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Cover and table of contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________

FORM 10-Q


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

For the quarterly period ended March 31, 2024


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

For the transition period from to

Commission File No. 001-36609

NORTHERN TRUST CORPORATION

(Exact name of registrant as specified in its charter)


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


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

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

____________________________________________

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


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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

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


Large accelerated filer	x	Accelerated filer	¨

Non-accelerated filer	¨	Smaller reporting company	☐

		Emerging growth company	☐

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

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

At March 31, 2024, 204,591,724 shares of common stock, $1.66 2/3 par value, were outstanding.

NORTHERN TRUST CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024

TABLE OF CONTENTS



			Page
Consolidated Financial Highlights (unaudited)			1

Part I – Financial Information
Items 2 and 3: Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk			3
Item 1: Consolidated Financial Statements (unaudited)			28
Consolidated Balance Sheets			28
Consolidated Statements of Income			29
Consolidated Statements of Comprehensive Income			29
Consolidated Statements of Changes in Stockholders’ Equity			30
Consolidated Statements of Cash Flows			31
Notes to Consolidated Financial Statements			32
Item 4: Controls and Procedures			72

Part II – Other Information
Item 1: Legal Proceedings			73
Item 1A: Risk Factors			73
Item 2: Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities			73
Item 3: Defaults Upon Senior Securities			73
Item 4: Mine Safety Disclosures			73
Item 5: Other Information			73
Item 6: Exhibits			74

Signatures			75

CONSOLIDATED FINANCIAL HIGHLIGHTS

(UNAUDITED)


	THREE MONTHS ENDED MARCH 31,
CONDENSED INCOME STATEMENTS ($ In Millions)	2024		2023		% CHANGE(1)
Noninterest Income	$	1,118.7	$	1,213.4	(8)	%
Net Interest Income	528.1		531.2		(1)
Total Revenue	1,646.8		1,744.6		(6)
Provision for Credit Losses	(8.5)		15.0		N/M
Noninterest Expense	1,364.7		1,285.6		6
Income before Income Taxes	290.6		444.0		(35)
Provision for Income Taxes	75.9		109.4		(31)
Net Income	$	214.7	$	334.6	(36)	%


PER COMMON SHARE
Net Income — Basic	$	0.96	$	1.51	(37)	%
— Diluted	0.96		1.51		(37)
Cash Dividends Declared Per Common Share	0.75		0.75		—
Book Value — End of Period (EOP)	54.83		51.37		7
Market Price — EOP	88.92		88.13		1


SELECTED BALANCE SHEET DATA ($ In Millions)	MARCH 31, 2024		DECEMBER 31, 2023		% CHANGE(1)
End of Period:
Total Assets	$	156,111.0	$	150,783.1	4	%
Earning Assets	144,495.9		140,369.6		3
Deposits	123,941.7		116,164.0		7
Stockholders’ Equity	12,101.8		11,897.9		2


	THREE MONTHS ENDED MARCH 31,
	2024		2023		% CHANGE(1)
Average Balances:
Total Assets	$	145,118.3	$	148,059.9	(2)	%
Earning Assets	133,816.8		135,957.4		(2)
Deposits	112,362.6		112,185.6		—
Stockholders’ Equity	11,783.7		11,281.5		4


CLIENT ASSETS ($ In Billions)	MARCH 31, 2024		DECEMBER 31, 2023		% CHANGE(1)
Assets Under Custody/Administration(2)	$	16,472.5	$	15,404.9	7	%
Assets Under Custody	12,804.1		11,916.5		7
Assets Under Management	1,500.7		1,434.5		5

N/M - Not meaningful

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

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

SELECTED RATIOS AND METRICS


	THREE MONTHS ENDED MARCH 31,
	2024		2023
Financial Ratios:
Return on Average Common Equity	7.3	%	12.4	%
Return on Average Assets	0.60		0.92
Dividend Payout Ratio	78.1		49.7
Net Interest Margin(1)	1.61		1.62


	MARCH 31, 2024				DECEMBER 31, 2023
	STANDARDIZED APPROACH		ADVANCED APPROACH		STANDARDIZED APPROACH		ADVANCED APPROACH		WELL-CAPITALIZED RATIOS		MINIMUM CAPITAL RATIOS
Capital Ratios:
Northern Trust Corporation
Common Equity Tier 1 Capital	11.4	%	13.5	%	11.4	%	13.4	%	N/A		4.5	%
Tier 1 Capital	12.4		14.6		12.3		14.5		6.0		6.0
Total Capital	14.2		16.5		14.2		16.5		10.0		8.0
Tier 1 Leverage	7.8		7.8		8.1		8.1		N/A		4.0
Supplementary Leverage	N/A		8.8		N/A		8.6		N/A		3.0

The Northern Trust Company
Common Equity Tier 1 Capital	11.9	%	14.2	%	12.2	%	14.6	%	6.5	%	4.5	%
Tier 1 Capital	11.9		14.2		12.2		14.6		8.0		6.0
Total Capital	13.4		15.8		13.8		16.3		10.0		8.0
Tier 1 Leverage	7.4		7.4		8.0		8.0		5.0		4.0
Supplementary Leverage	N/A		8.5		N/A		8.5		3.0		3.0

(1) Net interest margin is presented on a fully taxable equivalent (FTE) basis, a non-generally accepted accounting principle (GAAP) financial measure that facilitates the analysis of asset yields. The net interest margin on a GAAP basis and a reconciliation of net interest income on a GAAP basis to net interest income on an FTE basis are presented in “Reconciliation to Fully Taxable Equivalent” within the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section.

PART I – FINANCIAL INFORMATION

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

The following is management’s discussion and analysis of the financial condition and results of operations (MD&A) of Northern Trust Corporation (Corporation) for the first quarter of 2024. The following should be read in conjunction with the consolidated financial statements and related footnotes included in this report as well as the Annual Report on Form 10-K for the year ended December 31, 2023. Investors also should read the section entitled “Forward-Looking Statements.”

Certain terms used in this report are defined in the Glossary included in our Annual Report on Form 10-K for the year ended December 31, 2023.

FIRST QUARTER CONSOLIDATED RESULTS OF OPERATIONS

General

The Corporation is a leading provider of wealth management, asset servicing, asset management and banking solutions to corporations, institutions, families and individuals. The Corporation focuses on managing and servicing client assets through its two client-focused reporting segments: 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. Except where the context requires otherwise, the terms “Northern Trust,” “we,” “us,” “our,” “its,” or similar terms mean the Corporation and its subsidiaries on a consolidated basis.

Overview of Financial Results

Net Income per diluted common share was $0.96 in the current quarter and $1.51 in the first quarter of 2023. Net Income decreased $119.9 million to $214.7 million in the current quarter from $334.6 million in the prior-year quarter. Annualized return on average common equity was 7.3% in the current quarter and 12.4% in the prior-year quarter. The annualized return on average assets was 0.60% in the current quarter as compared to 0.92% in the prior-year quarter.

Revenue decreased $97.8 million, or 6%, to $1.65 billion in the current quarter from $1.74 billion in the prior-year quarter. Trust, Investment and Other Servicing Fees increased $79.3 million, or 7%, from $1.06 billion in the prior-year quarter to $1.14 billion in the current quarter, primarily due to favorable markets and new business. Other Noninterest Income (Loss) decreased $174.0 million from $149.8 million in the prior-year quarter to a loss of $24.2 million in the current quarter, primarily due to the $189.4 million available for sale debt security loss reflected in Investment Security Gains (Losses) in the current quarter, partially offset by higher Other Operating Income. Net Interest Income decreased $3.1 million, or 1%, to $528.1 million in the current quarter as compared to $531.2 million in the prior-year quarter, primarily due to higher funding costs.

Noninterest Expense increased $79.1 million, or 6%, from $1.29 billion in the prior-year quarter to $1.36 billion in the current quarter, primarily attributable to higher Compensation and Equipment and Software Expenses, as well as the $12.5 million FDIC special assessment recorded in the current quarter.

The Provision for Income Taxes in the current quarter totaled $75.9 million, representing an effective tax rate of 26.1%. The Provision for Income Taxes in the prior-year quarter totaled $109.4 million, representing an effective tax rate of 24.6%.

FDIC Special Assessment

In November 2023, the Federal Deposit Insurance Corporation (FDIC) issued a final rule to implement a special assessment to recoup losses to the deposit insurance fund associated with bank failures in the first half of 2023. In conjunction with the special assessment, $84.6 million was recognized as an accrued liability and related expense in the fourth quarter of 2023. During the current quarter, the FDIC published revised estimated losses as well as expected recoveries from the related bank failures. As a result, Northern Trust recognized an additional cost of $12.5 million in the current quarter, recorded to Other Operating Expense.

Trust, Investment and Other Servicing Fees

Trust, Investment and Other Servicing Fees are based primarily on the market value of assets held in custody, managed or serviced; the volume of transactions; securities lending volume and spreads; and fees for other services rendered. Certain market value calculations on which fees are based are performed on a monthly or quarterly basis in arrears.

FIRST QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)

Trust, Investment and Other Servicing Fees (continued)

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

TABLE 1: TRUST, INVESTMENT AND OTHER SERVICING FEES


	THREE MONTHS ENDED MARCH 31,
($ In Millions)	2024		2023		CHANGE
Asset Servicing Trust, Investment and Other Servicing Fees
Custody and Fund Administration	$	436.7	$	413.6	$	23.1	6	%
Investment Management	140.0		126.2		13.8		11
Securities Lending	17.9		19.1		(1.2)		(6)
Other	45.0		44.1		0.9		2
Total Asset Servicing Trust, Investment and Other Servicing Fees	$	639.6	$	603.0	$	36.6	6	%
Wealth Management Trust, Investment and Other Servicing Fees
Central	$	178.3	$	163.6	$	14.7	9	%
East	129.9		119.8		10.1		8
West	99.9		91.2		8.7		10
Global Family Office	95.2		86.0		9.2		11
Total Wealth Management Trust, Investment and Other Servicing Fees	$	503.3	$	460.6	$	42.7	9	%
Total Consolidated Trust, Investment and Other Servicing Fees	$	1,142.9	$	1,063.6	$	79.3	7	%

Asset Servicing

Custody and Fund Administration fees, the largest component of Asset Servicing fees, are driven primarily by values of client assets under custody/administration (AUC/A), transaction volumes and the number of accounts. The asset values used to calculate these fees vary depending on the individual fee arrangements negotiated with each client. Custody fees related to asset values are client-specific and are priced based on month-end market values, quarter-end market values, or the average of month-end market values for the quarter. The fund administration fees that are asset-value-related are priced using month-end, quarter-end, or average daily balances. Investment Management fees are based generally on market values of client AUM throughout the period. Typically, the asset values used to calculate fee revenue are based on a one-month or one-quarter lag. Securities Lending revenue is affected by market values; the demand for securities to be lent, which drives volumes; and the interest rate spread earned on the investment of cash deposited by investment firms as collateral for securities they have borrowed. The Other fee category in Asset Servicing includes such products as investment risk and analytical services, benefit payments, and other services. Revenue from these products is based generally on the volume of services provided or a fixed fee.

Custody and Fund Administration fees increased from the prior-year quarter, primarily due to favorable markets and new business. Investment Management fees increased from the prior-year quarter, primarily due to favorable markets.

Wealth Management

Wealth Management fee income is calculated primarily based on market values and is impacted by both one-month and one-quarter lagged asset values. Fee income in the regions increased from the prior-year quarter, primarily due to favorable markets. Global Family Office fee income increased from the prior-year quarter, primarily due to favorable markets and asset inflows.

Market Indices

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

TABLE 2: EQUITY MARKET INDICES


	DAILY AVERAGES				PERIOD-END
	THREE MONTHS ENDED MARCH 31,				AS OF MARCH 31,
	2024	2023	CHANGE		2024	2023	CHANGE
S&P 500	4,989	3,998	25	%	5,254	4,109	28	%
MSCI EAFE (U.S. dollars)	2,262	2,059	10		2,347	2,093	12
MSCI EAFE (local currency)	1,447	1,301	11		1,519	1,315	16

FIRST QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)

Trust, Investment and Other Servicing Fees (continued)

TABLE 3: FIXED INCOME MARKET INDICES


	AS OF MARCH 31,
	2024	2023	CHANGE
Barclays Capital U.S. Aggregate Bond Index	2,145	2,109	2	%
Barclays Capital Global Aggregate Bond Index	462	459	1

Client Assets

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

TABLE 4: ASSETS UNDER CUSTODY / ADMINISTRATION BY REPORTING SEGMENT


	MARCH 31, 2024		DECEMBER 31, 2023		MARCH 31, 2023		CHANGE Q1-24/Q4-23		CHANGE Q1-24/Q1-23
($ In Billions)
Asset Servicing	$	15,385.4	$	14,362.6	$	13,221.5	7	%	16	%
Wealth Management	1,087.1		1,042.3		953.3		4		14
Total Assets Under Custody / Administration	$	16,472.5	$	15,404.9	$	14,174.8	7	%	16	%

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

TABLE 5: ASSETS UNDER CUSTODY BY REPORTING SEGMENT


	MARCH 31, 2024		DECEMBER 31, 2023		MARCH 31, 2023		CHANGE Q1-24/Q4-23		CHANGE Q1-24/Q1-23
($ In Billions)
Asset Servicing	$	11,723.1	$	10,882.0	$	10,065.6	8	%	16	%
Wealth Management	1,081.0		1,034.5		947.6		4		14
Total Assets Under Custody	$	12,804.1	$	11,916.5	$	11,013.2	7	%	16	%

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

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

TABLE 6: ALLOCATION OF ASSETS UNDER CUSTODY


	MARCH 31, 2024						DECEMBER 31, 2023						MARCH 31, 2023
	AS		WM		TOTAL		AS		WM		TOTAL		AS		WM		TOTAL
Equities	47	%	61	%	48	%	46	%	60	%	47	%	45	%	58	%	46	%
Fixed Income Securities	31		13		30		33		13		31		33		14		32
Cash and Other Assets	20		26		21		19		27		21		20		28		20
Securities Lending Collateral	2		—		1		2		—		1		2		—		2

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

TABLE 7: ASSETS UNDER CUSTODY BY INVESTMENT TYPE


($ In Billions)	MARCH 31, 2024		DECEMBER 31, 2023		MARCH 31, 2023		CHANGE Q1-24/Q4-23		CHANGE Q1-24/Q1-23
Equities	$	6,172.5	$	5,652.5	$	5,091.1	9	%	21	%
Fixed Income Securities	3,804.2		3,737.1		3,501.4		2		9
Cash and Other Assets	2,664.2		2,359.5		2,252.8		13		18
Securities Lending Collateral	163.2		167.4		167.9		(3)		(3)
Total Assets Under Custody	$	12,804.1	$	11,916.5	$	11,013.2	7	%	16	%

FIRST QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)

Trust, Investment and Other Servicing Fees (continued)

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

TABLE 8: ASSETS UNDER MANAGEMENT BY REPORTING SEGMENT


	MARCH 31, 2024		DECEMBER 31, 2023		MARCH 31, 2023		CHANGE Q1-24/Q4-23		CHANGE Q1-24/Q1-23
($ In Billions)
Asset Servicing	$	1,080.1	$	1,032.0	$	962.1	5	%	12	%
Wealth Management	420.6		402.5		368.3		5		14
Total Assets Under Management	$	1,500.7	$	1,434.5	$	1,330.4	5	%	13	%

Consolidated assets under management increased compared to the prior quarter, primarily reflecting favorable markets and client asset inflows. Consolidated assets under management increased compared to the prior-year quarter, primarily reflecting the impact of favorable markets.

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

TABLE 9: ALLOCATION OF ASSETS UNDER MANAGEMENT


	MARCH 31, 2024						DECEMBER 31, 2023						MARCH 31, 2023
	AS		WM		TOTAL		AS		WM		TOTAL		AS		WM		TOTAL
Equities	56	%	57	%	56	%	55	%	55	%	55	%	54	%	53	%	54	%
Fixed Income Securities	11		21		14		11		22		14		11		22		14
Cash and Other Assets	18		22		19		18		23		19		18		25		19
Securities Lending Collateral	15		—		11		16		—		12		17		—		13

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

TABLE 10: ASSETS UNDER MANAGEMENT BY INVESTMENT TYPE


($ In Billions)	MARCH 31, 2024		DECEMBER 31, 2023		MARCH 31, 2023		CHANGE Q1-24/Q4-23		CHANGE Q1-24/Q1-23
Equities	$	841.1	$	785.5	$	712.1	7	%	18	%
Fixed Income Securities	203.5		203.4		187.6		—		8
Cash and Other Assets	292.9		278.2		262.8		5		11
Securities Lending Collateral	163.2		167.4		167.9		(2)		(3)
Total Assets Under Management	$	1,500.7	$	1,434.5	$	1,330.4	5	%	13	%

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

TABLE 11: ACTIVITY IN CONSOLIDATED ASSETS UNDER MANAGEMENT BY PRODUCT


		THREE MONTHS ENDED
(In Billions)		MARCH 31, 2024		DECEMBER 31, 2023		SEPTEMBER 30, 2023		JUNE 30, 2023		MARCH 31, 2023
Beginning Balance of AUM		$	1,434.5	$	1,249.5	$	1,365.8	$	1,330.4	$	1,249.5
Inflows by Product
	Equities	38.3		206.4		49.5		44.8		52.1
	Fixed Income	15.3		57.8		15.0		11.2		14.4
	Cash and Other Assets	629.5		2,012.5		565.2		551.3		276.7
	Securities Lending Collateral	75.8		238.3		54.6		53.4		66.3
Total Inflows		758.9		2,515.0		684.3		660.7		409.5
Outflows by Product
	Equities	(47.7)		(224.5)		(54.6)		(54.7)		(59.2)
	Fixed Income	(14.6)		(57.1)		(12.4)		(10.2)		(16.6)
	Cash and Other Assets	(605.0)		(1,970.3)		(559.5)		(529.7)		(264.0)
	Securities Lending Collateral	(80.0)		(219.2)		(61.4)		(52.5)		(46.7)
Total Outflows		(747.2)		(2,471.1)		(687.9)		(647.1)		(386.5)
Net Inflows (Outflows)		11.7		43.9		(3.6)		13.6		23.0
Market Performance, Currency & Other
	Market Performance & Other	58.8		133.8		(24.1)		27.7		52.4
	Currency	(4.2)		7.3		(4.8)		(5.9)		5.5
Total Market Performance, Currency & Other		54.6		141.1		(28.9)		21.8		57.9
Ending Balance of AUM		$	1,500.7	$	1,434.5	$	1,333.3	$	1,365.8	$	1,330.4

FIRST QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)

Other Noninterest Income

The components of Other Noninterest Income are provided below.

TABLE 12: OTHER NONINTEREST INCOME


	THREE MONTHS ENDED MARCH 31,
($ In Millions)	2024		2023		CHANGE
Foreign Exchange Trading Income	$	57.0	$	53.0	$	4.0	8	%
Treasury Management Fees	9.3		8.4		0.9		11
Security Commissions and Trading Income	37.9		34.7		3.2		9
Other Operating Income	61.0		46.8		14.2		30
Investment Security Gains (Losses), net	(189.4)		6.9		(196.3)		N/M
Total Other Noninterest Income	$	(24.2)	$	149.8	$	(174.0)	N/M

N/M - Not meaningful

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

Other Operating Income increased compared to the prior-year quarter, primarily driven by higher income associated with a market value increase in supplemental compensation plans and lower expense associated with existing swap agreements related to Visa Inc. Class B common shares.

Investment Security Gains (Losses), net reflects the $189.4 million available for sale debt security loss as compared to the $6.9 million gain on the sale of available for sale debt securities in the prior-year quarter, each arising from a repositioning of the portfolio.

Net Interest Income

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

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

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

FIRST QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)

Net Interest Income (continued)

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

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


(INTEREST AND RATE ON A FULLY TAXABLE EQUIVALENT BASIS)	FIRST QUARTER
2024					2023
($ In Millions)	INTEREST		AVERAGE BALANCE		AVERAGE RATE(7)		INTEREST		AVERAGE BALANCE		AVERAGE RATE(7)
Interest-Earning Assets
Federal Reserve and Other Central Bank Deposits	$	459.7	$	35,897.3	5.15	%	$	377.0	$	36,641.8	4.17	%
Interest-Bearing Due from and Deposits with Banks(1)	34.6		4,418.0		3.15		28.2		4,198.7		2.72
Federal Funds Sold	—		0.5		5.64		0.2		19.7		4.79
Securities Purchased under Agreements to Resell(2)	823.9		517.9		639.92		125.9		1,046.1		48.80
Debt Securities
Available for Sale	323.2		24,049.6		5.41		234.7		25,030.4		3.80
Held to Maturity	123.8		24,498.9		2.02		103.8		25,382.2		1.64
Trading Account	—		—		—		—		1.3		7.63
Total Debt Securities	447.0		48,548.5		3.70		338.5		50,413.9		2.72
Loans(3)	655.8		41,586.9		6.34		579.5		41,959.4		5.60
Other Interest-Earning Assets(4)	31.9		2,847.7		4.51		19.3		1,677.8		4.67
Total Interest-Earning Assets	2,452.9		133,816.8		7.37		1,468.6		135,957.4		4.38
Cash and Due from Banks and Other Central Bank Deposits(5)	—		1,799.5		—		—		1,795.9		—
Other Noninterest-Earning Assets	—		9,502.0		—		—		10,306.6		—
Total Assets	$	—	$	145,118.3	—	%	$	—	$	148,059.9	—	%
Average Source of Funds
Deposits
Savings, Money Market and Other	$	253.2	$	27,349.0	3.72	%	$	158.0	$	27,268.8	2.35	%
Savings Certificates and Other Time	58.8		4,554.3		5.19		21.6		2,360.1		3.70
Non-U.S. Offices — Interest-Bearing	569.7		63,752.8		3.59		385.0		62,411.1		2.50
Total Interest-Bearing Deposits	881.7		95,656.1		3.71		564.6		92,040.0		2.49
Federal Funds Purchased	33.6		2,650.1		5.11		40.1		3,653.9		4.45
Securities Sold under Agreements to Repurchase(2)	813.9		490.1		667.86		116.1		347.1		135.62
Other Borrowings(6)	88.6		6,852.1		5.20		135.0		11,324.0		4.83
Senior Notes	44.1		2,748.7		6.45		39.2		2,748.1		5.79
Long-Term Debt	55.6		4,067.0		5.50		29.2		2,066.3		5.73

Total Interest-Bearing Liabilities	1,917.5		112,464.1		6.86		924.2		112,179.4		3.34
Interest Rate Spread	—		—		0.51		—		—		1.04
Demand and Other Noninterest-Bearing Deposits	—		16,706.5		—		—		20,145.6		—
Other Noninterest-Bearing Liabilities	—		4,164.0		—		—		4,453.4		—
Stockholders’ Equity	—		11,783.7		—		—		11,281.5		—
Total Liabilities and Stockholders’ Equity	$	—	$	145,118.3	—	%	$	—	$	148,059.9	—	%
Net Interest Income/Margin (FTE Adjusted)	$	535.4	$	—	1.61	%	$	544.4	$	—	1.62	%
Net Interest Income/Margin (Unadjusted)	$	528.1	$	—	1.59	%	$	531.2	$	—	1.58	%

*(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)*Includes the impact of balance sheet netting under master netting arrangements of approximately $60.2 billion and $10.0 billion for the three months ended March 31, 2024 and 2023, respectively. Excluding the impact of netting for the three months ended March 31, 2024 and 2023, the average interest rate on Securities Purchased under Agreements to Resell would be approximately 5.46% and 4.63%, respectively. Excluding the impact of netting for the three months ended March 31, 2024 and 2023, the average interest rate on Securities Sold under Agreements to Repurchase would be approximately 5.39% and 4.56%, respectively. Northern Trust nets securities sold under repurchase agreements against those purchased under resale agreements when there is a legally enforceable master netting agreement.

*(3)*Average balances include nonaccrual loans.

*(4)*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.

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

*(6)*Other Borrowings primarily includes advances from the Federal Home Loan Bank of Chicago.

*(7)*Rate calculations are based on actual balances rather than the rounded amounts presented in the average consolidated balance sheets with analysis of Net Interest Income.

FIRST QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)

Net Interest Income (continued)

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


(INTEREST AND RATE ON A FULLY TAXABLE EQUIVALENT BASIS)	THREE MONTHS ENDED MARCH 31, 2024 VS. 2023
	CHANGE DUE TO
(In Millions)	AVERAGE BALANCE		AVERAGE RATE		NET (DECREASE) INCREASE
Increase (Decrease) in Net Interest Income (FTE)
Federal Reserve and Other Central Bank Deposits	$	(7.6)	$	90.3	$	82.7
Interest-Bearing Due from and Deposits with Banks	1.6		4.8		6.4
Federal Funds Sold	(0.2)		—		(0.2)
Securities Purchased under Agreements to Resell	(95.1)		793.1		698.0
Debt Securities
Available for Sale	(9.5)		98.0		88.5
Held to Maturity	(3.7)		23.7		20.0

Total Debt Securities	(13.2)		121.7		108.5
Loans	(4.9)		81.2		76.3
Other Interest-Earning Assets	13.2		(0.6)		12.6
Total Interest Income	$	(106.2)	$	1,090.5	$	984.3

Interest-Bearing Deposits
Savings, Money Market and Other	$	0.5	$	94.7	$	95.2
Savings Certificates and Other Time	26.0		11.2		37.2
Non-U.S. Offices - Interest-Bearing	8.6		176.1		184.7
Total Interest-Bearing Deposits	35.1		282.0		317.1
Federal Funds Purchased	(12.0)		5.5		(6.5)
Securities Sold under Agreements to Repurchase	66.3		631.5		697.8
Other Borrowings	(56.3)		9.9		(46.4)
Senior Notes	—		4.9		4.9
Long-Term Debt	27.6		(1.2)		26.4

Total Interest Expense	$	60.7	$	932.6	$	993.3
Increase (Decrease) in Net Interest Income (FTE)	$	(166.9)	$	157.9	$	(9.0)

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

Notes: Net Interest Income (FTE), a non-GAAP financial measure, includes adjustments to a fully taxable equivalent basis for loans, securities and other interest-earning assets. The adjustments are based on a federal income tax rate of 21.0%, where the rate is adjusted for applicable state income taxes, net of related federal tax benefit. Total taxable equivalent interest adjustments amounted to $7.3 million and $13.2 million for the three months ended March 31, 2024 and 2023, respectively. A reconciliation of Net Interest Income and net interest margin on a GAAP basis to Net Interest Income and net interest margin on an FTE basis (each of which is a non-GAAP financial measure) is provided in “Reconciliation to Fully Taxable Equivalent” within this MD&A. Net interest margin is calculated by dividing annualized Net Interest Income by average interest-earning assets.

Interest Income on cash collateral positions is reported above in Interest-Bearing Due from and Deposits with Banks, Loans and in Other Interest-Earning Assets. Interest Expense on cash collateral positions is reported above in Savings, Money Market and Other and in Non-U.S. Offices Interest-Bearing Deposits. Where it can be net, related cash collateral received from and deposited with derivative counterparties is recorded net of the associated derivative contract in Other Assets and Other Liabilities, respectively.

Net Interest Income, stated on a FTE basis, decreased from the prior-year quarter, primarily due to higher funding costs. Average earning assets decreased from the prior-year quarter, primarily due to lower borrowing activity.

The net interest margin on an FTE basis decreased from the prior-year quarter, primarily due to higher funding costs.

Federal Reserve and Other Central Bank Deposits averaged $35.9 billion and decreased $0.7 billion, or 2%, from $36.6 billion in the prior-year quarter. Interest-Bearing Due from and Deposits with Banks averaged $4.4 billion and increased $0.2 billion, or 5%, from $4.2 billion in the prior-year quarter.

Average Securities were $48.5 billion and decreased $1.9 billion, or 4%, from $50.4 billion in the prior-year quarter. Average taxable Securities were $43.3 billion in the current quarter and $47.4 billion in the prior-year quarter. Average nontaxable Securities, which represent securities that are primarily exempt from U.S. federal and state income taxes, were $5.2 billion in the current quarter and $3.0 billion in the prior-year quarter.

Securities Purchased under Agreements to Resell averaged $517.9 million and decreased $528.2 million, or 50%, from $1,046.1 million in the prior-year quarter, primarily due to a shift to investments in higher interest earning assets.

Loans averaged $41.6 billion and decreased $0.4 billion, or 1%, from $42.0 billion in the prior-year quarter, primarily reflecting lower levels of commercial and institutional, non-U.S, private client, and residential real estate loans, partially offset by higher levels of commercial real estate loans. Commercial and institutional loans averaged $10.6 billion and decreased $1.8 billion, or

FIRST QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)

Net Interest Income (continued)

15%, from $12.4 billion for the prior-year quarter. Non-U.S. loans averaged $2.8 billion and decreased $714.8 million, or 20%, from $3.6 billion for the prior-year quarter. Private client loans averaged $13.4 billion and decreased $492.3 million, or 4%, from $13.9 billion for the prior-year quarter. Residential real estate loans averaged $6.3 billion and decreased $155.0 million, or 2%, from $6.4 billion for the prior-year quarter. Commercial real estate loans averaged $5.2 billion and increased $288.2 million, or 6%, from $4.9 billion for the prior-year quarter.

Average Other Interest-Earning Assets include collateral deposits with certain securities depositories and clearing houses, certain community development investments, Federal Home Loan Bank stock, Federal Reserve stock, and money market investments of $1,516.6 million, $878.8 million, $312.0 million, $70.0 million, and $64.7 million, respectively, which are recorded in Other Assets on the consolidated balance sheets.

Northern Trust utilizes a diverse mix of funding sources. Average Interest-Bearing Deposits increased $3.7 billion, or 4%, to an average of $95.7 billion in the current quarter from $92.0 billion in the prior-year quarter. Interest expense for Interest-Bearing Deposits in the current quarter was driven by higher interest rates. Average Non-U.S. Offices Interest-Bearing Deposits comprised 67% and 68% of total average Interest-Bearing Deposits for the three months ended March 31, 2024 and 2023, respectively. Other average interest-bearing liabilities decreased $3.3 billion, or 17%, to an average of $16.8 billion in the current quarter from $20.1 billion in the prior-year quarter. The balances within short-term borrowing classifications vary based on funding requirements and strategies, interest rate levels, changes in the volume of lower-cost deposit sources, and the availability of collateral to secure these borrowings.

Provision for Credit Losses

In the current quarter, there was a negative Provision for Credit Losses of $8.5 million, as compared to a $15.0 million Provision for Credit Losses in the prior-year quarter. The negative provision in the current quarter resulted from decreases in both individual and collective reserves. The decrease in individual reserves was driven by one Commercial and Institutional (C&I) loan that was charged-off in the current quarter. The decrease in collective reserve was primarily in the C&I portfolio, driven by improvement in the quality of the portfolio, and in the Commercial Real Estate (CRE) portfolio, driven by improved macroeconomic factors. The reserve evaluated on a collective basis relates to pooled financial assets sharing similar risk characteristics.

The Provision for Credit Losses in the prior-year quarter 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.

Net charge-offs in the current quarter were $10.4 million, reflecting $0.7 million of recoveries and $11.1 million of charge-offs. The prior-year quarter included $2.9 million of net charge-offs, reflecting $1.1 million of recoveries and $4.0 million of charge-offs.

For additional discussion of the allowance for credit losses, refer to the “Asset Quality” section in this MD&A.

Noninterest Expense

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

TABLE 15: NONINTEREST EXPENSE


	THREE MONTHS ENDED MARCH 31,
($ In Millions)	2024		2023		CHANGE
Compensation	$	627.1	$	595.2	$	31.9	5	%
Employee Benefits	101.1		101.0		0.1		—
Outside Services	229.3		210.8		18.5		9
Equipment and Software	252.7		231.7		21.0		9
Occupancy	54.1		61.3		(7.2)		(12)
Other Operating Expense	100.4		85.6		14.8		17
Total Noninterest Expense	$	1,364.7	$	1,285.6	$	79.1	6	%

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

Outside Services expense increased compared to the prior-year quarter, primarily due to higher technical services and consulting fees, partially offset by lower subcustodian expense.

Equipment and Software expense increased compared to the prior-year quarter, primarily due to higher software amortization, partially offset by lower equipment depreciation.

FIRST QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)

Noninterest Expense (continued)

Occupancy expense decreased compared to the prior-year quarter, primarily due to a $9.8 million charge related to early lease exits recorded in the first quarter of 2023.

Other Operating Expense increased compared to the prior-year quarter, primarily due to the $12.5 million FDIC special assessment in the current quarter, partially offset by the impact of reclassifying certain investment amortization to the Provision for Income Taxes from Other Operating Expense in accordance with a new accounting standard.

Provision for Income Taxes

Income tax expense for the three months ended March 31, 2024 was $75.9 million, representing an effective tax rate of 26.1%, compared to $109.4 million in the prior-year quarter, representing an effective tax rate of 24.6%.

The effective tax rate increased compared to the prior-year quarter primarily due to a higher net tax impact from international operations and lower net tax benefits from tax-credit investments, including the impact of reclassifying certain investment amortization to the Provision for Income Taxes from Other Operating Expense in accordance with a new accounting standard.

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 corporate transactions and costs incurred associated with acquisitions, divestitures, litigation, restructuring, and tax adjustments not directly attributable to a specific reporting segment, which are reported within the Other segment.

Effective January 2024, Northern Trust implemented certain enhancements to its FTP methodology, impacting the allocation of Net Interest Income to the Asset Servicing and Wealth Management segments. As a result, the approximate impact on the Asset Servicing and Wealth Management segments was a $31 million decrease and a $31 million increase in Net Interest Income, respectively, for the three months ended March 31, 2024. Prior-period segment results have not been revised to reflect this methodology change.

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.

REPORTING SEGMENTS (continued)

The following table presents the earnings contributions and average assets of Northern Trust’s reporting segments for the three month periods ended March 31, 2024 and 2023.

TABLE 16: RESULTS OF REPORTING SEGMENTS


($ In Millions)	ASSET SERVICING					WEALTH MANAGEMENT					OTHER					RECONCILING ITEMS				TOTAL CONSOLIDATED
THREE MONTHS ENDED MARCH 31,	2024		2023			2024		2023			2024		2023			2024		2023		2024			2023
Noninterest Income
Trust, Investment and Other Servicing Fees	$	639.6	$	603.0		$	503.3	$	460.6		$	—	$	—		$	—	$	—	$	1,142.9		$	1,063.6
Foreign Exchange Trading Income (Loss)	59.9		54.9			(2.9)		(1.9)			—		—			—		—		57.0			53.0
Other Noninterest Income (Loss)	70.8		63.2			38.5		34.3			(190.5)		(0.7)			—		—		(81.2)			96.8
Total Noninterest Income (Loss)	770.3		721.1			538.9		493.0			(190.5)		(0.7)			—		—		1,118.7			1,213.4
Net Interest Income	293.8		312.1			241.6		232.3			—		—			(7.3)		(13.2)		528.1			531.2
Revenue	1,064.1		1,033.2			780.5		725.3			(190.5)		(0.7)			(7.3)		(13.2)		1,646.8			1,744.6
Provision for Credit Losses	(5.8)		(2.9)			(1.7)		17.9			(1.0)		—			—		—		(8.5)			15.0
Noninterest Expense	852.7		801.0			491.7		469.2			20.3		15.4			—		—		1,364.7			1,285.6
Income before Income Taxes	217.2		235.1			290.5		238.2			(209.8)		(16.1)			(7.3)		(13.2)		290.6			444.0
Provision for Income Taxes	56.6		60.5			81.4		66.1			(54.8)		(4.0)			(7.3)		(13.2)		75.9			109.4
Net Income	$	160.6	$	174.6		$	209.1	$	172.1		$	(155.0)	$	(12.1)		$	—	$	—	$	214.7		$	334.6
Percentage of Consolidated Net Income	N/M		52		%	N/M		52		%	N/M		(4)		%	N/A		N/A		100		%	100		%
Average Assets	$	106,955.0	$	111,215.3		$	38,163.3	$	36,844.6		$	—	$	—		N/A		N/A		$	145,118.3		$	148,059.9

N/M - Not meaningful

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.

Asset Servicing

Asset Servicing Trust, Investment and Other Servicing Fees

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

Asset Servicing Foreign Exchange Trading Income

For the quarter ended March 31, 2024, Foreign Exchange Trading Income increased $5.0 million, or 9%, from the prior-year quarter, primarily driven by higher client volumes.

Asset Servicing Other Noninterest Income

For the quarter ended March 31, 2024, Other Noninterest Income increased $7.6 million, or 12%, from the prior-year quarter, primarily due to higher brokerage related revenue and higher income allocations.

Asset Servicing Net Interest Income

For the quarter ended March 31, 2024, Net Interest Income stated on an FTE basis decreased $18.3 million, or 6%, from the prior-year quarter, primarily due to the change in reporting segment allocation methodology beginning in 2024 noted above. Average earning assets decreased $5.6 billion, or 5%.

Asset Servicing Provision for Credit Losses

For the quarter ended March 31, 2024, there was a negative Provision for Credit Losses of $5.8 million compared to a $2.9 million negative Provision for Credit Losses in the prior-year quarter. The decrease of credit reserves in the current quarter resulted from decreases in both collective and individual reserves. The decrease in collective reserve was driven by improved macroeconomic factors and portfolio quality. The decrease in individual reserves was driven by one loan that was moved back to the collective reserve.

Asset Servicing Noninterest Expense

For the quarter ended March 31, 2024, Noninterest Expense, which includes the direct expense of the reporting segment, indirect expense allocations for product and operating support and indirect expense allocations for certain corporate support services, increased $51.7 million, or 6%, from the prior-year quarter primarily due to higher expense allocations.

REPORTING SEGMENTS (continued)

Wealth Management

Wealth Management Net Income

For the quarter ended March 31, 2024, Net Income increased $37.0 million, or 21%, from the prior-year quarter, primarily due to higher Trust, Investment and Other Servicing Fees and higher Net Interest Income, partially offset by higher Noninterest Expense.

Wealth Management Trust, Investment and Other Servicing Fees

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

Wealth Management Other Noninterest Income

For the quarter ended March 31, 2024, Other Noninterest Income increased $4.2 million, or 12%, from the prior-year quarter, primarily due to higher income allocations.

Wealth Management Net Interest Income

For the quarter ended March 31, 2024, Net Interest Income stated on an FTE basis increased $9.3 million, or 4%, from the prior-year quarter, primarily due to the change in reporting segment allocation methodology beginning in 2024 and higher average earning assets. Average earning assets increased $3.4 billion, or 10%, primarily due to higher client deposits.

Wealth Management Provision for Credit Losses

For the quarter ended March 31, 2024, there was a negative Provision for Credit Losses of $1.7 million compared to a $17.9 million Provision for Credit Losses in the prior-year quarter. The decrease of credit reserves in the current quarter resulted from decreases in both individual and collective reserves. The decrease in individual reserves was driven by one Commercial and Institutional (C&I) loan that was charged-off in the current quarter. The decrease in the collective reserve was primarily in the Commercial Real Estate (CRE) portfolio, driven by improved macroeconomic factors.

Wealth Management Noninterest Expense

For the quarter ended March 31, 2024, Noninterest Expense, which includes the direct expenses of the reporting segment, indirect expense allocations for product and operating support and indirect expense allocations for certain corporate support services, increased $22.5 million, or 5%, from the prior-year quarter primarily reflecting higher indirect expense allocations.

Other

Other—Noninterest Income

For the quarter ended March 31, 2024, Other Noninterest Income decreased $189.8 million from the prior-year quarter, primarily due to the loss on sale of available for sale debt securities arising from a repositioning of the portfolio.

Other—Noninterest Expense

For the quarter ended March 31, 2024, Other Noninterest Expense increased $4.9 million, or 32%, from the prior-year quarter, primarily due to the $12.5 million FDIC special assessment, partially offset by lower non-allocated occupancy expense primarily arising from early lease exits.

CONSOLIDATED BALANCE SHEETS

The following tables summarize selected consolidated balance sheet information.

TABLE 17: SELECT CONSOLIDATED BALANCE SHEET INFORMATION


($ In Billions)	MARCH 31, 2024		DECEMBER 31, 2023		CHANGE
Assets
Federal Reserve and Other Central Bank Deposits	$	40.3	$	34.3	$	6.0	17	%
Interest-Bearing Due from and Deposits with Banks(1)	4.7		5.3		(0.6)		(11)
Securities Purchased under Agreements to Resell	0.5		0.8		(0.3)		(36)
Total Debt Securities	49.1		49.3		(0.2)		—
Loans	47.3		47.6		(0.3)		(1)
Other Interest-Earning Assets(2)	2.6		3.1		(0.5)		(17)
Total Earning Assets	144.5		140.4		4.1		3
Total Assets	156.1		150.8		5.3		4
Liabilities and Stockholders' Equity
Total Interest-Bearing Deposits	98.6		93.3		5.3		6
Demand and Other Noninterest-Bearing Deposits	25.3		22.8		2.5		11
Federal Funds Purchased	2.6		3.0		(0.4)		(15)
Securities Sold under Agreements to Repurchase	0.5		0.8		(0.3)		(35)
Other Borrowings(3)	6.5		6.6		(0.1)		(1)
Total Stockholders’ Equity	12.1		11.9		0.2		2

(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) Other Interest-Earning Assets includes 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.

(3) Other Borrowings primarily includes advances from the Federal Home Loan Bank of Chicago.

TABLE 18: SELECT AVERAGE CONSOLIDATED BALANCE SHEET INFORMATION


	THREE MONTHS ENDED MARCH 31,
($ In Billions)	2024		2023		CHANGE
Assets
Federal Reserve and Other Central Bank Deposits	$	35.9	$	36.6	$	(0.7)	(2)	%
Interest-Bearing Due from and Deposits with Banks(1)	4.4		4.2		0.2		5
Securities Purchased under Agreements to Resell	0.5		1.1		(0.6)		(50)
Total Debt Securities	48.5		50.4		(1.9)		(4)
Loans	41.6		42.0		(0.4)		(1)
Other Interest-Earning Assets(2)	2.9		1.7		1.2		70
Total Earning Assets	133.8		136.0		(2.2)		(2)
Total Assets	145.1		148.1		(3.0)		(2)
Liabilities and Stockholders' Equity
Total Interest-Bearing Deposits	95.7		92.0		3.7		4
Demand and Other Noninterest-Bearing Deposits	16.7		20.1		(3.4)		(17)
Federal Funds Purchased	2.7		3.7		(1.0)		(27)
Securities Sold under Agreements to Repurchase	0.5		0.3		0.2		41
Other Borrowings(3)	6.9		11.3		(4.4)		(39)
Total Stockholders’ Equity	11.8		11.3		0.5		4

(3) Other Borrowings primarily includes advances from the Federal Home Loan Bank of Chicago.

Average balances are considered to be a better measure of balance sheet trends, as period-end balances can be impacted by the timing of deposit and withdrawal activity involving large client balances. Average earning assets decreased from the prior-year quarter, primarily due to lower borrowing activity.

CONSOLIDATED BALANCE SHEETS (continued)

Select Earning Assets. Average securities decreased from the prior-year quarter, reflecting the impact of repositioning and reinvesting in short-term securities that will mature usually in one year or less. For additional discussion relating to the securities portfolio, refer to the “Asset Quality” section in this MD&A and to Note 4—Securities to the consolidated financial statements provided in Item 1. Consolidated Financial Statements (unaudited).

Client Deposits. Average Interest-Bearing Deposits increased from the prior-year quarter primarily due to an increase in client balances as a result of strategic pricing actions. Demand and Other Noninterest-Bearing Deposits decreased from the prior-year quarter as clients migrated into higher yielding products.

Short-Term Borrowings. Short-term borrowings includes Federal Funds Purchased, Securities Sold under Agreements to Repurchase, and Other Borrowings. The decrease in average Other Borrowings from the prior-year quarter was primarily due to strategic utilization of balance sheet capacity.

Stockholders’ Equity. During the three months ended March 31, 2024, the Corporation declared cash dividends totaling $153.4 million to common stockholders, and cash dividends totaling $16.2 million to preferred stockholders, respectively. During the three months ended March 31, 2023, the Corporation declared cash dividends totaling $158.6 million to common stockholders, and cash dividends totaling $16.2 million to preferred stockholders.

For the three months ended March 31, 2024, the Corporation repurchased 1,647,526 shares of common stock, at a total cost of $132.0 million ($80.11 average price per share), including 373,623 shares withheld to satisfy tax withholding obligations related to share-based compensation.

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.

ASSET QUALITY

Securities Portfolio

Northern Trust maintains a high quality debt securities portfolio. Debt securities not explicitly rated were grouped where possible under the credit rating of the issuer of the security. The following tables provide the fair value of available for sale (AFS) debt securities and amortized cost of held to maturity (HTM) debt securities by credit rating.

TABLE 19: FAIR VALUE OF AVAILABLE FOR SALE DEBT SECURITIES BY CREDIT RATING


	MARCH 31, 2024
($ In Millions)	AAA			AA			A			BBB			NOT RATED			TOTAL
U.S. Government	$	6,112.3		$	—		$	—		$	—		$	—		$	6,112.3
Obligations of States and Political Subdivisions	37.8			257.2			—			—			—			295.0
Government Sponsored Agency	12,351.4			—			—			—			—			12,351.4
Non-U.S. Government	307.6			—			—			—			—			307.6
Corporate Debt	19.2			83.0			141.0			—			7.0			250.2
Covered Bonds	275.9			—			20.9			—			—			296.8
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds	2,406.4			360.8			93.6			—			—			2,860.8
Other Asset-Backed	2,523.0			—			—			—			—			2,523.0
Commercial Mortgage-Backed	641.8			—			—			—			—			641.8
Total	$	24,675.4		$	701.0		$	255.5		$	—		$	7.0		$	25,638.9
Percent of Total	96		%	3		%	1		%	—		%	—		%	100		%

ASSET QUALITY (continued)

Securities Portfolio (continued)


	DECEMBER 31, 2023
($ In Millions)	AAA			AA			A			BBB			NOT RATED			TOTAL
U.S. Government	$	3,622.2		$	—		$	—		$	—		$	—		$	3,622.2
Obligations of States and Political Subdivisions	38.1			257.7			—			—			—			295.8
Government Sponsored Agency	11,553.0			—			—			—			—			11,553.0
Non-U.S. Government	264.4			—			—			—			—			264.4
Corporate Debt	24.7			87.0			157.4			—			10.4			279.5
Covered Bonds	325.3			—			21.8			—			—			347.1
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds	2,353.5			334.0			212.4			—			—			2,899.9
Other Asset-Backed	2,962.6			—			—			—			—			2,962.6
Commercial Mortgage-Backed	865.3			—			—			—			—			865.3
Total	$	22,009.1		$	678.7		$	391.6		$	—		$	10.4		$	23,089.8
Percent of Total	95		%	3		%	2		%	—		%	—		%	100		%

As of both March 31, 2024 and December 31, 2023, the less than 1% of AFS debt securities not rated by Moody’s Investors Service, Inc. (Moody’s), S&P Global Ratings (S&P Global) or Fitch Ratings, Inc. (Fitch Ratings) consisted of corporate debt securities.

TABLE 20: AMORTIZED COST OF HELD TO MATURITY DEBT SECURITIES BY CREDIT RATING


	MARCH 31, 2024
($ In Millions)	AAA			AA			A			BBB			NOT RATED			TOTAL

Obligations of States and Political Subdivisions	$	956.9		$	1,614.7		$	—		$	—		$	—		$	2,571.6
Government Sponsored Agency	9,223.3			—			—			—			—			9,223.3
Non-U.S. Government	896.7			707.4			812.9			325.1			—			2,742.1
Corporate Debt	2.2			298.7			309.4			—			—			610.3
Covered Bonds	2,110.3			—			—			—			—			2,110.3
Certificates of Deposit	355.4			—			—			—			47.8			403.2
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds	3,840.8			1,153.1			29.5			1.1			—			5,024.5
Other Asset-Backed	193.7			—			—			—			—			193.7
Commercial Mortgage-Backed	37.6			—			—			—			—			37.6
Other	52.5			—			—			—			528.8			581.3
Total	$	17,669.4		$	3,773.9		$	1,151.8		$	326.2		$	576.6		$	23,497.9
Percent of Total	75		%	16		%	5		%	1		%	3		%	100		%


	DECEMBER 31, 2023
($ In Millions)	AAA			AA			A			BBB			NOT RATED			TOTAL
U.S. Government	$	—		$	—		$	—		$	—		$	—		$	—
Obligations of States and Political Subdivisions	954.7			1,609.0			—			—			0.2			2,563.9
Government Sponsored Agency	9,355.3			—			—			—			—			9,355.3
Non-U.S. Government	813.3			1,179.6			2,463.3			332.9			—			4,789.1
Corporate Debt	2.1			302.6			341.4			—			—			646.1
Covered Bonds	2,208.6			—			—			—			—			2,208.6
Certificates of Deposit	545.9			—			—			—			39.2			585.1
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds	4,047.9			1,166.5			30.0			1.1			—			5,245.5
Other Asset-Backed	214.2			—			—			—			—			214.2
Commercial Mortgage-Backed	37.6			—			—			—			—			37.6
Other	54.8			—			—			—			521.5			576.3
Total	$	18,234.4		$	4,257.7		$	2,834.7		$	334.0		$	560.9		$	26,221.7
Percent of Total	70		%	16		%	11		%	1		%	2		%	100		%

As of March 31, 2024 and December 31, 2023, the 3% and 2%, respectively, of HTM debt securities not rated by Moody’s, S&P Global or Fitch Ratings consisted of certificates of deposit with a remaining life of less than six months, as well as investments purchased by Northern Trust to fulfill its obligations under the Community Reinvestment Act (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.

ASSET QUALITY (continued)

Securities Portfolio (continued)

Net unrealized losses within the investment securities portfolio totaled $2.2 billion and $2.3 billion at March 31, 2024 and December 31, 2023, respectively. Net unrealized losses as of March 31, 2024 were comprised of $35.3 million and $2.2 billion of gross unrealized gains and losses, respectively. Net unrealized losses as of December 31, 2023 were comprised of $20.1 million and $2.3 billion of gross unrealized gains and losses, respectively. $332.7 million of the $2.2 billion gross unrealized losses relate to AFS debt securities as of March 31, 2024, and $582.4 million of the $2.3 billion gross unrealized losses relate to AFS debt securities as of December 31, 2023.

As of March 31, 2024, the $25.6 billion AFS debt securities portfolio had unrealized losses, excluding securities with an allowance for credit losses, of $163.0 million, $55.6 million, and $31.0 million related to government-sponsored agency securities, sub-sovereign, supranational and non-U.S. agency bonds and other asset-backed, respectively, which are primarily attributable to higher intermediate rates. As of December 31, 2023, the $23.1 billion AFS debt securities portfolio had unrealized losses, excluding securities with an allowance for credit losses, of $200.3 million, $105.8 million, and $100.0 million related to government sponsored agency, supranational and non-U.S. agency bonds, and other asset-backed, respectively, which were primarily attributable to to lower yields and tighter spreads.

In January 2024, the Corporation sold certain AFS debt securities that were in an unrealized loss position. The $189.4 million loss is recognized in Investment Security Gains (Losses), net on the consolidated statements of income for the period ended March 31, 2024. In November 2023, the Corporation sold certain AFS debt securities that were in an unrealized loss position. The $176.4 million loss is recognized in Investment Security Gains (Losses), net on the consolidated statements of income for the period ended December 31, 2023.

As of March 31, 2024, the $23.5 billion HTM debt securities portfolio had unrealized losses of $1.1 billion and $289.4 million related to government-sponsored agency securities and sub-sovereign, supranational and non-U.S. agency bonds, respectively, which are primarily attributable to higher intermediate rates. As of December 31, 2023, the $26.2 billion HTM debt securities portfolio had an unrealized loss of $1.0 billion and $294.9 million related to government-sponsored agency and sub-sovereign, supranational and non-U.S. agency bonds, respectively, which are primarily attributable to lower yields and tighter spreads.

HTM debt securities consist of securities that management intends to, and Northern Trust has the ability to, hold until maturity. For additional information relating to the securities portfolio, refer to Note 4—Securities to the consolidated financial statements provided in Item 1. Consolidated Financial Statements (unaudited).

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

For additional information relating to the securities sold under agreements to repurchase, refer to Note 22—Securities Sold Under Agreements to Repurchase to the consolidated financial statements provided in Item 1. Consolidated Financial Statements (unaudited).

Nonaccrual Loans and Other Real Estate Owned

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

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

ASSET QUALITY (continued)

Nonaccrual Loans and Other Real Estate Owned (continued)

TABLE 21: NONACCRUAL ASSETS


	MARCH 31, 2024					DECEMBER 31, 2023
($ In Millions)	AMOUNT			% OF NONACCRUAL LOANS TO TOTAL NONACCRUAL LOANS		AMOUNT			% OF NONACCRUAL LOANS TO TOTAL NONACCRUAL LOANS
Nonaccrual Loans
Commercial
Commercial and Institutional	$	7.6		21	%	$	16.3		26	%
Commercial Real Estate	5.7			15		—			—

Total Commercial	$	13.3		36	%	$	16.3		26	%
Personal
Private Client	$	2.0		5	%	$	20.3		32	%
Residential Real Estate	21.7			59		27.0			42
Total Personal	$	23.7		64	%	$	47.3		74	%
Total Nonaccrual Loans	37.0					63.6
Other Real Estate Owned	—					1.5
Total Nonaccrual Assets	$	37.0				$	65.1
90 Day Past Due Loans Still Accruing	$	29.8				$	20.1
Nonaccrual Loans to Total Loans	0.08		%			0.13		%
Allowance for Credit Losses Assigned to Loans to Nonaccrual Loans	4.4		x			2.8		x

Nonaccrual assets of $37.0 million as of March 31, 2024 decreased $28.1 million, or 43%, from December 31, 2023, primarily due to a private client loan payoff and a commercial and institutional loan charge-off. In addition to the negative impact on Net Interest Income and the risk of credit losses, nonaccrual assets also increase operating costs due to the expense associated with collection efforts. Changes in the level of nonaccrual assets may be indicative of changes in the credit quality of one or more loan classes. Changes in credit quality impact the allowance for credit losses through the resultant adjustment of the allowance evaluated on an individual basis and the quantitative and qualitative factors used in the determination of the allowance evaluated on a collective basis within the allowance for credit losses.

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

The commercial real estate portfolio consists of commercial mortgages and construction, acquisition and development loans extended primarily to experienced investors well known to Northern Trust. Underwriting standards generally reflect conservative loan-to-value ratios and debt service coverage requirements. Recourse to owners through guarantees also is commonly required. For additional information relating to the loans portfolio, refer to Note 5—Loans to the consolidated financial statements provided in Item 1. Consolidated Financial Statements (unaudited).

Allowance for Credit Losses

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

Management’s estimates utilized in establishing an appropriate level of allowance for credit losses are not dependent on any single assumption. In determining an appropriate allowance level, management evaluates numerous variables, many of which are interrelated or dependent on other assumptions and estimates, and takes into consideration past events, current conditions and reasonable and supportable forecasts. The results of the credit reserve estimation methodology are reviewed quarterly by Northern Trust’s Credit Loss Reserve Committee, which receives input from Financial Risk Management, Treasury, Corporate Finance, the Economic Research Department, and each of Northern Trust’s reporting business units.

ASSET QUALITY (continued)

Allowance for Credit Losses (continued)

As of March 31, 2024, the Allowance for Credit Losses related to loans, undrawn loan commitments and standby letters of credit, HTM debt securities, and other financial assets, was $162.4 million, $25.2 million, $12.4 million, and $1.0 million, respectively. As of December 31, 2023, the Allowance for Credit Losses related to loans, undrawn loan commitments and standby letters of credit, HTM debt securities, and other financial assets, was $178.7 million, $26.9 million, $12.7 million, and $0.9 million, respectively. There was a $0.5 million and $1.2 million allowance for credit losses related to AFS debt securities as of March 31, 2024 and December 31, 2023, respectively. For additional information relating to the allowance for credit losses and the changes in the allowance for credit losses during the three months ended March 31, 2024 and March 31, 2023 due to charge-offs, recoveries and provisions for credit losses, refer to Note 6—Allowance for Credit Losses to the consolidated financial statements provided in Item 1. Consolidated Financial Statements (unaudited).

The table provides the allowance evaluated on an individual and collective basis for the loan portfolio by segment and class.

TABLE 22: ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES FOR LOANS


	MARCH 31, 2024					DECEMBER 31, 2023
($ In Millions)	ALLOWANCE AMOUNT			PERCENT OF LOANS TO TOTAL LOANS		ALLOWANCE AMOUNT			PERCENT OF LOANS TO TOTAL LOANS
Evaluated on an Individual Basis	$	2.5		—	%	$	13.4		—	%
Evaluated on a Collective Basis
Commercial
Commercial and Institutional	53.5			23		57.2			24
Commercial Real Estate	98.1			11		101.4			11
Non-U.S.	1.4			5		1.6			6
Other	0.7			15		0.1			13
Total Commercial	153.7			54		160.3			54
Personal
Private Client	12.1			30		12.0			30
Residential Real Estate	17.8			13		18.8			13
Non-U.S.	1.5			1		1.1			1
Other	—			2		—			2
Total Personal	31.4			46		31.9			46
Total Allowance Evaluated on a Collective Basis	$	185.1				$	192.2
Total Allowance for Credit Losses	$	187.6				$	205.6
Allowance Assigned to
Loans	$	162.4				$	178.7
Undrawn Commitments and Standby Letters of Credit	25.2					26.9
Total Allowance for Credit Losses	$	187.6				$	205.6
Allowance Assigned to Loans to Total Loans	0.34		%			0.38		%

Commercial Real Estate Loans

The table below provides additional detail regarding commercial real estate loan types.

TABLE 23: COMMERCIAL REAL ESTATE LOANS



(In Millions)	MARCH 31, 2024		DECEMBER 31, 2023
Commercial Mortgages
Apartment/ Multi-family	$	1,713.7	$	1,633.9
Office	1,019.9		1,035.1
Industrial/ Warehouse	739.4		687.1
Retail	665.2		620.9
Other	681.0		575.3
Total Commercial Mortgages	4,819.1		4,552.3
Construction, Acquisition and Development Loans	513.9		581.9
Total Commercial Real Estate Loans	$	5,333.0	$	5,134.2

For an overall discussion on the loan portfolio and on the allowance, refer to Note 5—Loans and Note 6—Allowance for Credit Losses to the consolidated financial statements provided in Item 1. Consolidated Financial Statements (unaudited).

STATEMENTS OF CASH FLOWS

The following discusses the statement of cash flow activities for the three months ended March 31, 2024 and 2023.

TABLE 24: CASH FLOW ACTIVITY SUMMARY


	THREE MONTHS ENDED MARCH 31,
(In Millions)	2024		2023
Net cash provided by (used in):
Operating activities	$	(1,452.6)	$	(164.9)
Investing activities	(4,793.4)		4,919.2
Financing activities	6,936.0		(4,597.7)
Effect of Foreign Currency Exchange Rates on Cash	(172.8)		15.1
Change in Cash and Due from Banks	$	517.2	$	171.7

Operating Activities

Net cash used in operating activities of $1.5 billion for the three months ended March 31, 2024, was primarily attributable to higher net collateral deposited with derivative counterparties, net changes in other operating activities, pension plan contributions, partially offset by higher investment security losses.

Net cash used in operating activities of $164.9 million for the three months ended March 31, 2023, was primarily attributable to higher net collateral deposited with derivative counterparties and an increase in receivables, partially offset by period earnings, net changes in other operating activities, and the impact of lower non-cash charges such as amortization and depreciation.

Investing Activities

Net cash used in investing activities of $4.8 billion for the three months ended March 31, 2024, was primarily attributable to increased levels of Federal Reserve and other central bank deposits and net purchases of AFS debt securities partially offset by net proceeds of HTM debt securities.

Net cash provided by investing activities of $4.9 billion for the three months ended March 31, 2023, was primarily attributable to net proceeds associated with AFS and HTM debt securities, and decreased levels of Federal Reserve and other central bank deposits.

Financing Activities

Net cash provided by financing activities of $6.9 billion for the three months ended March 31, 2024, was primarily attributable to the increased levels of total deposits, partially offset by decreased levels of federal funds purchased.

Net cash used in financing activities of $4.6 billion for the three months ended March 31, 2023, was primarily attributable to the decreased levels of total deposits, partially offset by increased levels of short-term other borrowings and federal funds purchased. The decrease in total deposits was primarily attributable to lower levels of savings, money market and other interest-bearing deposits.

CAPITAL RATIOS

The capital ratios of Northern Trust Corporation and its principal subsidiary, The Northern Trust Company, remained strong at March 31, 2024, exceeding the requirements for classification as “well-capitalized” under applicable U.S. regulatory requirements.

Northern Trust is a Category II institution as defined by the Federal Reserve Board which requires us to adhere to regulatory capital standards. In adhering to these standards, Northern Trust engages in a range of reporting and activities with regulators to affirm our financial strength and stability, including but not limited to, capital adequacy reporting that deducts any unrealized losses related to AFS securities from reported capital, and stringent, annual company-run and supervisory stress testing in the form of Comprehensive Capital Analysis and Review (CCAR) exercises, which confirms our ability to remain solvent under severely adverse market conditions.

The results of the 2023 Dodd-Frank Act Stress Test (DFAST), published by the Federal Reserve Board on June 28, 2023, resulted in Northern Trust’s stress capital buffer and effective Common Equity Tier 1 capital ratio minimum requirement remaining constant at 2.5% and 7.0%, respectively, for the annual capital plan cycle beginning on October 1, 2023 through September 30, 2024.

On July 27, 2023, the U.S. banking regulators issued the Basel III Endgame Proposal, which would change how risk-based capital requirements are determined for banking organizations including Northern Trust. The proposal would eliminate the existing advanced approach methodologies for determining risk-weighted assets (RWA) and replace it with a new expanded risk-based approach. The new requirements would be phased in over a three-year period beginning July 1, 2025. Based on our current understanding of the proposed rule, we estimate that, if the expanded risk-based approach had applied on a fully phased-in basis, and in the absence of taking any actions to mitigate its impact, our expanded risk-based approach RWAs would have been approximately 5% to 15% higher than our actual standardized approach RWAs.

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

TABLE 25: REGULATORY CAPITAL RATIOS


Capital Ratios — Northern Trust Corporation	MARCH 31, 2024				DECEMBER 31, 2023				MARCH 31, 2023
STANDARDIZED APPROACH	ADVANCED APPROACH		STANDARDIZED APPROACH		ADVANCED APPROACH		STANDARDIZED APPROACH		ADVANCED APPROACH		WELL-CAPITALIZED RATIOS		MINIMUM CAPITAL RATIOS
Common Equity Tier 1 Capital	11.4	%	13.5	%	11.4	%	13.4	%	11.3	%	11.7	%	N/A	4.5	%
Tier 1 Capital	12.4		14.6		12.3		14.5		12.3		12.7		6.0	6.0
Total Capital	14.2		16.5		14.2		16.5		14.4		14.7		10.0	8.0
Tier 1 Leverage	7.8		7.8		8.1		8.1		7.3		7.3		N/A	4.0
Supplementary Leverage	N/A		8.8		N/A		8.6		N/A		8.3		N/A	3.0


Capital Ratios — The Northern Trust Company	MARCH 31, 2024				DECEMBER 31, 2023				MARCH 31, 2023
STANDARDIZED APPROACH	ADVANCED APPROACH		STANDARDIZED APPROACH		ADVANCED APPROACH		STANDARDIZED APPROACH		ADVANCED APPROACH		WELL-CAPITALIZED RATIOS		MINIMUM CAPITAL RATIOS
Common Equity Tier 1 Capital	11.9	%	14.2	%	12.2	%	14.6	%	12.3	%	12.9	%	6.5	%	4.5	%
Tier 1 Capital	11.9		14.2		12.2		14.6		12.3		12.9		8.0		6.0
Total Capital	13.4		15.8		13.8		16.3		14.2		14.6		10.0		8.0
Tier 1 Leverage	7.4		7.4		8.0		8.0		7.3		7.3		5.0		4.0
Supplementary Leverage	N/A		8.5		N/A		8.5		N/A		8.3		3.0		3.0

RECENT ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (ASU 2023-07). ASU 2023-07 significantly expands disclosures about a public entity’s reportable segments, primarily through more frequent and enhanced disclosures about significant segment expenses. ASU 2023-07 does not change how a public entity identifies its operating segments, aggregates those operating segments or applies the quantitative thresholds to determine its reportable segments. ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and interim periods within annual periods beginning after December 15, 2024. Early adoption is permitted. Upon adoption, the impact of ASU 2023-07 will be limited to certain enhancements within the notes to the consolidated financial statements and therefore is not expected to have an impact on Northern Trust’s consolidated balance sheets or consolidated statements of income.

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (ASU 2023-09). ASU 2023-09 enhances disclosures by further disaggregating existing annual income tax disclosures related to the effective tax rate reconciliation and income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, although early adoption is permitted. Upon adoption, the impact of ASU 2023-09 will be limited to certain enhancements within the notes to the consolidated financial statements and therefore is not expected to have an impact on Northern Trust’s consolidated balance sheets or consolidated statements of income.

In March 2024, the FASB issued ASU No. 2024-01, “Compensation—Stock Compensation (Topic 718): Scope Applications of Profits Interests and Similar Awards” (ASU 2024-01). ASU 2024-01 adds an example to Topic 718 which illustrates how to apply the scope guidance to determine whether profits interests and similar awards should be accounted for as share-based payment arrangements under Topic 718 or under other U.S. GAAP. ASU 2024-01 is effective for annual periods beginning after December 15, 2024, although early adoption is permitted. Upon adoption, ASU 2024-01 is not expected to have an impact on Northern Trust’s consolidated balance sheets or consolidated statements of income.

RISK MANAGEMENT

Liquidity Risk

Liquidity risk is the risk of not being able to raise sufficient funds or maintain collateral to meet balance sheet and contingent liability cash flow obligations when due, because of firm-specific or market-wide stress events. Northern Trust is a Category II institution as defined by the Federal Reserve Board which requires us to adhere to the same regulatory liquidity standards as U.S. global systemically important bank holding companies (GSIBs). In adhering to these standards, Northern Trust engages in a range of reporting and activities with regulators to affirm our financial strength and stability, including but not limited to, daily Liquidity Coverage Ratio and Net Stable Funding Ratio calculations to regulators.

We maintain a highly liquid balance sheet consisting principally of cash held at the Federal Reserve and other central banks, money market assets, and short-term investment securities, which were 61% and 59% of total assets as of March 31, 2024 and December 31, 2023, respectively. 86% and 82% of Northern Trust’s securities portfolio is composed of U.S. Treasury, government sponsored agency and triple-A rated securities as of March 31, 2024 and December 31, 2023, respectively.

Market Risk

There are two types of market risk, interest rate risk associated with the banking book and trading risk. Interest rate risk associated with the banking book is the potential for movements in interest rates to cause changes in Net Interest Income and the market value of equity, including Accumulated Other Comprehensive Income (Loss) from the AFS debt securities portfolio. Trading risk is the potential for movements in market variables such as foreign exchange and interest rates to cause changes in the value of trading positions.

Northern Trust uses two primary measurement techniques to manage interest rate risk: Net Interest Income (NII) sensitivity and Market Value of Equity (MVE) sensitivity. NII sensitivity provides management with a short-term view of the impact of interest rate changes on NII. MVE sensitivity provides management with a long-term view of interest rate changes on MVE based on the period-end balance sheet. Higher interest rates may impact the fair value of AFS debt securities which in turn affects Accumulated Other Comprehensive Income (Loss), which can impact regulatory capital ratios.

As part of its risk management activities, Northern Trust also measures daily the risk of loss associated with all non-U.S. currency positions using a Value-at-Risk (VaR) model and applying the historical simulation methodology. The following information about Northern Trust’s management of market risk should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023.

RISK MANAGEMENT (continued)

Market Risk (continued)

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

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

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

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

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

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

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

The following table shows the estimated NII impact over the next twelve months of 100 and 200 basis point ramps upward and downward in interest rates relative to forward rates as of March 31, 2024 and March 31, 2023. Each rate movement is assumed to occur gradually over a one-year period.

TABLE 26: NET INTEREST INCOME SENSITIVITY


INCREASE (DECREASE) ESTIMATED IMPACT ON NEXT TWELVE MONTHS OF NET INTEREST INCOME
(In Millions)	MARCH 31, 2024		MARCH 31, 2023
Increase in Interest Rates Above Market Implied Forward Rates
100 Basis Points	$	31	$	15
200 Basis Points	69		29
Decrease in Interest Rates Below Market Implied Forward Rates
100 Basis Points	$	(54)	$	1
200 Basis Points	(129)		$	5

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

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

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

▪the present value of nonmaturity deposits is estimated using dynamic decay methodologies or estimated remaining lives, which are based on a combination of Northern Trust’s actual historical runoff patterns and management

RISK MANAGEMENT (continued)

Market Risk (continued)

judgment—some balances are assumed to be core and have longer lives while other balances are assumed to be temporary and have comparatively shorter lives;

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

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

The following table shows the estimated impact on MVE of 100 and 200 basis point shocks up and down from current market implied forward rates at March 31, 2024 and December 31, 2023. Each rate movement is assumed to occur gradually over a one-year period.

TABLE 27: MARKET VALUE OF EQUITY SENSITIVITY


INCREASE (DECREASE) ESTIMATED IMPACT ON MARKET VALUE OF EQUITY
(In Millions)	MARCH 31, 2024		DECEMBER 31, 2023
Increase in Interest Rates Above Market Implied Forward Rates
100 Basis Points	$	(382)	$	(360)
200 Basis Points	(850)		(817)
Decrease in Interest Rates Below Market Implied Forward Rates
100 Basis Points	$	401	$	430
200 Basis Points	622		725

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

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

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

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

TABLE 28: GLOBAL FOREIGN CURRENCY VALUE-AT-RISK


(In Millions)	TOTAL VaR (FX AND IR DRIVERS)						FX VaR (FX DRIVERS ONLY)						IR VaR (IR DRIVERS ONLY)
THREE MONTHS ENDED	MARCH 31, 2024		DECEMBER 31, 2023		MARCH 31, 2023		MARCH 31, 2024		DECEMBER 31, 2023		MARCH 31, 2023		MARCH 31, 2024		DECEMBER 31, 2023		MARCH 31, 2023
High	$	1.7	$	1.8	$	0.3	$	2.0	$	1.7	$	0.2	$	0.4	$	0.3	$	0.3
Low	0.2		0.3		0.1		0.1		0.2		—		0.1		0.1		0.1
Average	0.7		0.8		0.2		0.6		0.8		0.1		0.2		0.2		0.2
Quarter-End	0.3		1.7		0.2		0.2		1.6		0.2		0.2		0.1		0.1

For the GFX portfolio, the daily high, low, average, and quarter-end VaR values were all less than $1.8 million for the quarter ended March 31, 2024. During the three months ended March 31, 2024, Northern Trust did not incur an actual GFX trading loss in excess of the daily GFX VaR estimate.

RISK MANAGEMENT (continued)

Market Risk (continued)

VaR measures for interest rate derivatives (IRDs), historically immaterial, became temporarily inflated during the second quarter of 2023 as a result of transitions of IRD contracts from London Interbank Offered Rate (LIBOR) to Secured Overnight Finance Rate (SOFR) referencing. Although they remained elevated relative to historical levels, the risk measures declined in the third quarter of 2023. For the IRD portfolio, the daily high, low, average, and quarter-end VaR values were all less than $0.5 million for the quarter ended March 31, 2024.

Foreign currency balances arise not from executing trades but rather in the course of regular business operations, namely from non-U.S.-dollar-denominated revenues and expenses accruing onto the Corporation’s balance sheet. No longer hedged as of the third quarter of 2023, the balances are considered trading positions for regulatory purposes. For foreign currency balances, the daily high, low, average, and quarter-end VaR values were all less than $2.1 million for the quarter ended March 31, 2024.

Reconciliation to Fully Taxable Equivalent

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

TABLE 29: RECONCILIATION TO FULLY TAXABLE EQUIVALENT


	THREE MONTHS ENDED MARCH 31,
($ In Millions)	2024			2023
Net Interest Income
Interest Income - GAAP	$	2,445.6		$	1,455.4
Add: FTE Adjustment	7.3			13.2
Interest Income (FTE) - Non-GAAP	$	2,452.9		$	1,468.6

Net Interest Income - GAAP	$	528.1		$	531.2
Add: FTE Adjustment	7.3			13.2
Net Interest Income (FTE) - Non-GAAP	$	535.4		$	544.4

Net Interest Margin - GAAP	1.59		%	1.58		%
Net Interest Margin (FTE) - Non-GAAP	1.61		%	1.62		%

Total Revenue
Total Revenue - GAAP	$	1,646.8		$	1,744.6
Add: FTE Adjustment	7.3			13.2
Total Revenue (FTE) - Non-GAAP	$	1,654.1		$	1,757.8

FORWARD-LOOKING STATEMENTS

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

financial market disruptions or economic recession in the U.S. or other countries across the globe resulting from any of a number of factors;
volatility or changes in financial markets, including debt and equity markets, that impact the value, liquidity, or credit ratings of financial assets in general, or financial assets held in particular investment funds or client portfolios, including those funds, portfolios, and other financial assets with respect to which Northern Trust has taken, or may in the future take, actions to provide asset value stability or additional liquidity;
the impact of equity markets on fee revenue;
changes in interest rates or in the monetary or other policies of various regulatory authorities or central banks;
Northern Trust’s success in controlling the costs and expenses of its business operations and the impacts of any broader inflationary environment thereon;
a decline in the value of securities held in Northern Trust’s investment portfolio, the liquidity and pricing of which may be negatively impacted by periods of economic turmoil and financial market disruptions;
Northern Trust’s ability to address operating risks, including those related to cybersecurity, data privacy and security, human errors or omissions, pricing or valuation of securities, fraud, operational resilience (including systems performance), failure to maintain sustainable business practices, and breakdowns in processes or internal controls;
Northern Trust's success in responding to and investing in changes and advancements in technology;
geopolitical risks, risks related to global climate change and the risks of extraordinary events such as pandemics, natural disasters, terrorist events and war (including the continuing military conflicts involving Ukraine and the Russian Federation and Israel and Hamas and other evolving events in the Middle East), and the responses of the U.S. and other countries to those events;
unexpected deposit outflows;
the effectiveness of Northern Trust’s management of its human capital, including its success in recruiting and retaining necessary and diverse personnel to support business growth and expansion and maintain sufficient expertise to support increasingly complex products and services;
changes in the legal, regulatory and enforcement framework and oversight applicable to financial institutions, including Northern Trust;
changes in foreign exchange trading client volumes and volatility in foreign currency exchange rates, changes in the valuation of the U.S. dollar relative to other currencies in which Northern Trust records revenue or accrues expenses, and Northern Trust’s success in assessing and mitigating the risks arising from all such changes and volatility;
a significant downgrade of any of Northern Trust’s debt ratings;
the health and soundness of the financial institutions and other counterparties with which Northern Trust conducts business;
uncertainties inherent in the complex and subjective judgments required to assess credit risk and establish appropriate allowances therefor;
increased costs of compliance and other risks associated with changes in regulation, the current regulatory environment, and areas of increased regulatory emphasis and oversight in the U.S. and other countries, such as anti-money laundering, anti-bribery, and data privacy and security;
failure to satisfy regulatory standards or to obtain regulatory approvals when required, including for the use and distribution of capital;
Northern Trust’s success in continuing to enhance its risk management practices and controls and managing risks inherent in its businesses, including credit risk, operational risk, market and liquidity risk, fiduciary risk, compliance risk and strategic risk;
risks and uncertainties inherent in the litigation and regulatory process, including the possibility that losses may be in excess of Northern Trust’s recorded liability and estimated range of possible loss for litigation exposures;
the risk of damage to Northern Trust’s reputation which may undermine the confidence of clients, counterparties, rating agencies, and stockholders;
the downgrade of U.S. government-issued and other securities;

FORWARD-LOOKING STATEMENTS (continued)

changes in tax laws, accounting requirements or interpretations and other legislation in the U.S. or other countries that could affect Northern Trust or its clients;
the pace and extent of continued globalization of investment activity and growth in worldwide financial assets;
changes in the nature and activities of Northern Trust’s competition;
Northern Trust’s success in maintaining existing business and continuing to generate new business in existing and targeted markets and its ability to deploy deposits in a profitable manner consistent with its liquidity requirements;
Northern Trust’s ability to address the complex needs of a global client base and manage compliance with legal, tax, regulatory and other requirements;
Northern Trust’s ability to maintain a product mix that achieves acceptable margins;
Northern Trust’s ability to continue to generate investment results that satisfy clients and to develop an array of investment products;
uncertainties inherent in Northern Trust’s assumptions concerning its pension plan, including discount rates and expected contributions, returns and payouts;
risks associated with being a holding company, including Northern Trust’s dependence on dividends from its principal subsidiary; and
other factors identified elsewhere in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2023, including those factors described in Item 1A, “Risk Factors,” and other filings with the SEC, all of which are available on Northern Trust’s website.

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

Next: Item 1. Consolidated Financial Statements (unaudited)