates and credit spreads since their purchase. As of December 31, 2020, the $42.0 billion AFS debt securities portfolio had unrealized losses of $26.9 million and $2.8 million related to government-sponsored agency and other asset-backed securities, respectively, which are primarily attributable to changes in market interest rates and credit spreads since their purchase. As of September 30, 2021 and December 31, 2020, 15% and 16%, respectively of the AFS corporate debt securities portfolio was backed by guarantees provided by U.S. and non-U.S. government entities.

As of September 30, 2021, the $20.8 billion HTM debt securities portfolio had unrealized losses of $61.1 million, $47.4 million and $41.9 million related to other residential mortgage-backed securities, government-sponsored agency, and sub-sovereign, supranational and non-U.S. agency bonds, respectively, which are primarily attributable to changes in overall market interest rates and credit spreads since their purchase. As of December 31, 2020, the $17.8 billion HTM debt securities portfolio had an unrealized loss of $76.5 million related to other residential mortgage-backed securities, which is primarily attributable to changes in overall market interest rates and credit spreads since their purchase.

HTM debt securities consist of securities that management intends to, and Northern Trust has the ability to, hold until maturity. During the three months ended September 30, 2021, no securities were transferred from AFS to HTM. During the nine months ended September 30, 2021, $6.9 billion of government sponsored agency securities were transferred from AFS to HTM for capital management purposes, all of which were transferred in the second quarter of 2021. Upon transfer of a debt security from the AFS to HTM classification, the amortized cost is reset to fair value. Any net unrealized gain or loss at the date of transfer will remain in AOCI and be amortized into net interest income over the remaining life of the securities using the effective interest method. The amortization of amounts retained in AOCI will offset the effect on interest income of the amortization of the premium or discount resulting from transferring the securities at fair value. During the three months ended September 30, 2020, no securities were transferred from AFS to HTM. During the nine months ended September 30, 2020, $301.5 million of securities reflected in U.S government were transferred from AFS to HTM, all of which were transferred in the second quarter of 2020.

For additional information relating to the securities portfolio, refer to Note 4 — Securities to the consolidated financial statements provided in Item 1. Consolidated Financial Statements (unaudited).

Northern Trust participates in the repurchase agreement market as a relatively low-cost alternative for short-term funding. Securities purchased under agreements to resell and securities sold under agreements to repurchase are accounted for as collateralized financings and recorded at the amounts at which the securities were acquired or sold plus accrued interest. To minimize potential credit risk associated with these transactions, the fair value of the securities purchased or sold is monitored, limits are set on exposure with counterparties, and the financial condition of counterparties is regularly assessed. It is Northern Trust’s policy to take possession, either directly or via third-party custodians, of securities purchased under agreements to resell. Securities sold under agreements to repurchase are held by the counterparty until their repurchase.

For additional information relating to the securities sold under agreements to repurchase, refer to Note 5 — Securities Sold Under Agreements to Repurchase to the consolidated financial statements provided in Item 1. Consolidated Financial Statements (unaudited).

Nonaccrual Loans and Leases and Other Real Estate Owned

Nonaccrual assets consist of nonaccrual loans and leases and other real estate owned (OREO). OREO is comprised of commercial and residential properties acquired in partial or total satisfaction of loans.

The following table provides the amounts of nonaccrual loans and leases, by loan and lease segment and class, and of OREO that were outstanding at the dates shown, as well as the balance of loans that were delinquent 90 days or more and still accruing interest. Loans that are delinquent 90 days or more and still accruing interest can fluctuate widely based on the timing of cash collections, renegotiation and renewals.

ASSET QUALITY (continued)

Nonaccrual Loans and Leases and Other Real Estate Owned (continued)

TABLE 26: NONACCRUAL ASSETS

($ In Millions)			SEPTEMBER 30, 2021			DECEMBER 31, 2020
Nonaccrual Loans and Leases
Commercial
Commercial and Institutional			$	19.6		$	26.4
Commercial Real Estate			75.7			40.2
Total Commercial			$	95.3		$	66.6
Personal
Residential Real Estate			$	45.5		$	62.2
Private Client			0.2			2.9
Total Personal			$	45.7		$	65.1
Total Nonaccrual Loans and Leases			141.0			131.7
Other Real Estate Owned			0.2			0.7
Total Nonaccrual Assets			$	141.2		$	132.4
90 Day Past Due Loans Still Accruing			$	13.2		$	8.9
Nonaccrual Loans and Leases to Total Loans and Leases			0.36		%	0.39		%
Allowance for Credit Losses Assigned to Loans and Leases to Nonaccrual Loans and Leases			1.0		x	1.4		x

Nonaccrual assets of $141.2 million as of September 30, 2021 increased from December 31, 2020 primarily due to two new nonaccrual loans in the commercial real estate portfolio, partially offset by net payoffs in the residential real estate, commercial and institutional, and private client portfolios. In addition to the negative impact on net interest income and the risk of credit losses, nonaccrual assets also increase operating costs due to the expense associated with collection efforts. Changes in the level of nonaccrual assets may be indicative of changes in the credit quality of one or more loan classes. Changes in credit quality impact the allowance for credit losses through the resultant adjustment of the allowance evaluated on an individual basis and the quantitative and qualitative factors used in the determination of the allowance evaluated on a collective basis within the allowance for credit losses.

Northern Trust’s credit policies do not allow for the origination of loan types generally considered to be high risk in nature, such as option adjustable rate mortgage loans, subprime loans, loans with initial “teaser” rates and loans with excessively high loan-to-value ratios. Residential real estate loans consist of first lien mortgages and equity credit lines, which generally require a loan-to-collateral value of no more than 65% to 80% at inception. Appraisals of supporting collateral for residential real estate loans are obtained at loan origination and upon refinancing or default or when otherwise considered warranted. Residential real estate collateral appraisals are performed and reviewed by independent third parties.

The commercial real estate portfolio consists of commercial mortgages and construction, acquisition and development loans extended primarily to experienced investors well known to Northern Trust. Underwriting standards generally reflect conservative loan-to-value ratios and debt service coverage requirements. Recourse to owners through guarantees also is commonly required.

For additional information relating to the loans and leases portfolio, refer to Note 6 — Loans and Leases to the consolidated financial statements provided in Item 1. Consolidated Financial Statements (unaudited).

Allowance for Credit Losses

The allowance for credit losses—which represents management’s best estimate of lifetime expected credit losses related to various portfolios subject to credit risk, off-balance-sheet credit exposure, and specific borrower relationships—is determined by management through a disciplined credit review process. Northern Trust measures expected credit losses of financial assets with similar risk characteristics on a collective basis. A financial asset is measured individually if it does not share similar risk characteristics with other financial assets and the related allowance is determined through an individual evaluation.

Management’s estimates utilized in establishing an appropriate level of allowance for credit losses are not dependent on any single assumption. In determining an appropriate allowance level, management evaluates numerous variables, many of which are interrelated or dependent on other assumptions and estimates, and takes into consideration past events, current conditions and reasonable and supportable forecasts.

The results of the credit reserve estimation methodology are reviewed quarterly by Northern Trust’s Credit Loss Reserve Committee, which receives input from Credit Risk Management, Treasury, Corporate Finance, the Economic Research group, and each of Northern Trust’s business units.

ASSET QUALITY (continued)

Allowance for Credit Losses (continued)

As of September 30, 2021, the allowance for credit losses related to loans and leases, undrawn loan commitments and standby letters of credit, HTM debt securities, and other financial assets, was $143.9 million, $39.8 million, $10.4 million, and $1.0 million, respectively. As of December 31, 2020, the allowance for credit losses related to loans and leases, undrawn loan commitments and standby letters of credit, HTM debt securities, and other financial assets, was $190.7 million, $61.1 million, $7.3 million, and $0.8 million, respectively. For additional information relating to the allowance for credit losses and the changes in the allowance for credit losses during the three and nine months ended September 30, 2021 and 2020 due to charge-offs, recoveries and provisions for credit losses, refer to Note 7 — Allowance for Credit Losses to the consolidated financial statements provided in Item 1. Consolidated Financial Statements (unaudited). The following table shows the allowance evaluated on an individual and collective basis for the loans and leases portfolio by segment and class.

TABLE 27: ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES FOR LOANS AND LEASES

			SEPTEMBER 30, 2021						DECEMBER 31, 2020
($ In Millions)			ALLOWANCE AMOUNT			PERCENT OF LOANS TO TOTAL LOANS			ALLOWANCE AMOUNT			PERCENT OF LOANS TO TOTAL LOANS
Evaluated on an Individual Basis			$	10.6		—		%	$	10.7		—		%
Evaluated on a Collective Basis
Commercial
Commercial and Institutional			60.4			29			100.6			30
Commercial Real Estate			72.3			11			70.7			10
Lease Financing, net			0.4			—			0.4			—
Non-U.S.			9.2			6			17.7			4
Other			—			1			—			1
Total Commercial			142.3			47			189.4			45
Personal
Residential Real Estate			21.9			15			28.9			18
Private Client			8.1			37			20.6			35
Non-U.S.			0.8			1			2.2			2
Other			—			—			—			—
Total Personal			30.8			53			51.7			55
Total Allowance Evaluated on a Collective Basis			$	173.1					$	241.1
Total Allowance for Credit Losses			$	183.7					$	251.8
Allowance Assigned to
Loans and Leases			$	143.9					$	190.7
Undrawn Commitments and Standby Letters of Credit			39.8						61.1
Total Allowance for Credit Losses			$	183.7					$	251.8
Allowance Assigned to Loans and Leases to Total Loans and Leases			0.36		%				0.56		%

STATEMENTS OF CASH FLOWS

The following discusses the statement of cash flow activities for the nine months ended September 30, 2021 and 2020.

TABLE 28: CASH FLOW ACTIVITY SUMMARY

									NINE MONTHS ENDED SEPTEMBER 30,
(In Millions)									2021			2020
Net cash provided by (used in):
Operating activities									$	(685.9)		$	420.5
Investing activities									188.4			(13,114.5)
Financing activities									430.0			13,032.3
Effect of Foreign Currency Exchange Rates on Cash									(127.3)			(60.0)
Change in Cash and Due from Banks									$	(194.8)		$	278.3

Operating Activities

Net cash used in operating activities of $685.9 million for the nine months ended September 30, 2021 was primarily attributable to higher net collateral deposited with derivative counterparties, partially offset by period earnings and the impact of higher non-cash charges such as depreciation and amortization.

Net cash provided by operating activities of $420.5 million for the nine months ended September 30, 2020 was primarily attributable to period earnings and the impact of higher non-cash charges such as depreciation and amortization and the provision for credit losses, partially offset by higher net collateral deposited with derivative counterparties and net changes in other operating activities.

Investing Activities

Net cash provided by investing activities of $188.4 million for the nine months ended September 30, 2021 was primarily attributable to decreased levels of Federal Reserve and other central bank deposits, net proceeds from HTM debt securities, lower levels of interest-bearing deposits with banks, net changes in other investing activities, and lower levels of securities purchased under agreements to resell, partially offset by higher levels of loans and leases, net purchases of AFS debt securities and higher client security settlement receivables.

Net cash used in investing activities of $13.1 billion for the nine months ended September 30, 2020 was primarily attributable to increased levels of Federal Reserve and other central bank deposits as well as net purchases of debt securities held to maturity and available for sale, partially offset by lower levels of interest-bearing deposits with banks.

Financing Activities

Net cash provided by financing activities of $430.0 million for the nine months ended September 30, 2021 was primarily attributable to increased levels of short-term borrowings and securities sold under agreements to repurchase, partially offset by repayments of senior notes, dividends paid on common stock, a decrease in total deposits, the repurchase of common stock pursuant to the Corporation’s share repurchase program, and a decrease in federal funds purchased. The decrease in total deposits was primarily attributable to lower levels of non-U.S offices noninterest-bearing and interest-bearing client deposits, partially offset by an increase in domestic noninterest-bearing deposits and savings, money market, and other interest-bearing deposits.

Net cash provided by financing activities of $13.0 billion for the nine months ended September 30, 2020 was primarily attributable to the increased levels of total deposits. The increase in total deposits was primarily attributable to higher levels of non-U.S. offices noninterest-bearing client deposits, savings, money market and other interest-bearing deposits, and domestic noninterest-bearing deposits.

CAPITAL RATIOS

The capital ratios of Northern Trust Corporation and its principal subsidiary, The Northern Trust Company, remained strong at September 30, 2021, exceeding the requirements for classification as “well-capitalized” under applicable U.S. regulatory requirements.

As a result of the stress test results published by the Federal Reserve on June 25, 2020, Northern Trust’s stress capital buffer requirement for the 2020 Capital Plan cycle was set at 2.5%. The 2020 stress capital buffer became effective October 1, 2020, and resulted in an effective Common Equity Tier 1 capital ratio minimum requirement of 7.0% inclusive of this buffer. The results of the 2021 stress test, published by the Federal Reserve on June 24, 2021, resulted in Northern Trust’s stress capital buffer and effective Common Equity Tier 1 capital ratio minimum requirement remaining in effect for the 2021 Capital Plan cycle, beginning on October 1, 2021.

The table below provides capital ratios, as well as the required minimum capital ratios, for Northern Trust Corporation and The Northern Trust Company determined by Basel III phased-in requirements.

TABLE 29: REGULATORY CAPITAL RATIOS

Capital Ratios — Northern Trust Corporation			SEPTEMBER 30, 2021						JUNE 30, 2021						SEPTEMBER 30, 2020
STANDARDIZED APPROACH			ADVANCED APPROACH			STANDARDIZED APPROACH			ADVANCED APPROACH			STANDARDIZED APPROACH			ADVANCED APPROACH			WELL-CAPITALIZED RATIOS			MINIMUM CAPITAL RATIOS
Common Equity Tier 1 Capital			11.9		%	13.0		%	12.0		%	13.1		%	13.4		%	13.9		%	N/A			4.5		%
Tier 1 Capital			12.9			14.1			13.1			14.2			14.5			15.1			6.0			6.0
Total Capital			14.3			15.4			14.5			15.5			16.5			16.7			10.0			8.0
Tier 1 Leverage			7.1			7.1			7.1			7.1			7.7			7.7			N/A			4.0
Supplementary Leverage(1)			N/A			8.4			N/A			8.2			N/A			8.8			N/A			3.0

Capital Ratios — The Northern Trust Company			SEPTEMBER 30, 2021						JUNE 30, 2021						SEPTEMBER 30, 2020
STANDARDIZED APPROACH			ADVANCED APPROACH			STANDARDIZED APPROACH			ADVANCED APPROACH			STANDARDIZED APPROACH			ADVANCED APPROACH			WELL-CAPITALIZED RATIOS			MINIMUM CAPITAL RATIOS
Common Equity Tier 1 Capital			12.5		%	13.8		%	12.3		%	13.6		%	13.8		%	14.6		%	6.5		%	4.5		%
Tier 1 Capital			12.5			13.8			12.3			13.6			13.8			14.6			8.0			6.0
Total Capital			13.7			14.9			13.6			14.7			15.6			16.0			10.0			8.0
Tier 1 Leverage			6.8			6.8			6.7			6.7			7.2			7.2			5.0			4.0
Supplementary Leverage(1)			N/A			8.1			N/A			7.7			N/A			8.1			3.0			3.0

(1) In November 2019, the Federal Reserve and other U.S. federal banking agencies adopted a final rule that established a deduction for central bank deposits from the total leverage exposures of custodial banking organizations, including Northern Trust Corporation and The Northern Trust Company, equal to the lesser of (i) the total amount of funds the custodial banking organization and its consolidated subsidiaries have on deposit at qualifying central banks and (ii) the total amount of client funds on deposit at the custodial banking organization that are linked to fiduciary or custodial and safekeeping accounts. The rule became effective on April 1, 2020.

Further, on March 23, 2020, the Federal Reserve issued a temporary rule that required bank holding companies, including Northern Trust Corporation, to deduct their deposits with the Federal Reserve and investments in U.S. Treasury securities from their total leverage exposure. The U.S. Treasury securities deduction is applied in addition to the central bank deposits relief referred to above. This rule became effective on April 1, 2020 and expired on April 1, 2021.

On May 15, 2020, the U.S. federal banking agencies issued a temporary rule that permitted, but did not require, insured depository institutions of bank holding companies to exclude deposits with the Federal Reserve and investments in U.S. Treasury securities from their total leverage exposure. The Northern Trust Company did not elect to take this deduction.

The supplementary leverage ratios at September 30, 2021, June 30, 2021 and September 30, 2020 for the Northern Trust Corporation and The Northern Trust Company reflect the impact of these final rules.

RECENT ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS

There are no accounting pronouncements and developments issued but not yet effective as of September 30, 2021 that are expected to have a significant impact on Northern Trust’s consolidated balance sheets or results of operations.

MARKET RISK MANAGEMENT

There are two types of market risk, interest rate risk associated with the assets and liabilities on the balance sheet, and trading risk. Interest rate risk associated with the assets and liabilities on the balance sheet is the potential for movements in interest rates to cause changes in net interest income and the market value of equity. Trading risk is the potential for movements in market variables such as foreign exchange and interest rates to cause changes in the value of trading positions.

Northern Trust uses two primary measurement techniques to manage interest rate risk: Net Interest Income (NII) sensitivity and Market Value of Equity (MVE) sensitivity. NII sensitivity provides management with a short-term view of the impact of

MARKET RISK MANAGEMENT (continued)

interest rate changes on NII. MVE sensitivity provides management with a long-term view of interest rate changes on MVE based on the period-end balance sheet.

As part of its risk management activities, Northern Trust also measures daily the risk of loss associated with all non-U.S. currency positions using a Value-at-Risk (VaR) model and applying the historical simulation methodology. The following information about Northern Trust’s management of market risk should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2020.

NII Sensitivity — The modeling of NII sensitivity incorporates on-balance-sheet positions, as well as derivative financial instruments (principally interest rate swaps) that are used to manage interest rate risk. Northern Trust uses market implied forward interest rates as the base case and measures the sensitivity (i.e., change) of a static balance sheet to changes in interest rates. Stress testing of interest rates is performed to include such scenarios as immediate parallel shocks to rates, nonparallel (i.e., twist) changes to yield curves that result in their becoming steeper or flatter, and changes to the relationship among the yield curves (i.e., basis risk).

The NII sensitivity analysis incorporates certain critical assumptions such as interest rates and client behaviors under changing rate environments. These assumptions are based on a combination of historical analysis and future expected pricing behavior. The simulation cannot precisely estimate NII sensitivity given uncertainty in the assumptions. The following key assumptions are incorporated into the simulation:

▪the balance sheet size and mix remains constant over the simulation horizon with maturing assets and liabilities replaced with instruments with similar terms as those that are maturing, with the exception of certain nonmaturity deposits that are considered short-term in nature and therefore receive a more conservative interest-bearing treatment;

▪prepayments on mortgage loans and securities collateralized by mortgages are projected under each rate scenario using a third-party mortgage analytics system that incorporates market prepayment assumptions;

▪cash flows for structured securities are estimated using a third-party vendor in conjunction with the prepayments provided by the third-party mortgage analytics vendor;

▪nonmaturity deposit pricing is projected based on Northern Trust’s actual historical patterns and management judgment, depending upon the availability of historical data and current pricing strategies or judgment; and

▪new business rates are based on current spreads to market indices.

The following table shows the estimated NII impact over the next twelve months of 100 and 200 basis point ramps upward and 100 basis point ramp downward movements in interest rates relative to forward rates. Each rate movement is assumed to occur gradually over a one-year period.

TABLE 30: NET INTEREST INCOME SENSITIVITY AS OF SEPTEMBER 30, 2021

($ In Millions)			INCREASE (DECREASE) ESTIMATED IMPACT ON NEXT TWELVE MONTHS OF NET INTEREST INCOME
Increase in Interest Rates Above Market Implied Forward Rates
100 Basis Points			$	308
200 Basis Points			534
Decrease in Interest Rates Below Market Implied Forward Rates
100 Basis Points			$	36

The NII sensitivity analysis does not incorporate certain management actions that may be used to mitigate adverse effects of actual interest rate movement. For that reason and others, the estimated impacts do not reflect the likely actual results but serve as estimates of interest rate risk. NII sensitivity is not comparable to actual results disclosed elsewhere or directly predictive of future values of other measures provided.

MVE Sensitivity — MVE is defined as the present value of assets minus the present value of liabilities, net of the value of financial derivatives that are used to manage the interest rate risk of balance sheet items. The potential effect of interest rate changes on MVE is derived from the impact of such changes on projected future cash flows and the present value of these cash flows and is then compared to the established limit. Northern Trust uses current market rates (and the future rates implied by these market rates) as the base case and measures MVE sensitivity under various rate scenarios. Stress testing of interest rates is performed to include such scenarios as immediate parallel shocks to rates, nonparallel (i.e., twist) changes to yield curves that result in their becoming steeper or flatter, and changes to the relationship among the yield curves (i.e., basis risk).

The MVE sensitivity analysis incorporates certain critical assumptions such as interest rates and client behaviors under changing rate environments. These assumptions are based on a combination of historical analysis and future expected pricing behavior. The simulation cannot precisely estimate MVE sensitivity given uncertainty in the assumptions. Many of the

MARKET RISK MANAGEMENT (continued)

assumptions that apply to NII sensitivity also apply to MVE sensitivity simulations, with the following separate key assumptions incorporated into the MVE simulation:

▪the present value of nonmaturity deposits are estimated using dynamic decay methodologies or estimated remaining lives, which are based on a combination of Northern Trust’s actual historical runoff patterns and management judgment—some balances are assumed to be core and have longer lives while other balances are assumed to be temporary and have comparatively shorter lives;

▪the present values of most noninterest-related balances (such as receivables, equipment, and payables) are the same as their book values; and

▪Monte Carlo simulation is used to generate forward interest rate paths.

The following table shows the estimated impact on MVE of 100 and 200 basis point shocks up and a 100 basis point shock down from current market implied forward rates.

TABLE 31: MARKET VALUE OF EQUITY SENSITIVITY AS OF SEPTEMBER 30, 2021

($ In Millions)			INCREASE (DECREASE) ESTIMATED IMPACT ON MARKET VALUE OF EQUITY
Increase in Interest Rates Above Market Implied Forward Rates
100 Basis Points			$	291
200 Basis Points			12
Decrease in Interest Rates Below Market Implied Forward Rates
100 Basis Points			$	12

The MVE simulations do not incorporate certain management actions that may be used to mitigate adverse effects of actual interest rate movements. For that reason and others, the estimated impacts do not reflect the likely actual results but serve as estimates of interest rate risk. MVE sensitivity is not comparable to actual results disclosed elsewhere or directly predictive of future values of other measures provided.

Foreign Currency Value-At-Risk (VaR) — Northern Trust measures daily the risk of loss associated with all non-U.S. currency positions using a VaR model and applying the historical simulation methodology. This statistical model provides estimates, based on a variety of high confidence levels, of the potential loss in value that might be incurred if an adverse shift in non-U.S. currency exchange rates and interest rates were to occur over a small number of days. The model incorporates foreign currency and interest rate volatilities and correlations in price movements among the currencies. VaR is computed for each trading desk and for the global portfolio.

Northern Trust monitors several variations of the global foreign exchange (GFX) VaR measures to meet specific regulatory and internal management needs. Variations include different methodologies (historical simulation, Monte Carlo simulation and Taylor approximation), horizons of one day and ten days, confidence levels of 95% and 99%, subcomponent VaRs using only foreign exchange (FX) drivers and only interest rate (IR) drivers, and look-back periods of one year, two years, and four years. Those alternative measures provide management an array of corroborating metrics and alternative perspectives on Northern Trust’s market risks.

During the three and nine months ended September 30, 2021, Northern Trust did not incur an actual GFX trading loss in excess of the daily GFX VaR estimate.

The table below presents the levels of total regulatory VaR and its subcomponents for GFX in the periods indicated below, based on the historical simulation methodology, a 99% confidence level, a one-day horizon and equally-weighted volatility. The total VaR for GFX is typically less than the sum of its two subcomponents due to diversification benefits derived from the two subcomponents.

TABLE 32: GLOBAL FOREIGN CURRENCY VALUE-AT-RISK

($ In Millions)			TOTAL VaR (FX AND IR DRIVERS)						FX VaR (FX DRIVERS ONLY)						IR VaR (IR DRIVERS ONLY)
THREE MONTHS ENDED			SEPTEMBER 30, 2021			JUNE 30, 2021			SEPTEMBER 30, 2021			JUNE 30, 2021			SEPTEMBER 30, 2021			JUNE 30, 2021
High			$	0.3		$	0.3		$	0.2		$	0.3		$	0.2		$	0.2
Low			0.1			—			—			—			0.1			—
Average			0.1			0.1			0.1			0.1			0.1			0.1
Quarter-End			0.1			0.1			0.1			0.1			0.1			0.1

RECONCILIATION TO FULLY TAXABLE EQUIVALENT

The following table presents a reconciliation of interest income, net interest income, net interest margin, and total revenue prepared in accordance with GAAP to such measures on an FTE basis, which are non-GAAP financial measures. Net interest margin is calculated by dividing annualized net interest income by average interest-earning assets. Management believes this presentation provides a clearer indication of these financial measures for comparative purposes. When adjusted to an FTE basis, yields on taxable, nontaxable and partially taxable assets are comparable; however, the adjustment to an FTE basis has no impact on net income.

TABLE 33: RECONCILIATION TO FULLY TAXABLE EQUIVALENT

			THREE MONTHS ENDED SEPTEMBER 30,						NINE MONTHS ENDED SEPTEMBER 30,
($ In Millions)			2021			2020			2021			2020
Net Interest Income
Interest Income - GAAP			$	351.3		$	355.4		$	1,044.3		$	1,290.9
Add: FTE Adjustment			10.7			7.9			25.6			23.7
Interest Income (FTE) - Non-GAAP			$	362.0		$	363.3		$	1,069.9		$	1,314.6
Net Interest Income - GAAP			$	346.4		$	328.6		$	1,022.1		$	1,108.8
Add: FTE Adjustment			10.7			7.9			25.6			23.7
Net Interest Income (FTE) - Non-GAAP			$	357.1		$	336.5		$	1,047.7		$	1,132.5
Net Interest Margin - GAAP			0.95		%	1.01		%	0.96		%	1.22		%
Net Interest Margin (FTE) - Non-GAAP			0.98		%	1.03		%	0.99		%	1.24		%
Total Revenue
Total Revenue - GAAP			$	1,633.8		$	1,485.1		$	4,797.5		$	4,578.9
Add: FTE Adjustment			10.7			7.9			25.6			23.7
Total Revenue (FTE) - Non-GAAP			$	1,644.5		$	1,493.0		$	4,823.1		$	4,602.6

FORWARD-LOOKING STATEMENTS

This report may include statements which constitute “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are identified typically by words or phrases such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “likely,” “plan,” “goal,” “target,” “strategy,” and similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would,” and “could.” Forward-looking statements include statements, other than those related to historical facts, that relate to Northern Trust’s financial results and outlook; capital adequacy; dividend policy and share repurchase program; accounting estimates and assumptions; credit quality including allowance levels; future pension plan contributions; effective tax rate; anticipated expense levels; contingent liabilities; acquisitions; strategies; market and industry trends; and expectations regarding the impact of accounting pronouncements and legislation. These statements are based on Northern Trust’s current beliefs and expectations of future events or future results, and involve risks and uncertainties that are difficult to predict and subject to change. These statements are also based on assumptions about many important factors, including:

• the impact of the ongoing COVID-19 pandemic—and governmental and societal responses thereto—on Northern Trust’s business, financial condition, and results of operations;

• financial market disruptions or economic recession in the United States or other countries across the globe resulting from any of a number of factors;

• volatility or changes in financial markets, including debt and equity markets, that impact the value, liquidity, or credit ratings of financial assets in general, or financial assets held in particular investment funds or client portfolios, including those funds, portfolios, and other financial assets with respect to which Northern Trust has taken, or may in the future take, actions to provide asset value stability or additional liquidity;

• the impact of equity markets on fee revenue;

• the downgrade of U.S. government-issued and other securities;

• changes in foreign exchange trading client volumes and volatility in foreign currency exchange rates, changes in the valuation of the U.S. dollar relative to other currencies in which Northern Trust records revenue or accrues expenses, and Northern Trust’s success in assessing and mitigating the risks arising from all such changes and volatility;

• a decline in the value of securities held in Northern Trust’s investment portfolio, particularly asset-backed securities, the liquidity and pricing of which may be negatively impacted by periods of economic turmoil and financial market disruptions;

• Northern Trust’s ability to address operating risks, including those related to cybersecurity, data security, human errors or omissions, pricing or valuation of securities, fraud, systems performance or defects, systems interruptions, and breakdowns in processes or internal controls;

• Northern Trust’s success in responding to and investing in changes and advancements in technology;

• a significant downgrade of any of Northern Trust’s debt ratings;

• the health and soundness of the financial institutions and other counterparties with which Northern Trust conducts business;

• uncertainties inherent in the complex and subjective judgments required to assess credit risk and establish appropriate allowances therefor;

• changes in the availability of the London Interbank Offered Rate (LIBOR) or the calculation of alternative interest rate benchmarks;

• the pace and extent of continued globalization of investment activity and growth in worldwide financial assets;

• changes in interest rates or in the monetary or other policies of various regulatory authorities or central banks;

• changes in the legal, regulatory and enforcement framework and oversight applicable to financial institutions, including Northern Trust;

• increased costs of compliance and other risks associated with changes in regulation, the current regulatory environment, and areas of increased regulatory emphasis and oversight in the United States and other countries, such as anti-money laundering, anti-bribery, and data privacy;

• failure to satisfy regulatory standards or to obtain regulatory approvals when required, including for the use and distribution of capital;

• changes in tax laws, accounting requirements or interpretations and other legislation in the United States or other countries that could affect Northern Trust or its clients;

• geopolitical risks, risks related to global climate change and the risks of extraordinary events such as pandemics, natural disasters, terrorist events and war, and the responses of the United States and other countries to those events;

• the departure of the United Kingdom from the European Union, commonly referred to as “Brexit;”

• changes in the nature and activities of Northern Trust’s competition;

• Northern Trust’s success in maintaining existing business and continuing to generate new business in existing and targeted markets and its ability to deploy deposits in a profitable manner consistent with its liquidity requirements;

• Northern Trust’s ability to address the complex needs of a global client base and manage compliance with legal, tax, regulatory and other requirements;

• Northern Trust’s ability to maintain a product mix that achieves acceptable margins;

FORWARD-LOOKING STATEMENTS (continued)

• Northern Trust’s ability to continue to generate investment results that satisfy clients and to develop an array of investment products;

• the effectiveness of Northern Trust’s management of its human capital, including its success in recruiting and retaining the necessary personnel to support business growth and expansion and maintain sufficient expertise to support increasingly complex products and services;

• Northern Trust’s success in implementing its expense management initiatives;

• uncertainties inherent in Northern Trust’s assumptions concerning its pension plan, including discount rates and expected contributions, returns and payouts;

• Northern Trust’s success in continuing to enhance its risk management practices and controls and managing risks inherent in its businesses, including credit risk, operational risk, market and liquidity risk, fiduciary risk, compliance risk and strategic risk;

• risks and uncertainties inherent in the litigation and regulatory process, including the possibility that losses may be in excess of Northern Trust’s recorded liability and estimated range of possible loss for litigation exposures;

• risks associated with being a holding company, including Northern Trust’s dependence on dividends from its principal subsidiary;

• the risk of damage to Northern Trust’s reputation which may undermine the confidence of clients, counterparties, rating agencies, and stockholders; and

• other factors identified elsewhere in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2020, including those factors described in Item 1A, “Risk Factors,” and other filings with the SEC, all of which are available on Northern Trust’s website.

Actual results may differ materially from those expressed or implied by forward-looking statements. The information contained herein is current only as of the date of that information. All forward-looking statements included in this document are based upon information presently available, and Northern Trust assumes no obligation to update its forward-looking statements.