Item 1. Consolidated Financial Statements (unaudited)

CONSOLIDATED BALANCE SHEETS (UNAUDITED)			NORTHERN TRUST CORPORATION

(In Millions Except Share Information)			SEPTEMBER 30, 2021			DECEMBER 31, 2020
ASSETS
Cash and Due from Banks			$	4,194.7		$	4,389.5
Federal Reserve and Other Central Bank Deposits			50,030.2			55,503.6
Interest-Bearing Deposits with Banks			2,937.6			4,372.6
Federal Funds Sold			—			—
Securities Purchased under Agreements to Resell			872.8			1,596.5
Debt Securities
Available for Sale (Amortized cost of $37,741.5 and $41,155.7)			38,032.9			42,022.0
Held to Maturity (Fair value of $20,692.8 and $17,797.4)			20,797.8			17,791.1
Trading Account			0.2			0.5
Total Debt Securities			58,830.9			59,813.6
Loans and Leases
Commercial			18,445.9			15,262.0
Personal			21,010.7			18,497.7
Total Loans and Leases (Net of unearned income of $9.9 and $9.8)			39,456.6			33,759.7
Allowance for Credit Losses			(155.3)			(198.8)
Buildings and Equipment			493.6			514.9
Client Security Settlement Receivables			1,954.3			1,160.2
Goodwill			705.5			707.2
Other Assets			9,764.8			8,384.9
Total Assets			$	169,085.7		$	170,003.9
LIABILITIES
Deposits
Demand and Other Noninterest-Bearing			$	19,939.6		$	17,728.5
Savings, Money Market and Other Interest-Bearing			30,580.4			28,631.8
Savings Certificates and Other Time			882.1			937.1
Non U.S. Offices — Noninterest-Bearing			22,329.7			25,382.2
— Interest-Bearing			68,192.8			71,198.4
Total Deposits			141,924.6			143,878.0
Federal Funds Purchased			0.2			260.2
Securities Sold Under Agreements to Repurchase			573.6			39.8
Other Borrowings			5,617.4			4,011.5
Senior Notes			2,527.7			3,122.4
Long-Term Debt			1,160.6			1,189.3
Floating Rate Capital Debt			277.9			277.8
Other Liabilities			5,104.9			5,536.6
Total Liabilities			157,186.9			158,315.6
STOCKHOLDERS' EQUITY
Preferred Stock, No Par Value; Authorized 10,000,000 shares:
Series D, outstanding shares of 5,000			493.5			493.5
Series E, outstanding shares of 16,000			391.4			391.4
Common Stock, $1.66 2/3 Par Value; Authorized 560,000,000 shares;
Outstanding shares of 207,661,247 and 208,289,178			408.6			408.6
Additional Paid-In Capital			935.0			963.6
Retained Earnings			12,862.4			12,207.7
Accumulated Other Comprehensive Income			114.0			428.0
Treasury Stock (37,510,277 and 36,882,346 shares, at cost)			(3,306.1)			(3,204.5)
Total Stockholders’ Equity			11,898.8			11,688.3
Total Liabilities and Stockholders’ Equity			$	169,085.7		$	170,003.9

See accompanying notes to the consolidated financial statements.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)			NORTHERN TRUST CORPORATION

			THREE MONTHS ENDED SEPTEMBER 30,						NINE MONTHS ENDED SEPTEMBER 30,
(In Millions Except Share Information)			2021			2020			2021			2020
Noninterest Income
Trust, Investment and Other Servicing Fees			$	1,111.0		$	1,003.8		$	3,250.1		$	2,968.9
Foreign Exchange Trading Income			66.4			61.6			215.7			221.8
Treasury Management Fees			11.2			11.6			33.7			34.0
Security Commissions and Trading Income			36.5			26.0			104.3			100.9
Other Operating Income			62.3			53.5			171.6			144.4
Investment Security Gains, net			—			—			—			0.1
Total Noninterest Income			1,287.4			1,156.5			3,775.4			3,470.1
Net Interest Income
Interest Income			351.3			355.4			1,044.3			1,290.9
Interest Expense			4.9			26.8			22.2			182.1
Net Interest Income			346.4			328.6			1,022.1			1,108.8
Provision for Credit Losses			(13.0)			0.5			(70.0)			127.5
Net Interest Income after Provision for Credit Losses			359.4			328.1			1,092.1			981.3
Noninterest Expense
Compensation			496.0			461.7			1,500.8			1,421.8
Employee Benefits			101.7			97.5			323.5			285.8
Outside Services			210.7			186.0			625.2			555.0
Equipment and Software			185.2			170.7			540.2			497.1
Occupancy			53.9			51.8			156.9			162.9
Other Operating Expense			81.2			127.0			220.4			274.6
Total Noninterest Expense			1,128.7			1,094.7			3,367.0			3,197.2
Income before Income Taxes			518.1			389.9			1,500.5			1,254.2
Provision for Income Taxes			122.4			95.4			361.6			285.8
Net Income			$	395.7		$	294.5		$	1,138.9		$	968.4
Preferred Stock Dividends			16.2			16.2			37.1			51.5
Net Income Applicable to Common Stock			$	379.5		$	278.3		$	1,101.8		$	916.9
Per Common Share
Net Income – Basic			$	1.81		$	1.32		$	5.24		$	4.35
– Diluted			1.80			1.32			5.22			4.34
Average Number of Common Shares Outstanding
– Basic			208,116,009			208,106,190			208,199,352			208,351,088
– Diluted			208,923,306			208,688,494			209,002,530			209,023,331

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)			NORTHERN TRUST CORPORATION
			THREE MONTHS ENDED SEPTEMBER 30,						NINE MONTHS ENDED SEPTEMBER 30,
(In Millions)			2021			2020			2021			2020
Net Income			$	395.7		$	294.5		$	1,138.9		$	968.4
Other Comprehensive Income (Loss) (Net of Tax and Reclassifications)
Net Unrealized Gains (Losses) on Available for Sale Debt Securities			(89.6)			33.5			(358.4)			551.3
Net Unrealized Gains (Losses) on Cash Flow Hedges			4.6			1.3			2.4			5.3
Net Foreign Currency Adjustments			3.8			1.8			10.9			29.5
Net Pension and Other Postretirement Benefit Adjustments			0.5			17.5			31.1			33.1
Other Comprehensive Income (Loss)			(80.7)			54.1			(314.0)			619.2
Comprehensive Income			$	315.0		$	348.6		$	824.9		$	1,587.6

See accompanying notes to the consolidated financial statements.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)			NORTHERN TRUST CORPORATION

			NINE MONTHS ENDED SEPTEMBER 30, 2021
(In Millions Except Per Share Information)			PREFERRED STOCK			COMMON STOCK			ADDITIONAL PAID-IN CAPITAL			RETAINED EARNINGS			ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)			TREASURY STOCK			TOTAL
Balance at December 31, 2020			$	884.9		$	408.6		$	963.6		$	12,207.7		$	428.0		$	(3,204.5)		$	11,688.3
Net Income			—			—			—			375.1			—			—			375.1
Other Comprehensive Income (Loss) (Net of Tax and Reclassifications)			—			—			—			—			(362.1)			—			(362.1)
Dividends Declared:
Common Stock, $0.70 per share			—			—			—			(151.0)			—			—			(151.0)
Preferred Stock			—			—			—			(16.2)			—			—			(16.2)
Stock Awards and Options Exercised			—			—			(49.5)			—			—			108.9			59.4
Stock Purchased			—			—			—			—			—			(135.6)			(135.6)
Balance at March 31, 2021			$	884.9		$	408.6		$	914.1		$	12,415.6		$	65.9		$	(3,231.2)		$	11,457.9
Net Income			—			—			—			368.1			—			—			368.1
Other Comprehensive Income (Loss) (Net of Tax and Reclassifications)			—			—			—			—			128.8			—			128.8
Dividends Declared:
Common Stock, $0.70 per share			—			—			—			(148.1)			—			—			(148.1)
Preferred Stock			—			—			—			(4.7)			—			—			(4.7)
Stock Awards and Options Exercised			—			—			7.0			—			—			44.2			51.2
Stock Purchased			—			—			—			—			—			(30.2)			(30.2)
Balance at June 30, 2021			$	884.9		$	408.6		$	921.1		$	12,630.9		$	194.7		$	(3,217.2)		$	11,823.0
Net Income			—			—			—			395.7			—			—			395.7
Other Comprehensive Income (Loss) (Net of Tax and Reclassifications)			—			—			—			—			(80.7)			—			(80.7)
Dividends Declared:
Common Stock, $0.70 per share			—			—			—			(148.0)			—			—			(148.0)
Preferred Stock			—			—			—			(16.2)			—			—			(16.2)
Stock Awards and Options Exercised			—			—			13.9			—			—			11.1			25.0
Stock Purchased			—			—			—			—			—			(100.0)			(100.0)
Balance at September 30, 2021			$	884.9		$	408.6		$	935.0		$	12,862.4		$	114.0		$	(3,306.1)		$	11,898.8

See accompanying notes to the consolidated financial statements.

			NINE MONTHS ENDED SEPTEMBER 30, 2020
(In Millions Except Per Share Information)			PREFERRED STOCK			COMMON STOCK			ADDITIONAL PAID-IN CAPITAL			RETAINED EARNINGS			ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)			TREASURY STOCK			TOTAL
Balance at December 31, 2019			$	1,273.4		$	408.6		$	1,013.1		$	11,656.7		$	(194.7)		$	(3,066.1)		$	11,091.0
Cumulative Effect Adjustment related to the adoption of Accounting Standards Update 2016-13			—			—			—			(10.1)			—			—			(10.1)
Net Income			—			—			—			360.6			—			—			360.6
Other Comprehensive Income (Loss) (Net of Tax and Reclassifications)			—			—			—			—			239.7			—			239.7
Dividends Declared:
Common Stock, $0.70 per share			—			—			—			(148.6)			—			—			(148.6)
Preferred Stock			—			—			—			(19.0)			—			—			(19.0)
Redemption of Preferred Stock, Series C			(388.5)			—			—			(11.5)			—			—			(400.0)
Stock Awards and Options Exercised			—			—			(74.8)			—			—			137.7			62.9
Stock Purchased			—			—			—			—			—			(296.8)			(296.8)
Balance at March 31, 2020			$	884.9		$	408.6		$	938.3		$	11,828.1		$	45.0		$	(3,225.2)		$	10,879.7
Net Income			—			—			—			313.3			—			—			313.3
Other Comprehensive Income (Loss) (Net of Tax and Reclassifications)			—			—			—			—			325.4			—			325.4
Dividends Declared:
Common Stock, $0.70 per share			—			—			—			(148.2)			—			—			(148.2)
Preferred Stock			—			—			—			(4.8)			—			—			(4.8)
Stock Awards and Options Exercised			—			—			13.2			—			—			3.8			17.0
Stock Purchased			—			—			—			—			—			(0.2)			(0.2)
Balance at June 30, 2020			$	884.9		$	408.6		$	951.5		$	11,988.4		$	370.4		$	(3,221.6)		$	11,382.2
Net Income			—			—			—			294.5			—			—			294.5
Other Comprehensive Income (Loss) (Net of Tax and Reclassifications)			—			—			—			—			54.1			—			54.1
Dividends Declared:
Common Stock, $0.70 per share			—			—			—			(148.4)			—			—			(148.4)
Preferred Stock			—			—			—			(16.2)			—			—			(16.2)
Stock Awards and Options Exercised			—			—			10.3			—			—			4.1			14.4
Stock Purchased			—			—			—			—			—			(1.5)			(1.5)
Balance at September 30, 2020			$	884.9		$	408.6		$	961.8		$	12,118.3		$	424.5		$	(3,219.0)		$	11,579.1

See accompanying notes to the consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)			NORTHERN TRUST CORPORATION

			NINE MONTHS ENDED SEPTEMBER 30,
(In Millions)			2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income			$	1,138.9		$	968.4
Adjustments to Reconcile Net Income to Net Cash (Used in) Provided by Operating Activities
Investment Security (Losses) Gains, net			—			(0.1)
Amortization and Accretion of Securities and Unearned Income, net			75.3			63.3
Provision for Credit Losses			(70.0)			127.5
Depreciation and Amortization			382.8			372.5
Pension Plan Contributions			(6.7)			(10.6)
Change in Receivables			(139.3)			47.6
Change in Interest Payable			3.8			(5.0)
Change in Collateral With Derivative Counterparties, net			(2,101.2)			(937.2)
Other Operating Activities, net			30.5			(205.9)
Net Cash (Used in) Provided by Operating Activities			(685.9)			420.5
CASH FLOWS FROM INVESTING ACTIVITIES
Change in Federal Funds Sold			—			5.0
Change in Securities Purchased under Agreements to Resell			711.2			(722.9)
Change in Interest-Bearing Deposits with Banks			1,371.0			2,194.9
Net Change in Federal Reserve and Other Central Bank Deposits			4,689.0			(4,592.3)
Purchases of Held to Maturity Debt Securities			(40,859.6)			(28,474.0)
Proceeds from Maturity and Redemption of Held to Maturity Debt Securities			43,934.8			23,901.2
Purchases of Available for Sale Debt Securities			(9,811.6)			(8,558.6)
Proceeds from Sale, Maturity and Redemption of Available for Sale Debt Securities			6,229.6			5,761.9
Change in Loans and Leases			(5,721.5)			(1,339.6)
Purchases of Buildings and Equipment			(65.0)			(102.6)
Purchases and Development of Computer Software			(278.7)			(287.5)
Change in Client Security Settlement Receivables			(814.1)			(1,377.3)
Other Investing Activities, net			803.3			477.3
Net Cash Provided by (Used in) Investing Activities			188.4			(13,114.5)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in Deposits			(271.9)			12,697.8
Change in Federal Funds Purchased			(260.0)			1,650.8
Change in Securities Sold under Agreements to Repurchase			533.8			(219.9)
Change in Short-Term Other Borrowings			1,609.1			(934.0)
Proceeds from Senior Notes			—			993.2
Repayments of Senior Notes			(500.0)			—
Redemption of Preferred Stock - Series C			—			(400.0)
Treasury Stock Purchased			(265.8)			(298.5)
Net Proceeds from Stock Options			48.8			10.7
Cash Dividends Paid on Common Stock			(437.8)			(438.8)
Cash Dividends Paid on Preferred Stock			(25.6)			(29.7)
Other Financing Activities, net			(0.6)			0.7
Net Cash Provided by 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
Cash and Due from Banks at Beginning of Period			4,389.5			4,459.2
Cash and Due from Banks at End of Period			$	4,194.7		$	4,737.5
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest Paid			$	17.7		$	190.3
Income Taxes Paid			267.8			264.5
Transfers from Loans to OREO			10.1			0.2
Transfers from Available for Sale Debt Securities to Held to Maturity Debt Securities			6,864.1			301.5

See accompanying notes to the consolidated financial statements.

Notes to Consolidated Financial Statements (unaudited)

Note 1 – Basis of Presentation

The consolidated financial statements include the accounts of Northern Trust Corporation (Corporation) and its wholly-owned subsidiary, The Northern Trust Company (Bank), and various other wholly-owned subsidiaries of the Corporation and Bank. Throughout the notes to the consolidated financial statements, the term “Northern Trust” refers to the Corporation and its subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements, as of and for the periods ended September 30, 2021 and 2020, have not been audited by the Corporation’s independent registered public accounting firm. In the opinion of management, all accounting entries and adjustments, including normal recurring accruals, necessary for a fair presentation of the financial position and the results of operations for the interim periods have been made. The accounting and financial reporting policies of Northern Trust conform to U.S. generally accepted accounting principles (GAAP) and reporting practices prescribed for the banking industry. The consolidated statements of income include results of acquired subsidiaries from the dates of acquisition. Certain prior-period balances have been reclassified to conform with the current year’s presentation. For a description of Northern Trust’s significant accounting policies, refer to Note 1 — Summary of Significant Accounting Policies included under Item 8. Financial Statements and Supplementary Data in the Annual Report on Form 10-K for the year ended December 31, 2020.

Note 2 – Recent Accounting Pronouncements

On January 1, 2021, Northern Trust adopted Accounting Standards Update (ASU) No. 2020-01, “Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815” (ASU 2020-01). ASU 2020-01 addresses two accounting issues: (1) application of the measurement alternative under Topic 321 in correlation with the transition into and out of the equity method under Topic 323 and (2) the measurement of certain forward contracts and purchased options to acquire equity securities. ASU 2020-01 clarifies that an entity applying the measurement alternative under Topic 321 that must transition to the equity method under Topic 323 because of an observable transaction will remeasure its investment immediately before transition, whereas an entity applying the equity method under Topic 323 that must transition to Topic 321 because of an observable transaction will remeasure its investment immediately after transition. ASU 2020-01 also clarifies that certain forward contracts or purchased call options to acquire equity securities generally will be measured using the fair value principles of Topic 321 before settlement or exercise. Upon adoption of ASU 2020-01, there was no significant impact to Northern Trust’s consolidated balance sheets or consolidated statements of income.

On January 1, 2021, Northern Trust adopted ASU No. 2020-08, “Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs” (ASU 2020-08). ASU 2020-08 clarifies the Codification related to the standard issued in ASU No. 2017-08, “Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities.” ASU 2020-08 clarifies that an entity should amortize premiums on purchased callable debt securities to the first call date and related call amount and at that point reassess if there is a remaining premium to amortize to a subsequent call date. Upon adoption of ASU 2020-08, there was no significant impact to Northern Trust’s consolidated balance sheets or consolidated statements of income.

On January 7, 2021, Northern Trust retrospectively adopted ASU No. 2021-01, “Reference Rate Reform (Topic 848): Scope” (ASU 2021-01). ASU 2021-01 clarifies the scope of Topic 848 to explicitly include those derivative instruments affected by changes in interest rates used for margining, discounting, or contract price alignment as eligible for certain optional expedients and exceptions in Topic 848. Upon adoption of ASU 2021-01, Northern Trust elected the expedients provided in Topic 848 with no significant impact on Northern Trust’s consolidated balance sheets or consolidated statements of income.

Note 3 – Fair Value Measurements

Fair Value Hierarchy. The following describes the hierarchy of valuation inputs (Levels 1, 2, and 3) used to measure fair value and the primary valuation methodologies used by Northern Trust for financial instruments measured at fair value on a recurring basis. Observable inputs reflect market data obtained from sources independent of the reporting entity; unobservable inputs reflect the entity’s own assumptions about how market participants would value an asset or liability based on the best information available. GAAP requires an entity measuring fair value to maximize the use of observable inputs and minimize the use of unobservable inputs and establishes a fair value hierarchy of inputs. Financial instruments are categorized within the hierarchy based on the lowest level input that is significant to their valuation. No transfers into or out of Level 3 occurred during the nine months ended September 30, 2021 or the year ended December 31, 2020.

Notes to Consolidated Financial Statements (unaudited) (continued)

Level 1 — Quoted, active market prices for identical assets or liabilities.

Northern Trust’s Level 1 assets are comprised of available for sale (AFS) investments in U.S. Treasury securities.

Level 2 — Observable inputs other than Level 1 prices, such as quoted active market prices for similar assets or liabilities, quoted prices for identical or similar assets in inactive markets, and model-derived valuations in which all significant inputs are observable in active markets.

Northern Trust’s Level 2 assets include AFS and trading account debt securities, the fair values of which are determined predominantly by external pricing vendors. Prices received from vendors are compared to other vendor and third-party prices. If a security price obtained from a pricing vendor is determined to exceed pre-determined tolerance levels that are assigned based on an asset type’s characteristics, the exception is researched and, if the price is not able to be validated, an alternate pricing vendor is utilized, consistent with Northern Trust’s pricing source hierarchy. As of September 30, 2021, Northern Trust’s AFS debt securities portfolio included 2,501 Level 2 debt securities with an aggregate market value of $35.5 billion. Substantially all 2,501 debt securities were valued by external pricing vendors. As of December 31, 2020, Northern Trust’s AFS debt securities portfolio included 2,260 Level 2 debt securities with an aggregate market value of $39.2 billion. All 2,260 debt securities were valued by external pricing vendors. Trading account debt securities, which totaled $0.2 million and $0.5 million as of September 30, 2021 and December 31, 2020, respectively, were all valued using external pricing vendors.

Level 2 assets and liabilities also include derivative contracts which are valued internally using widely accepted income-based models that incorporate inputs readily observable in actively quoted markets and reflect the contractual terms of the contracts. Observable inputs include foreign exchange rates and interest rates for foreign exchange contracts; credit spreads, default probabilities, and recovery rates for credit default swap contracts; interest rates for interest rate swap contracts and forward contracts; and interest rates and volatility inputs for interest rate option contracts. Northern Trust evaluates the impact of counterparty credit risk and its own credit risk on the valuation of its derivative instruments. Factors considered include the likelihood of default by Northern Trust and its counterparties, the remaining maturities of the instruments, net exposures after giving effect to master netting arrangements or similar agreements, available collateral, and other credit enhancements in determining the appropriate fair value of derivative instruments. The resulting valuation adjustments have not been considered material.

Level 3 — Valuation techniques in which one or more significant inputs are unobservable in the marketplace.

Northern Trust’s Level 3 liabilities consist of swaps that Northern Trust entered into with the purchaser of 1.1 million and 1.0 million shares of Visa Inc. Class B common stock (Visa Class B common shares) previously held by Northern Trust and sold in June 2016 and 2015, respectively. Pursuant to the swaps, Northern Trust retains the risks associated with the ultimate conversion of the Visa Class B common shares into shares of Visa Inc. Class A common stock (Visa Class A common shares), such that the counterparty will be compensated for any dilutive adjustments to the conversion ratio and Northern Trust will be compensated for any anti-dilutive adjustments to the ratio. The swaps also require periodic payments from Northern Trust to the counterparty calculated by reference to the market price of Visa Class A common shares and a fixed rate of interest. The fair value of the swaps is determined using a discounted cash flow methodology. The significant unobservable inputs used in the fair value measurement are Northern Trust’s own assumptions about estimated changes in the conversion rate of the Visa Class B common shares into Visa Class A common shares, the date on which such conversion is expected to occur and the estimated growth rate of the Visa Class A common share price. See “Visa Class B Common Shares” under Note 21 — Commitments and Contingent Liabilities for further information.

Northern Trust believes its valuation methods for its assets and liabilities carried at fair value are appropriate; however, the use of different methodologies or assumptions, particularly as applied to Level 3 assets and liabilities, could have a material effect on the computation of their estimated fair values.

The following table presents the fair values of Northern Trust’s Level 3 liabilities as of September 30, 2021 and December 31, 2020, as well as the valuation techniques, significant unobservable inputs, and quantitative information used to develop significant unobservable inputs for such liabilities as of such dates.

Notes to Consolidated Financial Statements (unaudited) (continued)

TABLE 34: LEVEL 3 SIGNIFICANT UNOBSERVABLE INPUTS

			SEPTEMBER 30, 2021
FINANCIAL INSTRUMENT			FAIR VALUE			VALUATION TECHNIQUE			UNOBSERVABLE INPUTS			INPUT VALUES									WEIGHTED-AVERAGE INPUT VALUES(1)
Swaps Related to Sale of Certain Visa Class B Common Shares			$36.7 million			Discounted Cash Flow			Conversion Rate			1.62x									1.62x
Visa Class A Appreciation			10.89%									10.89%
Expected Duration			12			-			33 months			20 months

(1) Weighted average of expected duration based on scenario probability.

			DECEMBER 31, 2020
FINANCIAL INSTRUMENT			FAIR VALUE			VALUATION TECHNIQUE			UNOBSERVABLE INPUTS			INPUT VALUES									WEIGHTED-AVERAGE INPUT VALUES(1)
Swaps Related to Sale of Certain Visa Class B Common Shares			$35.3 million			Discounted Cash Flow			Conversion Rate			1.62x									1.62x
Visa Class A Appreciation			8.73%									8.73%
Expected Duration			12			-			33 months			20 months

(1) Weighted average of expected duration based on scenario probability.

The following table presents assets and liabilities measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020, segregated by fair value hierarchy level.

TABLE 35: RECURRING BASIS HIERARCHY LEVELING

			SEPTEMBER 30, 2021
(In Millions)			LEVEL 1			LEVEL 2			LEVEL 3			NETTING			ASSETS/LIABILITIES AT FAIR VALUE
Debt Securities
Available for Sale
U.S. Government			$	2,550.2		$	—		$	—		$	—		$	2,550.2
Obligations of States and Political Subdivisions			—			3,750.1			—			—			3,750.1
Government Sponsored Agency			—			18,541.7			—			—			18,541.7
Non-U.S. Government			—			273.4			—			—			273.4
Corporate Debt			—			2,443.8			—			—			2,443.8
Covered Bonds			—			559.0			—			—			559.0
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			—			3,022.7			—			—			3,022.7
Other Asset-Backed			—			5,635.0			—			—			5,635.0
Commercial Mortgage-Backed			—			1,257.0			—			—			1,257.0
Total Available for Sale			2,550.2			35,482.7			—			—			38,032.9
Trading Account			—			0.2			—			—			0.2
Total Available for Sale and Trading Debt Securities			2,550.2			35,482.9			—			—			38,033.1
Other Assets
Derivative Assets
Foreign Exchange Contracts			—			2,809.4			—			(936.9)			1,872.5
Interest Rate Contracts			—			194.8			—			(2.6)			192.2
Total Derivative Assets			—			3,004.2			—			(939.5)			2,064.7
Other Liabilities
Derivative Liabilities
Foreign Exchange Contracts			—			2,612.7			—			(2,268.8)			343.9
Interest Rate Contracts			—			107.3			—			(65.1)			42.2
Other Financial Derivatives(1)			—			—			36.7			—			36.7
Total Derivative Liabilities			$	—		$	2,720.0		$	36.7		$	(2,333.9)		$	422.8

Note: Northern Trust has elected to net derivative assets and liabilities when legally enforceable master netting arrangements or similar agreements exist between Northern Trust and the counterparty. As of September 30, 2021, derivative assets and liabilities shown above also include reductions of $92.9 million and $1,487.3 million, respectively, as a result of cash collateral received from and deposited with derivative counterparties.

*(1)*This line consists of swaps related to the sale of certain Visa Class B common shares.

Notes to Consolidated Financial Statements (unaudited) (continued)

			DECEMBER 31, 2020
(In Millions)			LEVEL 1			LEVEL 2			LEVEL 3			NETTING			ASSETS/LIABILITIES AT FAIR VALUE
Debt Securities
Available for Sale
U.S. Government			$	2,799.9		$	—		$	—		$	—		$	2,799.9
Obligations of States and Political Subdivisions			—			3,083.6			—			—			3,083.6
Government Sponsored Agency			—			24,956.7			—			—			24,956.7
Non-U.S. Government			—			714.0			—			—			714.0
Corporate Debt			—			2,539.6			—			—			2,539.6
Covered Bonds			—			553.1			—			—			553.1
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			—			2,345.8			—			—			2,345.8
Other Asset-Backed			—			3,997.5			—			—			3,997.5
Commercial Mortgage-Backed			—			1,031.8			—			—			1,031.8
Total Available for Sale			2,799.9			39,222.1			—			—			42,022.0
Trading Account			—			0.5			—			—			0.5
Total Available for Sale and Trading Debt Securities			2,799.9			39,222.6			—			—			42,022.5
Other Assets
Derivative Assets
Foreign Exchange Contracts			—			4,260.7			—			(3,505.3)			755.4
Interest Rate Contracts			—			297.5			—			(2.5)			295.0
Total Derivative Assets			—			4,558.2			—			(3,507.8)			1,050.4
Other Liabilities
Derivative Liabilities
Foreign Exchange Contracts			—			4,722.5			—			(2,718.6)			2,003.9
Interest Rate Contracts			—			125.0			—			(98.5)			26.5
Other Financial Derivatives(1)			—			—			35.3			—			35.3
Total Derivative Liabilities			$	—		$	4,847.5		$	35.3		$	(2,817.1)		$	2,065.7

Note: Northern Trust has elected to net derivative assets and liabilities when legally enforceable master netting arrangements or similar agreements exist between Northern Trust and the counterparty. As of December 31, 2020, derivative assets and liabilities shown above also include reductions of $1,867.8 million and $1,177.2 million, respectively, as a result of cash collateral received from and deposited with derivative counterparties.

(1) This line consists of swaps related to the sale of certain Visa Class B common shares.

The following table presents the changes in Level 3 liabilities for the three and nine months ended September 30, 2021 and 2020.

TABLE 36: CHANGES IN LEVEL 3 LIABILITIES

(In Millions)			SWAPS RELATED TO SALE OF CERTAIN VISA CLASS B COMMON SHARES
THREE MONTHS ENDED SEPTEMBER 30,			2021			2020
Fair Value at July 1			$	38.4		$	31.3
Total (Gains) Losses:
Included in Earnings(1)			3.6			5.3
Purchases, Issues, Sales, and Settlements
Settlements			(5.3)			(4.3)
Fair Value at September 30			$	36.7		$	32.3

(1) (Gains) losses are recorded in Other Operating Income on the consolidated statements of income.

NINE MONTHS ENDED SEPTEMBER 30,			2021			2020
Fair Value at January 1			$	35.3		$	33.4
Total (Gains) Losses:
Included in Earnings(1)			15.7			11.0
Purchases, Issues, Sales, and Settlements
Settlements			(14.3)			(12.1)
Fair Value at September 30			$	36.7		$	32.3

(1) (Gains) losses are recorded in Other Operating Income on the consolidated statements of income.

Notes to Consolidated Financial Statements (unaudited) (continued)

Carrying values of assets and liabilities that are not measured at fair value on a recurring basis may be adjusted to fair value in periods subsequent to their initial recognition, for example, to record an impairment of an asset. GAAP requires entities to separately disclose these subsequent fair value measurements and to classify them under the fair value hierarchy.

Assets measured at fair value on a nonrecurring basis at September 30, 2021 and December 31, 2020, all of which were categorized as Level 3 under the fair value hierarchy, were comprised of nonaccrual loans whose values were based on real estate and other available collateral, and of other real estate owned (OREO) properties.

Fair values of real estate loan collateral were estimated using a market approach typically supported by third-party valuations and property-specific fees and taxes. The fair values of real estate loan collateral were subject to adjustments to reflect management’s judgment as to realizable value and consisted of discount factors ranging from 15.0% to 20.0% with a weighted average based on fair values of 15.6% and 16.8% as of September 30, 2021 and December 31, 2020, respectively. Other loan collateral, which typically consists of accounts receivable, inventory and equipment, is valued using a market approach adjusted for asset-specific characteristics and in limited instances third-party valuations are used. OREO assets are carried at the lower of cost or fair value less estimated costs to sell, with fair value typically based on third-party appraisals.

Collateral-based nonaccrual loans that have been adjusted to fair value totaled $14.7 million and $24.6 million at September 30, 2021 and December 31, 2020, respectively.

The following table presents the fair values of Northern Trust’s Level 3 assets that were measured at fair value on a nonrecurring basis as of September 30, 2021 and December 31, 2020, as well as the valuation technique, significant unobservable inputs and quantitative information used to develop the significant unobservable inputs for such assets as of such dates.

TABLE 37: LEVEL 3 NONRECURRING BASIS SIGNIFICANT UNOBSERVABLE INPUTS

			SEPTEMBER 30, 2021
FINANCIAL INSTRUMENT			FAIR VALUE(1)			VALUATION TECHNIQUE			UNOBSERVABLE INPUTS			INPUT VALUES									WEIGHTED-AVERAGE INPUT VALUES
Loans			$14.7 million			Market Approach			Discount factor applied to real estate collateral-based loans to reflect realizable value			15.0		%	-			20.0%			15.6%

(1) Includes real estate collateral-based loans and other collateral-based loans.

			DECEMBER 31, 2020
FINANCIAL INSTRUMENT			FAIR VALUE(1)			VALUATION TECHNIQUE			UNOBSERVABLE INPUTS			INPUT VALUES									WEIGHTED-AVERAGE INPUT VALUES
Loans			$24.6 million			Market Approach			Discount factor applied to real estate collateral-based loans to reflect realizable value			15.0		%	-			20.0%			16.8%

(1) Includes real estate collateral-based loans and other collateral-based loans.

Notes to Consolidated Financial Statements (unaudited) (continued)

The following table summarizes the fair values of all financial instruments.

TABLE 38: FAIR VALUE OF FINANCIAL INSTRUMENTS

			SEPTEMBER 30, 2021
									FAIR VALUE
(In Millions)			BOOK VALUE			TOTAL FAIR VALUE			LEVEL 1			LEVEL 2			LEVEL 3
ASSETS
Cash and Due from Banks			$	4,194.7		$	4,194.7		$	4,194.7		$	—		$	—
Federal Reserve and Other Central Bank Deposits			50,030.2			50,030.2			—			50,030.2			—
Interest-Bearing Deposits with Banks			2,937.6			2,937.6			—			2,937.6			—
Federal Funds Sold			—			—			—			—			—
Securities Purchased under Agreements to Resell			872.8			872.8			—			872.8			—
Debt Securities
Available for Sale(1)			38,032.9			38,032.9			2,550.2			35,482.7			—
Held to Maturity			20,797.8			20,692.8			111.0			20,581.8			—
Trading Account			0.2			0.2			—			0.2			—
Loans (excluding Leases)
Held for Investment			39,181.9			39,183.4			—			—			39,183.4
Held for Sale			120.2			136.8			—			136.8			—
Client Security Settlement Receivables			1,954.3			1,954.3			—			1,954.3			—
Other Assets
Federal Reserve and Federal Home Loan Bank Stock			230.0			230.0			—			230.0			—
Community Development Investments			949.4			949.4			—			949.4			—
Employee Benefit and Deferred Compensation			222.8			228.1			123.4			104.7			—
LIABILITIES
Deposits
Demand, Noninterest-Bearing, Savings, Money Market and Other Interest-Bearing			$	72,849.7		$	72,849.7		$	72,849.7		$	—		$	—
Savings Certificates and Other Time			882.1			884.7			—			884.7			—
Non U.S. Offices Interest-Bearing			68,192.8			68,192.8			—			68,192.8			—
Federal Funds Purchased			0.2			0.2			—			0.2			—
Securities Sold Under Agreements to Repurchase			573.6			573.6			—			573.6			—
Other Borrowings			5,617.4			5,617.5			—			5,617.5			—
Senior Notes			2,527.7			2,618.9			—			2,618.9			—
Long-Term Debt
Subordinated Debt			1,160.6			1,213.9			—			1,213.9			—
Floating Rate Capital Debt			277.9			278.0			—			278.0			—
Other Liabilities
Standby Letters of Credit			17.0			17.0			—			—			17.0
Loan Commitments			61.6			61.6			—			—			61.6
Derivative Instruments
Asset/Liability Management
Foreign Exchange Contracts
Assets			$	159.8		$	159.8		$	—		$	159.8		$	—
Liabilities			19.0			19.0			—			19.0			—
Interest Rate Contracts
Assets			17.6			17.6			—			17.6			—
Liabilities			9.3			9.3			—			9.3			—
Other Financial Derivatives
Liabilities(2)			36.7			36.7			—			—			36.7
Client-Related and Trading
Foreign Exchange Contracts
Assets			2,649.6			2,649.6			—			2,649.6			—
Liabilities			2,593.7			2,593.7			—			2,593.7			—
Interest Rate Contracts
Assets			177.2			177.2			—			177.2			—
Liabilities			98.0			98.0			—			98.0			—

(1) Refer to the table located on page 42 for the disaggregation of AFS debt securities.

(2) This line consists of swaps related to the sale of certain Visa Class B common shares.

Notes to Consolidated Financial Statements (unaudited) (continued)

			DECEMBER 31, 2020
									FAIR VALUE
(In Millions)			BOOK VALUE			TOTAL FAIR VALUE			LEVEL 1			LEVEL 2			LEVEL 3
ASSETS
Cash and Due from Banks			$	4,389.5		$	4,389.5		$	4,389.5		$	—		$	—
Federal Reserve and Other Central Bank Deposits			55,503.6			55,503.6			—			55,503.6			—
Interest-Bearing Deposits with Banks			4,372.6			4,372.6			—			4,372.6			—
Securities Purchased under Agreements to Resell			1,596.5			1,596.5			—			1,596.5			—
Debt Securities
Available for Sale(1)			42,022.0			42,022.0			2,799.9			39,222.1			—
Held to Maturity			17,791.1			17,797.4			90.0			17,707.4			—
Trading Account			0.5			0.5			—			0.5			—
Loans (excluding Leases)
Held for Investment			33,558.0			34,017.5			—			—			34,017.5
Client Security Settlement Receivables			1,160.2			1,160.2			—			1,160.2			—
Other Assets
Federal Reserve and Federal Home Loan Bank Stock			275.0			275.0			—			275.0			—
Community Development Investments			919.6			919.6			—			919.6			—
Employee Benefit and Deferred Compensation			215.8			228.9			138.6			90.3			—
LIABILITIES
Deposits
Demand, Noninterest-Bearing, Savings, Money Market and Other Interest-Bearing			$	71,742.5		$	71,742.5		$	71,742.5		$	—		$	—
Savings Certificates and Other Time			937.1			943.0			—			943.0			—
Non U.S. Offices Interest-Bearing			71,198.4			71,198.4			—			71,198.4			—
Federal Funds Purchased			260.2			260.2			—			260.2			—
Securities Sold Under Agreements to Repurchase			39.8			39.8			—			39.8			—
Other Borrowings			4,011.5			4,012.7			—			4,012.7			—
Senior Notes			3,122.4			3,222.6			—			3,222.6			—
Long-Term Debt
Subordinated Debt			1,189.3			1,250.1			—			1,250.1			—
Floating Rate Capital Debt			277.8			264.6			—			264.6			—
Other Liabilities
Standby Letters of Credit			22.4			22.4			—			—			22.4
Loan Commitments			77.0			77.0			—			—			77.0
Derivative Instruments
Asset/Liability Management
Foreign Exchange Contracts
Assets			$	15.6		$	15.6		$	—		$	15.6		$	—
Liabilities			311.8			311.8			—			311.8			—
Interest Rate Contracts
Assets			8.3			8.3			—			8.3			—
Liabilities			10.2			10.2			—			10.2			—
Other Financial Derivatives
Liabilities(2)			35.3			35.3			—			—			35.3
Client-Related and Trading
Foreign Exchange Contracts
Assets			4,245.1			4,245.1			—			4,245.1			—
Liabilities			4,410.7			4,410.7			—			4,410.7			—
Interest Rate Contracts
Assets			289.2			289.2			—			289.2			—
Liabilities			114.8			114.8			—			114.8			—

(1) Refer to the table located on page 43 for the disaggregation of AFS debt securities.

(2) This line consists of swaps related to the sale of certain Visa Class B common shares.

Notes to Consolidated Financial Statements (unaudited) (continued)

Note 4 – Securities

Available for Sale Debt Securities. The following tables provide the amortized cost and fair values at September 30, 2021 and December 31, 2020, and remaining maturities of AFS debt securities at September 30, 2021.

TABLE 39: RECONCILIATION OF AMORTIZED COST TO FAIR VALUE OF AVAILABLE FOR SALE DEBT SECURITIES

			SEPTEMBER 30, 2021
(In Millions)			AMORTIZED COST			GROSS UNREALIZED GAINS			GROSS UNREALIZED LOSSES			FAIR VALUE
U.S. Government			$	2,517.1		$	40.6		$	7.5		$	2,550.2
Obligations of States and Political Subdivisions			3,682.1			95.3			27.3			3,750.1
Government Sponsored Agency			18,498.2			134.4			90.9			18,541.7
Non-U.S. Government			277.3			0.1			4.0			273.4
Corporate Debt			2,395.2			51.0			2.4			2,443.8
Covered Bonds			552.6			6.4			—			559.0
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			2,996.1			40.7			14.1			3,022.7
Other Asset-Backed			5,618.1			22.7			5.8			5,635.0
Commercial Mortgage-Backed			1,204.8			53.0			0.8			1,257.0
Total			$	37,741.5		$	444.2		$	152.8		$	38,032.9

			DECEMBER 31, 2020
(In Millions)			AMORTIZED COST			GROSS UNREALIZED GAINS			GROSS UNREALIZED LOSSES			FAIR VALUE
U.S. Government			$	2,728.8		$	71.1		$	—		$	2,799.9
Obligations of States and Political Subdivisions			2,927.8			155.9			0.1			3,083.6
Government Sponsored Agency			24,595.1			388.5			26.9			24,956.7
Non-U.S. Government			713.6			1.1			0.7			714.0
Corporate Debt			2,459.9			79.8			0.1			2,539.6
Covered Bonds			543.1			10.0			—			553.1
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			2,281.7			64.7			0.6			2,345.8
Other Asset-Backed			3,953.5			46.8			2.8			3,997.5
Commercial Mortgage-Backed			952.2			79.7			0.1			1,031.8
Total			$	41,155.7		$	897.6		$	31.3		$	42,022.0

Notes to Consolidated Financial Statements (unaudited) (continued)

TABLE 40: REMAINING MATURITY OF AVAILABLE FOR SALE DEBT SECURITIES

SEPTEMBER 30, 2021			ONE YEAR OR LESS						ONE TO FIVE YEARS						FIVE TO TEN YEARS						OVER TEN YEARS						TOTAL
(In Millions)			AMORTIZED COST			FAIR VALUE			AMORTIZED COST			FAIR VALUE			AMORTIZED COST			FAIR VALUE			AMORTIZED COST			FAIR VALUE			AMORTIZED COST			FAIR VALUE
U.S. Government			$	100.0		$	100.2		$	2,168.7		$	2,209.2		$	248.4		$	240.8		$	—		$	—		$	2,517.1		$	2,550.2
Obligations of States and Political Subdivisions			24.0			24.2			399.4			417.5			3,077.6			3,129.9			181.1			178.5			3,682.1			3,750.1
Government Sponsored Agency			2,878.7			2,892.9			8,382.3			8,412.6			6,022.9			6,020.7			1,214.3			1,215.5			18,498.2			18,541.7
Non-U.S. Government			—			—			195.1			193.5			82.2			79.9			—			—			277.3			273.4
Corporate Debt			382.9			387.6			1,988.7			2,032.7			18.0			17.9			5.6			5.6			2,395.2			2,443.8
Covered Bonds			174.6			175.4			378.0			383.6			—			—			—			—			552.6			559.0
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			747.0			752.8			1,885.6			1,910.6			363.5			359.3			—			—			2,996.1			3,022.7
Other Asset-Backed			1,112.0			1,120.8			3,218.7			3,227.5			1,125.5			1,124.8			161.9			161.9			5,618.1			5,635.0
Commercial Mortgage-Backed			9.8			9.7			751.5			778.2			443.5			469.1			—			—			1,204.8			1,257.0
Total			$	5,429.0		$	5,463.6		$	19,368.0		$	19,565.4		$	11,381.6		$	11,442.4		$	1,562.9		$	1,561.5		$	37,741.5		$	38,032.9

Note: Mortgage-backed and asset-backed securities are included in the above table taking into account anticipated future prepayments.

Available for Sale Debt Securities with Unrealized Losses. The following table provides information regarding AFS debt securities with no credit losses reported that had been in a continuous unrealized loss position for less than twelve months and for twelve months or longer as of September 30, 2021 and December 31, 2020.

TABLE 41: AVAILABLE FOR SALE DEBT SECURITIES IN UNREALIZED LOSS POSITION WITH NO CREDIT LOSSES REPORTED

AS OF SEPTEMBER 30, 2021			LESS THAN 12 MONTHS						12 MONTHS OR LONGER						TOTAL
(In Millions)			FAIR VALUE			UNREALIZED LOSSES			FAIR VALUE			UNREALIZED LOSSES			FAIR VALUE			UNREALIZED LOSSES
U.S. Government			$	241.8		$	7.5		$	—		$	—		$	241.8		$	7.5
Obligations of States and Political Subdivisions			1,500.0			27.3			—			—			1,500.0			27.3
Government Sponsored Agency			4,762.1			85.9			1,202.8			5.0			5,964.9			90.9
Non-U.S. Government			235.1			4.0			—			—			235.1			4.0
Corporate Debt			495.4			2.4			—			—			495.4			2.4
Covered Bonds			47.7			—			—			—			47.7			—
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			999.0			14.0			49.9			0.1			1,048.9			14.1
Other Asset-Backed			2,141.7			5.8			60.0			—			2,201.7			5.8
Commercial Mortgage-Backed			167.4			0.8			—			—			167.4			0.8
Total			$	10,590.2		$	147.7		$	1,312.7		$	5.1		$	11,902.9		$	152.8

AS OF DECEMBER 31, 2020			LESS THAN 12 MONTHS						12 MONTHS OR LONGER						TOTAL
(In Millions)			FAIR VALUE			UNREALIZED LOSSES			FAIR VALUE			UNREALIZED LOSSES			FAIR VALUE			UNREALIZED LOSSES
Obligations of States and Political Subdivisions			$	52.3		$	0.1		$	—		$	—		$	52.3		$	0.1
Government Sponsored Agency			2,402.3			13.6			2,528.7			13.3			4,931.0			26.9
Non-U.S. Government			90.5			0.7			—			—			90.5			0.7
Corporate Debt			66.6			0.1			—			—			66.6			0.1
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			162.8			0.5			49.9			0.1			212.7			0.6
Other Asset-Backed			176.8			0.2			792.3			2.6			969.1			2.8
Commercial Mortgage-Backed			44.4			0.1			—			—			44.4			0.1
Total			$	2,995.7		$	15.3		$	3,370.9		$	16.0		$	6,366.6		$	31.3

As of September 30, 2021, 966 AFS debt securities with a combined fair value of $11.9 billion were in an unrealized loss position, with their unrealized losses totaling $152.8 million. Unrealized losses related to AFS debt securities of $90.9 million and $27.3 million related to government-sponsored agency and obligations of states and political subdivisions, respectively, are primarily attributable to changes in market interest rates and credit spreads since their purchase. As of September 30, 2021, 15% of the AFS corporate debt securities portfolio were backed by guarantees provided by U.S. and non-U.S. governmental entities. The remaining unrealized losses on Northern Trust’s AFS debt securities portfolio as of September 30, 2021 are attributable to changes in overall market interest rates or credit spreads.

Notes to Consolidated Financial Statements (unaudited) (continued)

As of September 30, 2021, Northern Trust did not intend to sell any AFS debt securities in an unrealized loss position and it was more likely than not that Northern Trust would not be required to sell any such investment before the recovery of its amortized cost basis, which may be maturity.

AFS debt securities impairment reviews are conducted quarterly to identify and evaluate securities that have indications of possible credit losses. A determination as to whether a security’s decline in market value is related to credit impairment takes into consideration numerous factors and the relative significance of any single factor can vary by security. Factors Northern Trust considers in determining whether impairment is credit-related include, but are not limited to, the severity of the impairment; the cause of the impairment and the financial condition and near-term prospects of the issuer; activity in the market of the issuer, which may indicate adverse credit conditions; Northern Trust’s intent regarding the sale of the security as of the balance sheet date; and the likelihood that Northern Trust will not be required to sell the security for a period of time sufficient to allow for the recovery of the security’s amortized cost basis. For each security meeting the requirements of Northern Trust’s internal screening process, an extensive review is conducted to determine if a credit loss has occurred.

There was no provision for credit losses for corporate debt AFS securities for the three and nine months ended September 30, 2021 and 2020, respectively. There was no allowance for credit losses for corporate debt AFS securities as of September 30, 2021 and December 31, 2020, respectively. The process for identifying credit losses for corporate debt AFS securities is based on the best estimate of cash flows to be collected from the security, discounted using the security’s effective interest rate. If the present value of the expected cash flows is found to be less than the current amortized cost of the security, an allowance for credit losses is generally recorded equal to the difference between the two amounts, limited to the amount the amortized cost basis exceeds the fair value of the security. For additional information, please refer to Note 7 — Allowance for Credit Losses.

Held to Maturity Debt Securities. The following tables provide the amortized cost and fair values at September 30, 2021 and December 31, 2020, and remaining maturities of held to maturity (HTM) debt securities at September 30, 2021.

TABLE 42: RECONCILIATION OF AMORTIZED COST TO FAIR VALUE OF HELD TO MATURITY DEBT SECURITIES

			SEPTEMBER 30, 2021
(In Millions)			AMORTIZED COST			GROSS UNREALIZED GAINS			GROSS UNREALIZED LOSSES			FAIR VALUE
U.S Government			$	111.0		$	—		$	—		$	111.0
Obligations of States and Political Subdivisions			1.0			—			—			1.0
Government Sponsored Agency			6,208.8			5.0			47.4			6,166.4
Non-U.S. Government			2,792.8			5.7			3.7			2,794.8
Corporate Debt			945.8			4.2			2.3			947.7
Covered Bonds			2,988.5			12.2			3.4			2,997.3
Certificates of Deposit			777.8			—			—			777.8
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			5,804.9			21.4			41.9			5,784.4
Other Asset-Backed			694.3			1.7			0.1			695.9
Other			472.9			4.7			61.1			416.5
Total			$	20,797.8		$	54.9		$	159.9		$	20,692.8

			DECEMBER 31, 2020
(In Millions)			AMORTIZED COST			GROSS UNREALIZED GAINS			GROSS UNREALIZED LOSSES			FAIR VALUE
U.S. Government			$	90.0		$	—		$	—		$	90.0
Obligations of States and Political Subdivisions			2.1			0.1			—			2.2
Government Sponsored Agency			3.0			0.3			—			3.3
Non-U.S. Government			8,336.6			7.3			0.2			8,343.7
Corporate Debt			588.0			6.5			0.1			594.4
Covered Bonds			3,184.6			24.6			0.3			3,208.9
Certificates of Deposit			807.2			—			—			807.2
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			3,648.0			43.5			0.9			3,690.6
Other Asset-Backed			677.0			0.9			—			677.9
Other			454.6			1.1			76.5			379.2
Total			$	17,791.1		$	84.3		$	78.0		$	17,797.4

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.

Notes to Consolidated Financial Statements (unaudited) (continued)

TABLE 43: REMAINING MATURITY OF HELD TO MATURITY DEBT SECURITIES

SEPTEMBER 30, 2021			ONE YEAR OR LESS						ONE TO FIVE YEARS						FIVE TO TEN YEARS						OVER TEN YEARS						TOTAL
(In Millions)			Amortized Cost			Fair Value			Amortized Cost			Fair Value			Amortized Cost			Fair Value			Amortized Cost			Fair Value			Amortized Cost			Fair Value
U.S. Government			$	111.0		$	111.0		$	—		$	—		$	—		$	—		$	—		$	—		$	111.0		$	111.0
Obligations of States and Political Subdivisions			1.0			1.0			—			—			—			—			—			—			1.0			1.0
Government Sponsored Agency			1,266.9			1,259.1			2,120.8			2,106.2			1,883.8			1,871.9			937.3			929.2			6,208.8			6,166.4
Non-U.S. Government			1,543.0			1,543.0			753.0			757.0			496.8			494.8			—			—			2,792.8			2,794.8
Corporate Debt			25.1			25.1			791.7			794.3			129.0			128.3			—			—			945.8			947.7
Covered Bonds			885.2			887.7			1,572.2			1,581.0			531.1			528.6			—			—			2,988.5			2,997.3
Certificates of Deposit			777.8			777.8			—			—			—			—			—			—			777.8			777.8
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			842.7			847.7			3,850.4			3,847.2			1,111.8			1,089.5			—			—			5,804.9			5,784.4
Other Asset-Backed			231.4			231.8			424.5			425.6			38.4			38.5			—			—			694.3			695.9
Other			124.8			122.4			179.7			171.9			52.1			50.7			116.3			71.5			472.9			416.5
Total			$	5,808.9		$	5,806.6		$	9,692.3		$	9,683.2		$	4,243.0		$	4,202.3		$	1,053.6		$	1,000.7		$	20,797.8		$	20,692.8

Note: Mortgage-backed and asset-backed securities are included in the above table taking into account anticipated future prepayments.

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.

Credit Quality Indicators. The following table provides the amortized cost of HTM debt securities by credit rating.

TABLE 44: 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		%

Notes to Consolidated Financial Statements (unaudited) (continued)

			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		%

Credit quality indicators are metrics that provide information regarding the relative credit risk of debt securities. Northern Trust maintains a high quality debt securities portfolio, with 93% of the HTM portfolio at both September 30, 2021 and December 31, 2020 comprised of securities rated A or higher. The remaining HTM debt securities portfolio was comprised of 2% rated BBB at September 30, 2021 and 5% and 7% not rated by Moody’s Investors Service, Standard and Poor’s or Fitch Ratings at September 30, 2021 and December 31, 2020, respectively. Securities not explicitly rated were grouped where possible under the credit rating of the issuer of the security.

Investment Security Gains and Losses. During the three and nine months ended September 30, 2021, gross and net investment security gains were less than $0.1 million. There were no sales of debt securities during the three months ended September 30, 2020. Proceeds of $689.2 million from the sale of debt securities during the nine months ended September 30, 2020 resulted in gross realized debt securities gains of $3.4 million and gross realized debt securities losses of $3.3 million. There were no net investment security (losses) gains for the three months ended September 30, 2020. There was $0.1 million of net investment security gains for the nine months ended September 30, 2020.

Note 5 – Securities Sold Under Agreements to Repurchase

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 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.

The following table provides information regarding repurchase agreements that are accounted for as secured borrowings as of September 30, 2021 and December 31, 2020.

TABLE 45: REPURCHASE AGREEMENTS ACCOUNTED FOR AS SECURED BORROWINGS

			REMAINING CONTRACTUAL MATURITY OF THE AGREEMENTS
			OVERNIGHT AND CONTINUOUS
($ In Millions)			SEPTEMBER 30, 2021			DECEMBER 31, 2020
U.S. Treasury and Agency Securities			$	573.6		$	39.8
Total Borrowings			573.6			39.8
Net Amount of Recognized Liabilities for Repurchase Agreements in Note 23			573.6			39.8
Amounts related to agreements not included in Note 23			—			—

Notes to Consolidated Financial Statements (unaudited) (continued)

Note 6 – Loans and Leases

Amounts outstanding for Loans and Leases, by segment and class, are shown in the following table.

TABLE 46: LOANS AND LEASES

(In Millions)			SEPTEMBER 30, 2021			DECEMBER 31, 2020
Commercial
Commercial and Institutional			$	11,228.4		$	10,058.3
Commercial Real Estate			4,333.8			3,558.4
Non-U.S.			2,522.9			1,345.7
Lease Financing, net			11.0			11.4
Other			349.8			288.2
Total Commercial			18,445.9			15,262.0
Personal
Private Client			14,613.8			11,815.1
Residential Real Estate			5,857.0			6,035.7
Non-U.S.			371.5			597.9
Other			168.4			49.0
Total Personal			21,010.7			18,497.7
Total Loans and Leases			$	39,456.6		$	33,759.7

Residential real estate loans consist of traditional first lien mortgages and equity credit lines that generally require a loan-to-collateral value of no more than 65% to 80% at inception. Northern Trust’s equity credit line products generally have draw periods of up to 10 years and a balloon payment of any outstanding balance is due at maturity. Payments are interest-only with variable interest rates. Northern Trust does not offer equity credit lines that include an option to convert the outstanding balance to an amortizing payment loan. As of September 30, 2021 and December 31, 2020, equity credit lines totaled $262.2 million and $304.4 million, respectively, and equity credit lines for which first liens were held by Northern Trust represented 97% of the total equity credit lines as of both September 30, 2021 and December 31, 2020.

Included within the non-U.S., commercial-other and personal-other classes are short-duration advances primarily related to the processing of custodied client investments, totaling $2.0 billion at September 30, 2021 and $1.1 billion at December 31, 2020, respectively. Demand deposit overdrafts reclassified as loan balances totaled $6.0 million and $26.4 million at September 30, 2021 and December 31, 2020, respectively. Loans classified as held for sale totaled $120.2 million at September 30, 2021 related to the decision to exit a non-strategic loan portfolio. There were no loans classified as held for sale at December 31, 2020. Loans classified as held for sale are recorded at the lower of cost or fair value.

As of September 30, 2021 and December 31, 2020, there were no leases classified as held for sale.

Paycheck Protection Program. In response to the COVID-19 pandemic, Northern Trust became a lender under the Paycheck Protection Program, as amended (PPP), which was created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act and is administered by the U.S. Small Business Administration (SBA). Loans issued under the PPP are funded by Northern Trust directly to participating borrowers. The PPP loans are guaranteed by the SBA and borrowers are eligible to apply for PPP loan forgiveness for up to the full principal amount and accrued interest of the PPP loan.

To the extent a borrower uses PPP loan proceeds to cover eligible costs and has met all other SBA loan forgiveness requirements, the SBA will determine loan forgiveness under the CARES Act and will pay to Northern Trust the eligible PPP loan forgiven amount, which will be credited to the borrower’s loan to repay or pay down the PPP loan. The SBA forgiveness portal opened on August 10, 2020 and Northern Trust’s vendor portal opened on September 11, 2020 to begin processing the PPP loan forgiveness applications. When Northern Trust submits forgiveness applications to the SBA, the SBA has at least 90 days to respond as to the approval or denial of such application. 1,245 applications went through the PPP loan forgiveness process and resulted in $214.0 million of loan principal and interest being forgiven as of September 30, 2021.

Notes to Consolidated Financial Statements (unaudited) (continued)

As of September 30, 2021, Northern Trust had 314 outstanding loans totaling $79.6 million under the PPP in its commercial and institutional portfolio with an average loan balance of $0.3 million. For its origination efforts, Northern Trust received approximately $2.7 million in SBA fees, net of service charges as of September 30, 2021.

Northern Trust accounts for loans originated under the PPP as loan receivables in accordance with Accounting Standards Codification (ASC) 310 and recognizes such loans at the principal amount less the net amount of loan origination fees. PPP loans are reported in Total Loans and Leases on the consolidated balance sheets.

The SBA provides a 100% guarantee on PPP loans covering principal and interest. Northern Trust considers the risk mitigating effects of these guarantees, and accounts for them as a credit enhancement embedded in the contract. As a result, no allowance for credit losses is measured for Northern Trust’s exposure under the PPP.

Credit Quality Indicators. Credit quality indicators are statistics, measurements or other metrics that provide information regarding the relative credit risk of loans and leases. Northern Trust utilizes a variety of credit quality indicators to assess the credit risk of loans and leases at the segment, class, and individual credit exposure levels.

As part of its credit process, Northern Trust utilizes an internal borrower risk rating system to support identification, approval, and monitoring of credit risk. Borrower risk ratings are used in credit underwriting and management reporting. Risk ratings are used for ranking the credit risk of borrowers and the probability of their default. Each borrower is rated using one of a number of ratings models, which consider both quantitative and qualitative factors. The ratings models vary among classes of loans and leases in order to capture the unique risk characteristics inherent within each particular type of credit exposure. Provided below are the more significant performance indicator attributes considered within Northern Trust’s borrower rating models, by loan and lease class.

• Commercial and Institutional: leverage, profit margin, liquidity, asset size and capital levels;

• Commercial Real Estate: debt service coverage, loan-to-value ratio, leasing status and guarantor support;

• Lease Financing and Commercial-Other: leverage, profit margin, liquidity, asset size and capital levels;

• Non-U.S.: leverage, profit margin, liquidity, return on assets and capital levels;

• Residential Real Estate: payment history, credit bureau scores and loan-to-value ratio;

• Private Client: cash-flow-to-debt and net worth ratios, leverage and liquidity; and

• Personal-Other: cash-flow-to-debt and net worth ratios.

While the criteria vary by model, the objective is for the borrower ratings to be consistent in both the measurement and ranking of risk. Each model is calibrated to a master rating scale to support this consistency. Ratings for borrowers not in default range from “1” for the strongest credits to “7” for the weakest non-defaulted credits. Ratings of “8” or “9” are used for defaulted borrowers. Borrower risk ratings are monitored and are revised when events or circumstances indicate a change is required. Risk ratings are generally validated at least annually.

Loan and lease segment and class balances as of September 30, 2021 and December 31, 2020 are provided in the following table, segregated by borrower ratings into “1 to 3,” “4 to 5” and “6 to 9” (watch list and nonaccrual status) categories by year of origination at amortized cost basis. Loans that are held for investment are reported at the principal amount outstanding, net of unearned income.

Notes to Consolidated Financial Statements (unaudited) (continued)

TABLE 47: CREDIT QUALITY INDICATOR AT AMORTIZED COST BASIS BY ORIGINATION YEAR

September 30, 2021			TERM LOANS AND LEASES																		REVOLVING LOANS			REVOLVING LOANS CONVERTED TO TERM LOANS
(In Millions)			2021			2020			2019			2018			2017			PRIOR			TOTAL
Commercial
Commercial and Institutional
Risk Rating:
1 to 3 Category			$	878.7		$	517.7		$	337.1		$	208.1		$	69.8		$	613.2		$	4,565.5		$	0.1		$	7,190.2
4 to 5 Category			918.7			388.6			380.8			244.4			249.9			248.4			1,345.5			33.9			3,810.2
6 to 9 Category			25.3			27.0			48.4			30.9			10.0			2.7			83.7			—			228.0
Total Commercial and Institutional			1,822.7			933.3			766.3			483.4			329.7			864.3			5,994.7			34.0			11,228.4
Commercial Real Estate
Risk Rating:
1 to 3 Category			390.0			241.5			250.7			91.0			15.5			79.6			156.2			2.7			1,227.2
4 to 5 Category			829.4			740.2			601.4			228.0			90.7			415.8			74.4			20.6			3,000.5
6 to 9 Category			19.5			—			55.3			—			20.3			11.0			—			—			106.1
Total Commercial Real Estate			1,238.9			981.7			907.4			319.0			126.5			506.4			230.6			23.3			4,333.8
Non-U.S.
Risk Rating:
1 to 3 Category			1,325.4			231.0			16.6			—			9.1			—			491.2			—			2,073.3
4 to 5 Category			260.9			—			—			2.0			—			71.3			81.4			1.8			417.4
6 to 9 Category			0.1			—			23.1			—			—			—			9.0			—			32.2
Total Non-U.S.			1,586.4			231.0			39.7			2.0			9.1			71.3			581.6			1.8			2,522.9
Lease Financing, net
Risk Rating:
4 to 5 Category			—			—			—			—			—			11.0			—			—			11.0
Total Lease Financing, net			—			—			—			—			—			11.0			—			—			11.0
Other
Risk Rating:
1 to 3 Category			154.5			—			—			—			—			—			—			—			154.5
4 to 5 Category			195.3			—			—			—			—			—			—			—			195.3
Total Other			349.8			—			—			—			—			—			—			—			349.8
Total Commercial			4,997.8			2,146.0			1,713.4			804.4			465.3			1,453.0			6,806.9			59.1			18,445.9
Personal
Private Client
Risk Rating:
1 to 3 Category			282.7			227.6			86.9			13.4			53.9			131.4			7,399.7			64.3			8,259.9
4 to 5 Category			435.1			493.5			533.9			89.0			42.4			72.7			4,490.9			166.3			6,323.8
6 to 9 Category			1.0			5.4			—			20.8			—			0.2			2.7			—			30.1
Total Private Client			718.8			726.5			620.8			123.2			96.3			204.3			11,893.3			230.6			14,613.8
Residential Real Estate
Risk Rating:
1 to 3 Category			923.7			1,142.4			231.5			24.1			67.1			616.8			143.1			—			3,148.7
4 to 5 Category			398.4			993.3			278.2			90.5			109.6			494.8			237.7			1.9			2,604.4
6 to 9 Category			0.5			9.8			7.9			0.6			0.5			69.3			15.1			0.2			103.9
Total Residential Real Estate			1,322.6			2,145.5			517.6			115.2			177.2			1,180.9			395.9			2.1			5,857.0
Non-U.S.
Risk Rating:
1 to 3 Category			11.2			—			30.9			—			—			1.1			41.6			—			84.8
4 to 5 Category			37.0			7.1			6.2			10.4			—			3.9			209.0			12.9			286.5
6 to 9 Category			—			—			—			—			—			0.2			—			—			0.2
Total Non-U.S.			48.2			7.1			37.1			10.4			—			5.2			250.6			12.9			371.5
Other
Risk Rating:
1 to 3 Category			146.7			—			—			—			—			—			—			—			146.7
4 to 5 Category			21.7			—			—			—			—			—			—			—			21.7
Total Other			168.4			—			—			—			—			—			—			—			168.4
Total Personal			2,258.0			2,879.1			1,175.5			248.8			273.5			1,390.4			12,539.8			245.6			21,010.7
Total Loans and Leases			$	7,255.8		$	5,025.1		$	2,888.9		$	1,053.2		$	738.8		$	2,843.4		$	19,346.7		$	304.7		$	39,456.6

Notes to Consolidated Financial Statements (unaudited) (continued)

December 31, 2020			TERM LOANS AND LEASES																		REVOLVING LOANS			REVOLVING LOANS CONVERTED TO TERM LOANS
(In Millions)			2020			2019			2018			2017			2016			PRIOR			TOTAL
Commercial
Commercial and Institutional
Risk Rating:
1 to 3 Category			$	663.8		$	546.0		$	204.6		$	96.0		$	396.0		$	448.8		$	3,742.4		$	5.5		$	6,103.1
4 to 5 Category			793.4			505.1			354.1			405.4			134.6			167.3			1,238.7			32.3			3,630.9
6 to 9 Category			34.3			119.8			37.3			42.8			23.0			6.0			61.1			—			324.3
Total Commercial and Institutional			1,491.5			1,170.9			596.0			544.2			553.6			622.1			5,042.2			37.8			10,058.3
Commercial Real Estate
Risk Rating:
1 to 3 Category			406.3			109.2			27.6			36.5			11.8			99.4			124.3			8.7			823.8
4 to 5 Category			703.1			811.8			332.7			107.4			184.5			382.8			60.4			11.4			2,594.1
6 to 9 Category			15.3			55.2			32.0			25.8			—			12.2			—			—			140.5
Total Commercial Real Estate			1,124.7			976.2			392.3			169.7			196.3			494.4			184.7			20.1			3,558.4
Non-U.S.
Risk Rating:
1 to 3 Category			555.2			16.8			—			11.1			—			—			78.5			—			661.6
4 to 5 Category			313.1			0.7			2.0			—			—			157.9			39.2			1.8			514.7
6 to 9 Category			—			23.1			—			—			—			—			146.3			—			169.4
Total Non-U.S.			868.3			40.6			2.0			11.1			—			157.9			264.0			1.8			1,345.7
Lease Financing, net
Risk Rating:
4 to 5 Category			—			—			—			—			—			11.4			—			—			11.4
Total Lease Financing, net			—			—			—			—			—			11.4			—			—			11.4
Other
Risk Rating:
1 to 3 Category			81.7			—			—			—			—			—			—			—			81.7
4 to 5 Category			206.5			—			—			—			—			—			—			—			206.5
Total Other			288.2			—			—			—			—			—			—			—			288.2
Total Commercial			3,772.7			2,187.7			990.3			725.0			749.9			1,285.8			5,490.9			59.7			15,262.0
Personal
Private Client
Risk Rating:
1 to 3 Category			668.6			273.7			51.7			60.4			10.2			136.1			5,392.8			47.9			6,641.4
4 to 5 Category			492.1			479.9			117.3			60.4			77.5			77.5			3,564.7			207.3			5,076.7
6 to 9 Category			6.0			0.5			22.1			3.2			—			—			63.7			1.5			97.0
Total Private Client			1,166.7			754.1			191.1			124.0			87.7			213.6			9,021.2			256.7			11,815.1
Residential Real Estate
Risk Rating:
1 to 3 Category			1,554.3			317.4			42.9			109.9			205.1			627.8			152.8			1.7			3,011.9
4 to 5 Category			854.6			359.5			115.8			163.2			209.7			896.5			273.1			7.4			2,879.8
6 to 9 Category			15.3			8.3			0.7			0.5			1.9			94.8			22.5			—			144.0
Total Residential Real Estate			2,424.2			685.2			159.4			273.6			416.7			1,619.1			448.4			9.1			6,035.7
Non-U.S.
Risk Rating:
1 to 3 Category			23.3			14.9			—			—			—			1.8			275.6			—			315.6
4 to 5 Category			12.7			26.0			11.8			0.5			0.5			7.9			217.5			5.1			282.0
6 to 9 Category			—			—			—			—			—			0.3			—			—			0.3
Total Non-U.S.			36.0			40.9			11.8			0.5			0.5			10.0			493.1			5.1			597.9
Other
Risk Rating:
1 to 3 Category			34.6			—			—			—			—			—			—			—			34.6
4 to 5 Category			14.4			—			—			—			—			—			—			—			14.4
Total Other			49.0			—			—			—			—			—			—			—			49.0
Total Personal			3,675.9			1,480.2			362.3			398.1			504.9			1,842.7			9,962.7			270.9			18,497.7
Total Loans and Leases			$	7,448.6		$	3,667.9		$	1,352.6		$	1,123.1		$	1,254.8		$	3,128.5		$	15,453.6		$	330.6		$	33,759.7

Loans and leases in the “1 to 3” category are expected to exhibit minimal to modest probabilities of default and are characterized by borrowers having the strongest financial qualities, including above average financial flexibility, cash flows and capital levels. Borrowers assigned these ratings are anticipated to experience very little to moderate financial pressure in

Notes to Consolidated Financial Statements (unaudited) (continued)

adverse down-cycle scenarios. As a result of these characteristics, borrowers within this category exhibit a minimal to modest likelihood of loss.

Loans and leases in the “4 to 5” category are expected to exhibit moderate to acceptable probabilities of default and are characterized by borrowers with less financial flexibility than those in the “1 to 3” category. Cash flows and capital levels are generally sufficient to allow for borrowers to meet current requirements, but have fewer financial resources to manage through economic downturns. As a result of these characteristics, borrowers within this category exhibit a moderate likelihood of loss.

Loans and leases in the watch list category have elevated credit risk profiles that are monitored through internal watch lists, and consist of credits with borrower ratings of “6 to 9.” These credits, which include all nonaccrual credits, are expected to exhibit minimally acceptable probabilities of default, elevated risk of default, or are currently in default. Borrowers associated with these risk profiles that are not currently in default have limited financial flexibility. Cash flows and capital levels range from acceptable to potentially insufficient to meet current requirements, particularly in adverse down cycle scenarios. As a result of these characteristics, borrowers in this category exhibit an elevated to probable likelihood of loss.

Past Due Status. Past due status is based on the length of time from the contractual due date a principal or interest payment has been past due. For disclosure purposes, loans and leases that are 29 days past due or less are reported as current.

The following table provides balances and delinquency status of accrual and nonaccrual loans and leases by segment and class, as well as the other real estate owned and nonaccrual asset balances, as of September 30, 2021 and December 31, 2020.

TABLE 48: DELINQUENCY STATUS

			ACCRUAL																					NONACCRUAL WITH NO ALLOWANCE
(In Millions)			CURRENT			30 – 59 DAYS PAST DUE			60 – 89 DAYS PAST DUE			90 DAYS OR MORE PAST DUE			TOTAL ACCRUAL			NONACCRUAL			TOTAL LOANS AND LEASES
September 30, 2021
Commercial
Commercial and Institutional			$	11,155.4		$	52.6		$	0.5		$	0.3		$	11,208.8		$	19.6		$	11,228.4		$	8.8
Commercial Real Estate			4,254.8			2.1			—			1.2			4,258.1			75.7			4,333.8			61.2
Non-U.S.			2,522.9			—			—			—			2,522.9			—			2,522.9			—
Lease Financing, net			11.0			—			—			—			11.0			—			11.0			—
Other			349.8			—			—			—			349.8			—			349.8			—
Total Commercial			18,293.9			54.7			0.5			1.5			18,350.6			95.3			18,445.9			70.0
Personal
Private Client			14,463.5			118.5			19.9			11.7			14,613.6			0.2			14,613.8			0.2
Residential Real Estate			5,810.1			—			1.4			—			5,811.5			45.5			5,857.0			45.5
Non-U.S.			371.5			—			—			—			371.5			—			371.5			—
Other			168.4			—			—			—			168.4			—			168.4			—
Total Personal			20,813.5			118.5			21.3			11.7			20,965.0			45.7			21,010.7			45.7
Total Loans and Leases			$	39,107.4		$	173.2		$	21.8		$	13.2		$	39,315.6		$	141.0		$	39,456.6		$	115.7
			Other Real Estate Owned															$	0.2
			Total Nonaccrual Assets															$	141.2

Notes to Consolidated Financial Statements (unaudited) (continued)

			ACCRUAL																					NONACCRUAL WITH NO ALLOWANCE
(In Millions)			CURRENT			30 – 59 DAYS PAST DUE			60 – 89 DAYS PAST DUE			90 DAYS OR MORE PAST DUE			TOTAL ACCRUAL			NONACCRUAL			TOTAL LOANS AND LEASES
December 31, 2020
Commercial
Commercial and Institutional			$	9,877.0		$	153.7		$	1.2		$	—		$	10,031.9		$	26.4		$	10,058.3		$	9.1
Commercial Real Estate			3,516.2			2.0			—			—			3,518.2			40.2			3,558.4			32.3
Non-U.S.			1,345.7			—			—			—			1,345.7			—			1,345.7			—
Lease Financing, net			11.4			—			—			—			11.4			—			11.4			—
Other			288.2			—			—			—			288.2			—			288.2			—
Total Commercial			15,038.5			155.7			1.2			—			15,195.4			66.6			15,262.0			41.4
Personal
Private Client			11,765.4			29.1			9.9			7.8			11,812.2			2.9			11,815.1			2.9
Residential Real Estate			5,946.0			23.5			2.9			1.1			5,973.5			62.2			6,035.7			53.8
Non-U.S			596.7			1.2			—			—			597.9			—			597.9			—
Other			49.0			—			—			—			49.0			—			49.0			—
Total Personal			18,357.1			53.8			12.8			8.9			18,432.6			65.1			18,497.7			56.7
Total Loans and Leases			$	33,395.6		$	209.5		$	14.0		$	8.9		$	33,628.0		$	131.7		$	33,759.7		$	98.1
			Other Real Estate Owned															$	0.7
			Total Nonaccrual Assets															$	132.4

Interest income that would have been recorded for nonaccrual loans and leases in accordance with their original terms was $1.5 million and $3.2 million for the three and nine months ended September 30, 2021, and $1.1 million and $3.5 million for the three and nine months ended September 30, 2020, respectively.

Collateral Dependent Financial Assets. A financial asset is collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. Most of Northern Trust’s collateral dependent credit exposure relates to its residential real estate portfolio for which the collateral is usually the underlying real estate property. For collateral dependent financial assets, it is Northern Trust’s policy to reserve or charge-off the difference between the amortized cost basis of the loan and the value of the collateral. The collateral dependent financial asset balance as of September 30, 2021 was immaterial to Northern Trust’s financial statements.

Recognition of Income. Interest income on loans and leases is recorded on an accrual basis unless, in the opinion of management, there is a question as to the ability of the debtor to meet the terms of the loan agreement, or interest or principal is more than 90 days contractually past due and the loan is not well-secured and in the process of collection. Loans meeting such criteria are classified as nonaccrual and interest income is recorded on a cash basis. At the time a loan is determined to be nonaccrual, interest accrued but not collected is reversed against interest income in the current period. Interest collected on nonaccrual loans is applied to principal unless, in the opinion of management, collectability of principal is not in doubt. Management’s assessment of the indicators of loan and lease collectability, and its policies relative to the recognition of interest income, including the suspension and subsequent resumption of income recognition, do not meaningfully vary between loan and lease classes. Nonaccrual loans are returned to accrual status when factors indicating doubtful collectability no longer exist. Factors considered in returning a loan to accrual status are consistent across all classes of loans and leases and, in accordance with regulatory guidance, relate primarily to expected payment performance. Loans are eligible to be returned to accrual status when: (i) no principal or interest that is due is unpaid and repayment of the remaining contractual principal and interest is expected or (ii) the loan has otherwise become well-secured (possessing realizable value sufficient to discharge the debt, including accrued interest, in full) and is in the process of collection (through action reasonably expected to result in debt repayment or restoration to a current status in the near future). A loan that has not been brought fully current may be restored to accrual status provided there has been a sustained period of repayment performance (generally a minimum of six payment periods) by the borrower in accordance with the contractual terms, and Northern Trust is reasonably assured of repayment within a reasonable period of time. Additionally, a loan that has been formally restructured so as to be reasonably assured of repayment and performance according to its modified terms may be returned to accrual status, provided there was a well-documented credit evaluation of the borrower’s financial condition and prospects of repayment under the revised terms and there has been a sustained period of repayment performance (generally a minimum of six payment periods) under the revised terms.

Nonaccrual Loans and Troubled Debt Restructurings (TDRs). A loan that has been modified as a concession by Northern Trust or a bankruptcy court resulting from the debtor’s financial difficulties is referred to as a troubled debt restructuring

Notes to Consolidated Financial Statements (unaudited) (continued)

(TDR). All TDRs are reported starting in the calendar year of their restructuring. In subsequent years, a TDR may cease being reported if the loan was modified at a market rate and has performed according to the modified terms for at least six payment periods. A loan that has been modified at a below market rate will return to accrual status if it satisfies the six-payment-period performance requirement.

The expected credit loss is measured based upon the present value of expected future cash flows, discounted at the effective interest rate based on the original contractual rate. If a loan’s contractual interest rate varies based on subsequent changes in an independent factor, such as an index or rate, the loan’s effective interest rate is calculated based on the factor as it changes over the life of the loan. Northern Trust elected not to project changes in the factor for purposes of estimating expected future cash flows. Further, Northern Trust elected not to adjust the effective interest rate for prepayments. If the loan is collateral dependent, the expected loss is measured based on the fair value of the collateral at the reporting date.

If the loan valuation is less than the recorded value of the loan, either an allowance is established or a charge-off is recorded for the difference. Smaller balance (individually less than $1 million) homogeneous loans are collectively evaluated. Northern Trust’s accounting policies for material nonaccrual loans is consistent across all classes of loans and leases.

All loans and leases with TDR modifications are evaluated for additional expected credit losses. The nature and extent of further deterioration in credit quality, including a subsequent default, is considered in the determination of an appropriate level of allowance for credit losses.

Included within nonaccrual loans were $73.5 million and $38.9 million of nonaccrual TDRs, and $23.3 million and $29.3 million of accrual TDRs as of September 30, 2021 and December 31, 2020, respectively.

There were $0.2 million and $10.4 million of aggregate undrawn loan commitments and standby letters of credit at September 30, 2021 and December 31, 2020, respectively, issued to borrowers with TDR modifications of loans.

The following table provides, by segment and class, the number of TDR modifications of loans and leases during the three- and nine- month periods ended September 30, 2021 and 2020, and the recorded investments and unpaid principal balances as of September 30, 2021 and 2020.

TABLE 49: TROUBLED DEBT RESTRUCTURINGS

			THREE MONTHS ENDED SEPTEMBER 30, 2021									NINE MONTHS ENDED SEPTEMBER 30, 2021
($ In Millions)			NUMBER OF LOANS AND LEASES			RECORDED INVESTMENT			UNPAID PRINCIPAL BALANCE			NUMBER OF LOANS AND LEASES			RECORDED INVESTMENT			UNPAID PRINCIPAL BALANCE
Commercial
Commercial and Institutional			—			$	—		$	—		6			$	19.6		$	19.6
Commercial Real Estate			—			—			—			2			28.3			34.5
Total Commercial			—			—			—			8			47.9			54.1
Personal
Residential Real Estate			1			0.2			0.2			8			1.0			1.2
Total Personal			1			0.2			0.2			8			1.0			1.2
Total Loans and Leases			1			$	0.2		$	0.2		16			$	48.9		$	55.3

Note: Period-end balances reflect all paydowns and charge-offs during the period.

			THREE MONTHS ENDED SEPTEMBER 30, 2020									NINE MONTHS ENDED SEPTEMBER 30, 2020
($ In Millions)			NUMBER OF LOANS AND LEASES			RECORDED INVESTMENT			UNPAID PRINCIPAL BALANCE			NUMBER OF LOANS AND LEASES			RECORDED INVESTMENT			UNPAID PRINCIPAL BALANCE
Commercial
Commercial and Institutional			1			$	1.0		$	1.0		3			$	25.3		$	25.5
Total Commercial			1			1.0			1.0			3			25.3			25.5
Personal
Residential Real Estate			10			17.4			17.5			16			18.3			18.7
Total Personal			10			17.4			17.5			16			18.3			18.7
Total Loans and Leases			11			$	18.4		$	18.5		19			$	43.6		$	44.2

Note: Period-end balances reflect all paydowns and charge-offs during the period.

TDR modifications involve extensions of term, deferrals of principal, interest rate concessions, and other modifications. Other modifications typically reflect other nonstandard terms which Northern Trust would not offer in non-troubled situations.

During the three months ended September 30, 2021, the TDR loan modification within residential real estate was an extension of term. During the nine months ended September 30, 2021, the TDR modification of loans within residential real estate were

Notes to Consolidated Financial Statements (unaudited) (continued)

other modifications, deferred principal and extension of term. During the nine months ended September 30, 2021, the TDR modification of loans within commercial and institutional was deferred principal. During the nine months ended September 30, 2021, the TDR modification of loans within commercial real estate were deferred principal, interest rate concessions, and extension of term.

During the three and nine months ended September 30, 2020, the TDR modifications of loans within residential real estate were extensions of term, other modifications, deferred principal, and interest rate concessions. During the three and nine months ended September 30, 2020, the TDR modifications within commercial and institutional were other modifications and extension of term.

There was one residential real estate loan TDR modification during the twelve months ended June 30, 2021, which subsequently had a payment default during the three and nine months ended September 30, 2021. The total recorded investment for this loan was approximately $0.1 million and the unpaid principal balance for this loan was approximately $0.1 million.

There were no residential real estate loan TDR modifications during the twelve months ended June 30, 2020, which subsequently had a payment default during the three and nine months ended September 30, 2020.

Northern Trust may obtain physical possession of real estate via foreclosure on an in-substance repossession. As of September 30, 2021, Northern Trust held foreclosed real estate properties with a carrying value of $0.2 million as a result of obtaining physical possession. In addition, as of September 30, 2021, Northern Trust had loans with a carrying value of $5.7 million for which formal foreclosure proceedings were in process.

TDR Relief — COVID-19. Due to the economic environment arising from the COVID-19 pandemic, there have been two forms of relief provided for classifying loans as TDRs: the Interagency Guidance (as defined below) and the CARES Act.

Various banking regulators, including the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Consumer Financial Protection Bureau, issued guidance in the April 7, 2020 Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (revised) on loan modification treatment (Interagency Guidance) pursuant to which financial institutions can apply ASC 310-40 Receivables – Troubled Debt Restructurings by Creditors. In accordance with the Interagency Guidance, a loan modification is not considered a TDR if the modification is related to COVID-19; the borrower had been current (not more than 29 days past due) when the modification program was implemented; and the modification includes payment deferrals for not more than 6 months.

Under section 4013 of the CARES Act, relief provided to lenders exempting certain loan modifications which would otherwise be classified as TDRs from such classification applies for loans that were not more than 30 days past due as of December 31, 2019. The TDR relief under the CARES Act applies to COVID-19-related modifications that were made from March 1, 2020 until the earlier of (a) January 1, 2022 or (b) 60 days from the date the COVID-19 national emergency officially ends.

Financial institutions may account for eligible loan modifications under the Interagency Guidance and/or the CARES Act. Northern Trust elected to apply both the CARES Act and the Interagency Guidance, as applicable, in providing borrowers with loan modification relief in response to the COVID-19 pandemic. All other types of modifications which do not meet the CARES Act or Interagency Guidance requirements continue to be governed by existing regulations and accounting policies.

The following tables provide, by segment and class, the number of total COVID-19-related loan modifications including the loan volume and deferred principal and interest balances as of September 30, 2021, for which Northern Trust applied an exemption from TDR classification that are in active deferral (loans currently in the deferral period) or completed deferral (loans that returned to their regular payment schedule).

TABLE 50: COVID-19 LOAN MODIFICATIONS NOT CONSIDERED TDRS IN ACTIVE DEFERRAL STATUS

			SEPTEMBER 30, 2021
($ In Millions)			NUMBER OF COVID-19 RELATED MODIFICATIONS			LOAN VOLUME			DEFERRED PRINCIPAL AMOUNT			DEFERRED INTEREST AMOUNT
Personal
Residential Real Estate			14			$	3.2		$	0.1		$	0.1
Total Personal			14			$	3.2		$	0.1		$	0.1
Total Loans			14			$	3.2		$	0.1		$	0.1

Notes to Consolidated Financial Statements (unaudited) (continued)

TABLE 51: COVID-19 LOAN MODIFICATIONS NOT CONSIDERED TDRS THAT HAVE COMPLETED DEFERRAL

			SEPTEMBER 30, 2021
($ In Millions)			NUMBER OF COVID-19 RELATED MODIFICATIONS			LOAN VOLUME			DEFERRED PRINCIPAL AMOUNT			DEFERRED INTEREST AMOUNT
Commercial
Commercial and Institutional			79			$	211.6		$	—		$	1.7
Commercial Real Estate			83			396.3			—			2.3
Total Commercial			162			$	607.9		$	—		$	4.0
Personal
Private Client			30			$	150.7		$	—		$	1.0
Residential Real Estate			363			125.3			1.4			1.7
Total Personal			393			$	276.0		$	1.4		$	2.7
Total Loans			555			$	883.9		$	1.4		$	6.7

Northern Trust continues to accrue and recognize interest income during the loan deferral period, and hence has not moved these loans to nonaccrual or reported them as past due. Further, these loan balances continue to be assessed on a collective basis for purposes of measuring an allowance for expected credit losses. While these loans are under the COVID-19 loan modification program, this may delay the recognition of nonaccruals and charge-offs. Loans which have exited the COVID-19 loan modification program may be placed on nonaccrual status or charged-off if borrowers were unable to resume their regular payment schedule.

During the quarter ended September 30, 2021, 33 loans with an aggregate principal amount of $80.9 million that had been granted payment deferrals were paid off. As of September 30, 2021, less than 10% of loans that had been granted payment deferrals were either past due or in nonaccrual status.

Note 7 – Allowance for Credit Losses

Allowance and Provision 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 exposures, 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. The Credit Loss Reserve Committee determines the probability weights applied to each forecast approved by Northern Trust’s Macroeconomic Scenario Development Committee, and also reviews and approves qualitative adjustments to the collective allowance in line with Northern Trust’s qualitative adjustment framework.

The following table provides information regarding changes in the total allowance for credit losses during the three and nine months ended September 30, 2021 and 2020.

TABLE 52: CHANGES IN THE ALLOWANCE FOR CREDIT LOSSES

			THREE MONTHS ENDED SEPTEMBER 30, 2021
(In Millions)			LOANS AND LEASES			UNDRAWN LOAN COMMITMENTS AND STANDBY LETTERS OF CREDIT			HELD TO MATURITY DEBT SECURITIES			OTHER FINANCIAL ASSETS			TOTAL
Balance at Beginning of Period			$	148.8		$	46.5		$	10.5		$	1.2		$	207.0
Charge-Offs			—			—			—			—			—
Recoveries			1.1			—			—			—			1.1
Net Recoveries (Charge-Offs)			1.1			—			—			—			1.1
Provision for Credit Losses			(6.0)			(6.7)			(0.1)			(0.2)			(13.0)
Balance at End of Period			$	143.9		$	39.8		$	10.4		$	1.0		$	195.1

Notes to Consolidated Financial Statements (unaudited) (continued)

			NINE MONTHS ENDED SEPTEMBER 30, 2021
(In Millions)			LOANS AND LEASES			UNDRAWN LOAN COMMITMENTS AND STANDBY LETTERS OF CREDIT			HELD TO MATURITY DEBT SECURITIES			OTHER FINANCIAL ASSETS			TOTAL
Balance at Beginning of Period			$	190.7		$	61.1		$	7.3		$	0.8		$	259.9
Charge-Offs			(0.4)			—			—			—			(0.4)
Recoveries			5.6			—			—			—			5.6
Net Recoveries (Charge-Offs)			5.2			—			—			—			5.2
Provision for Credit Losses			(52.0)			(21.3)			3.1			0.2			(70.0)
Balance at End of Period			$	143.9		$	39.8		$	10.4		$	1.0		$	195.1

			THREE MONTHS ENDED SEPTEMBER 30, 2020
(In Millions)			LOANS AND LEASES			UNDRAWN LOAN COMMITMENTS AND STANDBY LETTERS OF CREDIT			HELD TO MATURITY DEBT SECURITIES			OTHER FINANCIAL ASSETS			TOTAL
Balance at Beginning of Period			$	210.2		$	49.0		$	6.5		$	1.3		$	267.0
Charge-Offs			(0.8)			—			—			—			(0.8)
Recoveries			1.2			—			—			—			1.2
Net Recoveries (Charge-Offs)			0.4			—			—			—			0.4
Provision for Credit Losses			4.8			(4.1)			0.4			(0.6)			0.5
Balance at End of Period			$	215.4		$	44.9		$	6.9		$	0.7		$	267.9

			NINE MONTHS ENDED SEPTEMBER 30, 2020
(In Millions)			LOANS AND LEASES			UNDRAWN LOAN COMMITMENTS AND STANDBY LETTERS OF CREDIT			HELD TO MATURITY DEBT SECURITIES			OTHER FINANCIAL ASSETS			TOTAL
Balance at End of Prior Period			$	104.5		$	19.9		$	—		$	—		$	124.4
Cumulative Effect Adjustment			(2.2)			8.9			6.6			0.4			13.7
Balance at Beginning of Period			$	102.3		$	28.8		$	6.6		$	0.4		$	138.1
Charge-Offs			(3.0)			—			—			—			(3.0)
Recoveries			5.3			—			—			—			5.3
Net Recoveries (Charge-Offs)			2.3			—			—			—			2.3
Provision for Credit Losses			110.8			16.1			0.3			0.3			127.5
Balance at End of Period			$	215.4		$	44.9		$	6.9		$	0.7		$	267.9

The portion of the allowance assigned to loans and leases, HTM debt securities, and other financial assets is presented as a contra asset in Allowance for Credit Losses on the consolidated balance sheets. The portion of the allowance assigned to undrawn loan commitments and standby letters of credit is reported in Other Liabilities on the consolidated balance sheets. For credit exposure and the associated allowance related to fee receivables, please refer to Note 14 — Revenue from Contracts with Clients. For information related to the allowance for AFS debt securities, please refer to Note 4 — Securities. For all other financial assets recognized at amortized cost, which include Cash and Due from Banks, Other Central Bank Deposits, Interest Bearing Deposits with Banks, Federal Funds Sold, and Other Assets, please refer to the Allowance for Other Financial Assets section within this footnote.

The Provision for Credit Losses on the consolidated statements of income represents the change in the Allowance for Credit Losses on the consolidated balance sheets and is the charge to current period earnings. It represents the amount needed to maintain the Allowance for Credit Losses on the consolidated balance sheets at an appropriate level to absorb lifetime expected credit losses related to financial assets in scope. Actual losses may vary from current estimates and the amount of the Provision for Credit Losses may be either greater or less than actual net charge-offs.

There was a $13.0 million release of credit reserves in the current quarter, as compared to a $0.5 million provision in the prior-year quarter. There were net recoveries of $1.1 million during the three months ended September 30, 2021, as compared to net recoveries of $0.4 million for the three months ended September 30, 2020. The release of credit reserves in the current quarter mostly related to undrawn loan commitments and standby letters of credit and loans and leases. For further detail, please see the Allowance for the Loan and Lease Portfolio section below.

There was a $70.0 million release of credit reserves for the nine months ended September 30, 2021, as compared to a $127.5 million provision for the nine months ended September 30, 2020. There were net recoveries of $5.2 million for the nine months ended September 30, 2021, as compared to net recoveries of $2.3 million for the nine months ended September 30, 2020. The

Notes to Consolidated Financial Statements (unaudited) (continued)

release of credit reserves for the nine months ended September 30, 2021 mostly related to loans and leases. For further detail, please see the Allowance for the Loan and Lease Portfolio section below.

Forecasting and Reversion. Estimating expected lifetime credit losses requires the consideration of the effect of future economic conditions. Northern Trust employs multiple scenarios over a reasonable and supportable period (currently two years) to project future conditions. Management determines the probability weights assigned to each scenario at each quarter-end. Key variables determined to be relevant for projecting credit losses on the portfolios in scope include macroeconomic factors, such as corporate profits, unemployment, and real estate price indices, as well as financial market factors such as equity prices, volatility, and credit spreads. For periods beyond the reasonable and supportable period, Northern Trust reverts to its own historical loss experiences on a straight-line basis over four quarters. For the current quarter, the primary forecast, consistent with Northern Trust’s economic outlook publications, assumes continued economic recovery from the challenges of COVID-19, with steady growth and a falling unemployment rate over the forecast horizon. An alternative scenario is also considered, which contemplates a resurgence of the virus, causing a double-dip recession.

Contractual Term. Northern Trust estimates expected credit losses over the contractual term of the financial assets adjusted for prepayments, unless prepayments are not relevant to specific portfolios or sub-portfolios. Extension and renewal options are typically not considered since it is not Northern Trust’s practice to enter into arrangements where the borrower has the unconditional option to renew, or a conditional extension option whereby the conditions are beyond Northern Trust’s control.

Allowance for the Loan and Lease Portfolio. The following table provides information regarding changes in the total allowance for credit losses, including undrawn loan commitments and standby letters of credit, by segment during the three and nine months ended September 30, 2021 and 2020.

TABLE 53: CHANGES IN THE ALLOWANCE FOR CREDIT LOSSES RELATED TO LOANS AND LEASES

			THREE MONTHS ENDED SEPTEMBER 30, 2021
			LOANS AND LEASES									UNDRAWN LOAN COMMITMENTS AND STANDBY LETTERS OF CREDIT
(In Millions)			COMMERCIAL			PERSONAL			TOTAL			COMMERCIAL			PERSONAL			TOTAL
Balance at Beginning of Period			$	118.0		$	30.8		$	148.8		$	43.6		$	2.9		$	46.5
Charge-Offs			—			—			—			—			—			—
Recoveries			0.4			0.7			1.1			—			—			—
Net Recoveries (Charge-Offs)			0.4			0.7			1.1			—			—			—
Provision for Credit Losses			(2.7)			(3.3)			(6.0)			(6.4)			(0.3)			(6.7)
Balance at End of Period			$	115.7		$	28.2		$	143.9		$	37.2		$	2.6		$	39.8

			NINE MONTHS ENDED SEPTEMBER 30, 2021
			LOANS AND LEASES									UNDRAWN LOAN COMMITMENTS AND STANDBY LETTERS OF CREDIT
(In Millions)			COMMERCIAL			PERSONAL			TOTAL			COMMERCIAL			PERSONAL			TOTAL
Balance at Beginning of Period			$	142.2		$	48.5		$	190.7		$	57.6		$	3.5		$	61.1
Charge-Offs			—			(0.4)			(0.4)			—			—			—
Recoveries			0.9			4.7			5.6			—			—			—
Net Recoveries (Charge-Offs)			0.9			4.3			5.2			—			—			—
Provision for Credit Losses			(27.4)			(24.6)			(52.0)			(20.4)			(0.9)			(21.3)
Balance at End of Period			$	115.7		$	28.2		$	143.9		$	37.2		$	2.6		$	39.8

			THREE MONTHS ENDED SEPTEMBER 30, 2020
			LOANS AND LEASES									UNDRAWN LOAN COMMITMENTS AND STANDBY LETTERS OF CREDIT
(In Millions)			COMMERCIAL			PERSONAL			TOTAL			COMMERCIAL			PERSONAL			TOTAL
Balance at Beginning of Period			$	162.8		$	47.4		$	210.2		$	46.1		$	2.9		$	49.0
Charge-Offs			—			(0.8)			(0.8)			—			—			—
Recoveries			0.2			1.0			1.2			—			—			—
Net Recoveries (Charge-Offs)			0.2			0.2			0.4			—			—			—
Provision for Credit Losses			(15.4)			20.2			4.8			(6.0)			1.9			(4.1)
Balance at End of Period			$	147.6		$	67.8		$	215.4		$	40.1		$	4.8		$	44.9

Notes to Consolidated Financial Statements (unaudited) (continued)

			NINE MONTHS ENDED SEPTEMBER 30, 2020
			LOANS AND LEASES									UNDRAWN LOAN COMMITMENTS AND STANDBY LETTERS OF CREDIT
(In Millions)			COMMERCIAL			PERSONAL			TOTAL			COMMERCIAL			PERSONAL			TOTAL
Balance at End of Prior Period			$	58.1		$	46.4		$	104.5		$	15.8		$	4.1		$	19.9
Cumulative Effect Adjustment			(5.9)			3.7			(2.2)			11.9			(3.0)			8.9
Balance at Beginning of Period			52.2			50.1			102.3			27.7			1.1			28.8
Charge-Offs			(0.1)			(2.9)			(3.0)			—			—			—
Recoveries			2.2			3.1			5.3			—			—			—
Net Recoveries (Charge-Offs)			2.1			0.2			2.3			—			—			—
Provision for Credit Losses			93.3			17.5			110.8			12.4			3.7			16.1
Balance at End of Period			$	147.6		$	67.8		$	215.4		$	40.1		$	4.8		$	44.9

The decrease to the allowance for both loans and leases and undrawn loan commitments and standby letters of credit 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. Decreases in the collective basis reserve were primarily in the commercial and institutional portfolio.

Allowance Related to Credit Exposure Evaluated on a Collective Basis. Expected credit losses are measured on a collective basis as long as the financial assets included in the respective pool share similar risk characteristics. If financial assets are deemed to not share similar risk characteristics, an individual assessment is warranted.

The allowance estimation methodology for the collective assessment is primarily based on internally developed loss data specific to the Northern Trust financial asset portfolio from a historical observation period that includes both expansionary and recessionary periods. The estimation methodology and the related qualitative adjustment framework segregate the loan and lease portfolio into homogenous segments based on similar risk characteristics or risk monitoring methods.

Northern Trust utilizes a quantitative probability of default/loss given default approach for the calculation of its credit allowance on a collective basis. For each of the different parameters, specific credit models for the individual loan segments were developed. For each segment, the probability of default and the loss given default are applied to the exposure at default for each projected quarter to determine the quantitative component of the allowance. The quantitative allowance is then reviewed within the qualitative adjustment framework, through which management applies judgment by assessing internal risk factors, potential limitations in the quantitative methodology, and environmental factors that are not fully contemplated in the forecast to compute an adjustment to the quantitative allowance for each segment of the loan portfolio.

Allowance Related to Credit Exposure Evaluated on an Individual Basis. The allowance is determined through an individual evaluation of loans, leases, and lending-related commitments that have defaulted, generally those with Borrower Ratings of 8 and 9, that is based on expected future cash flows, the value of collateral, and other factors that may impact the borrower’s ability to pay. For defaulted loans for which the amount of allowance, if any, is determined based on the value of the underlying real estate collateral, third-party appraisals are typically obtained and utilized by management. These appraisals are generally less than twelve months old and are subject to adjustments to reflect management’s judgment as to the realizable value of the collateral.

The following table provides information regarding the recorded investments in loans and leases and the allowance for credit losses for loans and leases and undrawn loan commitments and standby letters of credit by segment as of September 30, 2021 and December 31, 2020.

Notes to Consolidated Financial Statements (unaudited) (continued)

TABLE 54: RECORDED INVESTMENTS IN LOANS AND LEASES

			SEPTEMBER 30, 2021									DECEMBER 31, 2020
(In Millions)			COMMERCIAL			PERSONAL			TOTAL			COMMERCIAL			PERSONAL			TOTAL
Loans and Leases
Evaluated on an Individual Basis			$	116.8		$	76.1		$	192.9		$	66.6		$	65.1		$	131.7
Evaluated on a Collective Basis			18,329.1			20,934.6			39,263.7			15,195.4			18,432.6			33,628.0
Total Loans and Leases			18,445.9			21,010.7			39,456.6			15,262.0			18,497.7			33,759.7
Allowance for Credit Losses on Credit Exposures
Evaluated on an Individual Basis			10.6			—			10.6			8.8			0.3			9.1
Evaluated on a Collective Basis			105.1			28.2			133.3			133.4			48.2			181.6
Allowance Assigned to Loans and Leases			115.7			28.2			143.9			142.2			48.5			190.7
Allowance for Undrawn Loan Commitments and Standby Letters of Credit
Evaluated on an Individual Basis			—			—			—			1.6			—			1.6
Evaluated on a Collective Basis			37.2			2.6			39.8			56.0			3.5			59.5
Allowance Assigned to Undrawn Loan Commitments and Standby Letters of Credit			37.2			2.6			39.8			57.6			3.5			61.1
Total Allowance Assigned to Loans and Leases and Undrawn Loan Commitments and Standby Letters of Credit			$	152.9		$	30.8		$	183.7		$	199.8		$	52.0		$	251.8

Northern Trust analyzes its exposure to credit losses from both on-balance-sheet and off-balance-sheet activity using a consistent methodology for the quantitative framework as well as the qualitative framework. For purposes of estimating the allowance for credit losses for undrawn loan commitments and standby letters of credit, the exposure at default includes an estimated drawdown of unused credit based on credit utilization factors, resulting in a proportionate amount of expected credit losses.

Allowance for Held to Maturity Debt Securities Portfolio. The following table provides information regarding changes in the total allowance for credit losses for HTM debt securities during the three and nine months ended September 30, 2021 and 2020.

TABLE 55: CHANGES IN THE ALLOWANCE FOR CREDIT LOSSES RELATED TO HELD TO MATURITY DEBT SECURITIES

			THREE MONTHS ENDED SEPTEMBER 30, 2021
(In Millions)			CORPORATE DEBT			NON-U.S. GOVERNMENT			SUB-SOVEREIGN, SUPRANATIONAL, AND NON-U.S. AGENCY BONDS			CERTIFICATE OF DEPOSITS			COVERED BONDS			OTHER			TOTAL
Balance at Beginning of Period			$	1.6		$	1.5		$	2.6		$	—		$	0.1		$	4.7		$	10.5
Provision for Credit Losses			(0.2)			(0.1)			0.2			—			—			—			(0.1)
Balance at End of Period			$	1.4		$	1.4		$	2.8		$	—		$	0.1		$	4.7		$	10.4

			NINE MONTHS ENDED SEPTEMBER 30, 2021
(In Millions)			CORPORATE DEBT			NON-U.S. GOVERNMENT			SUB-SOVEREIGN, SUPRANATIONAL, AND NON-U.S. AGENCY BONDS			CERTIFICATE OF DEPOSITS			COVERED BONDS			OTHER			TOTAL
Balance at Beginning of Period			$	0.8		$	0.2		$	1.2		$	—		$	0.1		$	5.0		$	7.3
Provision for Credit Losses			0.6			1.2			1.6			—			—			(0.3)			3.1
Balance at End of Period			$	1.4		$	1.4		$	2.8		$	—		$	0.1		$	4.7		$	10.4

			THREE MONTHS ENDED SEPTEMBER 30, 2020
(In Millions)			CORPORATE DEBT			NON-U.S. GOVERNMENT			SUB-SOVEREIGN, SUPRANATIONAL, AND NON-U.S. AGENCY BONDS			CERTIFICATE OF DEPOSITS			COVERED BONDS			OTHER			TOTAL
Balance at Beginning of Period			$	0.5		$	0.4		$	0.7		$	—		$	—		$	4.9		$	6.5
Provision for Credit Losses			0.2			—			(0.1)			0.2			0.1			—			0.4
Balance at End of Period			$	0.7		$	0.4		$	0.6		$	0.2		$	0.1		$	4.9		$	6.9

Notes to Consolidated Financial Statements (unaudited) (continued)

			NINE MONTHS ENDED SEPTEMBER 30, 2020
(In Millions)			CORPORATE DEBT			NON-U.S. GOVERNMENT			SUB-SOVEREIGN, SUPRANATIONAL, AND NON-U.S. AGENCY BONDS			CERTIFICATE OF DEPOSITS			COVERED BONDS			OTHER			TOTAL
Balance at End of Prior Period			$	—		$	—		$	—		$	—		$	—		$	—		$	—
Cumulative Effect Adjustment			0.8			0.3			0.9			—			—			4.6			6.6
Balance at Beginning of Period			0.8			0.3			0.9			—			—			4.6			6.6
Provision for Credit Losses			(0.1)			0.1			(0.3)			0.2			0.1			0.3			0.3
Balance at End of Period			$	0.7		$	0.4		$	0.6		$	0.2		$	0.1		$	4.9		$	6.9

HTM debt securities classified as U.S. government, government sponsored agency, and certain securities classified as obligations of states and political subdivisions are considered to be guarantees of the U.S. government or an agency of the U.S. government and therefore an allowance for credit losses is not estimated for such investments as the expected probability of non-payment of the amortized cost basis is zero.

HTM debt securities classified as other asset-backed represent pools of underlying receivables from which the cash flows are used to pay the bonds that vary in seniority. Utilizing a qualitative estimation approach, the allowance for other asset-backed securities is assessed by evaluating underlying pool performance based on delinquency rates and available credit support.

HTM debt securities classified as other relates to investments purchased by Northern Trust to fulfill its obligations under the Community Reinvestment Act (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. The allowance for CRA investments is assessed using a qualitative estimation approach primarily based on internal historical performance experience and default history of the underlying CRA portfolios to determine a quantitative component of the allowance.

The allowance estimation methodology for all other HTM debt securities is developed using a combination of external and internal data. The estimation methodology groups securities with shared characteristics for which the probability of default and the loss given default are applied to the total exposure at default to determine a quantitative component of the allowance.

Allowance for Other Financial Assets. The allowance for Other Financial Assets consists of the allowance for Due from Banks, Other Central Bank Deposits, Interest Bearing Deposits with Banks, and Other Assets. The Other Assets category includes other miscellaneous credit exposures reported in Other Assets on the consolidated balance sheets. The allowance estimation methodology for Other Financial Assets primarily utilizes a similar approach as used for the HTM debt securities portfolio. It consists of a combination of externally and internally developed loss data, adjusted for the appropriate contractual term. Northern Trust’s portfolio of Other Financial Assets is composed mostly of institutions within the “1 to 3” internal borrower rating category and is expected to exhibit minimal to modest likelihood of loss. The allowance for credit losses related to Other Financial Assets was $1.0 million and $0.8 million as of September 30, 2021 and December 31, 2020, respectively.

Accrued Interest. Accrued interest balances are reported within Other Assets on the consolidated balance sheets. Northern Trust elected not to measure an allowance for credit losses for accrued interest receivables related to its loan and securities portfolio as its policy is to write-off uncollectible accrued interest receivable balances in a timely manner. Accrued interest is written off by reversing interest income during the quarter the financial asset is moved from an accrual to a nonaccrual status.

The following table provides the amount of accrued interest excluded from the amortized cost basis of the following portfolios.

TABLE 56: ACCRUED INTEREST

(In Millions)			SEPTEMBER 30, 2021			DECEMBER 31, 2020
Loans and Leases			$	61.7		$	55.3
Debt Securities
Held to Maturity			43.2			26.5
Available for Sale			124.1			153.6
Other Financial Assets			1.3			1.4
Total			$	230.3		$	236.8

The amount of accrued interest reversed through interest income for loans and leases was immaterial for the three and nine months ended September 30, 2021 and 2020, and there was no accrued interest reversed through interest income related to any other financial assets for the three and nine months ended September 30, 2021 and 2020.

Notes to Consolidated Financial Statements (unaudited) (continued)

Note 8 – Pledged and Restricted Assets

Certain of Northern Trust’s subsidiaries, as required or permitted by law, pledge assets to secure public and trust deposits, repurchase agreements and borrowings, as well as for other purposes, including support for securities settlement, primarily related to client activities, and for derivative contracts.

The following table presents Northern Trust's pledged assets.

TABLE 57: TYPE OF PLEDGED ASSETS

(In Billions)			SEPTEMBER 30, 2021			DECEMBER 31, 2020
Securities
Obligations of States and Political Subdivisions			$	3.6		$	2.9
Government Sponsored Agency and Other Securities			35.5			32.5
Loans			15.7			12.1
Total Pledged Assets			$	54.8		$	47.5

Collateral required for these purposes totaled $7.5 billion and $5.7 billion at September 30, 2021 and December 31, 2020, respectively.

The following table presents the AFS debt securities pledged as collateral that are included in pledged assets.

TABLE 58: FAIR VALUE OF AVAILABLE FOR SALE DEBT SECURITIES INCLUDED IN PLEDGED ASSETS

			SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE						DERIVATIVE CONTRACTS
(In Millions)			SEPTEMBER 30, 2021			DECEMBER 31, 2020			SEPTEMBER 30, 2021			DECEMBER 31, 2020
Debt Securities
Available for Sale			$	588.5		$	33.0		$	18.3		$	27.1

The secured parties to these transactions have the right to repledge or sell the securities as it relates to $589.0 million and $33.5 million of the pledged collateral as of September 30, 2021 and December 31, 2020, respectively.

Northern Trust accepts financial assets as collateral that it may, in some instances, be permitted to repledge or sell. The collateral is generally obtained under certain reverse repurchase agreements and derivative contracts.

The following table presents the fair value of securities accepted as collateral.

TABLE 59: ACCEPTED COLLATERAL

(In Millions)			SEPTEMBER 30, 2021			DECEMBER 31, 2020
Collateral that may be repledged or sold
Reverse repurchase agreements (1)			$	522.1		$	1,179.8
Derivative contracts			2.8			0.9
Collateral that may not be repledged or sold
Reverse repurchase agreements			850.0			500.0

(1) The fair value of securities collateral that was repledged or sold totaled $415.6 million at September 30, 2021. There was no repledged or sold collateral as of December 31, 2020.

As a result of the economic environment arising from the COVID-19 pandemic, the Federal Reserve reduced the reserve requirement to zero percent on March 26, 2020. Deposits maintained to meet Federal Reserve Bank reserve requirements averaged $0.5 billion for the nine months ended September 30, 2020.

Notes to Consolidated Financial Statements (unaudited) (continued)

Note 9 – Goodwill and Other Intangibles

Goodwill. Changes by reporting segment in the carrying amount of Goodwill for the nine months ended September 30, 2021, including the effect of foreign exchange rates on non-U.S. dollar denominated balances, were as follows.

TABLE 60: GOODWILL

(In Millions)			CORPORATE & INSTITUTIONAL SERVICES			WEALTH MANAGEMENT			TOTAL
Balance at December 31, 2020			$	636.0		$	71.2		$	707.2
Goodwill Acquired			4.2			—			4.2
Foreign Exchange Rates			(5.8)			(0.1)			(5.9)
Balance at September 30, 2021			$	634.4		$	71.1		$	705.5

In the second quarter of 2021, Northern Trust finalized the acquisition of Parilux Investment Technology, LLC, a provider of middle office software solutions for multi-manager investors, completing the investment in the firm that was initiated in 2018. The purchase price recorded in connection with the closing of the acquisition totaled $17.6 million. Goodwill and developed technology associated with the acquisition totaled $4.2 million and $13.4 million, respectively.

Other Intangible Assets Subject to Amortization. The gross carrying amount and accumulated amortization of other intangible assets subject to amortization as of September 30, 2021 and December 31, 2020 were as follows.

TABLE 61: OTHER INTANGIBLE ASSETS

(In Millions)			SEPTEMBER 30, 2021			DECEMBER 31, 2020
Gross Carrying Amount			$	208.4		$	221.3
Less: Accumulated Amortization			112.6			108.7
Net Book Value			$	95.8		$	112.6

Other intangible assets consist primarily of the value of acquired client relationships and are included within Other Assets on the consolidated balance sheets. Amortization expense related to other intangible assets totaled $3.4 million and $11.6 million for the three and nine months ended September 30, 2021, and $4.3 million and $12.6 million for the three and nine months ended September 30, 2020. Amortization for the remainder of 2021 and for the years 2022, 2023, 2024, and 2025 is estimated to be $3.3 million, $10.0 million, $9.7 million, $9.6 million, and $9.0 million, respectively.

Capitalized Software. The gross carrying amount and accumulated amortization of capitalized software as of September 30, 2021 and December 31, 2020 were as follows.

TABLE 62: CAPITALIZED SOFTWARE

(In Millions)			SEPTEMBER 30, 2021			DECEMBER 31, 2020
Gross Carrying Amount			$	4,635.7		$	4,337.4
Less: Accumulated Amortization			3,003.2			2,744.5
Net Book Value			$	1,632.5		$	1,592.9

Capitalized software, which is included in Other Assets on the consolidated balance sheets, consists primarily of purchased software, software licenses, and allowable internal costs, including compensation relating to software developed for internal use. Fees paid for the use of software licenses that are not hosted by Northern Trust are expensed as incurred. Amortization expense, which is included in Equipment and Software on the consolidated statements of income, totaled $98.1 million and $288.0 million, respectively, for the three and nine months ended September 30, 2021, and $91.3 million and $274.0 million, respectively, for the three and nine months ended September 30, 2020.

Note 10 – Reporting Segments

Northern Trust is organized around 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. 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

Notes to Consolidated Financial Statements (unaudited) (continued)

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.

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 63: 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.

($ 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.

Notes to Consolidated Financial Statements (unaudited) (continued)

Note 11 – Stockholders’ Equity

Preferred Stock. The Corporation is authorized to issue 10 million shares of preferred stock without par value. The Board of Directors is authorized to fix the particular designations, preferences and relative, participating, optional and other special rights and qualifications, limitations or restrictions for each series of preferred stock issued.

As of September 30, 2021, 5,000 shares of Series D Non-Cumulative Perpetual Preferred Stock (the “Series D Preferred Stock”) and 16,000 shares of Series E Non-Cumulative Perpetual Preferred Stock (“Series E Preferred Stock”) were outstanding.

Series D Preferred Stock. As of September 30, 2021, the Corporation had issued and outstanding 500,000 depositary shares, each representing a 1/100th ownership interest in a share of Series D Preferred Stock, issued in August 2016. Equity related to Series D Preferred Stock as of September 30, 2021 and December 31, 2020 was $493.5 million. Shares of the Series D Preferred Stock have no par value and a liquidation preference of $100,000 (equivalent to $1,000 per depositary share).

Dividends on the Series D Preferred Stock, which are not mandatory, accrue and are payable on the liquidation preference amount, on a non-cumulative basis, at a rate per annum equal to (i) 4.60% from the original issue date of the Series D Preferred Stock to but excluding October 1, 2026; and (ii) a floating rate equal to Three-Month LIBOR plus 3.202% from and including October 1, 2026. Fixed rate dividends are payable in arrears on the first day of April and October of each year, through and including October 1, 2026, and floating rate dividends will be payable in arrears on the first day of January, April, July and October of each year, commencing on January 1, 2027. On July 20, 2021, the Corporation declared a cash dividend of $2,300 per share of Series D Preferred Stock payable on October 1, 2021, to stockholders of record as of September 15, 2021.

Series E Preferred Stock. As of September 30, 2021, the Corporation had issued and outstanding 16 million depositary shares, each representing 1/1,000th ownership interest in a share of Series E Preferred Stock, issued in November 2019. Equity related to Series E Preferred Stock as of September 30, 2021 and December 31, 2020 was $391.4 million. Shares of the Series E Preferred Stock have no par value and a liquidation preference of $25,000 (equivalent to $25 per depositary share).

Dividends on the Series E Preferred Stock, which are not mandatory, will accrue and be payable on the liquidation preference amount, on a non-cumulative basis, quarterly in arrears on the first day of January, April, July and October of each year, commencing on April 1, 2020, at a rate per annum equal to 4.70%. On July 20, 2021, the Corporation declared a cash dividend of $293.75 per share of Series E Preferred Stock payable on October 1, 2021, to stockholders of record as of September 15, 2021.

Common Stock. On June 25, 2020, the Federal Reserve Board imposed restrictions that were designed to cause large bank holding companies to preserve capital, including suspending share repurchases, capping dividend payments, and only allowing common stock dividends according to a formula based on recent income. 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. In 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. During the current quarter, 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). These repurchases were made under the stock repurchase authorization approved by the Board of Directors in July 2018. On October 19, 2021, this program was terminated and replaced with a new repurchase program, under which the Board of Directors authorized the Corporation to repurchase up to 25.0 million shares of the Corporation’s common stock. Shares are repurchased by the Corporation to, among other things, manage the Corporation’s capital levels. Repurchased shares are used for general purposes, including the issuance of shares under stock option and other incentive plans. The repurchase authorization approved by the Board of Directors has no expiration date.

Notes to Consolidated Financial Statements (unaudited) (continued)

Note 12 – Accumulated Other Comprehensive Income (Loss)

The following tables summarize the components of Accumulated Other Comprehensive Income (Loss) (AOCI) at September 30, 2021 and 2020, and changes during the three and nine months then ended.

TABLE 64: SUMMARY OF CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

			THREE MONTHS ENDED SEPTEMBER 30, 2021
(In Millions)			NET UNREALIZED GAINS (LOSSES) ON AVAILABLE FOR SALE DEBT SECURITIES(1)			NET UNREALIZED (LOSSES) GAINS ON CASH FLOW HEDGES			NET FOREIGN CURRENCY ADJUSTMENT			NET PENSION AND OTHER POSTRETIREMENT BENEFIT ADJUSTMENTS			TOTAL
Balance at June 30, 2021			$	373.0		$	(5.4)		$	151.8		$	(324.7)		$	194.7
Net Change			(89.6)			4.6			3.8			0.5			(80.7)
Balance at September 30, 2021			$	283.4		$	(0.8)		$	155.6		$	(324.2)		$	114.0

(1) The balance at September 30, 2021 includes after-tax net unamortized gains of $91.7 million related to AFS debt securities that have been transferred to HTM debt securities during the second quarter of 2021. Refer to Note 4 - Securities for further information.

			NINE MONTHS ENDED SEPTEMBER 30, 2021
(In Millions)			NET UNREALIZED GAINS (LOSSES) ON AVAILABLE FOR SALE DEBT SECURITIES(1)			NET UNREALIZED (LOSSES) GAINS ON CASH FLOW HEDGES			NET FOREIGN CURRENCY ADJUSTMENT			NET PENSION AND OTHER POSTRETIREMENT BENEFIT ADJUSTMENTS			TOTAL
Balance at December 31, 2020			$	641.8		$	(3.2)		$	144.7		$	(355.3)		$	428.0
Net Change			(358.4)			2.4			10.9			31.1			(314.0)
Balance at September 30, 2021			$	283.4		$	(0.8)		$	155.6		$	(324.2)		$	114.0

(1) The balance at September 30, 2021 includes after-tax net unamortized gains of $91.7 million related to AFS debt securities that have been transferred to HTM debt securities during the second quarter of 2021. Refer to Note 4 - Securities for further information.

			THREE MONTHS ENDED SEPTEMBER 30, 2020
(In Millions)			NET UNREALIZED GAINS (LOSSES) ON AVAILABLE FOR SALE DEBT SECURITIES(1)			NET UNREALIZED (LOSSES) GAINS ON CASH FLOW HEDGES			NET FOREIGN CURRENCY ADJUSTMENT			NET PENSION AND OTHER POSTRETIREMENT BENEFIT ADJUSTMENTS			TOTAL
Balance at June 30, 2020			$	631.8		$	0.3		$	145.5		$	(407.2)		$	370.4
Net Change			33.5			1.3			1.8			17.5			54.1
Balance at September 30, 2020			$	665.3		$	1.6		$	147.3		$	(389.7)		$	424.5

(1) Includes net unrealized gains on debt securities transferred from AFS to HTM during the period ended September 30, 2020.

			NINE MONTHS ENDED SEPTEMBER 30, 2020
(In Millions)			NET UNREALIZED GAINS (LOSSES) ON AVAILABLE FOR SALE DEBT SECURITIES(1)			NET UNREALIZED (LOSSES) GAINS ON CASH FLOW HEDGES			NET FOREIGN CURRENCY ADJUSTMENT			NET PENSION AND OTHER POSTRETIREMENT BENEFIT ADJUSTMENTS			TOTAL
Balance at December 31, 2019			$	114.0		$	(3.7)		$	117.8		$	(422.8)		$	(194.7)
Net Change			551.3			5.3			29.5			33.1			619.2
Balance at September 30, 2020			$	665.3		$	1.6		$	147.3		$	(389.7)		$	424.5

(1) Includes net unrealized gains on debt securities transferred from AFS to HTM during the period ended September 30, 2020.

Notes to Consolidated Financial Statements (unaudited) (continued)

TABLE 65: DETAILS OF CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

THREE MONTHS ENDED SEPTEMBER 30,			2021									2020
(In Millions)			PRE-TAX			TAX			AFTER TAX			PRE-TAX			TAX			AFTER TAX
Unrealized Gains (Losses) on Available for Sale Debt Securities
Unrealized Gains (Losses) on Available for Sale Debt Securities			$	(107.0)		$	26.9		$	(80.1)		$	45.3		$	(11.8)		$	33.5
Reclassification Adjustments for (Gains) Losses Included in Net Income:
Interest Income on Debt Securities(1)			(12.7)			3.2			(9.5)			—			—			—
Net Gains on Debt Securities(2)			—			—			—			—			—			—
Net Change			$	(119.7)		$	30.1		$	(89.6)		$	45.3		$	(11.8)		$	33.5
Unrealized Gains (Losses) on Cash Flow Hedges
Foreign Exchange Contracts			$	5.5		$	(1.4)		$	4.1		$	6.6		$	(1.6)		$	5.0
Interest Rate Contracts			—			—			—			(0.2)			—			(0.2)
Reclassification Adjustment for (Gains) Losses Included in Net Income(3)			0.7			(0.2)			0.5			(4.7)			1.2			(3.5)
Net Change			$	6.2		$	(1.6)		$	4.6		$	1.7		$	(0.4)		$	1.3
Foreign Currency Adjustments
Foreign Currency Translation Adjustments			$	(64.5)		$	3.5		$	(61.0)		$	92.1		$	(3.1)		$	89.0
Long-Term Intra-Entity Foreign Currency Transaction Gains (Losses)			(0.1)			—			(0.1)			1.2			(0.3)			0.9
Net Investment Hedge Gains (Losses)			86.7			(21.8)			64.9			(117.4)			29.3			(88.1)
Net Change			$	22.1		$	(18.3)		$	3.8		$	(24.1)		$	25.9		$	1.8
Pension and Other Postretirement Benefit Adjustments
Net Actuarial Gains			$	(15.5)		$	3.9		$	(11.6)		$	12.6		$	(3.1)		$	9.5
Reclassification Adjustment for (Gains) Losses Included in Net Income(4)
Amortization of Net Actuarial Loss			16.2			(4.0)			12.2			10.7			(2.6)			8.1
Amortization of Prior Service Cost			(0.2)			0.1			(0.1)			(0.1)			—			(0.1)
Net Change			$	0.5		$	—		$	0.5		$	23.2		$	(5.7)		$	17.5
Total Net Change			$	(90.9)		$	10.2		$	(80.7)		$	46.1		$	8.0		$	54.1

NINE MONTHS ENDED SEPTEMBER 30,			2021									2020
(In Millions)			PRE-TAX			TAX			AFTER TAX			PRE-TAX			TAX			AFTER TAX
Unrealized Gains (Losses) on Available for Sale Debt Securities
Unrealized Gains (Losses) on Available for Sale Debt Securities			$	(453.6)		$	116.4		$	(337.2)		$	736.8		$	(185.4)		$	551.4
Reclassification Adjustments for (Gains) Losses Included in Net Income:
Interest Income on Debt Securities(1)			(28.3)			7.1			(21.2)			—			—			—
Net Gains on Debt Securities(2)			—			—			—			(0.1)			—			(0.1)
Net Change			$	(481.9)		$	123.5		$	(358.4)		$	736.7		$	(185.4)		$	551.3
Unrealized Gains (Losses) on Cash Flow Hedges
Foreign Exchange Contracts			$	7.2		$	(1.8)		$	5.4		$	18.1		$	(4.5)		$	13.6
Interest Rate Contracts			—			—			—			0.2			(0.1)			0.1
Reclassification Adjustment for (Gains) Losses Included in Net Income(3)			(4.0)			1.0			(3.0)			(11.2)			2.8			(8.4)
Net Change			$	3.2		$	(0.8)		$	2.4		$	7.1		$	(1.8)		$	5.3
Foreign Currency Adjustments
Foreign Currency Translation Adjustments			$	(111.7)		$	4.8		$	(106.9)		$	53.1		$	(1.0)		$	52.1
Long-Term Intra-Entity Foreign Currency Transaction Gains (Losses)			0.1			(0.1)			—			0.7			(0.2)			0.5
Net Investment Hedge Gains (Losses)			157.3			(39.5)			117.8			(29.8)			6.7			(23.1)
Net Change			$	45.7		$	(34.8)		$	10.9		$	24.0		$	5.5		$	29.5
Pension and Other Postretirement Benefit Adjustments
Net Actuarial Gains (Losses)			$	(17.2)		$	5.1		$	(12.1)		$	11.8		$	(3.0)		$	8.8
Reclassification Adjustment for (Gains) Losses Included in Net Income(4)
Amortization of Net Actuarial Loss			58.0			(14.2)			43.8			32.3			(7.8)			24.5
Amortization of Prior Service Cost			(0.8)			0.2			(0.6)			(0.2)			—			(0.2)
Net Change			$	40.0		$	(8.9)		$	31.1		$	43.9		$	(10.8)		$	33.1
Total Net Change			$	(393.0)		$	79.0		$	(314.0)		$	811.7		$	(192.5)		$	619.2

(1) The before-tax reclassification adjustment out of AOCI is related to the amortization of unrealized gains (losses) on AFS debt securities that were transferred to HTM debt securities during the second quarter of 2021. Refer to Note 4 - Securities for further information.

(2) The before-tax reclassification adjustment out of AOCI related to the realized gains (losses) on AFS debt securities is recorded in Investment Security Gains (Losses), net on the consolidated statements of income.

(3) See Note 22 — Derivative Financial Instruments for the location of the reclassification adjustment related to cash flow hedges.

(4) The before-tax reclassification adjustment out of AOCI related to pension and other postretirement benefit adjustments is recorded in Employee Benefits expense on the consolidated statements of income.

Notes to Consolidated Financial Statements (unaudited) (continued)

Note 13 – Net Income Per Common Share

The computations of net income per common share are presented in the following table.

TABLE 66: NET INCOME PER COMMON SHARE

			THREE MONTHS ENDED SEPTEMBER 30,						NINE MONTHS ENDED SEPTEMBER 30,
($ In Millions Except Per Common Share Information)			2021			2020			2021			2020
Basic Net Income Per Common Share
Average Number of Common Shares Outstanding			208,116,009			208,106,190			208,199,352			208,351,088
Net Income			$	395.7		$	294.5		$	1,138.9		$	968.4
Less: Dividends on Preferred Stock			16.2			16.2			37.1			51.5
Net Income Applicable to Common Stock			379.5			278.3			1,101.8			916.9
Less: Earnings Allocated to Participating Securities			3.0			3.3			9.9			10.6
Earnings Allocated to Common Shares Outstanding			376.5			275.0			1,091.9			906.3
Basic Net Income Per Common Share			$	1.81		$	1.32		$	5.24		$	4.35
Diluted Net Income Per Common Share
Average Number of Common Shares Outstanding			208,116,009			208,106,190			208,199,352			208,351,088
Plus: Dilutive Effect of Share-based Compensation			807,297			582,304			803,178			672,243
Average Common and Potential Common Shares			208,923,306			208,688,494			209,002,530			209,023,331
Earnings Allocated to Common and Potential Common Shares			$	376.5		$	275.0		$	1,091.9		$	906.3
Diluted Net Income Per Common Share			1.80			1.32			5.22			4.34

Note: For the three and nine months ended September 30, 2021 and 2020, there were no common stock equivalents excluded in the computation of diluted net income per share.

Note 14 – Revenue from Contracts with Clients

Trust, Investment, and Other Servicing Fees. Custody and Fund Administration income is comprised of revenues received from our core asset servicing business for providing custody, fund administration, and middle-office-related services, primarily to C&IS clients. Investment Management and Advisory income contains revenue received from providing asset management and related services to Wealth Management and C&IS clients and to Northern Trust sponsored funds. Securities Lending income represents revenues generated from securities lending arrangements that Northern Trust enters into as agent, mainly with C&IS clients. Other income largely consists of revenues received from providing employee benefit, investment risk and analytic and other services to C&IS and Wealth Management clients.

Other Noninterest Income. Treasury management income represents revenues received from providing cash and liquidity management services to C&IS and Wealth Management clients. The portion of Security Commissions and Trading Income that relates to revenue from contracts with clients is primarily comprised of commissions earned from providing securities brokerage services to Wealth Management and C&IS clients. The portion of Other Operating Income that relates to revenue from contracts with clients is mainly comprised of service fees for banking-related services provided to Wealth Management and C&IS clients.

Performance Obligations. Clients are typically charged monthly or quarterly in arrears based on the fee arrangement agreed to with each client; payment terms will vary depending on the client and services offered.

Substantially all revenues generated from contracts with clients for asset servicing, asset management, securities lending, treasury management and banking-related services are recognized on an accrual basis, over the period in which services are provided. The nature of Northern Trust’s performance obligations is to provide a series of distinct services in which the customer simultaneously receives and consumes the benefits of the promised services as they are performed. Fee arrangements are mainly comprised of variable amounts based on market value of client assets managed and serviced, transaction volumes, number of accounts, and securities lending volume and spreads. Revenue is recognized using the output method in an amount that reflects the consideration to which Northern Trust expects to be entitled in exchange for providing each month or quarter of service. For contracts with multiple performance obligations, revenue is allocated to each performance obligation based on the price agreed to with the client, representing its relative standalone selling price.

Security brokerage revenue is primarily represented by securities commissions received in exchange of providing trade execution related services. Control is transferred at a point in time, on the trade date of the transaction, and fees are typically variable based on transaction volumes and security types.

Northern Trust’s contracts with its clients are typically open-ended arrangements and are therefore considered to have an original duration of less than one year. Northern Trust has elected the practical expedient to not disclose the value of remaining performance obligations for contracts with an original expected duration of one year or less.

Notes to Consolidated Financial Statements (unaudited) (continued)

The following table presents revenues disaggregated by major revenue source.

TABLE 67: REVENUE DISAGGREGATION

			THREE MONTHS ENDED SEPTEMBER 30,						NINE MONTHS ENDED SEPTEMBER 30,
(In Millions)			2021			2020			2021			2020
Noninterest Income
Trust, Investment and Other Servicing Fees
Custody and Fund Administration			$	485.9		$	416.4		$	1,434.8		$	1,231.7
Investment Management and Advisory			549.2			519.3			1,586.8			1,515.2
Securities Lending			20.2			19.8			58.0			70.7
Other			55.7			48.3			170.5			151.3
Total Trust, Investment and Other Servicing Fees			$	1,111.0		$	1,003.8		$	3,250.1		$	2,968.9
Other Noninterest Income
Foreign Exchange Trading Income			$	66.4		$	61.6		$	215.7		$	221.8
Treasury Management Fees			11.2			11.6			33.7			34.0
Security Commissions and Trading Income			36.5			26.0			104.3			100.9
Other Operating Income			62.3			53.5			171.6			144.4
Investment Security Gains, net			—			—			—			0.1
Total Other Noninterest Income			$	176.4		$	152.7		$	525.3		$	501.2
Total Noninterest Income			$	1,287.4		$	1,156.5		$	3,775.4		$	3,470.1

On the consolidated statements of income, Trust, Investment and Other Servicing Fees and Treasury Management Fees represent revenue from contracts with clients. For the three months ended September 30, 2021, revenue from contracts with clients also includes $26.1 million of the $36.5 million total Security Commissions and Trading Income and $14.0 million of the $62.3 million total Other Operating Income. For the nine months ended September 30, 2021, revenue from contracts with clients also includes $82.0 million of the $104.3 million total Security Commissions and Trading Income and $39.5 million of the $171.6 million total Other Operating Income.

For the three months ended September 30, 2020, revenue from contracts with clients also includes $21.8 million of the $26.0 million total Security Commissions and Trading Income and $10.8 million of the $53.5 million total Other Operating Income. For the nine months ended September 30, 2020, revenue from contracts with clients also included $76.9 million of the $100.9 million total Security Commissions and Trading Income and $31.6 million of the $144.4 million total Other Operating Income.

Receivables Balances. The table below represents receivables balances from contracts with clients, which are included in Other Assets on the consolidated balance sheets, at September 30, 2021 and December 31, 2020.

TABLE 68: CLIENT RECEIVABLES

(In Millions)			SEPTEMBER 30, 2021			DECEMBER 31, 2020
Trust Fees Receivable, net(1)			$	960.6		$	819.3
Other			124.8			116.5
Total Client Receivables			$	1,085.4		$	935.8

(1) Trust Fees Receivable is net of a $10.5 million and $7.2 million fee receivable allowance as of September 30, 2021 and December 31, 2020, respectively.

Notes to Consolidated Financial Statements (unaudited) (continued)

Note 15 – Net Interest Income

The components of Net Interest Income were as follows:

TABLE 69: NET INTEREST INCOME

			THREE MONTHS ENDED SEPTEMBER 30,						NINE MONTHS ENDED SEPTEMBER 30,
(In Millions)			2021			2020			2021			2020
Interest Income
Loans and Leases			$	181.2		$	167.1		$	525.4		$	606.4
Securities — Taxable			162.9			182.6			502.5			632.1
— Non-Taxable(1)			0.3			0.3			1.1			1.1
Interest-Bearing Due from and Deposits with Banks(2)			1.9			2.7			7.0			20.0
Federal Reserve and Other Central Bank Deposits and Other			5.0			2.7			8.3			31.3
Total Interest Income			$	351.3		$	355.4		$	1,044.3		$	1,290.9
Interest Expense
Deposits			$	(16.3)		$	(3.5)		$	(44.5)		$	56.7
Federal Funds Purchased			—			0.1			(0.4)			2.1
Securities Sold Under Agreements to Repurchase			0.1			—			0.1			1.0
Other Borrowings			3.6			5.0			10.3			40.6
Senior Notes			11.7			19.1			39.2			57.0
Long-Term Debt			5.3			5.7			15.9			21.1
Floating Rate Capital Debt			0.5			0.4			1.6			3.6
Total Interest Expense			$	4.9		$	26.8		$	22.2		$	182.1
Net Interest Income			$	346.4		$	328.6		$	1,022.1		$	1,108.8

(1) Non-Taxable Securities represent securities that are exempt from U.S. federal income taxes.

(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.

Note 16 – Other Operating Income

The components of Other Operating Income were as follows:

TABLE 70: OTHER OPERATING INCOME

			THREE MONTHS ENDED SEPTEMBER 30,						NINE MONTHS ENDED SEPTEMBER 30,
(In Millions)			2021			2020			2021			2020
Loan Service Fees			$	16.1		$	13.6		$	49.3		$	37.3
Banking Service Fees			12.6			11.8			37.8			34.1
Other Income			33.6			28.1			84.5			73.0
Total Other Operating Income			$	62.3		$	53.5		$	171.6		$	144.4

For the three months ended September 30, 2021, 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.

For the nine months ended September 30, 2021, Other Operating Income increased compared to 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.

Notes to Consolidated Financial Statements (unaudited) (continued)

Note 17 – Other Operating Expense

The components of Other Operating Expense were as follows:

TABLE 71: OTHER OPERATING EXPENSE

			THREE MONTHS ENDED SEPTEMBER 30,						NINE MONTHS ENDED SEPTEMBER 30,
($ In Millions)			2021			2020			2021			2020
Business Promotion			$	27.2		$	23.4		$	44.0		$	50.1
Staff Related			10.3			11.8			26.9			20.5
FDIC Insurance Premiums			3.5			3.2			11.2			8.6
Other Intangibles Amortization			3.4			4.3			11.6			12.6
Other Expenses			36.8			84.3			126.7			182.8
Total Other Operating Expense			$	81.2		$	127.0		$	220.4		$	274.6

For the three months ended September 30, 2021, 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.

For the nine months ended September 30, 2021, 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.

Notes to Consolidated Financial Statements (unaudited) (continued)

Note 18 – Pension and Postretirement Health Care

The following table sets forth the net periodic pension and postretirement benefit expense for Northern Trust’s U.S. Qualified Plan, Non-U.S. Pension Plans, U.S. Non-Qualified Plan, and postretirement health care plan for the three and nine months ended September 30, 2021 and 2020.

TABLE 72: NET PERIODIC PENSION EXPENSE (BENEFIT)

U.S. QUALIFIED PLAN			THREE MONTHS ENDED SEPTEMBER 30,						NINE MONTHS ENDED SEPTEMBER 30,
(In Millions)			2021			2020			2021			2020
Service Cost			$	13.1		$	11.9		$	39.5		$	35.5
Interest Cost			10.4			10.8			30.0			32.4
Expected Return on Plan Assets			(20.0)			(19.2)			(60.2)			(57.6)
Amortization
Net Actuarial Loss			7.1			8.8			25.9			26.4
Prior Service Cost			(0.1)			(0.1)			(0.3)			(0.3)
Net Periodic Pension Expense			$	10.5		$	12.2		$	34.9		$	36.4
Settlement Expense			6.9			—			24.5			—
Total Pension Expense			$	17.4		$	12.2		$	59.4		$	36.4

NON-U.S. PENSION PLANS			THREE MONTHS ENDED SEPTEMBER 30,						NINE MONTHS ENDED SEPTEMBER 30,
(In Millions)			2021			2020			2021			2020
Service Cost			$	0.5		$	0.6		$	1.6		$	1.6
Interest Cost			0.5			0.7			1.6			2.1
Expected Return on Plan Assets			(0.6)			(0.8)			(1.9)			(2.3)
Amortization
Net Actuarial Loss			0.3			0.2			0.8			0.8
Prior Service Cost			—			0.1			0.1			0.1
Net Periodic Pension Expense			$	0.7		$	0.8		$	2.2		$	2.3
Settlement Expense			(0.2)			0.1			0.7			0.3
Total Pension Expense			$	0.5		$	0.9		$	2.9		$	2.6

U.S. NON-QUALIFIED PLAN			THREE MONTHS ENDED SEPTEMBER 30,						NINE MONTHS ENDED SEPTEMBER 30,
(In Millions)			2021			2020			2021			2020
Service Cost			$	1.3		$	1.2		$	3.9		$	3.4
Interest Cost			0.9			1.2			2.8			3.6
Amortization
Net Actuarial Loss			2.1			1.7			6.2			5.3
Prior Service Cost			0.1			—			0.1			0.1
Net Periodic Pension Expense			$	4.4		$	4.1		$	13.0		$	12.4

POSTRETIREMENT HEALTH CARE PLAN			THREE MONTHS ENDED SEPTEMBER 30,						NINE MONTHS ENDED SEPTEMBER 30,
(In Millions)			2021			2020			2021			2020
Service Cost			$	—		$	—		$	—		$	—
Interest Cost			—			0.2			0.2			0.6
Amortization
Net Actuarial (Gain)			—			(0.1)			(0.1)			(0.5)
Prior Service Cost			(0.2)			(0.1)			(0.7)			(0.1)
Net Periodic Postretirement Expense			$	(0.2)		$	—		$	(0.6)		$	—

Northern Trust’s U.S. Qualified Plan provides participants the option to select lump-sum benefit payments upon retirement and termination of service. In the second quarter of 2021 it became probable that total lump-sum payments in 2021 would exceed the settlement threshold of the sum of annual service and interest cost. Northern Trust recognized settlement charges related to its U.S. Qualified Plan in the second and third quarter of 2021 and will record a settlement charge in the fourth quarter of 2021.

The quarterly settlement charge represents the pro rata amount of the net loss in AOCI that is charged to income based on the proportion of the Projected Benefit Obligation settled to the total Projected Benefit Obligation and amounted to $6.9 million and $24.5 million for the three and nine months ended September 30, 2021, respectively.

Notes to Consolidated Financial Statements (unaudited) (continued)

The application of settlement accounting required an interim remeasurement of the U.S. Qualified Plan as of quarter-end. Northern Trust utilized a discount rate of 3.06% based on the established discount rate methodology and an expected rate of return of 5.00%. The remeasurement and the recognition of settlement charges decreased the Projected Benefit Obligation of the U.S Qualified Plan by $81.6 million from $1,470.6 million as of December 31, 2020 to $1,389.0 million as of September 30, 2021, resulting in an overall change of a $26.0 million decrease to the net funded status of the U.S. Qualified Plan.

The components of net periodic pension expense are recorded in Employee Benefits expense on the consolidated statements of income.

There were no contributions to the U.S. Qualified Plan during the nine months ended September 30, 2021 and 2020, respectively, and $6.7 million and $10.6 million of contributions to the U.S. Non-Qualified Plan during the nine months ended September 30, 2021 and 2020, respectively.

Note 19 – Share-Based Compensation Plans

The Northern Trust Corporation 2017 Long-Term Incentive Plan provides for the grant of non-qualified and incentive stock options; tandem and free-standing stock appreciation rights; stock awards in the form of restricted stock, restricted stock units and other stock awards; and performance awards.

Beginning with the grants made on February 21, 2017 under the Corporation’s prior equity incentive plan, restricted stock unit and performance stock unit grants continue to vest in accordance with the original terms of the award if the applicable employee retires after satisfying applicable age and service requirements.

Total compensation expense for share-based payment arrangements and the associated tax impacts were as follows for the three and nine months ended September 30, 2021 and 2020.

TABLE 73: TOTAL COMPENSATION EXPENSE FOR SHARE-BASED PAYMENT ARRANGEMENTS

			THREE MONTHS ENDED SEPTEMBER 30,						NINE MONTHS ENDED SEPTEMBER 30,
(In Millions)			2021			2020			2021			2020
Restricted Stock Unit Awards			$	13.9		$	12.2		$	67.5		$	66.3
Stock Options			—			0.1			—			0.4
Performance Stock Units			2.8			1.6			18.6			16.1
Total Share-Based Compensation Expense			16.7			13.9			86.1			82.8
Tax Benefits Recognized			$	4.2		$	3.5		$	21.6		$	20.6

Note 20 – Variable Interest Entities

Variable Interest Entities (VIEs) are defined within GAAP as entities which either (1) lack sufficient equity at risk to permit the entity to finance its activities without additional subordinated financial support, (2) have equity investors that lack attributes typical of an equity investor, such as the ability to make significant decisions through voting rights affecting the entity’s operations, or the obligation to absorb expected losses or the right to receive residual returns of the entity, or (3) are structured with voting rights that are disproportionate to the equity investor’s obligation to absorb losses or right to receive returns, and substantially all of the activities are conducted on behalf of the holder of the equity investment at risk with disproportionately few voting rights. Investors that finance a VIE through debt or equity interests are variable interest holders in the entity and the variable interest holder, if any, that has both the power to direct the activities that most significantly impact the entity’s economic performance and, through its variable interest, the obligation to absorb losses or the right to receive returns that could potentially be significant to the entity is deemed to be the VIE’s primary beneficiary and is required to consolidate the VIE.

Tax Credit Structures. Northern Trust invests in qualified affordable housing projects and community development entities (collectively, community development projects) that are designed to generate a return primarily through the realization of tax credits. The community development projects are formed as limited partnerships and limited liability companies in which Northern Trust invests as a limited partner/investor member through equity contributions. The economic performance of the community development projects, some of which are VIEs, is subject to the performance of their underlying investment and their ability to operate in compliance with the rules and regulations necessary for the qualification of tax credits generated by equity investments. Northern Trust has determined that it is not the primary beneficiary of any community development project VIEs as it lacks the power to direct the activities that most significantly impact the economic performance of the underlying investments or to affect their ability to operate in compliance with the rules and regulations necessary for the qualification of tax credits generated by equity investments. This power is held by the general partners and managing members who exercise full and exclusive control of the operations of the community development project VIEs.

Notes to Consolidated Financial Statements (unaudited) (continued)

Northern Trust’s maximum exposure to loss as a result of its involvement with community development projects is limited to the carrying amounts of its investments, including any undrawn commitments. As of September 30, 2021 and December 31, 2020, the carrying amounts of these investments in community development projects that generate tax credits, included in Other Assets on the consolidated balance sheets, totaled $949.4 million and $919.6 million, respectively, of which $906.7 million and $874.0 million are VIEs as of September 30, 2021 and December 31, 2020, respectively. As of September 30, 2021 and December 31, 2020, liabilities related to unfunded commitments on investments in tax credit community development projects, included in Other Liabilities on the consolidated balance sheets, totaled $313.5 million and $351.6 million, respectively, of which $297.7 million and $335.9 million related to undrawn commitments on VIEs as of September 30, 2021 and December 31, 2020, respectively. Northern Trust’s funding requirements are limited to its invested capital and undrawn commitments for future equity contributions. Northern Trust has no exposure to loss from liquidity arrangements and no obligation to purchase assets of the community development projects.

Tax credits and other tax benefits attributable to community development projects totaled $22.0 million and $20.7 million for the three months ended September 30, 2021 and 2020, respectively, and $68.1 million and $59.4 million for the nine months ended September 30, 2021 and 2020, respectively.

Investment Funds. Northern Trust acts as asset manager for various funds in which clients of Northern Trust are investors. As an asset manager of funds, Northern Trust earns a competitively priced fee that is based on assets managed and varies with each fund’s investment objective. Based on its analysis, Northern Trust has determined that it is not the primary beneficiary of these VIEs under GAAP.

Some of the funds for which Northern Trust acts as asset manager comply or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds and therefore the funds are exempt from the consolidation requirements in ASC 810-10. Northern Trust voluntarily waived $76.7 million of money market mutual fund fees for the three months ended September 30, 2021 and $206.7 million for the nine months ended September 30, 2021 related to the low-interest-rate environment and certain competitive factors. Northern Trust voluntarily waived $5.4 million and $5.7 million of money market mutual fund fees for the three and nine months ended September 30, 2020. Northern Trust does not have any contractual obligations to provide financial support to the funds. Any potential future support of the funds will be at the discretion of Northern Trust after an evaluation of the specific facts and circumstances.

Periodically, Northern Trust makes seed capital investments to certain funds. As of September 30, 2021, and December 31, 2020, Northern Trust had no seed capital investments and no unfunded commitments related to seed capital investments.

Note 21 – Commitments and Contingent Liabilities

Off-Balance Sheet Financial Instruments, Guarantees and Other Commitments. Northern Trust, in the normal course of business, enters into various types of commitments and issues letters of credit to meet the liquidity and credit enhancement needs of its clients. The contractual amounts of these instruments represent the maximum potential credit exposure should the instrument be fully drawn upon and the client default. To control the credit risk associated with entering into commitments and issuing letters of credit, Northern Trust subjects such activities to the same credit quality and monitoring controls as its lending activities. Northern Trust does not believe the total contractual amount of these instruments to be representative of its future credit exposure or funding requirements.

The following table provides details of Northern Trust's off-balance sheet financial instruments as of September 30, 2021 and December 31, 2020.

TABLE 74: SUMMARY OF OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

			SEPTEMBER 30, 2021									DECEMBER 31, 2020
($ In Millions)			ONE YEAR AND LESS			OVER ONE YEAR			TOTAL			ONE YEAR AND LESS			OVER ONE YEAR			TOTAL
Undrawn Commitments(1)			$	9,152.6		$	18,597.6		$	27,750.2		$	11,260.5		$	17,678.0		$	28,938.5
Standby Letters of Credit and Financial Guarantees(2)(3)			1,727.4			453.8			2,181.2			1,228.1			763.5			1,991.6
Commercial Letters of Credit			73.1			—			73.1			54.6			—			54.6
Custody Securities Lent with Indemnification			180,619.4			—			180,619.4			157,478.0			—			157,478.0
Total Off-Balance Sheet Financial Instruments			$	191,572.5		$	19,051.4		$	210,623.9		$	170,021.2		$	18,441.5		$	188,462.7

(1) These amounts exclude $365.9 million and $384.7 million of commitments participated to others at September 30, 2021 and December 31, 2020, respectively.

(2) These amounts include $33.5 million and $24.2 million of standby letters of credit secured by cash deposits or participated to others as of September 30, 2021 and December 31, 2020, respectively.

(3) This amount includes a $509.0 million guarantee to the Fixed Income Clearing Corporation (FICC) under the sponsored member program, without taking into consideration the related collateral, as of September 30, 2021. As of December 31, 2020, there was no guarantee to the FICC as Northern Trust became a sponsored member during the third quarter of 2021.

Notes to Consolidated Financial Statements (unaudited) (continued)

Undrawn Commitments generally have fixed expiration dates or other termination clauses. Since a significant portion of the commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future loans or liquidity requirements.

Standby Letters of Credit obligate Northern Trust to meet certain financial obligations of its clients, if, under the contractual terms of the agreement, the clients are unable to do so. These instruments are primarily issued to support public and private financial commitments, including commercial paper, bond financing, initial margin requirements on futures exchanges and similar transactions. Northern Trust is obligated to meet the entire financial obligation of these agreements and in certain cases is able to recover the amounts paid through recourse against collateral received or other participants.

Financial Guarantees are issued by Northern Trust to guarantee the performance of a client to a third party under certain arrangements.

Commercial Letters of Credit are instruments issued by Northern Trust on behalf of its clients that authorize a third party (the beneficiary) to draw drafts up to a stipulated amount under the specified terms and conditions of the agreement and other similar instruments. Commercial letters of credit are issued primarily to facilitate international trade.

Custody Securities Lent with Indemnification involves Northern Trust lending securities owned by clients to borrowers who are reviewed and approved by the Northern Trust Capital Markets Credit Committee, as part of its securities custody activities and at the direction of its clients. In connection with these activities, Northern Trust has issued indemnifications to certain clients against certain losses that are a direct result of a borrower’s failure to return securities when due, should the value of such securities exceed the value of the collateral required to be posted. Borrowers are required to collateralize fully securities received with cash or marketable securities. As securities are loaned, collateral is maintained at a minimum of 100% of the fair value of the securities plus accrued interest. The collateral is revalued on a daily basis. The amount of securities loaned as of September 30, 2021 and December 31, 2020 subject to indemnification was $180.6 billion and $157.5 billion, respectively. Because of the credit quality of the borrowers and the requirement to fully collateralize securities borrowed, management believes that the exposure to credit loss from this activity is not significant and no liability was recorded as of September 30, 2021 or December 31, 2020, related to these indemnifications.

Sponsored Member Program**.** Effective during the third quarter of 2021, Northern Trust became an approved Government Securities Division (GSD) netting and sponsoring member in the FICC sponsored member program, through which Northern Trust submits eligible repurchase and reverse repurchase transactions in U.S. Government securities between Northern Trust and its sponsored member clients for novation and clearing. Northern Trust may sponsor clients to clear their eligible repurchase transactions with the FICC. As a sponsoring member, Northern Trust guarantees to the FICC the prompt and full payment and performance of its sponsored member clients’ respective obligations under the FICC GSD’s rules. To mitigate Northern Trust’s credit exposure under this guarantee, Northern Trust obtains a security interest in its sponsored member clients’ collateral. See Note 23 - Offsetting of Assets and Liabilities for additional information on Northern Trust’s repurchase and reverse repurchase agreements.

Unsettled Repurchase and Reverse Repurchase Agreements**.** Northern Trust enters into repurchase agreements and reverse repurchase agreements which may settle at a future date. In repurchase agreements, Northern Trust receives cash from and provides securities as collateral to a counterparty. In reverse repurchase agreements, Northern Trust advances cash to and receives securities as collateral from a counterparty. These transactions are recorded on the consolidated balance sheets on the settlement date. As of September 30, 2021, there were no unsettled repurchase agreements and $99.5 million of unsettled reverse repurchase agreements. As of December 31, 2020, there were no unsettled repurchase or reverse repurchase agreements.

Clearing and Settlement Organizations**.** The Bank is a participating member of various cash, securities and foreign exchange clearing and settlement organizations. It participates in these organizations on behalf of its clients and on its own behalf as a result of its own activities. A wide variety of cash and securities transactions are settled through these organizations, including those involving obligations of states and political subdivisions, asset-backed securities, commercial paper, dollar placements, and securities issued by the Government National Mortgage Association.

Certain of these industry clearing and settlement exchanges require their members to guarantee their obligations and liabilities and/or to provide liquidity support in the event other members do not honor their obligations as stipulated in each clearing organization’s membership agreement. Exposure related to these agreements varies, primarily as a result of fluctuations in the volume of transactions cleared through the organizations. At September 30, 2021 and December 31, 2020, Northern Trust has not recorded any material liabilities under these arrangements as Northern Trust believes the likelihood that a clearing or settlement exchange (of which Northern Trust is a member) would become insolvent is remote. Controls related to these clearing transactions are closely monitored by management to protect the assets of Northern Trust and its clients.

Legal Proceedings. In the normal course of business, the Corporation and its subsidiaries are routinely defendants in or parties to pending and threatened legal actions, and are subject to regulatory examinations, information-gathering requests, investigations, and proceedings, both formal and informal. In certain legal actions, claims for substantial monetary damages are

Notes to Consolidated Financial Statements (unaudited) (continued)

asserted. In regulatory matters, claims for disgorgement, restitution, penalties and/or other remedial actions or sanctions may be sought.

Based on current knowledge, after consultation with legal counsel and after taking into account current accruals, management does not believe that losses, fines or penalties, if any, arising from pending litigation or threatened legal actions or regulatory matters either individually or in the aggregate, after giving effect to applicable reserves and insurance coverage will have a material adverse effect on the consolidated financial position or liquidity of the Corporation, although such matters could have a material adverse effect on the Corporation’s operating results for a particular period.

Under GAAP, (i) an event is “probable” if the “future event or events are likely to occur”; (ii) an event is “reasonably possible” if “the chance of the future event or events occurring is more than remote but less than likely”; and (iii) an event is “remote” if “the chance of the future event or events occurring is slight.”

The outcome of litigation and regulatory matters is inherently difficult to predict and/or the range of loss often cannot be reasonably estimated, particularly for matters that (i) will be decided by a jury, (ii) are in early stages, (iii) involve uncertainty as to the likelihood of a class being certified or the ultimate size of the class, (iv) are subject to appeals or motions, (v) involve significant factual issues to be resolved, including with respect to the amount of damages, (vi) do not specify the amount of damages sought or (vii) seek very large damages based on novel and complex damage and liability legal theories. Accordingly, the Corporation cannot reasonably estimate the eventual outcome of these pending matters, the timing of their ultimate resolution or what the eventual loss, fines or penalties, if any, related to each pending matter will be.

In accordance with applicable accounting guidance, the Corporation records accruals for litigation and regulatory matters when those matters present loss contingencies that are both probable and reasonably estimable. When loss contingencies are not both probable and reasonably estimable, the Corporation does not record accruals. No material accruals have been recorded for pending litigation or threatened legal actions or regulatory matters.

For a limited number of matters for which a loss is reasonably possible in future periods, whether in excess of an accrued liability or where there is no accrued liability, the Corporation is able to estimate a range of possible loss. As of September 30, 2021, the Corporation has estimated the range of reasonably possible loss for these matters to be from zero to approximately $20 million in the aggregate. The Corporation’s estimate with respect to the aggregate range of reasonably possible loss is based upon currently available information and is subject to significant judgment and a variety of assumptions and known and unknown uncertainties. The matters underlying the estimated range will change from time to time, and actual results may vary significantly from the current estimate.

In certain other pending matters, there may be a range of reasonably possible loss (including reasonably possible loss in excess of amounts accrued) that cannot be reasonably estimated for the reasons described above. Such matters are not included in the estimated range of reasonably possible loss discussed above.

In 2015, Northern Trust Fiduciary Services (Guernsey) Limited (NTFS), an indirect subsidiary of the Corporation, was charged by a French investigating magistrate judge with complicity in estate tax fraud in connection with the administration of two trusts for which it serves as trustee. Charges also were brought against a number of other persons and entities related to this matter. In 2017, a French court found no estate tax fraud had occurred and NTFS and all other persons and entities charged were acquitted. The Public Prosecutor’s Office of France appealed the court decision and in June 2018 a French appellate court issued its opinion on the matter, acquitting all persons and entities charged, including NTFS. In January 2021, the Cour de Cassation, the highest court in France, reversed the June 2018 appellate court ruling, requiring a re-trial at the appellate court level. The re-trial proceedings in the appellate court have not yet been scheduled. As trustee, NTFS provided no tax advice and had no involvement in the preparation or filing of the challenged estate tax filings.

Visa Class B Common Shares. Northern Trust, as a member of Visa U.S.A. Inc. (Visa U.S.A.) and in connection with the 2007 restructuring of Visa U.S.A. and its affiliates and the 2008 initial public offering of Visa Inc. (Visa), received certain Visa Class B common shares. The Visa Class B common shares are subject to certain selling restrictions until the final resolution of certain litigation related to interchange fees involving Visa (the covered litigation), at which time the shares are convertible into Visa Class A common shares based on a conversion rate dependent upon the ultimate cost of resolving the covered litigation. On June 28, 2018, and September 27, 2019, Visa deposited an additional $600 million and $300 million, respectively, into an escrow account previously established with respect to the covered litigation. As a result of the additional contributions to the escrow account, the rate at which Visa Class B common shares will convert into Visa Class A common shares was reduced.

In September 2018, Visa reached a proposed class settlement agreement covering damage claims but not injunctive relief claims regarding the covered litigation. In December 2019, the district court granted final approval for the proposed class settlement agreement. Certain merchants have opted out of the class settlement and are pursuing claims separately, while other merchants have appealed the approval order granted by the district court. The ultimate resolution of the covered litigation, the timing for removal of the selling restrictions on the Visa Class B common shares and the rate at which such shares will ultimately convert into Visa Class A common shares are uncertain.

Notes to Consolidated Financial Statements (unaudited) (continued)

In June 2016 and 2015, Northern Trust recorded a $123.1 million and $99.9 million net gain on the sale of 1.1 million and 1.0 million of its Visa Class B common shares, respectively. These sales do not affect Northern Trust’s risk related to the impact of the covered litigation on the rate at which such shares will ultimately convert into Visa Class A common shares. Northern Trust continued to hold approximately 4.1 million Visa Class B common shares, which are recorded at their original cost basis of zero, as of September 30, 2021 and December 31, 2020.

Note 22 – Derivative Financial Instruments

Northern Trust is a party to various derivative financial instruments that are used in the normal course of business to meet the needs of its clients, as part of its trading activity for its own account and as part of its risk management activities. These instruments may include foreign exchange contracts, interest rate contracts, total return swap contracts, and swaps related to the sale of certain Visa Class B common shares.

Foreign exchange contracts are agreements to exchange specific amounts of currencies at a future date, at a specified rate of exchange. Foreign exchange contracts are entered into primarily to meet the foreign exchange needs of clients. Foreign exchange contracts are also used for trading and risk management purposes. For risk management purposes, Northern Trust uses foreign exchange contracts to reduce its exposure to changes in foreign exchange rates relating to certain forecasted non-functional-currency-denominated revenue and expenditure transactions, foreign-currency-denominated assets and liabilities, including debt securities, and net investments in non-U.S. affiliates.

Interest rate contracts include swap and option contracts. Interest rate swap contracts involve the exchange of fixed and floating rate interest payment obligations without the exchange of the underlying principal amounts. Northern Trust enters into interest rate swap contracts with its clients and also may utilize such contracts to reduce or eliminate the exposure to changes in the cash flows or fair value of hedged assets or liabilities due to changes in interest rates. Interest rate option contracts may include caps, floors, collars and swaptions, and provide for the transfer or reduction of interest rate risk, typically in exchange for a fee. Northern Trust enters into option contracts primarily as a seller of interest rate protection to clients. Northern Trust receives a fee at the outset of the agreement for the assumption of the risk of an unfavorable change in interest rates. This assumed interest rate risk is then mitigated by entering into an offsetting position with an outside counterparty. Northern Trust may also purchase or enter into option contracts for risk management purposes including to reduce the exposure to changes in the cash flows of hedged assets due to changes in interest rates.

Notes to Consolidated Financial Statements (unaudited) (continued)

The following table shows the notional and fair values of all derivative financial instruments as of September 30, 2021 and December 31, 2020.

TABLE 75: NOTIONAL AND FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS

			SEPTEMBER 30, 2021									DECEMBER 31, 2020
			NOTIONAL VALUE			FAIR VALUE						NOTIONAL VALUE			FAIR VALUE
(In Millions)			ASSET(1)			LIABILITY(2)			ASSET(1)			LIABILITY(2)
Derivatives Designated as Hedging under GAAP
Interest Rate Contracts
Fair Value Hedges			$	4,503.2		$	17.6		$	9.3		$	4,717.6		$	8.2		$	10.2
Cash Flow Hedges			—			—			—			50.0			0.1			—
Foreign Exchange Contracts
Cash Flow Hedges			1,762.5			12.5			13.5			6,554.4			15.4			104.0
Net Investment Hedges			3,849.0			146.2			5.5			3,480.3			0.1			207.7
Total Derivatives Designated as Hedging under GAAP			$	10,114.7		$	176.3		$	28.3		$	14,802.3		$	23.8		$	321.9
Derivatives Not Designated as Hedging under GAAP
Non-Designated Risk Management Derivatives
Foreign Exchange Contracts			$	104.5		$	1.1		$	—		$	67.7		$	0.1		$	0.1
Other Financial Derivatives(3)			759.1			—			36.7			745.4			—			35.3
Total Non-Designated Risk Management Derivatives			$	863.6		$	1.1		$	36.7		$	813.1		$	0.1		$	35.4
Client-Related and Trading Derivatives
Foreign Exchange Contracts			$	302,703.2		$	2,649.6		$	2,593.7		$	320,563.4		$	4,245.1		$	4,410.7
Interest Rate Contracts			11,549.4			177.2			98.0			10,573.3			289.2			114.8
Total Client-Related and Trading Derivatives			$	314,252.6		$	2,826.8		$	2,691.7		$	331,136.7		$	4,534.3		$	4,525.5
Total Derivatives Not Designated as Hedging under GAAP			$	315,116.2		$	2,827.9		$	2,728.4		$	331,949.8		$	4,534.4		$	4,560.9
Total Gross Derivatives			$	325,230.9		$	3,004.2		$	2,756.7		$	346,752.1		$	4,558.2		$	4,882.8
Less: Netting(4)						939.5			2,333.9						3,507.8			2,817.1
Total Derivative Financial Instruments						$	2,064.7		$	422.8					$	1,050.4		$	2,065.7

(1) Derivative assets are reported in Other Assets on the consolidated balance sheets.

(2) Derivative liabilities are reported in Other Liabilities on the consolidated balance sheets.

(3) This line includes swaps related to sales of certain Visa Class B common shares.

(4) See further detail in Note 23 — Offsetting of Assets and Liabilities.

Notional amounts of derivative financial instruments do not represent credit risk, and are not recorded in the consolidated balance sheets. They are used merely to express the volume of this activity. Northern Trust’s credit-related risk of loss is limited to the positive fair value of the derivative instrument, net of any collateral received, which is significantly less than the notional amount.

All derivative financial instruments, whether designated as hedges or not, are recorded on the consolidated balance sheets at fair value within Other Assets or Other Liabilities. Northern Trust has elected to net derivative assets and liabilities when legally enforceable master netting arrangements or similar agreements exist between Northern Trust and the counterparty.

Hedging Derivative Instruments Designated under GAAP. Northern Trust uses derivative instruments to hedge its exposure to foreign currency, interest rate, and equity price. Certain hedging relationships are formally designated and qualify for hedge accounting under GAAP as fair value, cash flow or net investment hedges. Other derivatives that are entered into for risk management purposes as economic hedges are not formally designated as hedges and changes in fair value are recognized currently in Other Operating Income within the consolidated statements of income (see below section “Derivative Instruments Not Designated as Hedging under GAAP”).

In order to qualify for hedge accounting, a formal assessment is performed on a calendar-quarter basis to verify that derivatives used in designated hedging transactions continue to be highly effective in offsetting the changes in fair value or cash flows of the hedged item. If a derivative ceases to be highly effective, matures, is sold or is terminated, or if a hedged forecasted transaction is no longer probable of occurring, hedge accounting is terminated and the derivative is treated as if it were a trading instrument.

Fair Value Hedges. Derivatives are designated as fair value hedges to limit Northern Trust’s exposure to changes in the fair value of assets and liabilities due to movements in interest rates. Northern Trust enters into interest rate swaps to hedge changes in fair value of AFS debt securities and long-term subordinated debt and senior notes. Northern Trust applied the “shortcut” method of accounting, available under GAAP, which assumes there is perfect effectiveness in a hedge, for all of its fair value hedges during the three- and nine- month periods ended September 30, 2021 and 2020. Changes in the fair value of the

Notes to Consolidated Financial Statements (unaudited) (continued)

derivative instrument and changes in the fair value of the hedged asset or liability attributable to the hedged risk are recognized currently in earnings within the same income statement line item.

Cash Flow Hedges. Derivatives are also designated as cash flow hedges in order to minimize the variability in cash flows of earning assets or forecasted transactions caused by movements in interest or foreign exchange rates. Northern Trust enters into foreign exchange contracts to hedge changes in cash flows due to movements in foreign exchange rates of forecasted foreign- currency-denominated transactions and foreign-currency-denominated debt securities. Northern Trust also enters into interest rate contracts to hedge changes in cash flows due to movements in interest rates of AFS debt securities. The change in fair value of cash flow hedging derivative instruments are recorded in AOCI and reclassified to earnings when the hedged forecasted transaction impacts earnings within the same income statement line item.

There were no material gains or losses reclassified into earnings during the three- and nine- month periods ended September 30, 2021 and 2020, as a result of the discontinuance of forecasted transactions that were no longer probable of occurring. It is estimated that net losses of $2.2 million will be reclassified into net income within the next twelve months relating to cash flow hedges of foreign-currency-denominated transactions. As of September 30, 2021, 23 months was the maximum length of time over which the exposure to variability in future cash flows of forecasted foreign-currency-denominated transactions was being hedged.

The following tables provide fair value and cash flow hedge derivative gains and losses recognized in income during the three- and nine- month periods ended September 30, 2021 and 2020.

TABLE 76: LOCATION AND AMOUNT OF FAIR VALUE AND CASH FLOW HEDGE DERIVATIVE GAINS AND LOSSES RECORDED IN INCOME

(In Millions)			INTEREST INCOME						INTEREST EXPENSE						OTHER OPERATING INCOME
THREE MONTHS ENDED SEPTEMBER 30,			2021			2020			2021			2020			2021			2020
Total amounts on the consolidated statements of income			$	351.3		$	355.4		$	4.9		$	26.8		$	62.3		$	53.5
Gains (Losses) on fair value hedges recognized on
Interest Rate Contracts
Recognized on derivatives			9.3			15.1			(1.4)			(2.9)			—			—
Recognized on hedged items			(9.3)			(15.1)			1.4			2.9			—			—
Amounts related to interest settlements on derivatives			(10.6)			(14.2)			0.9			(2.5)			—			—
Total gains (losses) recognized on fair value hedges			$	(10.6)		$	(14.2)		$	0.9		$	(2.5)		$	—		$	—
Gains (Losses) on cash flow hedges recognized on
Foreign Exchange Contracts
Net gains (losses) reclassified from AOCI to net income			$	0.3		$	4.2		$	—		$	—		$	(1.0)		$	0.3
Interest Rate Contracts
Net gains (losses) reclassified from AOCI to net income			—			0.2			—			—			—			—
Total gains (losses) reclassified from AOCI to net income on cash flow hedges			$	0.3		$	4.4		$	—		$	—		$	(1.0)		$	0.3

(In Millions)			INTEREST INCOME						INTEREST EXPENSE						OTHER OPERATING INCOME
NINE MONTHS ENDED SEPTEMBER 30,			2021			2020			2021			2020			2021			2020
Total amounts on the consolidated statements of income			$	1,044.3		$	1,290.9		$	22.2		$	182.1		$	171.6		$	144.4
Gains (Losses) on fair value hedges recognized on
Interest Rate Contracts
Recognized on derivatives			27.2			(75.6)			(112.4)			152.1			—			—
Recognized on hedged items			(27.2)			75.6			112.4			(152.1)			—			—
Amounts related to interest settlements on derivatives			(14.2)			(11.6)			32.4			6.1			—			—
Total gains (losses) recognized on fair value hedges			$	(14.2)		$	(11.6)		$	32.4		$	6.1		$	—		$	—
Gains (Losses) on cash flow hedges recognized on
Foreign Exchange Contracts
Net gains (losses) reclassified from AOCI to net income			$	8.5		$	10.8		$	—		$	—		$	(4.5)		$	0.1
Interest Rate Contracts
Net gains (losses) reclassified from AOCI to net income			—			0.3			—			—			—			—
Total gains (losses) reclassified from AOCI to net income on cash flow hedges			$	8.5		$	11.1		$	—		$	—		$	(4.5)		$	0.1

Notes to Consolidated Financial Statements (unaudited) (continued)

The following table provides the impact of fair value hedge accounting on the carrying value of the designated hedged items as of September 30, 2021 and December 31, 2020.

TABLE 77: HEDGED ITEMS IN FAIR VALUE HEDGES

			SEPTEMBER 30, 2021						DECEMBER 31, 2020
(In Millions)			CARRYING VALUE OF THE HEDGED ITEMS			CUMULATIVE HEDGE ACCOUNTING BASIS ADJUSTMENT(1)			CARRYING VALUE OF THE HEDGED ITEMS			CUMULATIVE HEDGE ACCOUNTING BASIS ADJUSTMENT(2)
Available for Sale Debt Securities(3)			$	1,788.7		$	26.9		$	2,075.1		$	48.8
Senior Notes and Long-Term Subordinated Debt			2,745.5			96.9			2,745.1			221.5
Total			$	4,534.2		$	123.8		$	4,820.2		$	270.3

(1) The cumulative hedge accounting basis adjustment includes $9.8 million related to discontinued hedging relationships of AFS debt securities as of September 30, 2021. There are no amounts related to discontinued hedging relationships in the cumulative hedge accounting basis adjustment of senior notes and long-term debt as of September 30, 2021.

(2) The cumulative hedge accounting basis adjustment includes $10.4 million related to discontinued hedging relationships of AFS debt securities as of December 31, 2020. There were no amounts related to discontinued hedging relationships in the cumulative hedge accounting basis adjustment of senior notes and long-term debt as of December 31, 2020.

(3) Carrying value represents amortized cost.

Net Investment Hedges. Certain foreign exchange contracts are designated as net investment hedges to minimize Northern Trust’s exposure to variability in the foreign currency translation of net investments in non-U.S. branches and subsidiaries. Net investment hedge gains of $86.7 million and losses of $117.4 million were recognized in AOCI related to foreign exchange contracts for the three months ended September 30, 2021 and 2020, respectively. Net investment hedge gains of $157.3 million and losses of $29.8 million were recognized in AOCI related to foreign exchange contracts for the nine months ended September 30, 2021 and 2020, respectively.

Derivative Instruments Not Designated as Hedging under GAAP. Northern Trust’s derivative instruments that are not designated as hedging under GAAP include derivatives for purposes of client-related and trading activities, as well as other risk management purposes. These activities consist principally of providing foreign exchange services to clients in connection with Northern Trust’s global custody business. However, in the normal course of business, Northern Trust also engages in trading of currencies for its own account.

Non-designated risk management derivatives include foreign exchange contracts entered into to manage the foreign currency risk of non-U.S.-dollar-denominated assets and liabilities, the net investment in certain non-U.S. affiliates, commercial loans and forecasted foreign-currency-denominated transactions. Swaps related to sales of certain Visa Class B common shares were entered into pursuant to which Northern Trust retains the risks associated with the ultimate conversion of the Visa Class B common shares into Visa Class A common shares. Total return swaps are entered into to manage the equity price risk associated with certain investments.

Changes in the fair value of derivative instruments not designated as hedges under GAAP are recognized currently in income. The following table provides the location and amount of gains and losses recorded in the consolidated statements of income for the three and nine months ended September 30, 2021 and 2020 for derivative instruments not designated as hedges under GAAP.

TABLE 78: LOCATION AND AMOUNT OF GAINS AND LOSSES RECORDED IN INCOME FOR DERIVATIVES NOT DESIGNATED AS HEDGING UNDER GAAP

(In Millions)			DERIVATIVE GAINS (LOSSES) LOCATION RECOGNIZED IN INCOME			AMOUNT OF DERIVATIVE GAINS (LOSSES) RECOGNIZED IN INCOME
THREE MONTHS ENDED SEPTEMBER 30,						NINE MONTHS ENDED SEPTEMBER 30,
2021			2020			2021			2020
Non-designated risk management derivatives
Foreign Exchange Contracts			Other Operating Income			$	(0.3)		$	4.2		$	2.7		$	3.8
Other Financial Derivatives(1)			Other Operating Income			(3.6)			(5.3)			(15.7)			(11.0)
Gains (Losses) from non-designated risk management derivatives						$	(3.9)		$	(1.1)		$	(13.0)		$	(7.2)
Client-related and trading derivatives
Foreign Exchange Contracts			Foreign Exchange Trading Income			$	66.4		$	61.6		$	215.7		$	221.8
Interest Rate Contracts			Security Commissions and Trading Income			7.6			2.3			13.4			18.5
Gains (Losses) from client-related and trading derivatives						$	74.0		$	63.9		$	229.1		$	240.3
Total gains (losses) from derivatives not designated as hedging under GAAP						$	70.1		$	62.8		$	216.1		$	233.1

(1) This line includes swaps related to the sale of certain Visa Class B common shares.

Notes to Consolidated Financial Statements (unaudited) (continued)

Note 23 – Offsetting of Assets and Liabilities

Northern Trust has elected to net derivative assets and liabilities when legally enforceable master netting arrangements or similar agreements exist between Northern Trust and the counterparty.

The following table provides information regarding the offsetting of derivative assets and securities purchased under agreements to resell within the consolidated balance sheets as of September 30, 2021 and December 31, 2020.

TABLE 79: OFFSETTING OF DERIVATIVE ASSETS AND SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL

			SEPTEMBER 30, 2021
(In Millions)			GROSS RECOGNIZED ASSETS			GROSS AMOUNTS OFFSET IN THE BALANCE SHEET(3)			NET AMOUNTS PRESENTED IN THE BALANCE SHEET			GROSS AMOUNTS NOT OFFSET IN THE BALANCE SHEET(4)			NET AMOUNT(5)
Derivative Assets(1)
Foreign Exchange Contracts Over the Counter (OTC)			$	1,957.7		$	936.9		$	1,020.8		$	2.8		$	1,018.0
Interest Rate Swaps OTC			192.6			2.6			190.0			—			190.0
Interest Rate Swaps Exchange Cleared			2.2			—			2.2			—			2.2
Total Derivatives Subject to a Master Netting Arrangement			2,152.5			939.5			1,213.0			2.8			1,210.2
Total Derivatives Not Subject to a Master Netting Arrangement			851.7			—			851.7			—			851.7
Total Derivatives			3,004.2			939.5			2,064.7			2.8			2,061.9
Securities Purchased under Agreements to Resell(2)			$	1,372.8		$	500.0		$	872.8		$	872.8		$	—

			DECEMBER 31, 2020
(In Millions)			GROSS RECOGNIZED ASSETS			GROSS AMOUNTS OFFSET IN THE BALANCE SHEET(3)			NET AMOUNTS PRESENTED IN THE BALANCE SHEET			GROSS AMOUNTS NOT OFFSET IN THE BALANCE SHEET(4)			NET AMOUNT(5)
Derivative Assets(1)
Foreign Exchange Contracts OTC			$	3,799.7		$	3,505.3		$	294.4		$	0.9		$	293.5
Interest Rate Swaps OTC			295.9			2.5			293.4			—			293.4
Interest Rate Swaps Exchange Cleared			1.6			—			1.6			—			1.6
Total Derivatives Subject to a Master Netting Arrangement			4,097.2			3,507.8			589.4			0.9			588.5
Total Derivatives Not Subject to a Master Netting Arrangement			461.0			—			461.0			—			461.0
Total Derivatives			4,558.2			3,507.8			1,050.4			0.9			1,049.5
Securities Purchased under Agreements to Resell			$	1,596.5		$	—		$	1,596.5		$	1,596.5		$	—

*(1)*Derivative assets are reported in Other Assets on the consolidated balance sheets. Other Assets (excluding derivative assets) totaled $7.7 billion and $7.3 billion as of September 30, 2021 and December 31, 2020, respectively.

*(2)*Offsetting of Securities Purchased under Agreements to Resell primarily relates to our involvement in FICC.

*(3)*Including cash collateral received from counterparties.

*(4)*Including financial assets accepted as collateral which are received from counterparties.

*(5)*Northern Trust did not possess any cash collateral that was not offset in the consolidated balance sheets that could have been used to offset the net amounts presented in the consolidated balance sheets as of September 30, 2021 and December 31, 2020.

Notes to Consolidated Financial Statements (unaudited) (continued)

The following table provides information regarding the offsetting of derivative liabilities and securities sold under agreements to repurchase within the consolidated balance sheets as of September 30, 2021 and December 31, 2020.

TABLE 80: OFFSETTING OF DERIVATIVE LIABILITIES AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

			SEPTEMBER 30, 2021
(In Millions)			GROSS RECOGNIZED LIABILITIES			GROSS AMOUNTS OFFSET IN THE BALANCE SHEET(3)			NET AMOUNTS PRESENTED IN THE BALANCE SHEET			GROSS AMOUNTS NOT OFFSET IN THE BALANCE SHEET(4)			NET AMOUNT(5)
Derivative Liabilities(1)
Foreign Exchange Contracts OTC			$	2,365.1		$	2,268.8		$	96.3		$	0.5		$	95.8
Interest Rate Swaps OTC			106.3			65.1			41.2			—			41.2
Interest Rate Swaps Exchange Cleared			1.0			—			1.0			—			1.0
Other Financial Derivatives			36.7			—			36.7			—			36.7
Total Derivatives Subject to a Master Netting Arrangement			2,509.1			2,333.9			175.2			0.5			174.7
Total Derivatives Not Subject to a Master Netting Arrangement			247.6			—			247.6			—			247.6
Total Derivatives			2,756.7			2,333.9			422.8			0.5			422.3
Securities Sold under Agreements to Repurchase(2)			$	1,073.6		$	500.0		$	573.6		$	573.6		$	—

			DECEMBER 31, 2020
(In Millions)			GROSS RECOGNIZED LIABILITIES			GROSS AMOUNTS OFFSET IN THE BALANCE SHEET(3)			NET AMOUNTS PRESENTED IN THE BALANCE SHEET			GROSS AMOUNTS NOT OFFSET IN THE BALANCE SHEET(4)			NET AMOUNT(5)
Derivative Liabilities(1)
Foreign Exchange Contracts OTC			$	3,577.7		$	2,718.6		$	859.1		$	0.5		$	858.6
Interest Rate Swaps OTC			125.0			98.5			26.5			—			26.5
Interest Rate Swaps Exchange Cleared			—			—			—			—			—
Other Financial Derivatives			35.3			—			35.3			—			35.3
Total Derivatives Subject to a Master Netting Arrangement			3,738.0			2,817.1			920.9			0.5			920.4
Total Derivatives Not Subject to a Master Netting Arrangement			1,144.8			—			1,144.8			—			1,144.8
Total Derivatives			4,882.8			2,817.1			2,065.7			0.5			2,065.2
Securities Sold under Agreements to Repurchase			$	39.8		$	—		$	39.8		$	39.8		$	—

*(1)*Derivative liabilities are reported in Other Liabilities on the consolidated balance sheets. Other Liabilities (excluding derivative liabilities) totaled $4.7 billion and $3.5 billion as of September 30, 2021 and December 31, 2020, respectively.

*(2)*Offsetting of Securities Sold under Agreements to Repurchase primarily relates to our involvement in FICC.

*(3)*Including cash collateral deposited with counterparties.

*(4)*Including financial assets accepted as collateral which are deposited with counterparties.

*(5)*Northern Trust did not place any cash collateral with counterparties that was not offset in the consolidated balance sheets that could have been used to offset the net amounts presented in the consolidated balance sheets as of September 30, 2021 and December 31, 2020.

All of Northern Trust’s securities sold under agreements to repurchase (repurchase agreements) and securities purchased under agreements to resell (reverse repurchase agreements) involve the transfer of financial assets in exchange for cash subject to a right and obligation to repurchase those assets for an agreed upon amount. In the event of a repurchase failure, the cash or financial assets are available for offset. All of Northern Trust’s repurchase agreements and reverse repurchase agreements are subject to a master netting arrangement, which sets forth the rights and obligations for repurchase and offset. Under the master netting arrangement, Northern Trust is entitled to offset receivables from and collateral placed with a single counterparty against obligations owed to that counterparty. In addition, collateral held by Northern Trust can be offset against receivables from that counterparty. Northern Trust’s repurchase agreements and reverse repurchase agreements, other than those in which the counterparty is FICC, do not meet the requirements to net under GAAP.

Derivative asset and liability positions with a single counterparty can be offset against each other in cases where legally enforceable master netting arrangements or similar agreements exist. Derivative assets and liabilities can be further offset by cash collateral received from, and deposited with, the transacting counterparty. The basis for this view is that, upon termination of transactions subject to a master netting arrangement or similar agreement, the individual derivative receivables do not represent resources to which general creditors have rights and individual derivative payables do not represent claims that are equivalent to the claims of general creditors.

Credit risk associated with derivative instruments relates to the failure of the counterparty and the failure of Northern Trust to pay based on the contractual terms of the agreement, and is generally limited to the unrealized fair value gains and losses on these instruments, net of any collateral received or deposited. The amount of credit risk will increase or decrease during the

Notes to Consolidated Financial Statements (unaudited) (continued)

lives of the instruments as interest rates, foreign exchange rates, or equity prices fluctuate. Northern Trust’s risk is controlled by limiting such activity to an approved list of counterparties and by subjecting such activity to the same credit and quality controls as are followed in lending and investment activities. Credit Support Annexes and other similar agreements are currently in place with a number of Northern Trust’s counterparties which mitigate the aforementioned credit risk associated with derivative activity conducted with those counterparties by requiring that significant net unrealized fair value gains be supported by collateral placed with Northern Trust.

Additional cash collateral received from and deposited with derivative counterparties totaling $142.3 million and $247.9 million, respectively, as of September 30, 2021, and $111.0 million and $49.0 million, respectively, as of December 31, 2020, was not offset against derivative assets and liabilities in the consolidated balance sheets as the amounts exceeded the net derivative positions with those counterparties.

Certain master netting arrangements Northern Trust enters into with derivative counterparties contain credit-risk-related contingent features in which the counterparty has the option to declare Northern Trust in default and accelerate cash settlement of net derivative liabilities with the counterparty in the event Northern Trust’s credit rating falls below specified levels. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a liability position was $690.4 million and $1,648.2 million at September 30, 2021 and December 31, 2020, respectively. Cash collateral amounts deposited with derivative counterparties on those dates included $689.0 million and $1,044.0 million, respectively, posted against these liabilities, resulting in a net maximum amount of termination payments that could have been required at September 30, 2021 and December 31, 2020, of $1.4 million and $604.2 million, respectively. Accelerated settlement of these liabilities would not have a material effect on the consolidated financial position or liquidity of Northern Trust.

Note 24 – Subsequent Events

In September 2021, the holders of the Floating Rate Capital Securities Series A and Series B were notified that such securities would be redeemed at the principal amount plus accrued and unpaid interest on October 15, 2021. In 1997, the Corporation established two statutory business trusts, NTC Capital I and NTC Capital II, for the sole purpose of issuing the Floating Rate Capital Securities, Series A due in January 2027 and the Floating Rate Capital Securities, Series B due in April 2027, respectively. The sole assets of the trusts were the subordinated debentures of Northern Trust Corporation that had the same interest rates and maturity dates as the corresponding distribution rates and redemption dates of the Floating Rate Capital Securities. On October 15, 2021, concurrently with the redemption of the Floating Rate Capital Securities Series A and B, the corresponding subordinated debentures were fully redeemed for $278.8 million principal amount plus accrued and unpaid interest, with $154.9 million attributable to the Series A subordinated debenture and $123.9 million attributable to the Series B subordinated debenture.