Item 1. Consolidated Financial Statements (unaudited)

CONSOLIDATED BALANCE SHEETS (UNAUDITED)			NORTHERN TRUST CORPORATION

(In Millions Except Share Information)			MARCH 31, 2023			DECEMBER 31, 2022
ASSETS
Cash and Due from Banks			$	4,825.9		$	4,654.2
Federal Reserve and Other Central Bank Deposits			39,288.7			40,030.4
Interest-Bearing Deposits with Banks			1,588.0			1,941.1
Federal Funds Sold			—			32.0
Securities Purchased under Agreements to Resell			1,057.4			1,070.3
Debt Securities
Available for Sale (Amortized cost of $25,464.4 and $27,760.0)			24,627.5			26,699.9
Held to Maturity (Fair value of $22,823.1 and $22,879.3)			24,716.2			25,036.1
Trading Account			0.1			95.2
Total Debt Securities			49,343.8			51,831.2
Loans
Commercial			21,609.7			21,635.6
Personal			20,759.8			21,257.7
Total Loans (Net of unearned income of $8.3 and $9.0)			42,369.5			42,893.3
Allowance for Credit Losses			(176.9)			(161.1)
Buildings and Equipment			481.5			500.5
Client Security Settlement Receivables			1,300.5			1,698.3
Goodwill			695.1			691.3
Other Assets			10,334.5			9,855.2
Total Assets			$	151,108.0		$	155,036.7
LIABILITIES
Deposits
Demand and Other Noninterest-Bearing			$	14,512.7		$	16,582.7
Savings, Money Market and Other Interest-Bearing			23,183.4			31,128.6
Savings Certificates and Other Time			2,840.1			1,981.3
Non U.S. Offices — Noninterest-Bearing			8,901.2			8,757.6
— Interest-Bearing			64,290.0			65,481.9
Total Deposits			113,727.4			123,932.1
Federal Funds Purchased			4,487.3			1,896.9
Securities Sold Under Agreements to Repurchase			362.9			567.2
Other Borrowings			11,365.1			7,592.3
Senior Notes			2,769.2			2,724.2
Long-Term Debt			2,070.9			2,066.2
Other Liabilities			4,737.4			4,998.3
Total Liabilities			139,520.2			143,777.2
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 208,342,348 and 208,428,309			408.6			408.6
Additional Paid-In Capital			964.5			983.5
Retained Earnings			13,958.3			13,798.5
Accumulated Other Comprehensive Loss			(1,366.2)			(1,569.2)
Treasury Stock (36,829,176 and 36,743,215 shares, at cost)			(3,262.3)			(3,246.8)
Total Stockholders’ Equity			11,587.8			11,259.5
Total Liabilities and Stockholders’ Equity			$	151,108.0		$	155,036.7

See accompanying notes to the consolidated financial statements.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)			NORTHERN TRUST CORPORATION

			THREE MONTHS ENDED MARCH 31,
(In Millions Except Share Information)			2023			2022
Noninterest Income
Trust, Investment and Other Servicing Fees			$	1,063.6		$	1,168.4
Foreign Exchange Trading Income			53.0			80.9
Treasury Management Fees			8.4			11.1
Security Commissions and Trading Income			34.7			36.2
Other Operating Income			46.8			41.1
Investment Security Gains (Losses), net			6.9			—
Total Noninterest Income			1,213.4			1,337.7
Net Interest Income
Interest Income			1,455.4			383.5
Interest Expense			924.2			2.5
Net Interest Income			531.2			381.0
Provision for Credit Losses			15.0			2.0
Net Interest Income after Provision for Credit Losses			516.2			379.0
Noninterest Expense
Compensation			595.2			563.9
Employee Benefits			101.0			104.3
Outside Services			210.8			213.4
Equipment and Software			231.7			193.5
Occupancy			61.3			51.1
Other Operating Expense			85.6			79.7
Total Noninterest Expense			1,285.6			1,205.9
Income before Income Taxes			444.0			510.8
Provision for Income Taxes			109.4			121.5
Net Income			$	334.6		$	389.3
Preferred Stock Dividends			16.2			16.2
Net Income Applicable to Common Stock			$	318.4		$	373.1
Per Common Share
Net Income – Basic			$	1.51		$	1.78
– Diluted			1.51			1.77
Average Number of Common Shares Outstanding
– Basic			208,186,841			208,024,962
– Diluted			208,730,389			208,809,133

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)			NORTHERN TRUST CORPORATION
			THREE MONTHS ENDED MARCH 31,
(In Millions)			2023			2022
Net Income			$	334.6		$	389.3
Other Comprehensive Income (Loss) (Net of Tax and Reclassifications)
Net Unrealized Gains (Losses) on Available for Sale Debt Securities			180.2			(868.4)
Net Unrealized Gains (Losses) on Cash Flow Hedges			(0.1)			(1.4)
Net Foreign Currency Adjustments			22.7			(7.9)
Net Pension and Other Postretirement Benefit Adjustments			0.2			6.3
Other Comprehensive Income (Loss)			203.0			(871.4)
Comprehensive Income (Loss)			$	537.6		$	(482.1)

See accompanying notes to the consolidated financial statements.

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

			THREE MONTHS ENDED MARCH 31, 2023
(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, 2022			$	884.9		$	408.6		$	983.5		$	13,798.5		$	(1,569.2)		$	(3,246.8)		$	11,259.5
Net Income			—			—			—			334.6			—			—			334.6
Other Comprehensive Income (Loss) (Net of Tax and Reclassifications)			—			—			—			—			203.0			—			203.0
Dividends Declared:
Common Stock, $0.75 per share			—			—			—			(158.6)			—			—			(158.6)
Preferred Stock			—			—			—			(16.2)			—			—			(16.2)
Stock Awards and Options Exercised			—			—			(19.0)			—			—			85.4			66.4
Stock Purchased			—			—			—			—			—			(100.9)			(100.9)
Balance at March 31, 2023			$	884.9		$	408.6		$	964.5		$	13,958.3		$	(1,366.2)		$	(3,262.3)		$	11,587.8

See accompanying notes to the consolidated financial statements.

			THREE MONTHS ENDED MARCH 31, 2022
(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, 2021			$	884.9		$	408.6		$	939.3		$	13,117.3		$	(35.6)		$	(3,297.7)		$	12,016.8
Net Income			—			—			—			389.3			—			—			389.3
Other Comprehensive Income (Loss) (Net of Tax and Reclassifications)			—			—			—			—			(871.4)			—			(871.4)
Dividends Declared:
Common Stock, $0.70 per share			—			—			—			(147.8)			—			—			(147.8)
Preferred Stock			—			—			—			(16.2)			—			—			(16.2)
Stock Awards and Options Exercised			—			—			(7.6)			—			—			80.5			72.9
Stock Purchased			—			—			—			—			—			(33.8)			(33.8)
Balance at March 31, 2022			$	884.9		$	408.6		$	931.7		$	13,342.6		$	(907.0)		$	(3,251.0)		$	11,409.8

See accompanying notes to the consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)			NORTHERN TRUST CORPORATION

			THREE MONTHS ENDED MARCH 31,
(In Millions)			2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income			$	334.6		$	389.3
Adjustments to Reconcile Net Income to Net Cash (Used in) Provided by Operating Activities
Investment Security Gains			(6.9)			—
Amortization and Accretion of Securities and Unearned Income, net			7.0			21.7
Provision for Credit Losses			15.0			2.0
Depreciation and Amortization			154.9			130.9
Pension Plan Contributions			(16.5)			(20.7)
Change in Receivables			(193.1)			285.4
Change in Interest Payable			59.8			12.0
Change in Collateral With Derivative Counterparties, net			(717.8)			(505.7)
Other Operating Activities, net			198.1			432.0
Net Cash (Used in) Provided by Operating Activities			(164.9)			746.9
CASH FLOWS FROM INVESTING ACTIVITIES
Change in Securities Purchased under Agreements to Resell			36.4			(336.2)
Change in Interest-Bearing Deposits with Banks			360.0			(843.9)
Net Change in Federal Reserve and Other Central Bank Deposits			1,021.6			8,497.2
Purchases of Held to Maturity Debt Securities			(9,867.8)			(11,916.4)
Proceeds from the Maturity and Redemption of Held to Maturity Debt Securities			10,412.9			13,983.4
Purchases of Available for Sale Debt Securities			(1,273.9)			(1,784.8)
Proceeds from the Maturity and Sales of Available for Sale Debt Securities			3,626.5			1,821.5
Change in Loans			528.9			1,233.1
Purchases of Buildings and Equipment			(11.5)			(25.8)
Purchases and Development of Computer Software			(117.6)			(123.2)
Change in Client Security Settlement Receivables			400.2			(250.3)
Other Investing Activities, net			(196.5)			71.0
Net Cash Provided by Investing Activities			4,919.2			10,325.6
CASH FLOWS FROM FINANCING ACTIVITIES
Change in Deposits			(10,478.1)			(9,862.9)
Change in Federal Funds Purchased			2,590.4			—
Change in Securities Sold under Agreements to Repurchase			(204.3)			(202.2)
Change in Short-Term Other Borrowings			3,766.3			(70.4)
Treasury Stock Purchased			(100.9)			(33.8)
Net Proceeds from Stock Options			1.6			2.6
Cash Dividends Paid on Common Stock			(156.5)			(145.5)
Cash Dividends Paid on Preferred Stock			(16.2)			(4.7)
Other Financing Activities, net			—			0.3
Net Cash Used in Financing Activities			(4,597.7)			(10,316.6)
Effect of Foreign Currency Exchange Rates on Cash			15.1			(29.5)
Change in Cash and Due from Banks			171.7			726.4
Cash and Due from Banks at Beginning of Period			4,654.2			3,056.8
Cash and Due from Banks at End of Period			$	4,825.9		$	3,783.2
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest Paid			$	864.1		$	(9.7)
Income Taxes Paid			31.2			47.2

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 March 31, 2023 and 2022, 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. 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, 2022.

Note 2 – Recent Accounting Pronouncements

On January 1, 2023 Northern Trust adopted Accounting Standard Update (ASU) No. 2022-01, “Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method” (ASU 2022-01). The amendments in ASU 2022-01 expand the current last-of-layer hedging model from a single-layer method to allow multiple hedged layers of a single closed portfolio. To reflect that expansion, the last-of-layer method is renamed the portfolio layer method. In addition, ASU 2022-01 (1) expands the scope of the portfolio layer method to include non-prepayable assets, (2) specifies eligible hedging instruments in a single-layer hedge, (3) provides additional guidance on the accounting for and disclosure of hedge basis adjustments under the portfolio layer method and (4) specifies how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio. Upon adoption of ASU 2022-01, there was no impact to Northern Trust’s consolidated balance sheets or consolidated statements of income.

On January 1, 2023 Northern Trust adopted ASU No. 2022-02, “Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” (ASU 2022-02). The amendments in ASU 2022-02 eliminate the accounting guidance for troubled debt restructurings (TDRs) for creditors that have adopted the current expected credit losses accounting standard while enhancing disclosure requirements for certain loan refinancings and restructurings made to borrowers experiencing financial difficulty. In addition, ASU 2022-02 requires that a public business entity disclose current-period gross charge-offs by year of origination for financing receivables and net investment in leases. Upon adoption of ASU 2022-02, there was no significant impact to Northern Trust’s consolidated balance sheets or consolidated statements of income. Please refer to Note 5—Loans for further information.

On January 1, 2023 Northern Trust adopted ASU No. 2022-04, “Liabilities—Supplier Finance Programs (Topic 405-50): Disclosure of Supplier Finance Program Obligations” (ASU 2022-04). The amendments in ASU 2022-04 enhance the transparency about the use of supplier finance programs for investors or other allocators of capital. Specifically, ASU 2022-04 requires that a buyer in a supplier finance program disclose sufficient qualitative and quantitative information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. Upon adoption of ASU 2022-04, there was no impact to Northern Trust’s consolidated balance sheets or consolidated statements of income.

Notes to Consolidated Financial Statements (unaudited) (continued)

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 three months ended March 31, 2023 or the year ended December 31, 2022.

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

Northern Trust’s Level 1 assets are comprised primarily 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 certain 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 predetermined 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 March 31, 2023, Northern Trust’s AFS debt securities portfolio included 1,018 Level 2 debt securities with an aggregate market value of $21.8 billion. All 1,018 debt securities were valued by external pricing vendors. As of December 31, 2022, Northern Trust’s AFS debt securities portfolio included 1,163 Level 2 debt securities with an aggregate market value of $24.0 billion. All 1,163 debt securities were valued by 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 20—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 March 31, 2023 and December 31, 2022, 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 30: LEVEL 3 SIGNIFICANT UNOBSERVABLE INPUTS

			MARCH 31, 2023
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			$34.6 million			Discounted Cash Flow			Conversion Rate			1.60x									1.60x
Visa Class A Appreciation			8.92%									8.92%
Expected Duration			12			-			33 months			20 months

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

			DECEMBER 31, 2022
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			$34.8 million			Discounted Cash Flow			Conversion Rate			1.60x									1.60x
Visa Class A Appreciation			8.53%									8.53%
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 March 31, 2023 and December 31, 2022, segregated by fair value hierarchy level.

TABLE 31: RECURRING BASIS HIERARCHY LEVELING

			MARCH 31, 2023
(In Millions)			LEVEL 1			LEVEL 2			LEVEL 3			NETTING			ASSETS/LIABILITIES AT FAIR VALUE
Debt Securities
Available for Sale
U.S. Government			$	2,859.9		$	—		$	—		$	—		$	2,859.9
Obligations of States and Political Subdivisions			—			291.9			—			—			291.9
Government Sponsored Agency			—			11,433.4			—			—			11,433.4
Non-U.S. Government			—			361.4			—			—			361.4
Corporate Debt			—			634.5			—			—			634.5
Covered Bonds			—			344.4			—			—			344.4
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			—			2,787.7			—			—			2,787.7
Other Asset-Backed			—			5,010.4			—			—			5,010.4
Commercial Mortgage-Backed			—			903.9			—			—			903.9
Total Available for Sale			2,859.9			21,767.6			—			—			24,627.5
Trading Account			—			0.1			—			—			0.1
Total Available for Sale and Trading Debt Securities			2,859.9			21,767.7			—			—			24,627.6
Other Assets
Money Market Investment			95.0			—			—			—			95.0
Derivative Assets
Foreign Exchange Contracts			—			2,315.0			—			(1,601.1)			713.9
Interest Rate Contracts			—			276.2			—			(206.5)			69.7
Other Financial Derivatives(1)			—			0.4			—			—			0.4
Total Derivative Assets			—			2,591.6			—			(1,807.6)			784.0
Other Liabilities
Derivative Liabilities
Foreign Exchange Contracts			—			2,272.0			—			(1,499.5)			772.5
Interest Rate Contracts			—			369.9			—			(11.8)			358.1
Other Financial Derivatives(2)			—			1.3			34.6			(14.3)			21.6
Total Derivative Liabilities			$	—		$	2,643.2		$	34.6		$	(1,525.6)		$	1,152.2

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 March 31, 2023, derivative assets and liabilities shown above also include reductions of $539.5 million and $257.5 million, respectively, as a result of cash collateral received from and deposited with derivative counterparties.

*(1)*This line consists of total return swap contracts.

*(2)*This line consists of swaps related to the sale of certain Visa Class B common shares and total return swap contracts.

Notes to Consolidated Financial Statements (unaudited) (continued)

			DECEMBER 31, 2022
(In Millions)			LEVEL 1			LEVEL 2			LEVEL 3			NETTING			ASSETS/LIABILITIES AT FAIR VALUE
Debt Securities
Available for Sale
U.S. Government			$	2,747.4		$	—		$	—		$	—		$	2,747.4
Obligations of States and Political Subdivisions			—			787.6			—			—			787.6
Government Sponsored Agency			—			11,545.2			—			—			11,545.2
Non-U.S. Government			—			360.0			—			—			360.0
Corporate Debt			—			1,747.6			—			—			1,747.6
Covered Bonds			—			388.7			—			—			388.7
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			—			2,479.4			—			—			2,479.4
Other Asset-Backed			—			5,256.2			—			—			5,256.2
Commercial Mortgage-Backed			—			1,387.8			—			—			1,387.8
Total Available for Sale			2,747.4			23,952.5			—			—			26,699.9
Trading Account			95.0			0.2			—			—			95.2
Total Available for Sale and Trading Debt Securities			2,842.4			23,952.7			—			—			26,795.1
Other Assets
Derivative Assets
Foreign Exchange Contracts			—			3,510.1			—			(2,666.4)			843.7
Interest Rate Contracts			—			222.0			—			(144.3)			77.7
Other Financial Derivatives(1)			—			0.3			—			—			0.3
Total Derivative Assets			—			3,732.4			—			(2,810.7)			921.7
Other Liabilities
Derivative Liabilities
Foreign Exchange Contracts			—			3,187.5			—			(1,826.7)			1,360.8
Interest Rate Contracts			—			431.8			—			(5.9)			425.9
Other Financial Derivatives(2)			—			—			34.8			(33.3)			1.5
Total Derivative Liabilities			$	—		$	3,619.3		$	34.8		$	(1,865.9)		$	1,788.2

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, 2022, derivative assets and liabilities shown above also include reductions of $1,140.2 million and $195.3 million, respectively, as a result of cash collateral received from and deposited with derivative counterparties.

(1) This line consists of total return swap contracts.

(2) 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 months ended March 31, 2023 and 2022.

TABLE 32: CHANGES IN LEVEL 3 LIABILITIES

(In Millions)			SWAPS RELATED TO SALE OF CERTAIN VISA CLASS B COMMON SHARES
THREE MONTHS ENDED MARCH 31,			2023			2022
Fair Value at January 1			$	34.8		$	37.5
Total (Gains) Losses:
Included in Earnings(1)			7.6			4.5
Purchases, Issues, Sales, and Settlements
Settlements			(7.8)			(6.7)
Fair Value at March 31			$	34.6		$	35.3

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

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 March 31, 2023 and December 31, 2022, 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

Notes to Consolidated Financial Statements (unaudited) (continued)

management’s judgment as to realizable value and consisted of a discount factor of 20.0% and a range of discount factors from 15.0% to 20.0% with a weighted average based on fair values of 20.0% and 17.2%, as of March 31, 2023 and December 31, 2022, 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-dependent nonaccrual loans that have been adjusted to fair value totaled $5.1 million and $6.6 million at March 31, 2023 and December 31, 2022, 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 March 31, 2023 and December 31, 2022, 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 33: LEVEL 3 NONRECURRING BASIS SIGNIFICANT UNOBSERVABLE INPUTS

			MARCH 31, 2023
FINANCIAL INSTRUMENT			FAIR VALUE**(1)**			VALUATION TECHNIQUE			UNOBSERVABLE INPUTS			INPUT VALUES									WEIGHTED-AVERAGE INPUT VALUES
Loans			$5.1 million			Market Approach			Discount factor applied to real estate collateral-dependent loans to reflect realizable value			20.0%									20.0%

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

			DECEMBER 31, 2022
FINANCIAL INSTRUMENT			FAIR VALUE(1)			VALUATION TECHNIQUE			UNOBSERVABLE INPUTS			INPUT VALUES									WEIGHTED-AVERAGE INPUT VALUES
Loans			$6.6 million			Market Approach			Discount factor applied to real estate collateral-dependent loans to reflect realizable value			15.0		%	-			20.0%			17.2%

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

Notes to Consolidated Financial Statements (unaudited) (continued)

The following tables present the book value and estimated fair value, including the fair value hierarchy level, of Northern Trust’s financial instruments that are not measured at fair value on the consolidated balance sheets as of March 31, 2023 and December 31, 2022. The following tables exclude those items measured at fair value on a recurring basis.

TABLE 34: FAIR VALUE OF FINANCIAL INSTRUMENTS

			MARCH 31, 2023
									ESTIMATED FAIR VALUE
(In Millions)			BOOK VALUE			TOTAL ESTIMATED FAIR VALUE			LEVEL 1			LEVEL 2			LEVEL 3
FINANCIAL ASSETS
Cash and Due from Banks			$	4,825.9		$	4,825.9		$	4,825.9		$	—		$	—
Federal Reserve and Other Central Bank Deposits			39,288.7			39,288.7			—			39,288.7			—
Interest-Bearing Deposits with Banks			1,588.0			1,588.0			—			1,588.0			—
Securities Purchased under Agreements to Resell			1,057.4			1,057.4			—			1,057.4			—
Debt Securities - Held to Maturity			24,716.2			22,823.1			—			22,823.1			—
Loans
Held for Investment			42,209.6			42,227.1			—			—			42,227.1
Other Assets			1,608.6			1,591.4			105.6			1,485.8			—
FINANCIAL LIABILITIES
Deposits
Demand, Noninterest-Bearing, Savings, Money Market and Other Interest-Bearing			$	46,597.3		$	46,597.3		$	46,597.3		$	—		$	—
Savings Certificates and Other Time			2,840.1			2,846.0			—			2,846.0			—
Non U.S. Offices Interest-Bearing			64,290.0			64,290.0			—			64,290.0			—
Federal Funds Purchased			4,487.3			4,487.3			—			4,487.3			—
Securities Sold Under Agreements to Repurchase			362.9			362.9			—			362.9			—
Other Borrowings			11,365.1			11,366.3			—			11,366.3			—
Senior Notes			2,769.2			2,745.8			—			2,745.8			—
Long-Term Debt			2,070.9			2,107.1			—			2,107.1			—
Unfunded Commitments			220.1			220.1			—			220.1			—
Other Liabilities			79.2			79.2			—			—			79.2

			DECEMBER 31, 2022
									ESTIMATED FAIR VALUE
(In Millions)			BOOK VALUE			TOTAL ESTIMATED FAIR VALUE			LEVEL 1			LEVEL 2			LEVEL 3
FINANCIAL ASSETS
Cash and Due from Banks			$	4,654.2		$	4,654.2		$	4,654.2		$	—		$	—
Federal Reserve and Other Central Bank Deposits			40,030.4			40,030.4			—			40,030.4			—
Interest-Bearing Deposits with Banks			1,941.1			1,941.1			—			1,941.1			—
Federal Funds Sold			32.0			32.0			—			32.0			—
Securities Purchased under Agreements to Resell			1,070.3			1,070.3			—			1,070.3			—
Debt Securities - Held to Maturity			25,036.1			22,879.3			50.0			22,829.3			—
Loans
Held for Investment			42,749.0			42,636.5			—			—			42,636.5
Other Assets			1,476.9			1,460.4			94.7			1,365.7			—
FINANCIAL LIABILITIES
Deposits
Demand, Noninterest-Bearing, Savings, Money Market and Other Interest-Bearing			$	56,468.9		$	56,468.9		$	56,468.9		$	—		$	—
Savings Certificates and Other Time			1,981.3			1,976.1			—			1,976.1			—
Non U.S. Offices Interest-Bearing			65,481.9			65,481.9			—			65,481.9			—
Federal Funds Purchased			1,896.9			1,896.9			—			1,896.9			—
Securities Sold Under Agreements to Repurchase			567.2			567.2			—			567.2			—
Other Borrowings			7,592.3			7,592.8			—			7,592.8			—
Senior Notes			2,724.2			2,729.8			—			2,729.8			—
Long-Term Debt			2,066.2			2,110.7			—			2,110.7			—
Unfunded Commitments			218.9			218.9			—			218.9			—
Other Liabilities			73.2			73.2			—			—			73.2

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 as of March 31, 2023 and December 31, 2022, and remaining maturities of AFS debt securities as of March 31, 2023.

TABLE 35: RECONCILIATION OF AMORTIZED COST TO FAIR VALUE OF AVAILABLE FOR SALE DEBT SECURITIES

			MARCH 31, 2023
(In Millions)			AMORTIZED COST			GROSS UNREALIZED GAINS			GROSS UNREALIZED LOSSES			FAIR VALUE
U.S. Government			$	2,931.1		$	4.8		$	76.0		$	2,859.9
Obligations of States and Political Subdivisions			318.1			—			26.2			291.9
Government Sponsored Agency			11,686.8			5.1			258.5			11,433.4
Non-U.S. Government			382.0			—			20.6			361.4
Corporate Debt			652.6			0.3			18.4			634.5
Covered Bonds			356.1			0.2			11.9			344.4
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			2,918.9			1.9			133.1			2,787.7
Other Asset-Backed			5,247.6			0.5			237.7			5,010.4
Commercial Mortgage-Backed			971.2			—			67.3			903.9
Total			$	25,464.4		$	12.8		$	849.7		$	24,627.5

			DECEMBER 31, 2022
(In Millions)			AMORTIZED COST			GROSS UNREALIZED GAINS			GROSS UNREALIZED LOSSES			FAIR VALUE
U.S. Government			$	2,837.7		$	2.5		$	92.8		$	2,747.4
Obligations of States and Political Subdivisions			817.8			—			30.2			787.6
Government Sponsored Agency			11,892.5			4.3			351.6			11,545.2
Non-U.S. Government			387.6			—			27.6			360.0
Corporate Debt			1,774.3			0.2			26.9			1,747.6
Covered Bonds			403.1			0.3			14.7			388.7
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			2,645.8			0.3			166.7			2,479.4
Other Asset-Backed			5,544.3			—			288.1			5,256.2
Commercial Mortgage-Backed			1,456.9			0.1			69.2			1,387.8
Total			$	27,760.0		$	7.7		$	1,067.8		$	26,699.9

TABLE 36: REMAINING MATURITY OF AVAILABLE FOR SALE DEBT SECURITIES

MARCH 31, 2023			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			$	1,086.5		$	1,085.1		$	1,844.6		$	1,774.8		$	—		$	—		$	—		$	—		$	2,931.1		$	2,859.9
Obligations of States and Political Subdivisions			—			—			—			—			298.7			273.6			19.4			18.3			318.1			291.9
Government Sponsored Agency			2,557.4			2,520.7			5,406.0			5,291.3			3,035.6			2,968.7			687.8			652.7			11,686.8			11,433.4
Non-U.S. Government			100.2			100.1			281.8			261.3			—			—			—			—			382.0			361.4
Corporate Debt			305.4			303.5			328.9			315.0			18.3			16.0			—			—			652.6			634.5
Covered Bonds			135.2			134.7			220.9			209.7			—			—			—			—			356.1			344.4
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			566.6			561.3			2,131.9			2,038.3			220.4			188.1			—			—			2,918.9			2,787.7
Other Asset-Backed			989.4			944.4			2,978.0			2,812.9			1,154.0			1,129.7			126.2			123.4			5,247.6			5,010.4
Commercial Mortgage-Backed			37.6			35.2			772.5			731.8			161.1			136.9			—			—			971.2			903.9
Total			$	5,778.3		$	5,685.0		$	13,964.6		$	13,435.1		$	4,888.1		$	4,713.0		$	833.4		$	794.4		$	25,464.4		$	24,627.5

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

Notes to Consolidated Financial Statements (unaudited) (continued)

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 March 31, 2023 and December 31, 2022.

TABLE 37: AVAILABLE FOR SALE DEBT SECURITIES IN UNREALIZED LOSS POSITION WITH NO CREDIT LOSSES REPORTED

MARCH 31, 2023			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			$	949.8		$	39.5		$	534.3		$	36.5		$	1,484.1		$	76.0
Obligations of States and Political Subdivisions			18.5			1.8			190.7			17.6			209.2			19.4
Government Sponsored Agency			7,010.8			181.7			3,490.2			76.8			10,501.0			258.5
Non-U.S. Government			66.6			—			294.9			20.6			361.5			20.6
Corporate Debt			196.3			8.4			172.3			0.8			368.6			9.2
Covered Bonds			131.4			9.3			149.4			2.6			280.8			11.9
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			1,070.1			38.9			826.3			67.5			1,896.4			106.4
Other Asset-Backed			2,672.5			130.6			2,226.3			107.1			4,898.8			237.7
Commercial Mortgage-Backed			523.1			37.2			363.6			30.1			886.7			67.3
Total			$	12,639.1		$	447.4		$	8,248.0		$	359.6		$	20,887.1		$	807.0

Note: Eleven sub-sovereign, supranational and non-U.S. agency bonds AFS securities with a fair value of $148.7 million and unrealized losses of $9.2 million, Six corporate debt AFS securities with a fair value of $431.3 million and unrealized losses of $26.7 million and three Obligations of States and Political Subdivisions AFS securities with a fair value of $82.7 million and unrealized losses of $6.8 million have been excluded from the table above as these AFS securities have a $1.8 million allowance for credit losses reported as of March 31, 2023. Refer to the discussion further below and Note 6—Allowance for Credit Losses for further information.

DECEMBER 31, 2022			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			$	1,123.6		$	64.1		$	343.1		$	28.7		$	1,466.7		$	92.8
Obligations of States and Political Subdivisions			160.0			16.8			120.6			13.4			280.6			30.2
Government Sponsored Agency			7,631.4			262.1			2,737.7			89.5			10,369.1			351.6
Non-U.S. Government			235.4			17.3			124.6			10.3			360.0			27.6
Corporate Debt			427.3			14.6			130.3			2.8			557.6			17.4
Covered Bonds			238.0			13.5			42.8			1.2			280.8			14.7
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			1,305.4			74.4			807.1			83.2			2,112.5			157.6
Other Asset-Backed			3,873.4			217.5			1,247.6			70.6			5,121.0			288.1
Commercial Mortgage-Backed			670.9			47.4			215.6			21.8			886.5			69.2
Total			$	15,665.4		$	727.7		$	5,769.4		$	321.5		$	21,434.8		$	1,049.2

Note: Three corporate debt AFS securities with a fair value of $93.8 million and unrealized losses of $9.5 million and one sub-sovereign, supranational and non-U.S. agency bonds AFS security with a fair value of $68.3 million and unrealized loss of $9.1 million have been excluded from the table above as these AFS securities have a $1.3 million allowance for credit losses reported as of December 31, 2022. Refer to the discussion further below and Note 6—Allowance for Credit Losses for further information.

As of March 31, 2023, 1,013 AFS debt securities with a combined fair value of $20.9 billion were in an unrealized loss position without an allowance for credit losses, with their unrealized losses totaling $807.0 million. As of March 31, 2023, unrealized losses related to AFS debt securities of $258.5 million, $237.7 million, and $106.4 million related to government-sponsored agency securities, other asset-backed and sub-sovereign, supranational and non-U.S. agency bonds, respectively, which are primarily attributable to changes in overall market interest rates.

As of December 31, 2022, 1,030 AFS debt securities with a combined fair value of $21.4 billion were in an unrealized loss position without an allowance for credit losses, with their unrealized losses totaling $1.0 billion. As of December 31, 2022, unrealized losses related to AFS debt securities of $351.6 million, $288.1 million, and $157.6 million related to government-sponsored agency, other asset-backed, and sub-sovereign, supranational and non-U.S. agency bonds, respectively, which are primarily attributable to changes in overall market interest rates and credit spreads since their purchase.

As of December 31, 2022, the Corporation intended to sell certain AFS debt securities that were in an unrealized loss position. The securities were written down to their fair value of $2.1 billion with a $213.0 million loss recognized in Investment Security Gains (Losses), net on the consolidated statements of income for the period ended December 31, 2022. In January 2023, the securities were subsequently sold resulting in an incremental $6.9 million gain upon sale as compared to the fair value recorded on the consolidated balance sheets at December 31, 2022.

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

Notes to Consolidated Financial Statements (unaudited) (continued)

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 a $0.5 million provision for credit losses for AFS securities for the three months ended March 31, 2023.There was $0.4 million provision for credit losses for AFS securities for the three months ended March 31, 2022. There was an $1.8 million allowance for credit losses for AFS securities as of March 31, 2023 which was primarily corporate debt securities and $1.3 million allowance for credit losses for AFS securities as of December 31, 2022. The process for identifying credit losses for 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 6— Allowance for Credit Losses.

Held to Maturity Debt Securities. Held to maturity (HTM) debt securities consist of securities that management intends to, and Northern Trust has the ability to, hold until maturity. The following tables provide the amortized cost and fair values as of March 31, 2023 and December 31, 2022, and remaining maturities of HTM debt securities as of March 31, 2023.

TABLE 38: RECONCILIATION OF AMORTIZED COST TO FAIR VALUE OF HELD TO MATURITY DEBT SECURITIES

			MARCH 31, 2023
(In Millions)			AMORTIZED COST			GROSS UNREALIZED GAINS			GROSS UNREALIZED LOSSES			FAIR VALUE
Obligations of States and Political Subdivisions			$	2,573.6		$	0.7		$	74.9		$	2,499.4
Government Sponsored Agency			9,259.9			—			949.8			8,310.1
Non-U.S. Government			2,772.2			0.7			121.5			2,651.4
Corporate Debt			673.0			—			42.6			630.4
Covered Bonds			2,275.8			0.4			148.9			2,127.3
Certificates of Deposit			544.7			—			—			544.7
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			5,700.3			2.1			397.1			5,305.3
Other Asset-Backed			335.7			—			1.0			334.7
Commercial Mortgage-Backed			37.6			—			0.8			36.8
Other			543.4			—			160.4			383.0
Total			$	24,716.2		$	3.9		$	1,897.0		$	22,823.1

			DECEMBER 31, 2022
(In Millions)			AMORTIZED COST			GROSS UNREALIZED GAINS			GROSS UNREALIZED LOSSES			FAIR VALUE
U.S. Government			$	50.0		$	—		$	—		$	50.0
Obligations of States and Political Subdivisions			2,565.3			—			149.8			2,415.5
Government Sponsored Agency			9,407.7			—			1,076.0			8,331.7
Non-U.S. Government			3,234.0			0.1			133.8			3,100.3
Corporate Debt			713.3			—			45.4			667.9
Covered Bonds			2,530.3			0.3			158.7			2,371.9
Certificates of Deposit			35.9			—			—			35.9
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			5,703.3			1.0			436.1			5,268.2
Other Asset-Backed			263.7			—			1.0			262.7
Other			532.6			—			157.4			375.2
Total			$	25,036.1		$	1.4		$	2,158.2		$	22,879.3

As of March 31, 2023, the $24.7 billion HTM debt securities portfolio had unrealized losses of $949.8 million and $397.1 million related to 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. As of December 31, 2022, the $25.0 billion HTM debt securities portfolio had unrealized losses of $1.1 billion and $436.1 million related to 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 39: REMAINING MATURITY OF HELD TO MATURITY DEBT SECURITIES

MARCH 31, 2023			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
Obligations of States and Political Subdivisions			$	46.3		$	45.8		$	832.4		$	813.6		$	1,270.8		$	1,231.5		$	424.1		$	408.5		$	2,573.6		$	2,499.4
Government Sponsored Agency			907.6			809.9			3,012.3			2,706.1			3,546.2			3,203.5			1,793.8			1,590.6			9,259.9			8,310.1
Non-U.S. Government			1,359.7			1,354.4			1,379.2			1,269.0			33.3			28.0			—			—			2,772.2			2,651.4
Corporate Debt			62.7			61.5			594.9			556.5			15.4			12.4			—			—			673.0			630.4
Covered Bonds			171.4			168.4			1,708.9			1,619.9			395.5			339.0			—			—			2,275.8			2,127.3
Certificates of Deposit			544.7			544.7			—			—			—			—			—			—			544.7			544.7
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			956.3			944.9			4,687.9			4,314.0			56.1			46.4			—			—			5,700.3			5,305.3
Other Asset-Backed			28.6			28.6			96.4			96.0			182.4			181.9			28.3			28.2			335.7			334.7
Commercial Mortgage-Backed			—			—			37.6			36.8			—			—			—			—			37.6			36.8
Other			53.0			51.1			295.0			257.6			34.7			25.3			160.7			49.0			543.4			383.0
Total			$	4,130.3		$	4,009.3		$	12,644.6		$	11,669.5		$	5,534.4		$	5,068.0		$	2,406.9		$	2,076.3		$	24,716.2		$	22,823.1

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

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

TABLE 40: AMORTIZED COST OF HELD TO MATURITY DEBT SECURITIES BY CREDIT RATING

			MARCH 31, 2023
(In Millions)			AAA			AA			A			BBB			NOT RATED			TOTAL
Obligations of States and Political Subdivisions			$	929.5		$	1,644.1		$	—		$	—		$	—		$	2,573.6
Government Sponsored Agency			9,259.9			—			—			—			—			9,259.9
Non-U.S. Government			1,021.0			894.8			528.5			327.9			—			2,772.2
Corporate Debt			2.2			302.3			368.5			—			—			673.0
Covered Bonds			2,275.8			—			—			—			—			2,275.8
Certificates of Deposit			501.3			—			—			—			43.4			544.7
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			4,380.1			1,289.6			29.5			1.1			—			5,700.3
Other Asset-Backed			335.7			—			—			—			—			335.7
Commercial Mortgage-Backed			37.6			—			—			—			—			37.6
Other			63.5			—			—			—			479.9			543.4
Total			$	18,806.6		$	4,130.8		$	926.5		$	329.0		$	523.3		$	24,716.2
Percent of Total			76		%	17		%	4		%	1		%	2		%	100		%

			DECEMBER 31, 2022
(In Millions)			AAA			AA			A			BBB			NOT RATED			TOTAL
U.S. Government			$	50.0		$	—		$	—		$	—		$	—		$	50.0
Obligations of States and Political Subdivisions			926.8			1,638.5			—			—			—			2,565.3
Government Sponsored Agency			9,407.7			—			—			—			—			9,407.7
Non-U.S. Government			762.2			926.5			1,223.0			322.3			—			3,234.0
Corporate Debt			2.1			305.7			405.5			—			—			713.3
Covered Bonds			2,530.3			—			—			—			—			2,530.3
Certificates of Deposit			—			—			—			—			35.9			35.9
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds			4,171.3			1,502.0			28.9			1.1			—			5,703.3
Other Asset-Backed			263.7			—			—			—			—			263.7
Other			65.8			—			—			—			466.8			532.6
Total			$	18,179.9		$	4,372.7		$	1,657.4		$	323.4		$	502.7		$	25,036.1
Percent of Total			73		%	17		%	7		%	1		%	2		%	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 97% of the HTM portfolio at both March 31, 2023 and December 31, 2022, respectively, comprised of securities rated A or higher. The remaining HTM debt securities portfolio was comprised of 1% rated BBB at both March 31, 2023 and December 31, 2022, respectively, and 2% was not rated by Moody’s, S&P Global,

Notes to Consolidated Financial Statements (unaudited) (continued)

or Fitch Ratings at both March 31, 2023 and December 31, 2022, respectively. Securities not explicitly rated were grouped where possible under the credit rating of the issuer of the security.

Investment Security Gains and Losses. Proceeds of $2.1 billion from the sale of debt securities resulted in investment security gains of $6.9 million for the three months ended March 31, 2023. The gain was comprised of a $9.8 million gain in obligations of states and political subdivisions, offset by losses of $1.2 million in corporate debt, $0.9 million in commercial mortgage-backed, and $0.8 million in other asset-backed securities. There were no sales of debt securities and no net investment security gains (losses) for the three months ended March 31, 2022.

Note 5 – Loans

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

TABLE 41: LOANS

(In Millions)			MARCH 31, 2023			DECEMBER 31, 2022
Commercial
Commercial and Institutional(1)			$	12,750.2		$	12,415.0
Commercial Real Estate			4,981.4			4,773.0
Non-U.S.(1)			3,004.3			3,131.1
Other			873.8			1,316.5
Total Commercial			21,609.7			21,635.6
Personal
Private Client			13,865.3			14,119.0
Residential Real Estate			6,377.0			6,413.5
Non-U.S.			429.0			510.0
Other			88.5			215.2
Total Personal			20,759.8			21,257.7
Total Loans			$	42,369.5		$	42,893.3

(1) Commercial and institutional and commercial-non-U.S. combined include $5.5 billion and $5.6 billion of private equity capital call finance loans at March 31, 2023 and December 31, 2022, respectively.

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 March 31, 2023 and December 31, 2022, equity credit lines totaled $232.7 million and $248.6 million, respectively, and equity credit lines for which first liens were held by Northern Trust represented 98% of the total equity credit lines as of both March 31, 2023 and December 31, 2022.

Included within the commercial-non-U.S., commercial-other and personal-other classes are short-duration advances primarily related to the processing of custodied client investments, totaling $2.2 billion and $2.9 billion at March 31, 2023 and December 31, 2022, respectively. Demand deposit overdrafts reclassified as loan balances, primarily in personal-other, totaled $5.2 million and $24.4 million at March 31, 2023 and December 31, 2022, respectively.

There were no loans classified as held for sale at both March 31, 2023 and December 31, 2022. Loans classified as held for sale are recorded at the lower of cost or fair value. There were no loans sold for the three months ended March 31, 2023 and $0.6 million loans sold for the three months ended March 31, 2022, which were comprised of commercial and institutional and residential real estate loans.

Notes to Consolidated Financial Statements (unaudited) (continued)

Credit Quality Indicators. Credit quality indicators are statistics, measurements or other metrics that provide information regarding the relative credit risk of loans. Northern Trust utilizes a variety of credit quality indicators to assess the credit risk of loans 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 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 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;

• 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 segment and class balances as of March 31, 2023 and December 31, 2022 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 42: CREDIT QUALITY INDICATOR AT AMORTIZED COST BASIS BY ORIGINATION YEAR

March 31, 2023			TERM LOANS																		REVOLVING LOANS			REVOLVING LOANS CONVERTED TO TERM LOANS
(In Millions)			2023			2022			2021			2020			2019			PRIOR			TOTAL
Commercial
Commercial and Institutional
Risk Rating:
1 to 3 Category			$	253.4		$	695.7		$	907.8		$	133.6		$	138.8		$	459.7		$	6,388.9		$	17.5		$	8,995.4
4 to 5 Category			263.6			820.2			705.1			232.4			164.7			248.1			1,113.4			62.2			3,609.7
6 to 9 Category			1.2			28.7			37.7			—			9.7			10.7			57.1			—			145.1
Total Commercial and Institutional			518.2			1,544.6			1,650.6			366.0			313.2			718.5			7,559.4			79.7			12,750.2
Commercial Real Estate
Risk Rating:
1 to 3 Category			129.5			253.3			196.6			48.3			83.5			62.7			27.3			0.5			801.7
4 to 5 Category			858.8			1,052.3			826.3			455.3			353.1			308.8			224.4			15.4			4,094.4
6 to 9 Category			5.4			—			25.5			—			42.1			9.8			2.5			—			85.3
Total Commercial Real Estate			993.7			1,305.6			1,048.4			503.6			478.7			381.3			254.2			15.9			4,981.4
Commercial Real Estate Gross Charge-offs			—			(4.0)			—			—			—			—			—			—			(4.0)
Non-U.S.
Risk Rating:
1 to 3 Category			797.9			—			45.8			145.9			15.3			3.7			1,125.1			—			2,133.7
4 to 5 Category			452.7			7.9			—			—			—			143.2			212.0			1.8			817.6
6 to 9 Category			0.1			14.8			—			—			23.1			—			15.0			—			53.0
Total Non-U.S.			1,250.7			22.7			45.8			145.9			38.4			146.9			1,352.1			1.8			3,004.3
Other
Risk Rating:
1 to 3 Category			594.5			—			—			—			—			—			—			—			594.5
4 to 5 Category			279.3			—			—			—			—			—			—			—			279.3
Total Other			873.8			—			—			—			—			—			—			—			873.8
Total Commercial			3,636.4			2,872.9			2,744.8			1,015.5			830.3			1,246.7			9,165.7			97.4			21,609.7
Commercial Gross Charge-offs			—			(4.0)			—			—			—			—			—			—			(4.0)
Personal
Private Client
Risk Rating:
1 to 3 Category			324.6			402.1			80.3			21.5			17.3			13.1			4,952.0			71.6			5,882.5
4 to 5 Category			72.0			493.8			681.3			183.6			174.9			175.3			5,888.1			283.1			7,952.1
6 to 9 Category			—			0.9			—			5.0			—			18.2			6.6			—			30.7
Total Private Client			396.6			896.8			761.6			210.1			192.2			206.6			10,846.7			354.7			13,865.3
Residential Real Estate
Risk Rating:
1 to 3 Category			50.4			809.9			660.7			772.4			147.1			390.6			208.9			7.9			3,047.9
4 to 5 Category			41.9			449.0			873.7			902.8			189.3			623.1			178.2			—			3,258.0
6 to 9 Category			—			5.8			2.5			1.7			10.9			38.9			11.3			—			71.1
Total Residential Real Estate			92.3			1,264.7			1,536.9			1,676.9			347.3			1,052.6			398.4			7.9			6,377.0
Non-U.S.
Risk Rating:
1 to 3 Category			—			12.3			—			—			—			1.0			47.8			—			61.1
4 to 5 Category			—			26.0			41.4			1.0			19.2			2.9			269.5			7.8			367.8
6 to 9 Category			—			—			—			—			—			0.1			—			—			0.1
Total Non-U.S.			—			38.3			41.4			1.0			19.2			4.0			317.3			7.8			429.0
Other
Risk Rating:
1 to 3 Category			28.9			—			—			—			—			—			—			—			28.9
4 to 5 Category			59.6			—			—			—			—			—			—			—			59.6
Total Other			88.5			—			—			—			—			—			—			—			88.5
Total Personal			577.4			2,199.8			2,339.9			1,888.0			558.7			1,263.2			11,562.4			370.4			20,759.8
Personal Gross Charge-offs			—			—			—			—			—			—			—			—			—
Total Loans			$	4,213.8		$	5,072.7		$	5,084.7		$	2,903.5		$	1,389.0		$	2,509.9		$	20,728.1		$	467.8		$	42,369.5
Total Loans Gross Charge-offs			$	—		$	(4.0)		$	—		$	—		$	—		$	—		$	—		$	—		$	(4.0)

Notes to Consolidated Financial Statements (unaudited) (continued)

December 31, 2022			TERM LOANS																		REVOLVING LOANS			REVOLVING LOANS CONVERTED TO TERM LOANS
(In Millions)			2022			2021			2020			2019			2018			PRIOR			TOTAL
Commercial
Commercial and Institutional
Risk Rating:
1 to 3 Category			$	753.3		$	1,087.5		$	209.8		$	159.3		$	45.9		$	511.3		$	6,032.8		$	17.7		$	8,817.6
4 to 5 Category			744.1			740.6			300.8			191.1			151.4			174.7			1,102.3			32.9			3,437.9
6 to 9 Category			50.8			30.5			—			13.7			—			—			64.5			—			159.5
Total Commercial and Institutional			1,548.2			1,858.6			510.6			364.1			197.3			686.0			7,199.6			50.6			12,415.0
Commercial Real Estate
Risk Rating:
1 to 3 Category			318.7			227.4			123.6			123.5			39.8			39.1			113.4			3.0			988.5
4 to 5 Category			968.5			1,040.0			637.8			447.3			153.0			256.9			181.5			17.5			3,702.5
6 to 9 Category			7.7			22.7			—			49.1			—			—			2.5			—			82.0
Total Commercial Real Estate			1,294.9			1,290.1			761.4			619.9			192.8			296.0			297.4			20.5			4,773.0
Non-U.S.
Risk Rating:
1 to 3 Category			991.9			46.2			109.6			14.8			—			6.5			1,158.3			—			2,327.3
4 to 5 Category			459.0			—			—			—			—			214.9			89.5			1.8			765.2
6 to 9 Category			0.1			—			—			23.1			—			—			15.4			—			38.6
Total Non-U.S.			1,451.0			46.2			109.6			37.9			—			221.4			1,263.2			1.8			3,131.1
Other
Risk Rating:
1 to 3 Category			993.9			—			—			—			—			—			—			—			993.9
4 to 5 Category			322.6			—			—			—			—			—			—			—			322.6
Total Other			1,316.5			—			—			—			—			—			—			—			1,316.5
Total Commercial			5,610.6			3,194.9			1,381.6			1,021.9			390.1			1,203.4			8,760.2			72.9			21,635.6
Personal
Private Client
Risk Rating:
1 to 3 Category			395.5			159.9			50.5			313.6			13.4			18.5			5,352.5			28.2			6,332.1
4 to 5 Category			430.3			755.1			192.4			191.3			38.7			160.0			5,728.6			267.2			7,763.6
6 to 9 Category			0.9			—			0.1			—			18.6			—			3.7			—			23.3
Total Private Client			826.7			915.0			243.0			504.9			70.7			178.5			11,084.8			295.4			14,119.0
Residential Real Estate
Risk Rating:
1 to 3 Category			871.6			666.7			567.7			168.1			102.9			750.8			128.4			7.9			3,264.1
4 to 5 Category			354.3			656.7			597.6			290.0			170.9			838.2			180.4			1.0			3,089.1
6 to 9 Category			—			6.8			1.5			1.1			3.7			35.9			11.3			—			60.3
Total Residential Real Estate			1,225.9			1,330.2			1,166.8			459.2			277.5			1,624.9			320.1			8.9			6,413.5
Non-U.S.
Risk Rating:
1 to 3 Category			3.0			3.7			—			—			4.6			2.3			124.6			—			138.2
4 to 5 Category			24.2			40.3			—			21.3			3.2			2.9			272.0			7.8			371.7
6 to 9 Category			—			—			—			—			—			0.1			—			—			0.1
Total Non-U.S.			27.2			44.0			—			21.3			7.8			5.3			396.6			7.8			510.0
Other
Risk Rating:
1 to 3 Category			190.8			—			—			—			—			—			—			—			190.8
4 to 5 Category			24.4			—			—			—			—			—			—			—			24.4
Total Other			215.2			—			—			—			—			—			—			—			215.2
Total Personal			2,295.0			2,289.2			1,409.8			985.4			356.0			1,808.7			11,801.5			312.1			21,257.7
Total Loans			$	7,905.6		$	5,484.1		$	2,791.4		$	2,007.3		$	746.1		$	3,012.1		$	20,561.7		$	385.0		$	42,893.3

Notes to Consolidated Financial Statements (unaudited) (continued)

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

Loans 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 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 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 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 by segment and class, as well as the other real estate owned and nonaccrual asset balances, as of March 31, 2023 and December 31, 2022.

TABLE 43: 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
March 31, 2023
Commercial
Commercial and Institutional			$	12,605.9		$	117.5		$	4.2		$	0.7		$	12,728.3		$	21.9		$	12,750.2		$	9.1
Commercial Real Estate			4,971.8			2.8			0.2			0.5			4,975.3			6.1			4,981.4			6.1
Non-U.S.			3,002.5			1.8			—			—			3,004.3			—			3,004.3			—
Other			873.8			—			—			—			873.8			—			873.8			—
Total Commercial			21,454.0			122.1			4.4			1.2			21,581.7			28.0			21,609.7			15.2
Personal
Private Client			13,630.4			143.2			14.3			75.4			13,863.3			2.0			13,865.3			—
Residential Real Estate			6,330.4			26.9			—			0.8			6,358.1			18.9			6,377.0			17.5
Non-U.S.			428.3			0.7			—			—			429.0			—			429.0			—
Other			88.5			—			—			—			88.5			—			88.5			—
Total Personal			20,477.6			170.8			14.3			76.2			20,738.9			20.9			20,759.8			17.5
Total Loans			$	41,931.6		$	292.9		$	18.7		$	77.4		$	42,320.6		$	48.9		$	42,369.5		$	32.7
			Other Real Estate Owned															$	—
			Total Nonaccrual Assets															$	48.9

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
December 31, 2022
Commercial
Commercial and Institutional			$	12,353.7		$	40.2		$	3.0		$	0.7		$	12,397.6		$	17.4		$	12,415.0		$	4.4
Commercial Real Estate			4,761.5			1.3			—			—			4,762.8			10.2			4,773.0			6.2
Non-U.S.			3,131.1			—			—			—			3,131.1			—			3,131.1			—
Other			1,316.5			—			—			—			1,316.5			—			1,316.5			—
Total Commercial			21,562.8			41.5			3.0			0.7			21,608.0			27.6			21,635.6			10.6
Personal
Private Client			13,843.5			192.3			29.9			53.3			14,119.0			—			14,119.0			—
Residential Real Estate			6,373.2			9.6			12.3			0.1			6,395.2			18.3			6,413.5			18.3
Non-U.S			509.9			—			—			0.1			510.0			—			510.0			—
Other			215.2			—			—			—			215.2			—			215.2			—
Total Personal			20,941.8			201.9			42.2			53.5			21,239.4			18.3			21,257.7			18.3
Total Loans			$	42,504.6		$	243.4		$	45.2		$	54.2		$	42,847.4		$	45.9		$	42,893.3		$	28.9
			Other Real Estate Owned															$	—
			Total Nonaccrual Assets															$	45.9

Interest income that would have been recorded for nonaccrual loans in accordance with their original terms was $0.7 million and $1.1 million for the three months ended March 31, 2023 and 2022, respectively.

Northern Trust may obtain physical possession of real estate via foreclosure on an in-substance repossession. As of March 31, 2023 and December 31, 2022, Northern Trust held foreclosed real estate properties with an immaterial carrying value, as a result of obtaining physical possession. In addition, as of March 31, 2023 and December 31, 2022, Northern Trust had loans with a carrying value of $0.8 million and $1.1 million, respectively, for which formal foreclosure proceedings were in process.

Loan Modifications to Borrowers Experiencing Financial Difficulty (After the Adoption of Accounting Standards Update No. 2022-02)

For borrowers experiencing financial difficulties, Northern Trust may provide payment relief by modifying the terms of the original loan. Loan modifications to borrowers experiencing financial difficulty involve primarily the extensions of term, deferrals of principal and interest, interest rate concessions, and other modifications or a combination thereof. Northern Trust considers payment deferrals of less than 90 days as insignificant, absent any material modifications to other loan terms.

The following table shows the amortized cost basis of loan modifications provided to financially distressed borrowers that impacted the respective cash flows of the underlying loans as of March 31, 2023, disaggregated by relevant class of financing receivable and type of modification provided.

TABLE 44: LOAN MODIFICATIONS MADE TO BORROWERS EXPERIENCING FINANCIAL DIFFICULTY

			TYPE OF LOAN MODIFICATION
THREE MONTHS ENDED MARCH 31, 2023			PRINCIPAL AND INTEREST DEFERRAL
(in $ million)			AMORTIZED COST BASIS			% OF TOTAL SEGMENT
Personal
Residential Real Estate			$	2.9		0.05		%
Total Personal			$	2.9		0.05		%
Total Loans			$	2.9		0.05		%

Notes to Consolidated Financial Statements (unaudited) (continued)

The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty.

TABLE 45: FINANCIAL EFFECT OF MODIFICATIONS MADE TO BORROWERS EXPERIENCING FINANCIAL DIFFICULTY

			FINANCIAL EFFECT
PRINCIPAL AND INTEREST DEFERRAL
Personal
Residential Real Estate			Northern Trust provided a weighted average of 180 days payment deferrals to borrowers for immaterial principal and interest deferral amounts. These payments are, in general, due at the end of the deferral period.

The effectiveness of Northern Trust’s modification efforts is measured by the loans’ respective past due status under the modified terms as of the end of the period. Given that principal and interest payments were deferred under the modified terms for all loan modifications to borrowers experiencing financial difficulty processed in the first quarter of 2023, none of the modified loans were considered past due for purposes of these disclosures as of March 31, 2023. Further, there were no defaults and related charge-offs for any of the loan modifications to borrowers experiencing financial difficulty that had been modified since Northern Trust’s adoption of ASU 2022-02 as of January 1, 2023.

There were no undrawn loan commitments or standby letters of credit issued to financially distressed borrowers for which Northern Trust has modified the terms of the loan in the form of payment deferrals as of March 31, 2023.

The expected credit loss for nonacrrual loans including loan modifications to borrowers experiencing financial difficulty is measured based on either the expected future cash flows, the value of collateral, or other factors that may impact the borrower’s ability to pay. If the discounted cash flow method is utilized, the credit loss is measured based upon the present value of expected future cash flows, discounted at the effective interest rate based on the post-modification 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. 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 for all loan modifications to borrowers experiencing financial difficulty.

Troubled Debt Restructurings (Prior to the Adoption of Accounting Standards Update No. 2022-02)

Prior to January 1, 2023, 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 (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.

All loans 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 $35.3 million of nonaccrual TDRs, and $39.7 million of accrual TDRs as of December 31, 2022. There were $0.2 million of aggregate undrawn loan commitments and standby letters of credit at December 31, 2022, issued to borrowers with TDR modifications of loans.

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.

Notes to Consolidated Financial Statements (unaudited) (continued)

The following table provides, by segment and class, the number of TDR modifications of loans and leases entered into during the three months ended March 31, 2022, and the recorded investments and unpaid principal balances as of March 31, 2022.

TABLE 46: TROUBLED DEBT RESTRUCTURINGS

($ In Millions)			LOAN MODIFICATION DETAIL			NUMBER OF LOANS AND LEASES			RECORDED INVESTMENT			UNPAID PRINCIPAL BALANCE
March 31, 2022
Commercial
Commercial and Institutional			Other modification			1			$	0.5		$	0.5
Total Commercial						1			0.5			0.5
Personal
Residential Real Estate			Interest rate concession, deferrals of principal, and extension of term			2			0.1			0.1
Total Personal						2			0.1			0.1
Total Loans and Leases						3			$	0.6		$	0.6

Note: Period-end balances reflect all pay downs and charge-offs during the year.

There were no residential real estate loan TDR modifications during the twelve months ended December 31, 2021, which subsequently had a payment default during the three months ended March 31, 2022.

Note 6 – 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 Department, and each of Northern Trust’s reporting segments. 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 Provision for Credit Losses on the consolidated statements of income represents the change in the Allowance for Credit Losses on the consolidated balance sheets after accounting for net charge-offs or recoveries 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.

Notes to Consolidated Financial Statements (unaudited) (continued)

The following table provides information regarding changes in the total allowance for credit losses during the three months ended March 31, 2023 and 2022.

TABLE 47: CHANGES IN THE ALLOWANCE FOR CREDIT LOSSES

			THREE MONTHS ENDED MARCH 31, 2023
(In Millions)			LOANS			UNDRAWN LOAN COMMITMENTS AND STANDBY LETTERS OF CREDIT			HELD TO MATURITY DEBT SECURITIES			OTHER FINANCIAL ASSETS			TOTAL
Balance at Beginning of Period			$	144.3		$	38.5		$	16.0		$	0.8		$	199.6
Charge-Offs			(4.0)			—			—			—			(4.0)
Recoveries			1.1			—			—			—			1.1
Net Recoveries (Charge-Offs)			(2.9)			—			—			—			(2.9)
Provision for Credit Losses(1)			18.5			(4.2)			—			0.2			14.5
Balance at End of Period			$	159.9		$	34.3		$	16.0		$	1.0		$	211.2

(1) The table excludes a provision for credit losses of $0.5 million for the three months ended March 31, 2023 for AFS debt securities. See further detail in Note 4—Securities.

			THREE MONTHS ENDED MARCH 31, 2022
(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			$	138.4		$	34.1		$	11.2		$	1.0		$	184.7
Charge-Offs			(0.1)			—			—			—			(0.1)
Recoveries			3.3			—			—			—			3.3
Net Recoveries (Charge-Offs)			3.2			—			—			—			3.2
Provision for Credit Losses			(5.3)			3.4			3.4			0.1			1.6
Balance at End of Period			$	136.3		$	37.5		$	14.6		$	1.1		$	189.5

(1) The table excludes a provision for credit losses of $0.4 million for the three months ended March 31, 2022 for AFS debt securities. See further detail in Note 4—Securities.

The Provision for Credit Losses, excluding the provision for available for sale debt securities, was a provision of $14.5 million in the current quarter, as compared to a $1.6 million provision in the prior-year quarter. The provision was primarily due to an increase in the reserve evaluated on a collective basis, driven by growth in the size and duration of the commercial real estate portfolio, primarily in multi-family properties, partially offset by improvement in credit quality for the commercial and institutional segment. The reserve evaluated on a collective basis relates to pooled financial assets sharing similar risk characteristics. There were net charge-offs of $2.9 million during the three months ended March 31, 2023, as compared to net recoveries of $3.2 million for the three months ended March 31, 2022. For further detail, please see the Allowance for the Loan and Lease Portfolio and the Allowance for Held to Maturity Debt Securities Portfolio sections below.

The portion of the allowance assigned to loans, 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 13—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, and Other Assets, please refer to the Allowance for Other Financial Assets section within this footnote.

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. 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. The primary forecast in the current quarter reflects continued marginal economic growth, persistent inflation and higher interest rates. Recognizing the uncertainty in the primary forecast, an alternative scenario is also considered, which reflects a recession that incorporates the experiences of a wider set of historical economic cycles.

Notes to Consolidated Financial Statements (unaudited) (continued)

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 related to loans and leases, including undrawn loan commitments and standby letters of credit, by segment during the three months ended March 31, 2023 and 2022.

TABLE 48: CHANGES IN THE ALLOWANCE FOR CREDIT LOSSES RELATED TO LOANS AND LEASES

			THREE MONTHS ENDED MARCH 31, 2023
			LOANS									UNDRAWN LOAN COMMITMENTS AND STANDBY LETTERS OF CREDIT
(In Millions)			COMMERCIAL			PERSONAL			TOTAL			COMMERCIAL			PERSONAL			TOTAL
Balance at Beginning of Period			$	116.2		$	28.1		$	144.3		$	36.3		$	2.2		$	38.5
Charge-Offs			(4.0)			—			(4.0)			—			—			—
Recoveries			—			1.1			1.1			—			—			—
Net Recoveries (Charge-Offs)			(4.0)			1.1			(2.9)			—			—			—
Provision for Credit Losses			18.6			(0.1)			18.5			(5.0)			0.8			(4.2)
Balance at End of Period			$	130.8		$	29.1		$	159.9		$	31.3		$	3.0		$	34.3

			THREE MONTHS ENDED MARCH 31, 2022
			LOANS AND LEASES									UNDRAWN LOAN COMMITMENTS AND STANDBY LETTERS OF CREDIT
(In Millions)			COMMERCIAL			PERSONAL			TOTAL			COMMERCIAL			PERSONAL			TOTAL
Balance at Beginning of Period			$	105.6		$	32.8		$	138.4		$	31.4		$	2.7		$	34.1
Charge-Offs			—			(0.1)			(0.1)			—			—			—
Recoveries			2.2			1.1			3.3			—			—			—
Net Recoveries (Charge-Offs)			2.2			1.0			3.2			—			—			—
Provision for Credit Losses			(5.3)			—			(5.3)			3.3			0.1			3.4
Balance at End of Period			$	102.5		$	33.8		$	136.3		$	34.7		$	2.8		$	37.5

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 or qualitative estimation methodologies 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, 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.

Notes to Consolidated Financial Statements (unaudited) (continued)

The following table provides information regarding the recorded investments in loans and the allowance for credit losses for loans and undrawn loan commitments and standby letters of credit by segment as of March 31, 2023 and December 31, 2022.

TABLE 49: RECORDED INVESTMENTS IN LOANS

			MARCH 31, 2023									DECEMBER 31, 2022
(In Millions)			COMMERCIAL			PERSONAL			TOTAL			COMMERCIAL			PERSONAL			TOTAL
Loans
Evaluated on an Individual Basis			$	63.3		$	46.0		$	109.3		$	63.0		$	46.1		$	109.1
Evaluated on a Collective Basis			21,546.4			20,713.8			42,260.2			21,572.6			21,211.6			42,784.2
Total Loans			21,609.7			20,759.8			42,369.5			21,635.6			21,257.7			42,893.3
Allowance for Credit Losses on Loans
Evaluated on an Individual Basis			9.0			2.0			11.0			10.4			—			10.4
Evaluated on a Collective Basis			121.8			27.1			148.9			105.8			28.1			133.9
Allowance Assigned to Loans			130.8			29.1			159.9			116.2			28.1			144.3
Allowance for Undrawn Loan Commitments and Standby Letters of Credit
Evaluated on an Individual Basis			—			—			—			—			—			—
Evaluated on a Collective Basis			31.3			3.0			34.3			36.3			2.2			38.5
Allowance Assigned to Undrawn Loan Commitments and Standby Letters of Credit			31.3			3.0			34.3			36.3			2.2			38.5
Total Allowance Assigned to Loans and Undrawn Loan Commitments and Standby Letters of Credit			$	162.1		$	32.1		$	194.2		$	152.5		$	30.3		$	182.8

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 months ended March 31, 2023 and 2022.

TABLE 50: CHANGES IN THE ALLOWANCE FOR CREDIT LOSSES RELATED TO HELD TO MATURITY DEBT SECURITIES

			THREE MONTHS ENDED MARCH 31, 2023
(In Millions)			CORPORATE DEBT			NON-U.S. GOVERNMENT			SUB-SOVEREIGN, SUPRANATIONAL, AND NON-U.S. AGENCY BONDS			OBLIGATIONS OF STATES AND POLITICAL SUBDIVISIONS**(1)**			COVERED BONDS			OTHER			TOTAL
Balance at Beginning of Period			$	1.9		$	3.6		$	4.0		$	1.5		$	0.1		$	4.9		$	16.0
Provision for Credit Losses			—			0.3			0.1			(0.2)			—			(0.2)			—
Balance at End of Period			$	1.9		$	3.9		$	4.1		$	1.3		$	0.1		$	4.7		$	16.0

(1) The allowance for Obligations of States and Political Subdivisions is related to (non pre-refunded) municipal securities that do not fall under Northern Trust’s zero-loss assumption.

			THREE MONTHS ENDED MARCH 31, 2022
(In Millions)			CORPORATE DEBT			NON-U.S. GOVERNMENT			SUB-SOVEREIGN, SUPRANATIONAL, AND NON-U.S. AGENCY BONDS			OBLIGATIONS OF STATES AND POLITICAL SUBDIVISIONS			COVERED BONDS			OTHER			TOTAL
Balance at Beginning of Period			$	1.4		$	1.9		$	3.0		$	—		$	0.1		$	4.8		$	11.2
Provision for Credit Losses			0.2			1.5			1.6			—			—			0.1			3.4
Balance at End of Period			$	1.6		$	3.4		$	4.6		$	—		$	0.1		$	4.9		$	14.6

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.

Notes to Consolidated Financial Statements (unaudited) (continued)

HTM debt securities classified as “other asset-backed securities” 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” relate 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 the one 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 March 31, 2023 and December 31, 2022, 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 51: ACCRUED INTEREST

(In Millions)			MARCH 31, 2023			DECEMBER 31, 2022
Loans			$	210.8		$	203.1
Debt Securities
Held to Maturity			66.0			63.2
Available for Sale			136.5			147.1
Other Financial Assets			59.0			43.8
Total			$	472.3		$	457.2

The amount of accrued interest reversed through interest income for loans was immaterial for the three months ended March 31, 2023 and 2022, and there was no accrued interest reversed through interest income related to any other financial assets for the three months ended March 31, 2023 and 2022.

Notes to Consolidated Financial Statements (unaudited) (continued)

Note 7 – Pledged and Restricted Assets

Pledged Assets. For our liquidity management strategy, we may pledge loans and/or securities to various financial market utilities to allow for client payment, clearing and settlement processing as part of our custody services. We may pledge loans or securities to Central Banks, Federal Home Loan Bank (FHLB) of Chicago and third parties for various purposes, for example: securing public and trust deposits, repurchase agreements and borrowings and derivative settlements.

The following table presents the carrying value of Northern Trust's pledged assets by type.

TABLE 52: TYPE OF PLEDGED ASSETS

(In Billions)			MARCH 31, 2023			DECEMBER 31, 2022
Debt Securities(1)			$	32.7		$	31.4
Loans(2)			11.9			11.8
Total Pledged Assets			$	44.6		$	43.2

(1) Debt securities are comprised of held to maturity and available for sale securities.

(2) Loans pledged at the FHLB of Chicago and the Federal Reserve Bank of Chicago.

Collateral required for these purposes totaled $13.3 billion and $8.7 billion at March 31, 2023 and December 31, 2022, respectively.

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

TABLE 53: FAIR VALUE OF AVAILABLE FOR SALE DEBT SECURITIES INCLUDED IN PLEDGED ASSETS

			SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE						DERIVATIVE CONTRACTS
(In Millions)			MARCH 31, 2023			DECEMBER 31, 2022			MARCH 31, 2023			DECEMBER 31, 2022
Debt Securities
Available for Sale			$	365.0		$	464.7		$	69.4		$	34.7

The secured parties to these transactions have the right to repledge or sell the securities as it relates to $365.0 million and $464.7 million of the pledged collateral as of March 31, 2023 and December 31, 2022, 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 54: ACCEPTED COLLATERAL

(In Millions)			MARCH 31, 2023			DECEMBER 31, 2022
Collateral that may be repledged or sold
Reverse repurchase agreements (1)			$	22,878.6		$	12,119.4
Derivative contracts			5.3			5.0
Collateral that may not be repledged or sold
Reverse repurchase agreements			300.0			450.0
Total Collateral Accepted(2)			$	23,183.9		$	12,574.4

(1) The fair value of securities collateral that was repledged or sold totaled $22.2 billion and $11.5 billion at March 31, 2023 and December 31, 2022, respectively.

(2) This includes collateral accepted as related to the sponsored member program. Refer to Note 20—Commitments and Contingent Liabilities for further information.

Restricted Assets. Certain cash may be restricted in terms of usage or withdrawal. As a result of the continuing military conflict involving Ukraine and the Russian Federation and related sanctions and legal restrictions in place, cash balances denominated in Russian rubles received for the benefit of certain clients in our Asset Servicing business are subject to distribution restrictions. As of March 31, 2023 and December 31, 2022, these balances totaled $529.1 million and $330.4 million, respectively, and are reported in Cash and Due from Banks on the consolidated balance sheets.

At March 31, 2023 and December 31, 2022, Northern Trust held cash of $569.6 million and $574.2 million, respectively, to meet non-U.S. reserve requirements. As a result of the economic environment arising from the COVID-19 pandemic, the Federal Reserve reduced the U.S. reserve requirement to zero percent on March 26, 2020. There were no average deposits required to meet Federal Reserve Bank reserve requirements for both the three months ended March 31, 2023 and March 31, 2022.

Notes to Consolidated Financial Statements (unaudited) (continued)

Note 8 – Goodwill and Other Intangibles

Goodwill. Changes by reporting segment in the carrying amount of Goodwill for the three months ended March 31, 2023, including the effect of foreign exchange rates on non-U.S. dollar denominated balances, were as follows.

TABLE 55: GOODWILL

(In Millions)			ASSET SERVICING			WEALTH MANAGEMENT			TOTAL
Balance at December 31, 2022			$	611.0		$	80.3		$	691.3
Foreign Exchange Rates			3.8			—			3.8
Balance at March 31, 2023			$	614.8		$	80.3		$	695.1

Other Intangible Assets Subject to Amortization. The gross carrying amount and accumulated amortization of other intangible assets subject to amortization as of March 31, 2023 and December 31, 2022 were as follows.

TABLE 56: OTHER INTANGIBLE ASSETS

(In Millions)			MARCH 31, 2023			DECEMBER 31, 2022
Gross Carrying Amount			$	131.2		$	197.9
Less: Accumulated Amortization			54.7			120.3
Net Book Value			$	76.5		$	77.6

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 $2.3 million and $2.7 million for the three months ended March 31, 2023 and 2022, respectively. Amortization for the remainder of 2023 and for the years 2024, 2025, 2026, and 2027 is estimated to be $7.0 million, $9.2 million, $8.6 million, $8.3 million, and $8.0 million, respectively.

Capitalized Software. The gross carrying amount and accumulated amortization of capitalized software as of March 31, 2023 and December 31, 2022 were as follows.

TABLE 57: CAPITALIZED SOFTWARE

(In Millions)			MARCH 31, 2023			DECEMBER 31, 2022
Gross Carrying Amount			$	3,600.0		$	3,479.3
Less: Accumulated Amortization			1,636.5			1,517.4
Net Book Value			$	1,963.5		$	1,961.9

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 $121.3 million and $101.5 million for the three months ended March 31, 2023 and 2022, respectively.

Note 9 – Reporting Segments

Northern Trust is organized around its two client-focused reporting segments: Asset Servicing and Wealth Management. Asset management and related services are provided to Asset Servicing 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 Asset Servicing and Wealth Management.

Reporting segment financial information, presented on an internal management reporting basis, is determined by accounting systems used to allocate revenue and expense to each segment, and incorporates processes for allocating assets, liabilities, equity and the applicable interest income and expense utilizing a funds transfer pricing (FTP) methodology. Under the methodology, assets and liabilities receive a funding charge or credit that considers interest rate risk, liquidity risk, and other product characteristics on an instrument level. Additionally, segment information is presented on an FTE basis as management believes an FTE presentation provides a clearer indication of net interest income. The adjustment to an FTE basis has no impact on Net Income.

Revenues, expenses and average assets are allocated to Asset Servicing 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.

Notes to Consolidated Financial Statements (unaudited) (continued)

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.

The following table presents the earnings contributions and average assets of Northern Trust’s reporting segments for the three months ended March 31, 2023 and 2022.

TABLE 58: RESULTS OF REPORTING SEGMENTS

($ In Millions)			ASSET SERVICING						WEALTH MANAGEMENT						OTHER						RECONCILING ITEMS						TOTAL CONSOLIDATED
THREE MONTHS ENDED MARCH 31,			2023			2022			2023			2022			2023			2022			2023			2022			2023			2022
Noninterest Income
Trust, Investment and Other Servicing Fees			$	603.0		$	662.4		$	460.6		$	506.0		$	—		$	—		$	—		$	—		$	1,063.6		$	1,168.4
Foreign Exchange Trading Income			54.9			77.4			(1.9)			3.5			—			—			—			—			53.0			80.9
Other Noninterest Income			63.2			61.1			34.3			31.8			(0.7)			(4.5)			—			—			96.8			88.4
Total Noninterest Income			721.1			800.9			493.0			541.3			(0.7)			(4.5)			—			—			1,213.4			1,337.7
Net Interest Income			312.1			190.1			232.3			197.6			—			—			(13.2)			(6.7)			531.2			381.0
Revenue			1,033.2			991.0			725.3			738.9			(0.7)			(4.5)			(13.2)			(6.7)			1,744.6			1,718.7
Provision for Credit Losses			(2.9)			8.4			17.9			(6.4)			—			—			—			—			15.0			2.0
Noninterest Expense			801.0			757.9			469.2			445.1			15.4			2.9			—			—			1,285.6			1,205.9
Income before Income Taxes			235.1			224.7			238.2			300.2			(16.1)			(7.4)			(13.2)			(6.7)			444.0			510.8
Provision for Income Taxes			60.5			51.8			66.1			78.3			(4.0)			(1.9)			(13.2)			(6.7)			109.4			121.5
Net Income			$	174.6		$	172.9		$	172.1		$	221.9		$	(12.1)		$	(5.5)		$	—		$	—		$	334.6		$	389.3
Percentage of Consolidated Net Income			52		%	44		%	52		%	57		%	(4)		%	(1)		%	N/A			N/A			100		%	100		%
Average Assets			$	111,215.3		$	125,234.9		$	36,844.6		$	36,908.1		$	—		$	—		N/A			N/A			$	148,059.9		$	162,143.0

Note: Segment results are stated on an FTE basis. The FTE adjustments are eliminated in the reconciling items column with the Corporation’s total consolidated financial results stated on a GAAP basis. The adjustment to an FTE basis has no impact on net income.

Note 10 – 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 March 31, 2023, 5,000 shares of Series D Non-Cumulative Perpetual Preferred Stock (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 March 31, 2023, 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 March 31, 2023 and December 31, 2022 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 the three-month CME Term Secured Overnight Finance Rate, as administered by CME Group Benchmark Administration, Ltd., plus a statutory spread adjustment of 0.26161% (as set forth in the final rule to implement the LIBOR Act) 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 January 18, 2023, the Corporation declared a cash dividend of $2,300 per share of Series D Preferred Stock payable on April 1, 2023, to stockholders of record as of March 15, 2023.

Series E Preferred Stock. As of March 31, 2023, 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 March 31, 2023 and December 31, 2022 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).

Notes to Consolidated Financial Statements (unaudited) (continued)

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, at a rate per annum equal to 4.70%. On January 18, 2023, the Corporation declared a cash dividend of $293.75 per share of Series E Preferred Stock payable on April 1, 2023, to stockholders of record as of March 15, 2023.

Common Stock. The Corporation’s current stock repurchase authorization to repurchase up to 25.0 million shares was approved by the Board of Directors in October 2021. 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. For the three months ended March 31, 2023, the Corporation repurchased 1,050,227 shares of common stock, at a total cost of $100.9 million ($96.04 average price per share), including 326,811 shares withheld to satisfy tax withholding obligations related to share-based compensation. For the three months ended March 31, 2022, the Corporation repurchased 295,410 shares of common stock, at a total cost of $33.8 million ($114.58 average price per share), all of which were shares withheld to satisfy tax withholding obligations related to share-based compensation.

Note 11 – Accumulated Other Comprehensive Income (Loss)

The following tables summarize the components of Accumulated Other Comprehensive Income (Loss) (AOCI) at March 31, 2023 and 2022, and changes during the three months then ended.

TABLE 59: SUMMARY OF CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

			THREE MONTHS ENDED MARCH 31, 2023
(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, 2022			$	(1,367.6)		$	1.2		$	164.6		$	(367.4)		$	(1,569.2)
Net Change			180.2			(0.1)			22.7			0.2			203.0
Balance at March 31, 2023			$	(1,187.4)		$	1.1		$	187.3		$	(367.2)		$	(1,366.2)

(1) Includes net unrealized gains (losses) on debt securities transferred from AFS to HTM. Refer to Note 4—Securities for further information.

			THREE MONTHS ENDED MARCH 31, 2022
(In Millions)			NET UNREALIZED GAINS (LOSSES) ON AVAILABLE FOR SALE DEBT SECURITIES			NET UNREALIZED (LOSSES) GAINS ON CASH FLOW HEDGES			NET FOREIGN CURRENCY ADJUSTMENT			NET PENSION AND OTHER POSTRETIREMENT BENEFIT ADJUSTMENTS			TOTAL
Balance at December 31, 2021			$	107.1		$	(2.4)		$	155.2		$	(295.5)		$	(35.6)
Net Change			(868.4)			(1.4)			(7.9)			6.3			(871.4)
Balance at March 31, 2022			$	(761.3)		$	(3.8)		$	147.3		$	(289.2)		$	(907.0)

Notes to Consolidated Financial Statements (unaudited) (continued)

TABLE 60: DETAILS OF CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

THREE MONTHS ENDED MARCH 31,			2023									2022
(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			$	229.3		$	(60.3)		$	169.0		$	(1,171.5)		$	301.4		$	(870.1)
Reclassification Adjustments for (Gains) Losses Included in Net Income:
Interest Income on Debt Securities(1)			21.9			(5.5)			16.4			2.3			(0.6)			1.7
Net (Gains) Losses on Debt Securities(2)			(6.9)			1.7			(5.2)			—			—			—
Net Change			$	244.3		$	(64.1)		$	180.2		$	(1,169.2)		$	300.8		$	(868.4)
Unrealized Gains (Losses) on Cash Flow Hedges
Foreign Exchange Contracts			$	0.5		$	(0.1)		$	0.4		$	(3.6)		$	0.9		$	(2.7)
Reclassification Adjustment for (Gains) Losses Included in Net Income(3)			(0.6)			0.1			(0.5)			1.7			(0.4)			1.3
Net Change			$	(0.1)		$	—		$	(0.1)		$	(1.9)		$	0.5		$	(1.4)
Foreign Currency Adjustments
Foreign Currency Translation Adjustments			$	46.8		$	0.2		$	47.0		$	(50.3)		$	(1.8)		$	(52.1)
Net Investment Hedge Gains (Losses)			(32.5)			8.2			(24.3)			59.4			(15.2)			44.2
Net Change			$	14.3		$	8.4		$	22.7		$	9.1		$	(17.0)		$	(7.9)
Pension and Other Postretirement Benefit Adjustments
Net Actuarial Gains (Losses)			$	(1.1)		$	0.1		$	(1.0)		$	0.8		$	(0.6)		$	0.2
Reclassification Adjustment for (Gains) Losses Included in Net Income(4)
Amortization of Net Actuarial Loss			1.6			(0.4)			1.2			7.6			(1.9)			5.7
Amortization of Prior Service Cost (Credit)			—			—			—			(0.3)			0.1			(0.2)
Settlement Loss			—			—			—			0.7			(0.1)			0.6
Net Change			$	0.5		$	(0.3)		$	0.2		$	8.8		$	(2.5)		$	6.3
Total Net Change			$	259.0		$	(56.0)		$	203.0		$	(1,153.2)		$	281.8		$	(871.4)

(1) The before-tax reclassification adjustment is related to the unrealized gains (losses) amortization on AFS debt securities that were transferred to HTM debt securities during the second quarter of 2021 and third quarter of 2022. Refer to Note 4—Securities for further information.

(2) The net gains (losses) on AFS debt securities before-tax reclassification adjustment is recorded in Investment Security Gains (Losses), net on the consolidated statements of income. Refer to Note 4—Securities for further information.

(3) See Note 21—Derivative Financial Instruments for the location of the reclassification adjustment related to cash flow hedges.

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

Note 12 – Net Income Per Common Share

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

TABLE 61: NET INCOME PER COMMON SHARE

			THREE MONTHS ENDED MARCH 31,
($ In Millions Except Per Common Share Information)			2023			2022
Basic Net Income Per Common Share
Average Number of Common Shares Outstanding			208,186,841			208,024,962
Net Income			$	334.6		$	389.3
Less: Dividends on Preferred Stock			16.2			16.2
Net Income Applicable to Common Stock			318.4			373.1
Less: Earnings Allocated to Participating Securities			3.2			3.1
Earnings Allocated to Common Shares Outstanding			315.2			370.0
Basic Net Income Per Common Share			$	1.51		$	1.78
Diluted Net Income Per Common Share
Average Number of Common Shares Outstanding			208,186,841			208,024,962
Plus: Dilutive Effect of Share-based Compensation			543,548			784,171
Average Common and Potential Common Shares			208,730,389			208,809,133
Earnings Allocated to Common and Potential Common Shares			$	315.2		$	370.0
Diluted Net Income Per Common Share			1.51			1.77

Note: For the three months ended March 31, 2023 and 2022, there were no common stock equivalents excluded in the computation of diluted net income per share.

Notes to Consolidated Financial Statements (unaudited) (continued)

Note 13 – 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 Asset Servicing clients. Investment Management and Advisory income contains revenue received from providing asset management and related services to Wealth Management and Asset Servicing 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 Asset Servicing clients. Other income largely consists of revenues received from providing employee benefit, investment risk and analytic and other services to Asset Servicing and Wealth Management clients.

Other Noninterest Income. Treasury Management income represents revenues received from providing cash and liquidity management services to Asset Servicing 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 Asset Servicing 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 Asset Servicing 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 for 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.

The following table presents revenues disaggregated by major revenue source.

TABLE 62: REVENUE DISAGGREGATION

			THREE MONTHS ENDED MARCH 31,
(In Millions)			2023			2022
Noninterest Income
Trust, Investment and Other Servicing Fees
Custody and Fund Administration			$	441.6		$	484.0
Investment Management and Advisory			540.5			603.2
Securities Lending			19.1			18.9
Other			62.4			62.3
Total Trust, Investment and Other Servicing Fees			$	1,063.6		$	1,168.4
Other Noninterest Income
Foreign Exchange Trading Income			$	53.0		$	80.9
Treasury Management Fees			8.4			11.1
Security Commissions and Trading Income			34.7			36.2
Other Operating Income			46.8			41.1
Investment Security Gains (Losses), net			6.9			—
Total Other Noninterest Income			$	149.8		$	169.3
Total Noninterest Income			$	1,213.4		$	1,337.7

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 March 31, 2023, revenue from contracts with clients

Notes to Consolidated Financial Statements (unaudited) (continued)

also includes $29.9 million of the $34.7 million total Security Commissions and Trading Income and $9.1 million of the $46.8 million total Other Operating Income.

For the three months ended March 31, 2022, revenue from contracts with clients also includes $31.6 million of the $36.2 million total Security Commissions and Trading Income and $9.7 million of the $41.1 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 March 31, 2023 and December 31, 2022.

TABLE 63: CLIENT RECEIVABLES

(In Millions)			MARCH 31, 2023			DECEMBER 31, 2022
Trust Fees Receivable, net(1)			$	895.9		$	882.5
Other			50.5			55.4
Total Client Receivables			$	946.4		$	937.9

(1) Trust Fees Receivable is net of a $14.2 million and $13.5 million fee receivable allowance as of March 31, 2023 and December 31, 2022, respectively.

Note 14 – Net Interest Income

The components of Net Interest Income were as follows.

TABLE 64: NET INTEREST INCOME

			THREE MONTHS ENDED MARCH 31,
(In Millions)			2023			2022
Interest Income
Federal Reserve and Other Central Bank Deposits			$	377.0		$	17.6
Interest-Bearing Due from and Deposits with Banks(1)			28.2			2.6
Federal Funds Sold			0.2			—
Securities Purchased under Agreements to Resell			125.9			0.9
Securities — Taxable			337.8			169.0
— Nontaxable(2)			0.3			0.4
Loans and Leases			578.2			191.2
Other Interest-Earning Assets(3)			7.8			1.8
Total Interest Income			$	1,455.4		$	383.5
Interest Expense
Deposits			$	564.6		$	(15.9)
Federal Funds Purchased			40.1			—
Securities Sold Under Agreements to Repurchase			116.1			0.3
Other Borrowings			135.0			3.1
Senior Notes			39.2			9.6
Long-Term Debt			29.2			5.4
Total Interest Expense			$	924.2		$	2.5
Net Interest Income			$	531.2		$	381.0

(1) 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.

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

(3) Other Interest-Earning Assets include certain community development investments, collateral deposits with certain securities depositories and clearing houses, Federal Home Loan Bank and Federal Reserve stock, and money market investments which are classified in Other Assets on the consolidated balance sheets.

Note 15 – Other Operating Income

The components of Other Operating Income were as follows.

TABLE 65: OTHER OPERATING INCOME

			THREE MONTHS ENDED MARCH 31,
(In Millions)			2023			2022
Loan Service Fees			$	18.7		$	16.7
Banking Service Fees			12.2			12.7
Bank Owned Life Insurance			16.7			11.8
Other Income(1)			(0.8)			(0.1)
Total Other Operating Income			$	46.8		$	41.1

(1) Other Income includes the mark-to-market gain or loss on derivative swap activity primarily related to the sale of certain Visa Class B common shares.

Notes to Consolidated Financial Statements (unaudited) (continued)

Note 16 – Other Operating Expense

The components of Other Operating Expense were as follows.

TABLE 66: OTHER OPERATING EXPENSE

			THREE MONTHS ENDED MARCH 31,
($ In Millions)			2023			2022
Business Promotion			$	16.2		$	10.8
Staff Related			7.8			2.9
FDIC Insurance Premiums			6.2			5.8
Charitable Contributions			3.2			2.5
Other Expenses			52.2			57.7
Total Other Operating Expense			$	85.6		$	79.7

Note 17 – Pension

The following table sets forth the net periodic pension expense for Northern Trust’s U.S. Qualified Plan, Non-U.S. Pension Plans, and U.S. Non-Qualified Plan for the three months ended March 31, 2023 and 2022.

TABLE 67: NET PERIODIC PENSION EXPENSE (BENEFIT)

U.S. QUALIFIED PLAN			THREE MONTHS ENDED MARCH 31,
(In Millions)			2023			2022
Service Cost			$	11.5		$	13.2
Interest Cost			13.5			10.3
Expected Return on Plan Assets			(25.3)			(20.2)
Amortization
Net Actuarial Loss			0.4			5.7
Prior Service Cost (Credit)			—			(0.1)
Net Periodic Pension Expense			$	0.1		$	8.9

NON-U.S. PENSION PLANS			THREE MONTHS ENDED MARCH 31,
(In Millions)			2023			2022
Service Cost			$	0.3		$	0.4
Interest Cost			1.2			0.7
Expected Return on Plan Assets			(1.5)			(0.7)
Amortization
Net Actuarial Loss (Gain)			(0.1)			0.2
Net Periodic Pension Expense (Benefit)			$	(0.1)		$	0.6
Settlement Expense			—			0.7
Total Pension Expense (Benefit)			$	(0.1)		$	1.3

U.S. NON-QUALIFIED PLAN			THREE MONTHS ENDED MARCH 31,
(In Millions)			2023			2022
Service Cost			$	1.2		$	1.4
Interest Cost			1.3			1.0
Amortization
Net Actuarial Loss			1.3			1.8
Net Periodic Pension Expense			$	3.8		$	4.2

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 three months ended March 31, 2023 and 2022, and $16.5 million and $20.7 million of contributions to the U.S. Non-Qualified Plan during the three months ended March 31, 2023 and 2022, respectively.

Notes to Consolidated Financial Statements (unaudited) (continued)

Note 18 – 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.

The Corporation granted 1,029,713 stock units awards with a total grant-date fair value of $95.9 million during the three months ended March 31, 2023, compared to 936,837 stock units awards with a total grant-date fair value of $106.0 million during the three months ended March 31, 2022. Compensation expense for the three months ended March 31, 2023 included $31.4 million attributable to restricted stock units granted to retirement-eligible employees that were expensed in their entirety on the date of grant, compared to $32.6 million in the prior-year quarter.

The Corporation granted 219,314 performance stock units with a total grant-date fair value of $20.6 million during the three months ended March 31, 2023, compared to 211,906 performance stock units with a total grant-date fair value of $24.1 million during the three months ended March 31, 2022. Compensation expense for the three months ended March 31, 2023 included $14.2 million attributable to performance stock units granted to retirement-eligible employees that were expensed in their entirety on the date of grant, compared to $16.2 million in the prior-year quarter.

Restricted stock unit award compensation expense for the three months ended March 31, 2023 and 2022 included $4.2 million and $5.7 million, respectively, attributable to restricted stock units vested in full and expensed in their entirety upon date of grant.

Total compensation expense for share-based payment arrangements and the associated tax impacts were as follows for the three months ended March 31, 2023 and 2022.

TABLE 68: TOTAL COMPENSATION EXPENSE FOR SHARE-BASED PAYMENT ARRANGEMENTS

			THREE MONTHS ENDED MARCH 31,
(In Millions)			2023			2022
Restricted Stock Unit Awards			$	50.3		$	52.6
Performance Stock Units			14.1			17.4
Total Share-Based Compensation Expense			64.4			70.0
Tax Benefits Recognized			$	16.2		$	17.6

Note 19 – Variable Interest Entities

Northern Trust is involved with various entities in the normal course of business that are deemed to be variable interest entities (VIEs). 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 holds tax-advantaged investments in unconsolidated entities that own and operate affordable housing and other community development projects. These entities, which are limited partnerships and similar entities, are primarily VIEs and are designed to generate a return primarily through the realization of tax credits and other tax benefits, such as tax deductions from operating losses of the investments. Northern Trust invests as a limited partner/investor member and lacks both the power to direct the entities’ most significant activities and the obligation to absorb losses or right to receive benefits that could potentially be significant to the entities. Northern Trust is not required to consolidate these entities as it does not have a controlling financial interest and thus is not the primary beneficiary.

Northern Trust’s maximum exposure to loss as a result of its involvement with these entities is limited to the carrying amounts of its investments, including any undrawn commitments. Northern Trust’s funding requirements are limited to its invested

Notes to Consolidated Financial Statements (unaudited) (continued)

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 these entities.

Northern Trust’s investments in these unconsolidated entities and related unfunded commitments are reported in Other Assets and Other Liabilities, respectively, on the consolidated balance sheets.

TABLE 69: SUMMARY OF UNCONSOLIDATED TAX CREDIT STRUCTURES

(In Millions)			MARCH 31, 2023			DECEMBER 31, 2022
Investment Carrying Amount
Affordable Housing			$	651.1		$	635.9
Other Community Development			263.7			268.4
Total Investment Carrying Amount(1)			$	914.8		$	904.3
Unfunded Commitments
Affordable Housing			$	220.1		$	218.9
Other Community Development			—			—
Total Unfunded Commitments(2)			$	220.1		$	218.9

(1) As of March 31, 2023 and December 31, 2022, $879.0 million and $867.2 million are VIEs, respectively.

(2) As of March 31, 2023 and December 31, 2022, $213.0 million and $210.1 million relate to undrawn commitments on VIEs, respectively.

Tax credits and other tax benefits attributable to unconsolidated tax credit structures totaled $28.3 million and $22.7 million for the three months ended March 31, 2023 and 2022, 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 $2.0 million and $50.7 million of money market fund fees for the three months ended March 31, 2023 and 2022, respectively, related to certain competitive factors. 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 March 31, 2023, Northern Trust had $21.5 million of investments valued using net asset value per share and included in Other Assets and had no unfunded commitments related to seed capital investments. As of December 31, 2022, Northern Trust had $19.9 million of investments valued using net asset value per share and included in Other Assets and had no unfunded commitments related to seed capital investments.

Notes to Consolidated Financial Statements (unaudited) (continued)

Note 20 – 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 March 31, 2023 and December 31, 2022.

TABLE 70: SUMMARY OF OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

			MARCH 31, 2023									DECEMBER 31, 2022
($ In Millions)			ONE YEAR AND LESS			OVER ONE YEAR			TOTAL			ONE YEAR AND LESS			OVER ONE YEAR			TOTAL
Undrawn Commitments(1)			$	13,088.4		$	18,000.8		$	31,089.2		$	13,639.2		$	17,321.4		$	30,960.6
Standby Letters of Credit and Financial Guarantees(2)(3)			30,651.0			496.6			31,147.6			17,553.0			409.9			17,962.9
Commercial Letters of Credit			23.2			1.2			24.4			25.4			1.3			26.7
Securities Lent with Indemnification			146,033.2			—			146,033.2			130,311.0			—			130,311.0
Unsettled Reverse Repurchase Agreements			4,803.4			—			4,803.4			496.8			—			496.8
Total Off-Balance Sheet Financial Instruments			$	194,599.2		$	18,498.6		$	213,097.8		$	162,025.4		$	17,732.6		$	179,758.0

(1) These amounts exclude $237.1 million and $266.6 million of commitments participated to others at March 31, 2023 and December 31, 2022, respectively.

(2) These amounts include $32.7 million and $35.1 million of standby letters of credit secured by cash deposits or participated to others as of March 31, 2023 and December 31, 2022, respectively.

(3) These amounts include a $29.4 billion and $16.3 billion guarantee to the Fixed Income Clearing Corporation (FICC) under the sponsored member program, without taking into consideration the related collateral, as of March 31, 2023 and December 31, 2022, respectively. Northern Trust became a sponsored member during the third quarter of 2021.

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.

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 March 31, 2023 and December 31, 2022 subject to indemnification was $146.0 billion and $130.3 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 March 31, 2023 or December 31, 2022, related to these indemnifications.

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 March 31, 2023 and December 31, 2022, there were $4.8 billion and $496.8 million unsettled reverse repurchase agreements, respectively, and no unsettled repurchase agreements.

Notes to Consolidated Financial Statements (unaudited) (continued)

Sponsored Member Program**.** Northern Trust is 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.

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 U.S. Treasuries, 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 March 31, 2023 and December 31, 2022, 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 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 March 31, 2023, the Corporation has estimated the range of reasonably possible loss for these matters to be from zero to approximately $25 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.

Notes to Consolidated Financial Statements (unaudited) (continued)

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 are scheduled to commence in September 2023. 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. Since 2018, Visa has deposited an additional $2.1 billion 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. In March 2023, the Second Circuit Court of Appeals affirmed the district court’s approval of the 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.

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 March 31, 2023 and December 31, 2022.

Note 21 – 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 March 31, 2023 and December 31, 2022.

TABLE 71: NOTIONAL AND FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS

			MARCH 31, 2023									DECEMBER 31, 2022
			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			$	4,111.0		$	58.1		$	35.8		$	4,622.0		$	58.5		$	32.7
Foreign Exchange Contracts
Cash Flow Hedges			95.3			4.3			2.8			150.9			7.4			5.7
Net Investment Hedges			3,697.5			27.2			0.8			3,765.0			283.5			12.7
Total Derivatives Designated as Hedging under GAAP			$	7,903.8		$	89.6		$	39.4		$	8,537.9		$	349.4		$	51.1
Derivatives Not Designated as Hedging under GAAP
Non-Designated Risk Management Derivatives
Foreign Exchange Contracts			$	48.1		$	0.1		$	0.2		$	55.9		$	0.1		$	0.1
Other Financial Derivatives(3)			777.1			0.4			35.9			717.7			0.3			34.8
Total Non-Designated Risk Management Derivatives			$	825.2		$	0.5		$	36.1		$	773.6		$	0.4		$	34.9
Client-Related and Trading Derivatives
Foreign Exchange Contracts			$	307,557.0		$	2,283.4		$	2,268.2		$	288,994.6		$	3,219.1		$	3,169.0
Interest Rate Contracts			12,251.2			218.1			334.1			12,378.2			163.5			399.1
Total Client-Related and Trading Derivatives			$	319,808.2		$	2,501.5		$	2,602.3		$	301,372.8		$	3,382.6		$	3,568.1
Total Derivatives Not Designated as Hedging under GAAP			$	320,633.4		$	2,502.0		$	2,638.4		$	302,146.4		$	3,383.0		$	3,603.0
Total Gross Derivatives			$	328,537.2		$	2,591.6		$	2,677.8		$	310,684.3		$	3,732.4		$	3,654.1
Less: Netting(4)						1,807.6			1,525.6						2,810.7			1,865.9
Total Derivative Financial Instruments						$	784.0		$	1,152.2					$	921.7		$	1,788.2

(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 and total return swap contracts.

(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 month periods ended March 31, 2023 and 2022. Changes in the fair value of the 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.

Notes to Consolidated Financial Statements (unaudited) (continued)

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 month periods ended March 31, 2023 and 2022, as a result of the discontinuance of forecasted transactions that were no longer probable of occurring. It is estimated that net gains of $1.6 million will be reclassified into net income within the next twelve months relating to cash flow hedges of foreign-currency-denominated transactions. As of March 31, 2023, 5 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 month periods ended March 31, 2023 and 2022.

TABLE 72: 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 MARCH 31,			2023			2022			2023			2022			2023			2022
Total amounts on the consolidated statements of income			$	1,455.4		$	383.5		$	924.2		$	2.5		$	46.8		$	41.1
Gains (Losses) on fair value hedges recognized on
Interest Rate Contracts
Recognized on derivatives			(18.5)			39.2			49.1			(155.9)			—			—
Recognized on hedged items			18.5			(39.2)			(49.1)			155.9			—			—
Amounts related to interest settlements on derivatives			12.3			(8.9)			(18.4)			1.2			—			—
Total gains (losses) recognized on fair value hedges			$	12.3		$	(8.9)		$	(18.4)		$	1.2		$	—		$	—
Gains (Losses) on cash flow hedges recognized on
Foreign Exchange Contracts
Net gains (losses) reclassified from AOCI to net income			$	—		$	0.6		$	—		$	—		$	0.6		$	(2.3)
Total gains (losses) reclassified from AOCI to net income on cash flow hedges			$	—		$	0.6		$	—		$	—		$	0.6		$	(2.3)

The following table provides the impact of fair value hedge accounting on the carrying value of the designated hedged items as of March 31, 2023 and December 31, 2022.

TABLE 73: HEDGED ITEMS IN FAIR VALUE HEDGES

			MARCH 31, 2023						DECEMBER 31, 2022
(In Millions)			CARRYING VALUE OF THE HEDGED ITEMS			CUMULATIVE HEDGE ACCOUNTING BASIS ADJUSTMENT**(1)(3)**			CARRYING VALUE OF THE HEDGED ITEMS			CUMULATIVE HEDGE ACCOUNTING BASIS ADJUSTMENT(2)(3)
Available for Sale Debt Securities(4)			$	1,328.4		$	(36.0)		$	1,820.8		$	(60.2)
Senior Notes and Long-Term Subordinated Debt			2,498.8			(244.9)			2,746.2			(294.0)

(1) The cumulative hedge accounting basis adjustment includes $1.5 million related to discontinued hedging relationships of AFS debt securities as of March 31, 2023. 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 March 31, 2023.

(2) The cumulative hedge accounting basis adjustment includes $7.3 million related to discontinued hedging relationships of AFS debt securities as of December 31, 2022. 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, 2022.

(3) Positive (negative) amounts related to AFS securities represent cumulative fair value hedge basis adjustments that will reduce (increase) net interest income in future periods. Positive (negative) amounts related to Senior Notes and Long-Term Subordinated Debt represent cumulative fair value hedge basis adjustments that will increase (reduce) net interest income in future periods.

(4) 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 losses of $32.5 million and gains of $59.4 million were recognized in AOCI related to foreign exchange contracts for the three months ended March 31, 2023 and 2022, 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

Notes to Consolidated Financial Statements (unaudited) (continued)

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 months ended March 31, 2023 and 2022 for derivative instruments not designated as hedges under GAAP.

TABLE 74: 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 MARCH 31,
2023			2022
Non-designated risk management derivatives
Foreign Exchange Contracts			Other Operating Income			$	0.7		$	2.7
Other Financial Derivatives(1)			Other Operating Income			(8.8)			(4.5)
Gains (Losses) from non-designated risk management derivatives						$	(8.1)		$	(1.8)
Client-related and trading derivatives
Foreign Exchange Contracts			Foreign Exchange Trading Income			$	53.0		$	80.9
Interest Rate Contracts			Security Commissions and Trading Income			2.5			1.0
Gains from client-related and trading derivatives						$	55.5		$	81.9
Total gains from derivatives not designated as hedging under GAAP						$	47.4		$	80.1

(1) This line includes swaps related to the sale of certain Visa Class B common shares and total return swap contracts.

Note 22 – 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 either directly held by, or pledged to the counterparty until the repurchase. Northern Trust nets securities sold under repurchase agreements against those purchased under resale agreements when the FICC is the counterparty. Refer to Note 20—Commitments and Contingent Liabilities.

The following table provides information regarding repurchase agreements that are accounted for as secured borrowings as of March 31, 2023 and December 31, 2022

TABLE 75: REPURCHASE AGREEMENTS ACCOUNTED FOR AS SECURED BORROWINGS

			REMAINING CONTRACTUAL MATURITY OF THE AGREEMENTS
			MARCH 31, 2023			DECEMBER 31, 2022
($ In Millions)			OVERNIGHT AND CONTINUOUS
U.S. Treasury and Agency Securities			$	362.9		$	567.2
Total Borrowings			362.9			567.2
Net Amount of Recognized Liabilities for Repurchase Agreements in Note 23			362.9			567.2

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 March 31, 2023 and December 31, 2022.

TABLE 76: OFFSETTING OF DERIVATIVE ASSETS AND SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL

			MARCH 31, 2023
(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)			$	1,955.0		$	1,601.1		$	353.9		$	5.3		$	348.6
Interest Rate Swaps OTC			276.2			206.5			69.7			—			69.7
Interest Rate Swaps Exchange Cleared			—			—			—			—			—
Other Financial Derivative			0.4			—			0.4			—			0.4
Total Derivatives Subject to a Master Netting Arrangement			2,231.6			1,807.6			424.0			5.3			418.7
Total Derivatives Not Subject to a Master Netting Arrangement			360.0			—			360.0			—			360.0
Total Derivatives			2,591.6			1,807.6			784.0			5.3			778.7
Securities Purchased under Agreements to Resell(2)			$	23,032.4		$	21,975.0		$	1,057.4		$	1,057.4		$	—

			DECEMBER 31, 2022
(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			$	2,928.9		$	2,666.4		$	262.5		$	5.0		$	257.5
Interest Rate Swaps OTC			217.6			144.3			73.3			—			73.3
Interest Rate Swaps Exchange Cleared			4.4			—			4.4			—			4.4
Other Financial Derivative			0.3			—			0.3			—			0.3
Total Derivatives Subject to a Master Netting Arrangement			3,151.2			2,810.7			340.5			5.0			335.5
Total Derivatives Not Subject to a Master Netting Arrangement			581.2			—			581.2			—			581.2
Total Derivatives			3,732.4			2,810.7			921.7			5.0			916.7
Securities Purchased under Agreements to Resell(2)			$	12,494.2		$	11,423.9		$	1,070.3		$	1,070.3		$	—

*(1)*Derivative assets are reported in Other Assets on the consolidated balance sheets. Other Assets (excluding derivative assets) totaled $9.6 billion and $8.9 billion as of March 31, 2023 and December 31, 2022, respectively.

*(2)*Offsetting of Securities Purchased under Agreements to Resell relates to our involvement in the 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 March 31, 2023 and December 31, 2022.

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 March 31, 2023 and December 31, 2022.

TABLE 77: OFFSETTING OF DERIVATIVE LIABILITIES AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

			MARCH 31, 2023
(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			$	1,657.2		$	1,499.5		$	157.7		$	—		$	157.7
Interest Rate Swaps OTC			369.9			11.8			358.1			—			358.1
Interest Rate Swaps Exchange Cleared			—			—			—			—			—
Other Financial Derivatives			35.9			14.3			21.6			—			21.6
Total Derivatives Subject to a Master Netting Arrangement			2,063.0			1,525.6			537.4			—			537.4
Total Derivatives Not Subject to a Master Netting Arrangement			614.8			—			614.8			—			614.8
Total Derivatives			2,677.8			1,525.6			1,152.2			—			1,152.2
Securities Sold under Agreements to Repurchase(2)			$	22,337.9		$	21,975.0		$	362.9		$	362.9		$	—

			DECEMBER 31, 2022
(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			$	2,082.3		$	1,826.7		$	255.6		$	—		$	255.6
Interest Rate Swaps OTC			426.5			5.9			420.6			—			420.6
Interest Rate Swaps Exchange Cleared			5.3			—			5.3			—			5.3
Other Financial Derivatives			34.8			33.3			1.5			—			1.5
Total Derivatives Subject to a Master Netting Arrangement			2,548.9			1,865.9			683.0			—			683.0
Total Derivatives Not Subject to a Master Netting Arrangement			1,105.2			—			1,105.2			—			1,105.2
Total Derivatives			3,654.1			1,865.9			1,788.2			—			1,788.2
Securities Sold under Agreements to Repurchase(2)			$	11,991.1		$	11,423.9		$	567.2		$	567.2		$	—

*(1)*Derivative liabilities are reported in Other Liabilities on the consolidated balance sheets. Other Liabilities (excluding derivative liabilities) totaled $3.6 billion and $3.2 billion as of March 31, 2023 and December 31, 2022, respectively.

*(2)*Offsetting of Securities Sold under Agreements to Repurchase relates to our involvement in the 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 March 31, 2023 and December 31, 2022.

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 the 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 $204.2 million and $21.7 million, respectively, as of March 31, 2023, and $131.8 million and $26.3 million, respectively, as of December 31, 2022, 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 $159.8 million and $190.9 million at March 31, 2023 and December 31, 2022, respectively. Cash collateral amounts deposited with derivative counterparties on those dates included $95.6 million and $55.1 million, respectively, posted against these liabilities, resulting in a net maximum amount of termination payments that could have been required at March 31, 2023 and December 31, 2022, of $64.2 million and $135.8 million, respectively. Accelerated settlement of these liabilities would not have a material effect on the consolidated financial position or liquidity of Northern Trust.