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NORTHERN TRUST CORP - Quarter Report: 2023 September (Form 10-Q)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File No. 001-36609
NORTHERN TRUST CORPORATION
(Exact name of registrant as specified in its charter)
Delaware36-2723087
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
50 South LaSalle Street60603
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 classTrading SymbolName of each exchange on which registered
Common Stock, $1.66 2/3 Par ValueNTRSThe NASDAQ Stock Market LLC
Depositary Shares, each representing 1/1,000th interest in a share of Series E Non-Cumulative Perpetual Preferred StockNTRSOThe 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 filerxAccelerated filer¨
Non-accelerated filer¨Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No  x
At September 30, 2023, 207,036,370 shares of common stock, $1.66 2/3 par value, were outstanding.



NORTHERN TRUST CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023
TABLE OF CONTENTS
Page
i

CONSOLIDATED FINANCIAL HIGHLIGHTS
(UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30,NINE MONTHS ENDED SEPTEMBER 30,
CONDENSED INCOME STATEMENTS ($ In Millions)20232022
% CHANGE(1)
20232022
% CHANGE(1)
Noninterest Income$1,270.3 $1,241.8 %$3,729.3 $3,889.5 (4)%
Net Interest Income456.2 513.0 (11)1,498.9 1,352.7 11 
Total Revenue1,726.5 1,754.8 (2)5,228.2 5,242.2 — 
Provision for Credit Losses14.0 0.5 N/M13.5 7.0 93 
Noninterest Expense1,278.2 1,229.8 3,895.7 3,659.3 
Income before Income Taxes434.3 524.5 (17)1,319.0 1,575.9 (16)
Provision for Income Taxes106.5 129.7 (18)324.8 395.6 (18)
Net Income$327.8 $394.8 (17)%$994.2 $1,180.3 (16)%
PER COMMON SHARE
Net Income — Basic$1.49 $1.80 (17)%$4.56 $5.44 (16)%
— Diluted1.49 1.80 (17)4.56 5.43 (16)
Cash Dividends Declared Per Common Share0.75 0.75 — 2.25 2.15 
Book Value — End of Period (EOP)52.95 48.68 52.95 48.68 
Market Price — EOP69.48 85.56 (19)69.48 85.56 (19)
SELECTED BALANCE SHEET DATA ($ In Millions)SEPTEMBER 30, 2023DECEMBER 31, 2022
% CHANGE(1)
End of Period:
Total Assets$146,330.6 $155,036.7 (6)%
Earning Assets134,055.9 142,484.7 (6)
Deposits110,165.9 123,932.1 (11)
Stockholders’ Equity11,847.2 11,259.5 
THREE MONTHS ENDED SEPTEMBER 30,NINE MONTHS ENDED SEPTEMBER 30,
20232022
% CHANGE(1)
20232022
% CHANGE(1)
Average Balances:
Total Assets$140,201.6 $146,402.2 (4)%$144,691.6 $154,152.1 (6)%
Earning Assets128,254.4 132,146.5 (3)132,747.8 140,540.9 (6)
Deposits101,763.1 118,488.1 (14)106,477.7 128,720.7 (17)
Stockholders’ Equity11,536.6 10,935.6 11,423.2 11,115.8 
CLIENT ASSETS ($ In Billions)SEPTEMBER 30, 2023DECEMBER 31, 2022
% CHANGE(1)
Assets Under Custody/Administration(2)
$14,164.7 $13,604.0 %
Assets Under Custody11,015.4 10,604.6 
Assets Under Management1,333.3 1,249.5 
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.



1

SELECTED RATIOS AND METRICS
THREE MONTHS ENDED SEPTEMBER 30,NINE MONTHS ENDED SEPTEMBER 30,
2023202220232022
Financial Ratios:
Return on Average Common Equity11.6 %14.9 %12.1 %14.9 %
Return on Average Assets0.93 1.07 0.92 1.02 
Dividend Payout Ratio50.3 41.7 49.4 39.6 
Net Interest Margin(1)
1.45 1.58 1.55 1.32 
SEPTEMBER 30, 2023DECEMBER 31, 2022
STANDARDIZED
APPROACH
ADVANCED
APPROACH
STANDARDIZED
APPROACH
ADVANCED
APPROACH
WELL-CAPITALIZED RATIOSMINIMUM CAPITAL RATIOS
Capital Ratios:
Northern Trust Corporation
Common Equity Tier 1 Capital11.4 %13.2 %10.8 %11.5 %N/A4.5 %
Tier 1 Capital12.4 14.3 11.8 12.5 6.0 6.0 
Total Capital14.5 16.5 13.9 14.5 10.0 8.0 
Tier 1 Leverage7.9 7.9 7.1 7.1 N/A4.0 
Supplementary LeverageN/A8.4 N/A7.9 N/A3.0 
The Northern Trust Company
Common Equity Tier 1 Capital12.3 %14.5 %11.6 %12.4 %6.5 %4.5 %
Tier 1 Capital12.3 14.5 11.6 12.4 8.0 6.0 
Total Capital14.2 16.4 13.5 14.2 10.0 8.0 
Tier 1 Leverage7.8 7.8 6.9 6.9 5.0 4.0 
Supplementary LeverageN/A8.3 N/A7.7 3.0 3.0 
(1)    Net interest margin is presented on a fully taxable equivalent (FTE) basis, a non-generally accepted accounting principle (GAAP) financial measure that facilitates the analysis of asset yields. The net interest margin on a GAAP basis and a reconciliation of net interest income on a GAAP basis to net interest income on an FTE basis are presented in “Reconciliation to Fully Taxable Equivalent” within the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section.
2


PART I – FINANCIAL INFORMATION
Items 2. and 3. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures about Market Risk
The following is management’s discussion and analysis of the financial condition and results of operations (MD&A) of Northern Trust Corporation (Corporation) for the third quarter of 2023. 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, 2022. 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, 2022.
THIRD QUARTER CONSOLIDATED RESULTS OF OPERATIONS
General
The Corporation is a leading provider of wealth management, asset servicing, asset management and banking solutions to corporations, institutions, families and individuals. The Corporation focuses on managing and servicing client assets through its two client-focused reporting segments: 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 $1.49 in the current quarter and $1.80 in the third quarter of 2022. Net Income decreased $67.0 million to $327.8 million in the current quarter from $394.8 million in the prior-year quarter. Annualized return on average common equity was 11.6% in the current quarter and 14.9% in the prior-year quarter. The annualized return on average assets was 0.93% in the current quarter as compared to 1.07% in the prior-year quarter. The impacts of a tight labor market are reflected in our Compensation expense. Inflationary pressures were also reflected in higher Equipment and Software expense.
Revenue decreased $28.3 million, or 2%, to $1.73 billion in the current quarter from $1.75 billion in the prior-year quarter. Trust, Investment and Other Servicing Fees increased $33.2 million, or 3%, from $1.08 billion in the prior-year quarter to $1.11 billion in the current quarter, primarily due to lagged favorable markets and favorable currency translation, partially offset by lower transaction volumes. Other Noninterest Income decreased $4.7 million, or 3%, from $163.1 million in the prior-year quarter to $158.4 million in the current quarter, primarily reflecting lower Foreign Exchange Trading Income, partially offset by higher Other Operating Income. Net Interest Income decreased $56.8 million, or 11%, to $456.2 million in the current quarter as compared to $513.0 million in the prior-year quarter, primarily due to lower average earning assets.
There was a $14.0 million Provision for Credit Losses in the current quarter, as compared to a $0.5 million Provision for Credit Losses in the prior-year quarter. The Provision for Credit Losses in the current quarter was primarily due to an increase in the reserve evaluated on a collective basis, driven by a small number of large new loans and renewals and credit quality deterioration of certain commercial real estate (CRE) and commercial and institutional (C&I) loans, partially offset by a net improvement in the overall macroeconomic outlook.
Noninterest Expense increased $48.4 million, or 4%, from $1.23 billion in the prior-year quarter to $1.28 billion in the current quarter, primarily attributable to higher Equipment and Software and Other Operating Expense.
The Provision for Income Taxes in the current quarter totaled $106.5 million, representing an effective tax rate of 24.5%. The Provision for Income Taxes in the prior-year quarter totaled $129.7 million, representing an effective tax rate of 24.7%. The effective tax rate decreased compared to the prior-year quarter primarily due to a lower state tax provision following the resolution of certain state matters.
FDIC Special Assessment
In May 2023, the Federal Deposit Insurance Corporation (FDIC) issued a proposed rule that would impose a special assessment to recover the loss to the Deposit Insurance Fund arising from the protection of uninsured depositors of Silicon Valley Bank and Signature Bank associated with their closures, and the systemic risk determination announced by the FDIC on March 12, 2023. While the timing and amount of any expense recognition are unknown until the proposed rule is finalized, if the FDIC final rule is issued as proposed, the estimated impact of the special assessment to Northern Trust, recognized in Other Operating Expense, would be approximately $80 million.
3

THIRD QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)
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.
Northern Trust voluntarily waived $2.2 million of money market fund fees for the three months ended September 30, 2023 and $2.6 million of money market fund fees for the three months ended September 30, 2022.
The components of Trust, Investment and Other Servicing Fees are provided below.
TABLE 1: TRUST, INVESTMENT AND OTHER SERVICING FEES
THREE MONTHS ENDED SEPTEMBER 30,
($ In Millions)20232022CHANGE
Asset Servicing Trust, Investment and Other Servicing Fees
Custody and Fund Administration$428.1 $407.3 $20.8 %
Investment Management137.1 136.0 1.1 
Securities Lending20.4 21.7 (1.3)(6)
Other40.4 38.2 2.2 
Total Asset Servicing Trust, Investment and Other Servicing Fees$626.0 $603.2 $22.8 %
Wealth Management Trust, Investment and Other Servicing Fees
Central$172.3 $171.3 $1.0 %
East126.1 124.1 2.0 
West95.8 92.5 3.3 
Global Family Office91.7 87.6 4.1 
Total Wealth Management Trust, Investment and Other Servicing Fees$485.9 $475.5 $10.4 %
Total Consolidated Trust, Investment and Other Servicing Fees$1,111.9 $1,078.7 $33.2 %
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 assets under management throughout the period. Typically, the asset values used to calculate fee revenue are based on a one-month or one-quarter lag. 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 new business, favorable currency translation, and favorable markets, partially offset by lower transaction volumes.
Wealth Management
Wealth Management fee income is calculated primarily based on market values and is impacted by both one-month and one-quarter lagged asset values. Fee income in the regions (Central, East and West) increased from the prior-year quarter, primarily due to lagged favorable markets, partially offset by product-related asset outflows. Global Family Office fee income increased from the prior-year quarter, primarily due to asset inflows.
4

THIRD QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)
Trust, Investment and Other Servicing Fees (continued)

Market Indices
The following tables present selected market indices and the percentage changes year-over-year to provide context regarding equity and fixed income market impacts on the Corporation’s results.
TABLE 2: EQUITY MARKET INDICES
DAILY AVERAGESPERIOD-END
THREE MONTHS ENDED SEPTEMBER 30,AS OF SEPTEMBER 30,
20232022CHANGE20232022CHANGE
S&P 5004,458 3,977 12 %4,288 3,586 20 %
MSCI EAFE (U.S. dollars)2,113 1,848 14 2,031 1,661 22 
MSCI EAFE (local currency)1,346 1,217 11 1,331 1,137 17 
TABLE 3: FIXED INCOME MARKET INDICES
AS OF SEPTEMBER 30,
20232022CHANGE
Barclays Capital U.S. Aggregate Bond Index2,024 2,011 %
Barclays Capital Global Aggregate Bond Index436 427 
Client Assets
As noted above, AUC/A and assets under management are two of the primary drivers of our Trust, Investment and Other Servicing Fees. For the purposes of disclosing AUC/A, to the extent that both custody and administration services are provided, the value of the assets is included only once in this amount. The following table presents AUC/A by reporting segment.
TABLE 4: ASSETS UNDER CUSTODY / ADMINISTRATION BY REPORTING SEGMENT
SEPTEMBER 30, 2023JUNE 30, 2023SEPTEMBER 30, 2022CHANGE Q3-23/Q2-23CHANGE Q3-23/Q3-22
($ In Billions)
Asset Servicing$13,206.2 $13,483.5 $11,954.0 (2)%10 %
Wealth Management958.5 995.4 868.0 (4)10 
Total Assets Under Custody / Administration$14,164.7 $14,478.9 $12,822.0 (2)%10 %
The following table presents Northern Trust’s assets under custody, a component of AUC/A, by reporting segment.
TABLE 5: ASSETS UNDER CUSTODY BY REPORTING SEGMENT
SEPTEMBER 30, 2023JUNE 30, 2023SEPTEMBER 30, 2022CHANGE Q3-23/Q2-23CHANGE Q3-23/Q3-22
($ In Billions)
Asset Servicing$10,064.4 $10,295.7 $9,125.5 (2)%10 %
Wealth Management951.0 989.1 860.8 (4)10 
Total Assets Under Custody$11,015.4 $11,284.8 $9,986.3 (2)%10 %
Consolidated assets under custody decreased from the prior quarter, primarily reflecting unfavorable markets and unfavorable currency translation, partially offset by asset inflows. Consolidated assets under custody increased from the prior-year quarter, primarily reflecting the impact of favorable markets, favorable currency translation, and favorable asset inflows.
The following table presents the allocation of Northern Trust’s custodied assets by reporting segment.
TABLE 6: ALLOCATION OF ASSETS UNDER CUSTODY
SEPTEMBER 30, 2023JUNE 30, 2023SEPTEMBER 30, 2022
ASWMTOTALASWMTOTALASWMTOTAL
Equities46 %58 %47 %46 %60 %47 %43 %55 %44 %
Fixed Income Securities33 13 31 33 13 31 35 15 33 
Cash and Other Assets19 29 21 19 27 21 20 30 21 
Securities Lending Collateral2  1 — — 

5

THIRD QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)
Trust, Investment and Other Servicing Fees (continued)

The following table presents Northern Trust’s assets under custody by investment type.
TABLE 7: ASSETS UNDER CUSTODY BY INVESTMENT TYPE
($ In Billions)SEPTEMBER 30, 2023JUNE 30, 2023SEPTEMBER 30, 2022CHANGE Q3-23/Q2-23CHANGE Q3-23/Q3-22
Equities$5,141.4 $5,328.7 $4,409.0 (4)%17 %
Fixed Income Securities3,445.0 3,524.7 3,288.7 (2)
Cash and Other Assets2,267.0 2,262.6 2,126.5 — 
Securities Lending Collateral162.0 168.8 162.1 (4)— 
Total Assets Under Custody$11,015.4 $11,284.8 $9,986.3 (2)%10 %
The following table presents Northern Trust’s assets under management by reporting segment.
TABLE 8: ASSETS UNDER MANAGEMENT BY REPORTING SEGMENT
SEPTEMBER 30, 2023JUNE 30, 2023SEPTEMBER 30, 2022CHANGE Q3-23/Q2-23CHANGE Q3-23/Q3-22
($ In Billions)
Asset Servicing$963.4 $989.8 $873.7 (3)%10 %
Wealth Management369.9 376.0 336.2 (2)10 
Total Assets Under Management$1,333.3 $1,365.8 $1,209.9 (2)%10 %
Consolidated assets under management decreased compared to the prior quarter, primarily reflecting unfavorable markets, product-related outflows, and unfavorable currency translation. Consolidated assets under management increased compared to the prior-year quarter, primarily reflecting the impact of favorable markets.
The following table presents the allocation of Northern Trust’s assets under management by reporting segment.
TABLE 9: ALLOCATION OF ASSETS UNDER MANAGEMENT
SEPTEMBER 30, 2023JUNE 30, 2023SEPTEMBER 30, 2022
ASWMTOTALASWMTOTALASWMTOTAL
Equities53 %53 %53 %54 %55 %54 %51 %51 %51 %
Fixed Income Securities11 22 14 11 21 14 12 24 15 
Cash and Other Assets19 25 21 18 24 20 19 25 21 
Securities Lending Collateral17  12 17 — 12 18 — 13 
The following table presents Northern Trust’s assets under management by investment type.
TABLE 10: ASSETS UNDER MANAGEMENT BY INVESTMENT TYPE
($ In Billions)SEPTEMBER 30, 2023JUNE 30, 2023SEPTEMBER 30, 2022CHANGE Q3-23/Q2-23CHANGE Q3-23/Q3-22
Equities$706.5 $740.5 $615.1 (5)%15 %
Fixed Income Securities190.2 188.7 182.6 
Cash and Other Assets274.6 267.8 250.1 10 
Securities Lending Collateral162.0 168.8 162.1 (4)— 
Total Assets Under Management$1,333.3 $1,365.8 $1,209.9 (2)%10 %
6

THIRD QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)
Trust, Investment and Other Servicing Fees (continued)

The following table presents activity in consolidated assets under management by product.
TABLE 11: ACTIVITY IN CONSOLIDATED ASSETS UNDER MANAGEMENT BY PRODUCT
THREE MONTHS ENDED
($ In Billions)SEPTEMBER 30, 2023JUNE 30, 2023MARCH 31, 2023DECEMBER 31, 2022SEPTEMBER 30, 2022
Beginning Balance of AUM$1,365.8 $1,330.4 $1,249.5 $1,209.9 $1,302.8 
Inflows by Product
Equities49.5 44.8 52.1 37.7 39.5 
Fixed Income15.0 11.2 14.4 11.6 12.3 
Cash and Other Assets565.2 551.3 276.7 121.9 128.9 
Securities Lending Collateral54.6 53.4 66.3 48.2 55.3 
Total Inflows684.3 660.7 409.5 219.4 236.0 
Outflows by Product
Equities(54.6)(54.7)(59.2)(42.8)(56.5)
Fixed Income(12.4)(10.2)(16.6)(12.7)(12.4)
Cash and Other Assets(559.5)(529.7)(264.0)(128.5)(152.2)
Securities Lending Collateral(61.4)(52.5)(46.7)(62.0)(62.5)
Total Outflows(687.9)(647.1)(386.5)(246.0)(283.6)
Net Inflows (Outflows)(3.6)13.6 23.0 (26.6)(47.6)
Market Performance, Currency & Other
Market Performance & Other(24.1)27.7 52.4 55.9 (35.1)
Currency(4.8)(5.9)5.5 10.3 (10.2)
Total Market Performance, Currency & Other(28.9)21.8 57.9 66.2 (45.3)
Ending Balance of AUM$1,333.3 $1,365.8 $1,330.4 $1,249.5 $1,209.9 
Other Noninterest Income
The components of Other Noninterest Income are provided below.
TABLE 12: OTHER NONINTEREST INCOME
THREE MONTHS ENDED SEPTEMBER 30,
($ In Millions)20232022CHANGE
Foreign Exchange Trading Income$51.8 $64.7 $(12.9)(20)%
Treasury Management Fees7.5 9.3 (1.8)(18)
Security Commissions and Trading Income30.9 32.1 (1.2)(4)
Other Operating Income68.2 57.3 10.9 19 
Investment Security Gains (Losses), net (0.3)0.3 N/M
Total Other Noninterest Income$158.4 $163.1 $(4.7)(3)%
N/M - Not meaningful
Foreign Exchange Trading Income decreased compared to the prior-year quarter primarily driven by an unfavorable impact from foreign exchange swap activity and lower 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, higher banking and credit-related services fees, and income from valuation adjustments to existing swap agreements related to Visa Inc. Class B common shares, partially offset by lower non-trading foreign exchange income and lower miscellaneous income.
7

THIRD QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)
Net Interest Income
Net Interest Income is defined as the total of Interest Income and amortized fees on earning assets, less Interest Expense on deposits and borrowed funds, adjusted for the impact of interest-related hedging activity. Earning assets—including Federal Funds Sold, Securities Purchased under Agreements to Resell, Interest-Bearing Due From 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 funds that include client deposits, short-term borrowings, Senior Notes and Long-Term Debt. Short-term borrowings include Federal Funds Purchased, Securities Sold Under Agreements to Repurchase, and Other Borrowings. Earning assets are also funded by noninterest-related funds, which include demand deposits and stockholders’ equity. Net Interest Income is subject to variations in the level and mix of earning assets and interest-bearing funds and their relative sensitivity to interest rates. In addition, the levels of nonaccruing assets and client compensating deposit balances used to pay for services impact Net Interest Income.
Net interest margin is the difference between what we earn on our assets and what we pay for deposits and other sources of funding. The direction and level of interest rates are important factors in our earnings. Net interest margin is calculated by dividing annualized Net Interest Income by average interest-earning assets.
Net Interest Income stated on a fully taxable equivalent (FTE) basis is a non-generally accepted accounting principle (GAAP) financial measure that facilitates the analysis of asset yields. Management believes an FTE presentation provides a clearer indication of net interest margins for comparative purposes. When adjusted to an FTE basis, yields on taxable, nontaxable, and partially taxable assets are comparable; however, the adjustment to an FTE basis has no impact on Net Income. A reconciliation of Net Interest Income on a GAAP basis to Net Interest Income on an FTE basis is provided in “Reconciliation to Fully Taxable Equivalent” within this MD&A.

8

THIRD QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)
Net Interest Income (continued)
The following tables present an analysis of average daily balances and interest rates affecting Net Interest Income and an analysis of Net Interest Income changes.
TABLE 13: AVERAGE CONSOLIDATED BALANCE SHEETS WITH ANALYSIS OF NET INTEREST INCOME
(INTEREST AND RATE ON A FULLY TAXABLE EQUIVALENT BASIS)THIRD QUARTER
20232022
($ In Millions)INTERESTAVERAGE BALANCE
AVERAGE RATE(7)
INTERESTAVERAGE BALANCE
AVERAGE RATE(7)
Interest-Earning Assets
Federal Reserve and Other Central Bank Deposits$352.1 $28,000.8 4.99 %$135.4 $30,548.7 1.76 %
Interest-Bearing Due from and Deposits with Banks(1)
34.9 4,301.4 3.22 14.5 3,976.8 1.45 
Federal Funds Sold 1.2 5.62 — 5.1 2.79 
Securities Purchased under Agreements to Resell(2)
463.9 950.8 193.58 30.5 1,270.9 9.51 
Debt Securities
Available for Sale277.9 24,430.7 4.51 150.6 28,482.8 2.10 
Held to Maturity125.2 25,919.2 1.93 87.1 25,126.6 1.38 
Trading Account0.1 0.4 21.15 0.1 0.4 23.60 
Total Debt Securities403.2 50,350.3 3.18 237.8 53,609.8 1.76 
Loans and Leases(3)
665.5 42,210.4 6.26 380.9 41,466.4 3.64 
Other Interest-Earning Assets(4)
28.6 2,439.5 4.65 12.5 1,268.8 3.92 
Total Interest-Earning Assets1,948.2 128,254.4 6.03 811.6 132,146.5 2.44 
Cash and Due from Banks and Other Central Bank Deposits(5)
 1,694.6  — 1,903.1  
Other Noninterest-Earning Assets 10,252.6  — 12,352.6  
Total Assets$ $140,201.6  %$— $146,402.2 — %
Average Source of Funds
Deposits
Savings, Money Market and Other$173.9 $22,624.9 3.05 %$68.6 $29,089.3 0.94 %
Savings Certificates and Other Time43.3 3,665.2 4.69 4.0 986.0 1.61 
Non-U.S. Offices — Interest-Bearing499.4 58,680.5 3.38 104.7 64,057.3 0.65 
Total Interest-Bearing Deposits716.6 84,970.6 3.35 177.3 94,132.6 0.75 
Federal Funds Purchased77.5 5,935.9 5.18 9.9 1,967.5 2.00 
Securities Sold under Agreements to Repurchase(2)
454.0 426.0 422.85 25.5 489.6 20.72 
Other Borrowings(6)
154.8 10,981.7 5.59 35.7 5,991.1 2.36 
Senior Notes44.1 2,713.2 6.44 28.6 2,969.6 3.79 
Long-Term Debt31.8 2,126.9 5.94 9.3 1,087.6 3.41 
Total Interest-Related Funds1,478.8 107,154.3 5.48 286.3 106,638.0 1.07 
Interest Rate Spread  0.55 — — 1.37 
Demand and Other Noninterest-Bearing Deposits 16,792.5  — 24,355.5 — 
Other Noninterest-Bearing Liabilities 4,718.2  — 4,473.1 — 
Stockholders’ Equity 11,536.6  — 10,935.6 — 
Total Liabilities and Stockholders’ Equity$ $140,201.6  %$— $146,402.2 — %
Net Interest Income/Margin (FTE Adjusted)$469.4 $ 1.45 %$525.3 $— 1.58 %
Net Interest Income/Margin (Unadjusted)$456.2 $ 1.41 %$513.0 $— 1.54 %
(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 $33.5 billion and $4.3 billion for the three months ended September 30, 2023 and 2022, respectively. Excluding the impact of netting for the three months ended September 30, 2023 and 2022, the average interest rate on Securities Purchased under Agreements to Resell would be approximately 5.34% and 2.16%, respectively. Excluding the impact of netting for the three months ended September 30, 2023 and 2022, the average interest rate on Securities Sold under Agreements to Repurchase would be approximately 5.30% and 2.11%, 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.


9

THIRD QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)
Net Interest Income (continued)
TABLE 14: ANALYSIS OF NET INTEREST INCOME CHANGES DUE TO VOLUME AND RATE(1)
(INTEREST AND RATE ON A FULLY TAXABLE EQUIVALENT BASIS)THREE MONTHS ENDED SEPTEMBER 30, 2023/2022
CHANGE DUE TO
(In Millions)AVERAGE BALANCEAVERAGE RATENET (DECREASE) INCREASE
Increase (Decrease) in Net Interest Income (FTE)
Federal Reserve and Other Central Bank Deposits$(3.7)$220.4 $216.7 
Interest-Bearing Due from and Deposits with Banks1.3 19.1 20.4 
Securities Purchased under Agreements to Resell(9.6)443.0 433.4 
Debt Securities
Available for Sale(18.5)145.8 127.3 
Held to Maturity2.8 35.3 38.1 
Total Debt Securities(15.7)181.1 165.4 
Loans and Leases6.9 277.7 284.6 
Other Interest-Earning Assets13.4 2.7 16.1 
Total Interest Income$(7.4)$1,144.0 $1,136.6 
Interest-Bearing Deposits
Savings, Money Market and Other$(18.4)$123.7 $105.3 
Savings Certificates and Other Time23.0 16.3 39.3 
Non-U.S. Offices - Interest-Bearing(46.5)441.2 394.7 
Total Interest-Bearing Deposits(41.9)581.2 539.3 
Federal Funds Purchased37.8 29.8 67.6 
Securities Sold under Agreements to Repurchase(3.7)432.2 428.5 
Other Borrowings45.1 74.0 119.1 
Senior Notes(2.6)18.1 15.5 
Long-Term Debt12.7 9.8 22.5 
Total Interest Expense$47.4 $1,145.1 $1,192.5 
Increase (Decrease) in Net Interest Income (FTE)$(54.8)$(1.1)$(55.9)
(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 $13.2 million and $12.3 million for the three months ended September 30, 2023 and 2022, 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 revenue on cash collateral positions is reported above in Interest-Bearing Due from and Deposits with Banks and in Loans and Leases. Interest Expense on cash collateral positions is reported above in Non-U.S. Offices Interest-Bearing Deposits. Related cash collateral received from and deposited with derivative counterparties is recorded net of the associated derivative contract in Other Assets and Other Liabilities, respectively.
Net Interest Income, stated on a FTE basis, decreased from the prior-year quarter, primarily due to lower average earning assets. Average earning assets decreased from the prior-year quarter, primarily due to lower client deposits, partially offset by increased borrowing activity.
The net interest margin on an FTE basis decreased from the prior-year quarter, primarily due to an unfavorable funding mix shift, partially offset by higher average interest rates.
Federal Reserve and Other Central Bank Deposits averaged $28.0 billion and decreased $2.5 billion, or 8%, from $30.5 billion in the prior-year quarter. Interest-Bearing Due from and Deposits with Banks averaged $4.3 billion and increased $0.3 billion, or 8%, from $4.0 billion in the prior-year quarter. Average Securities were $50.4 billion and decreased $3.2 billion, or 6%, from $53.6 billion in the prior-year quarter. Average Other Interest-Earning Assets include certain community development investments, collateral deposits with certain securities depositories and clearing houses, Federal Home Loan Bank stock, money market investments, and Federal Reserve stock of $904.6 million, $539.2 million, $385.7 million, $91.9 million, and $70.0 million, respectively, which are recorded in Other Assets on the consolidated balance sheets. Average taxable Securities were $47.4 billion in the current quarter and $50.9 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 $3.0 billion in the current quarter and $2.7 billion in the prior-year quarter.
Loans and Leases averaged $42.2 billion and increased $0.7 billion, or 2%, from $41.5 billion in the prior-year quarter, primarily reflecting higher levels of commercial real estate, private client, and commercial and institutional loans, partially offset by lower levels of non-U.S., and residential real estate loans. Commercial real estate loans averaged $5.0 billion and
10

THIRD QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)
Net Interest Income (continued)
increased $586.7 million, or 13%, from $4.4 billion for the prior-year quarter. Private client loans averaged $14.0 billion and increased $375.5 million, or 2.8%, from $13.6 billion for the prior-year quarter. Commercial and institutional loans averaged $12.4 billion and increased $39.3 million, or slightly, from $12.4 billion for the prior-year quarter. Non-U.S. loans averaged $3.4 billion and decreased $343.0 million, or 9%, from $3.7 billion for the prior-year quarter. Residential real estate loans averaged $6.4 billion and decreased $42.0 million, or 1%, from $6.4 billion for the prior-year quarter.
Northern Trust utilizes a diverse mix of funding sources. Average Interest-Bearing Deposits decreased $9.1 billion, or 10%, to an average of $85.0 billion in the current quarter from $94.1 billion in the prior-year quarter. Other average interest-related funding increased $9.7 billion, or 77%, to an average of $22.2 billion in the current quarter from $12.5 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.
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 69% and 68% of total average Interest-Bearing Deposits for the three months ended September 30, 2023 and 2022, respectively.
Provision for Credit Losses
There was a $14.0 million Provision for Credit Losses in the current quarter, as compared to a $0.5 million Provision for Credit Losses in the prior-year quarter. The provision in the current quarter was primarily due to an increase in the reserve evaluated on a collective basis, driven by a small number of large new loans and renewals and credit quality deterioration of certain CRE and C&I loans, partially offset by a net improvement in the overall macroeconomic outlook. 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 collective basis reserve, driven by a weaker macroeconomic outlook at the time, partially offset by improvements in credit quality mainly within the C&I portfolio.
Net recoveries in the current quarter were $0.3 million, reflecting $1.1 million of recoveries and $0.8 million of charge-offs. The prior-year quarter included $4.5 million of net charge-offs, reflecting $0.9 million of recoveries and $5.4 million of charge-offs.
For additional discussion of the allowance for credit losses, refer to the “Asset Quality” section in this MD&A.
Noninterest Expense
The components of Noninterest Expense are provided in the following table.
TABLE 15: NONINTEREST EXPENSE
THREE MONTHS ENDED SEPTEMBER 30,
($ In Millions)20232022CHANGE
Compensation$558.1 $553.3 $4.8 %
Employee Benefits100.8 109.9 (9.1)(8)
Outside Services229.6 220.9 8.7 
Equipment and Software232.5 212.4 20.1 
Occupancy58.7 51.3 7.4 14 
Other Operating Expense98.5 82.0 16.5 20 
Total Noninterest Expense$1,278.2 $1,229.8 $48.4 %
Compensation expense, the largest component of Noninterest Expense, increased compared to the prior-year quarter, primarily due to higher salary expense and unfavorable currency translation, partially offset by lower incentives.
Employee Benefits expense decreased compared to the prior-year quarter, primarily due to a $17.0 million pension settlement charge in the prior-year quarter, partially offset by smaller increases across various other benefit-related expense lines.
Outside Services expense increased compared to the prior-year quarter, primarily due to higher technical services and legal services, partially offset by lower consulting services.
Equipment and Software expense increased compared to the prior-year quarter, primarily due to higher software amortization and higher software costs, partially offset by a nonrecurring $4.1 million credit associated with computer maintenance and rental expense.
11

THIRD QUARTER CONSOLIDATED RESULTS OF OPERATIONS (continued)
Noninterest Expense (continued)
Occupancy expense increased compared to the prior-year quarter, primarily due to a $3.0 million charge related to early lease exits.
Other Operating Expense increased compared to the prior-year quarter, primarily due to higher supplemental compensation plan expense, higher account servicing activities, and an increase to the annual Federal Deposit Insurance Corporation assessment rate.
Provision for Income Taxes
Income tax expense for the three months ended September 30, 2023 was $106.5 million, representing an effective tax rate of 24.5%, compared to $129.7 million in the prior-year quarter, representing an effective tax rate of 24.7%.
The effective tax rate decreased compared to the prior-year quarter primarily due to a lower state tax provision following the resolution of certain state matters.
NINE-MONTH CONSOLIDATED RESULTS OF OPERATIONS
Overview of Financial Results
Net Income per diluted common share decreased in the current period to $4.56 from $5.43 in the comparable prior-year period. Net Income decreased $186.1 million, or 16%, to $994.2 million in the current period from $1.18 billion in the prior-year period. Annualized return on average common equity was 12.1% in the current period and 14.9% in the prior-year period. The annualized return on average assets was 0.92% in the current period compared to 1.02% in the prior-year period.
Revenue for the nine months ended September 30, 2023 decreased $14.0 million from $5.24 billion in the prior-year period to $5.23 billion in the current period. Trust, Investment and Other Servicing Fees decreased $118.7 million, or 4%, from $3.39 billion in the prior-year period to $3.27 billion in the current period, primarily driven by asset outflows and unfavorable lagged markets, partially offset by lower money market fund fee waivers. Other Noninterest Income decreased $41.5 million, or 8%, from $499.0 million in the prior-year period to $457.5 million in the current period, primarily driven by lower Foreign Exchange Trading Income, partially offset by higher Other Operating Income. Net Interest Income increased $146.2 million, or 11%, to $1.50 billion in the current period from $1.35 billion in the prior-year period, primarily due to higher average interest rates, partially offset by lower average earning assets.
There was a $13.5 million Provision for Credit Losses in the current period, as compared to a $7.0 million Provision for Credit Losses in the prior-year period. The provision was primarily due to an increase in the collective basis reserve, driven by new loans and renewals in the CRE portfolio and expectations of higher economic stress in the CRE market, particularly office CRE, partially offset by a net improvement in the overall macroeconomic outlook and lower loss projections for certain large C&I loans. The reserve evaluated on a collective basis relates to pooled financial assets sharing similar risk characteristics.
Noninterest Expense increased $236.4 million, or 6%, from $3.66 billion in the prior-year period to $3.90 billion in the current period, primarily attributable to higher Compensation, Equipment and Software, and Other Operating Expense.
The Provision for Income Taxes for the nine months ended September 30, 2023 totaled $324.8 million, representing an effective tax rate of 24.6%. The Provision for Income Taxes for the nine months ended September 30, 2022 totaled $395.6 million, representing an effective tax rate of 25.1%. The effective tax rate decreased compared to the prior-year period primarily due to a decrease in pretax earnings and a higher level of tax benefits from tax-credit investments and tax-exempt income, partially offset by lower tax benefits from share-based compensation.







12

NINE-MONTH CONSOLIDATED RESULTS OF OPERATIONS (continued)
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. Northern Trust voluntarily waived $6.5 million of money market fund fees for the nine months ended September 30, 2023 as compared to $61.9 million for the nine months ended September 30, 2022. The components of Trust, Investment and Other Servicing Fees are provided in the table below.
TABLE 16: TRUST, INVESTMENT AND OTHER SERVICING FEES
NINE MONTHS ENDED SEPTEMBER 30,
($ In Millions)20232022CHANGE
Asset Servicing Trust, Investment and Other Servicing Fees
Custody and Fund Administration$1,269.1 $1,293.8 $(24.7)(2)%
Investment Management397.4 431.3 (33.9)(8)
Securities Lending61.0 62.1 (1.1)(2)
Other122.7 121.1 1.6 
Total Asset Servicing Trust, Investment and Other Servicing Fees$1,850.2 $1,908.3 $(58.1)(3)%
Wealth Management Trust, Investment and Other Servicing Fees
Central$501.9 $530.4 $(28.5)(5)%
East370.0 386.2 (16.2)(4)
West280.7 292.6 (11.9)(4)
Global Family Office269.0 273.0 (4.0)(1)
Total Wealth Management Trust, Investment and Other Servicing Fees$1,421.6 $1,482.2 $(60.6)(4)%
Total Consolidated Trust, Investment and Other Servicing Fees$3,271.8 $3,390.5 $(118.7)(4)%
Asset Servicing
Custody and Fund Administration fees, the largest component of Asset Servicing fees, decreased from the prior-year period, primarily driven by unfavorable lagged markets. Investment Management fees decreased from the prior-year period, primarily due to asset outflows and unfavorable lagged markets, partially offset by lower money market fund fee waivers.
Wealth Management
Fee income in the regions (Central, East and West) decreased from the prior-year period, primarily due to product-related asset outflows and unfavorable lagged markets, partially offset by lower money market fund fee waivers. Global Family Office fee income decreased from the prior-year period, primarily due to unfavorable lagged markets, partially offset by lower money market fund fee waivers and asset inflows.
Other Noninterest Income
The components of other noninterest income are provided in the following table.
TABLE 17: OTHER NONINTEREST INCOME
NINE MONTHS ENDED SEPTEMBER 30,
($ In Millions)20232022CHANGE
Foreign Exchange Trading Income$154.9 $223.2 $(68.3)(31)%
Treasury Management Fees23.8 31.0 (7.2)(23)
Security Commissions and Trading Income101.7 101.1 0.6 
Other Operating Income170.2 144.0 26.2 18 
Investment Security Gains (Losses), net6.9 (0.3)7.2 N/M
Total Other Noninterest Income$457.5 $499.0 $(41.5)(8)%
N/M - Not meaningful
Foreign Exchange Trading Income decreased from the prior-year period, primarily due to lower client volumes and an unfavorable impact from foreign exchange swap activity.
Treasury Management Fees decreased from the prior-year period, primarily due to an increase in the earnings credit rate applied to client balances.
Other Operating Income increased from the prior-year period, primarily driven by higher income associated with a market value increase in supplemental compensation plans and increased income from banking and credit-related service fees.
Investment Security Gains (Losses), net included a $6.9 million gain upon sale of certain available for sale debt securities in the current-year period.
13

NINE-MONTH CONSOLIDATED RESULTS OF OPERATIONS (continued)
Net Interest Income
The following tables present an analysis of average daily balances and interest rate changes affecting Net Interest Income and an analysis of Net Interest Income changes.
TABLE 18: AVERAGE CONSOLIDATED BALANCE SHEETS WITH ANALYSIS OF NET INTEREST INCOME
(INTEREST AND RATE ON A FULLY TAXABLE EQUIVALENT BASIS)NINE MONTHS ENDED SEPTEMBER 30,
20232022
($ In Millions)INTERESTAVERAGE BALANCE
AVERAGE
RATE(7)
INTERESTAVERAGE BALANCE
AVERAGE
RATE(7)
Interest-Earning Assets
Federal Reserve and Other Central Bank Deposits$1,128.0 $32,976.0 4.57 %$212.2 $37,426.1 0.76 %
Interest-Bearing Due from and Deposits with Banks(1)
95.2 4,358.2 2.92 23.6 4,194.6 0.75 
Federal Funds Sold0.3 7.9 4.89 — 2.7 2.02 
Securities Purchased under Agreements to Resell(2)
874.1 1,078.2 108.40 38.4 1,039.4 4.94 
Debt Securities
Available for Sale767.3 24,655.4 4.16 409.2 33,852.1 1.62 
Held to Maturity341.5 25,453.6 1.79 192.6 22,240.3 1.16 
Trading Account0.1 0.6 14.27 0.1 0.6 12.22 
Total Debt Securities1,108.9 50,109.6 2.96 601.9 56,093.0 1.43 
Loans and Leases(3)
1,885.5 42,179.2 5.98 829.7 40,593.0 2.73 
Other Interest-Earning Assets(4)
72.9 2,038.7 4.78 31.9 1,192.1 3.58 
Total Interest-Earning Assets5,164.9 132,747.8 5.20 1,737.7 140,540.9 1.65 
Cash and Due from Banks and Other Central Bank Deposits(5)
 1,777.3  — 2,169.2 — 
Other Noninterest-Earning Assets 10,166.5  — 11,442.0 — 
Total Assets$ $144,691.6  %$— $154,152.1 — %
Average Source of Funds
Deposits
Savings, Money Market and Other$484.7 $24,268.0 2.67 %$90.6 $30,783.4 0.39 %
Savings Certificates and Other Time96.9 3,025.2 4.28 6.2 874.0 0.95 
Non-U.S. Offices — Interest-Bearing1,333.1 61,032.3 2.92 87.8 65,370.8 0.18 
Total Interest-Bearing Deposits1,914.7 88,325.5 2.90 184.6 97,028.2 0.25 
Federal Funds Purchased205.2 5,561.6 4.93 12.7 970.7 1.75 
Securities Sold under Agreements to Repurchase(2)
843.5 413.9 272.45 31.8 447.5 9.51 
Other Borrowings(6)
446.3 11,478.1 5.20 47.2 4,631.4 1.36 
Senior Notes125.4 2,740.7 6.12 57.1 2,767.6 2.75 
Long-Term Debt91.4 2,087.9 5.85 21.5 1,103.9 2.60 
Total Interest-Related Funds3,626.5 110,607.7 4.38 354.9 106,949.3 0.44 
Interest Rate Spread  0.82 — — 1.21 
Demand and Other Noninterest-Bearing Deposits 18,152.2  — 31,692.5 — 
Other Noninterest-Bearing Liabilities 4,508.5  — 4,394.5 — 
Stockholders’ Equity 11,423.2  — 11,115.8 — 
Total Liabilities and Stockholders’ Equity$ $144,691.6  %$— $154,152.1 — %
Net Interest Income/Margin (FTE Adjusted)$1,538.4 $ 1.55 %$1,382.8 $— 1.32 %
Net Interest Income/Margin (Unadjusted)$1,498.9 $ 1.51 %$1,352.7 $— 1.29 %
(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 $21.7 billion and $2.8 billion for the nine months ended September 30, 2023 and 2022, respectively. Excluding the impact of netting for the nine months ended September 30, 2023 and 2022, the average interest rate on Securities Purchased under Agreements to Resell would be approximately 5.13% and 1.35%, respectively. Excluding the impact of netting for the nine months ended September 30, 2023 and 2022, the average interest rate on Securities Sold under Agreements to Repurchase would be approximately 5.10% and 1.32%, 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.

14

NINE-MONTH CONSOLIDATED RESULTS OF OPERATIONS (continued)
Net Interest Income (continued)

TABLE 19: ANALYSIS OF NET INTEREST INCOME CHANGES DUE TO VOLUME AND RATE(1)
(INTEREST AND RATE ON A FULLY TAXABLE EQUIVALENT BASIS)NINE MONTHS ENDED SEPTEMBER 30, 2023/2022
CHANGE DUE TO
(In Millions)AVERAGE BALANCEAVERAGE
 RATE
NET (DECREASE) INCREASE
Increase (Decrease) in Net Interest Income (FTE)
Federal Reserve and Other Central Bank Deposits$(94.4)$1,010.2 $915.8 
Interest-Bearing Due from and Deposits with Banks0.9 70.7 71.6 
Federal Funds Sold0.2 0.1 0.3 
Securities Purchased under Agreements to Resell1.5 834.2 835.7 
Debt Securities
Available For Sale(104.6)462.7 358.1 
Held To Maturity31.4 117.5 148.9 
Total Debt Securities(73.2)580.2 507.0 
Loans and Leases29.2 1,026.6 1,055.8 
Other Interest-Earning Assets27.9 13.1 41.0 
Total Interest Income$(107.9)$3,535.1 $3,427.2 
Interest-Bearing Deposits
Savings, Money Market and Other$(165.1)$559.2 $394.1 
Savings Certificates and Other Time37.4 53.3 90.7 
Non-U.S. Offices - Interest-Bearing(6.2)1,251.5 1,245.3 
Total Interest-Bearing Deposits(133.9)1,864.0 1,730.1 
Federal Funds Purchased139.1 53.4 192.5 
Securities Sold under Agreements to Repurchase(2.6)814.3 811.7 
Other Borrowings137.5 261.6 399.1 
Senior Notes(0.6)68.9 68.3 
Long-Term Debt29.1 40.8 69.9 
Total Interest Expense$168.6 $3,103.0 $3,271.6 
(Decrease) Increase in Net Interest Income (FTE)$(276.5)$432.1 $155.6 
(1)     Changes not due solely to average balance changes or rate changes are allocated proportionately to average balance and rate based on their relative absolute magnitudes.
Notes:    Net Interest Income (FTE Adjusted), a non-GAAP financial measure, includes adjustments to a fully taxable equivalent basis for loans and securities. The adjustments are based on a federal income tax rate of 21.0%, where the rate is adjusted for applicable state income taxes, net of related federal tax benefit. Total taxable equivalent interest adjustments amounted to $39.5 million and $30.1 million for the nine months ended September 30, 2023 and 2022, 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 revenue on cash collateral positions is reported above within Interest-Bearing Due from and Deposits with Banks and within Loans and Leases. Interest expense on cash collateral positions is reported above within Non-U.S. Offices Interest-Bearing Deposits. Related cash collateral received from and deposited with derivative counterparties is recorded net of the associated derivative contract within Other Assets and Other Liabilities, respectively.
Net Interest Income, stated on an FTE basis, increased from the prior-year period, primarily due to higher average interest rates, partially offset by lower average earning assets. Average earning assets decreased from the prior-year period, primarily due to lower client deposits, partially offset by increased borrowing activity.
The net interest margin on an FTE basis increased from the prior-year period, primarily due to higher average interest rates, partially offset by unfavorable funding mix shift.
Federal Reserve and Other Central Bank Deposits averaged $33.0 billion and decreased $4.5 billion, or 12%, from $37.4 billion in the prior-year period. Average Securities were $50.1 billion and decreased $6.0 billion, or 11%, from $56.1 billion in the prior-year period. Average Other Interest-Earning Assets include certain community development investments, Federal Home Loan Bank stock, collateral deposits with certain securities depositories and clearing houses, money market investments, and Federal Reserve stock of $902.8 million, $379.2 million, $358.5 million, $81.8 million and $70.0 million, respectively, which are recorded in Other Assets on the consolidated balance sheets. Average taxable Securities were $47.1 billion in the current period and $53.5 billion in the prior-year period. Average nontaxable Securities, which represent securities that are primarily exempt from U.S. federal and state income taxes, were $3.0 billion in the current period and $2.6 billion in the prior-year period. Interest-Bearing Due from and Deposits with Banks averaged $4.4 billion in the current period and $4.2 billion in the prior-year period.
Loans and leases averaged $42.2 billion and increased $1.7 billion, or 4%, from $40.6 billion in the prior-year period, primarily reflecting higher levels of commercial real estate, commercial and institutional, non-U.S., residential real estate, and private client loans. Commercial real estate loans averaged $4.9 billion and increased $599.0 million, or 14%, from $4.3 billion for the prior-year period. Commercial and institutional loans averaged $12.6 billion and increased $480.9 million, or 4%, from $12.1
15

NINE-MONTH CONSOLIDATED RESULTS OF OPERATIONS (continued)
Net Interest Income (continued)

billion for the prior-year period. Non-U.S. loans averaged $3.4 billion and increased $117.2 million, or 4%, from $3.3 billion for the prior-year period. Residential real estate loans averaged $6.4 billion and increased $75.7 million, or 1%, from $6.3 billion for the prior-year period. Private client loans averaged $13.9 billion and increased $45.6 million from $13.8 billion for the prior-year period.
Northern Trust utilizes a diverse mix of funding sources. Average Interest-Bearing Deposits decreased $8.7 billion, or 9%, to an average of $88.3 billion in the current period from $97.0 billion in the prior-year period. Other average interest-related funding increased $12.4 billion, to an average of $22.3 billion in the current period from $9.9 billion in the prior-year period. The balances within short-term borrowing classifications vary based on funding requirements and strategies, interest rate levels, changes in the volume of lower-cost deposit sources, and the availability of collateral to secure these borrowings.
Interest expense for Interest-Bearing Deposits in the current period was driven by higher interest rates. Average non-U.S. offices interest-bearing deposits comprised 69% and 67% of total average interest-bearing deposits for the nine months ended September 30, 2023 and 2022, respectively.
Provision for Credit Losses
There was a $13.5 million Provision for Credit Losses for the nine months ended September 30, 2023, as compared to a $7.0 million provision in the prior-year period. The provision was primarily due to an increase in the collective basis reserve, driven by new loans and renewals in the CRE portfolio and expectations of higher economic stress in the CRE market, particularly office CRE, partially offset by a net improvement in the overall macroeconomic outlook and lower loss projections for certain large C&I loans. The reserve evaluated on a collective basis relates to pooled financial assets sharing similar risk characteristics.
The provision in the prior-year period was primarily due to an increase in the collective basis reserve, partially offset by net recoveries during the prior-year period. The increase in the collective basis reserve was driven by a weaker macroeconomic outlook at the time, partially offset by improvements in credit quality mainly within the C&I and CRE portfolios.
Net charge-offs in the current-year period totaled $2.6 million resulting from $5.6 million of charge-offs and $3.0 million of recoveries, compared to net recoveries of $4.2 million in the prior-year period resulting from $5.5 million of charge-offs and $9.7 million of recoveries.
For additional discussion of the allowance for credit losses, refer to the “Asset Quality” section in this MD&A.
Noninterest Expense
The components of Noninterest Expense are provided in the following table.
TABLE 20: NONINTEREST EXPENSE
NINE MONTHS ENDED SEPTEMBER 30,
($ In Millions)20232022CHANGE
Compensation$1,757.8 $1,663.7 $94.1 %
Employee Benefits303.2 333.8 (30.6)(9)
Outside Services671.3 647.4 23.9 
Equipment and Software693.5 609.4 84.1 14 
Occupancy173.8 153.4 20.4 13 
Other Operating Expense296.1 251.6 44.5 18 
Total Noninterest Expense$3,895.7 $3,659.3 $236.4 %
Compensation expense, the largest component of Noninterest Expense increased compared to the prior-year period, primarily due to higher salary expense and $36.7 million of severance-related charges, partially offset by lower incentives.
Employee Benefits expense decreased compared to the prior-year period, primarily due to a U.S. Qualified Plan pension settlement charge of $37.3 million in the prior-year period, partially offset by higher payroll taxes.
Outside Services expense increased compared to the prior-year period, primarily reflecting higher technical services and higher legal services, partially offset by lower consulting services and lower subcustodian expense.
Equipment and Software expense increased compared to the prior-year period, primarily due to higher software amortization and higher software costs.
16

NINE-MONTH CONSOLIDATED RESULTS OF OPERATIONS (continued)
Noninterest Expense (continued)

Occupancy expense increased compared to the prior-year period, primarily due to a $12.8 million charge related to early lease exits.
Other Operating Expense increased compared to the prior-year period,    primarily due to a $25.6 million charge related to the write-off of an investment in a client capability and higher supplemental compensation plan expense.
Provision for Income Taxes
Income tax expense for the nine months ended September 30, 2023 was $324.8 million, representing an effective tax rate of 24.6%, compared to $395.6 million for the nine months ended September 30, 2022, representing an effective tax rate of 25.1%.
The effective tax rate decreased compared to the prior-year period primarily due to a decrease in pretax earnings and a higher level of tax benefits from tax-credit investments and tax-exempt income, partially offset by lower tax benefits from share-based compensation.
REPORTING SEGMENTS
Northern Trust is organized around its two client-focused reporting segments: Asset Servicing and Wealth Management. Asset management and related services are provided to Asset Servicing and Wealth Management clients primarily by the Asset Management business. The revenue and expenses of Asset Management and certain other support functions are allocated fully to Asset Servicing and Wealth Management.
Reporting segment financial information, presented on an internal management reporting basis, is determined by accounting systems used to allocate revenue and expense to each segment, and incorporates processes for allocating assets, liabilities, equity and the applicable interest income and expense utilizing a funds transfer pricing (FTP) methodology. Under the methodology, assets and liabilities receive a funding charge or credit that considers interest rate risk, liquidity risk, and other product characteristics on an instrument level. Additionally, segment information is presented on an FTE basis as management believes an FTE presentation provides a clearer indication of net interest income. The adjustment to an FTE basis has no impact on Net Income.
Revenues, expenses and average assets are allocated to Asset Servicing and Wealth Management, with the exception of non-recurring activities such as certain costs associated with acquisitions, divestitures, litigation, restructuring, and tax adjustments not directly attributable to a specific reporting segment.
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.
17

REPORTING SEGMENTS (continued)
The following table presents the earnings contributions and average assets of Northern Trust’s reporting segments for the three- and nine-month periods ended September 30, 2023 and 2022.
TABLE 21: RESULTS OF REPORTING SEGMENTS
($ In Millions)ASSET SERVICINGWEALTH MANAGEMENTOTHERRECONCILING ITEMSTOTAL CONSOLIDATED
THREE MONTHS ENDED SEPTEMBER 30,2023202220232022202320222023202220232022
Noninterest Income
Trust, Investment and Other Servicing Fees$626.0 $603.2 $485.9 $475.5 $ $— $ $— $1,111.9 $1,078.7 
Foreign Exchange Trading Income (Loss)54.3 63.7 (2.5)1.0  —  — 51.8 64.7 
Other Noninterest Income (Loss)66.1 62.5 38.1 37.0 2.4 (1.1) — 106.6 98.4 
Total Noninterest Income (Loss)746.4 729.4 521.5 513.5 2.4 (1.1) — 1,270.3 1,241.8 
Net Interest Income281.2 303.3 188.2 222.0  — (13.2)(12.3)456.2 513.0 
Revenue1,027.6 1,032.7 709.7 735.5 2.4 (1.1)(13.2)(12.3)1,726.5 1,754.8 
Provision for (Release of) Credit Losses3.1 (5.1)10.9 5.6  —  — 14.0 0.5 
Noninterest Expense809.3 760.4 456.9 449.0 12.0 20.4  — 1,278.2 1,229.8 
Income before Income Taxes215.2 277.4 241.9 280.9 (9.6)(21.5)(13.2)(12.3)434.3 524.5 
Provision for Income Taxes54.3 67.7 67.7 79.6 (2.3)(5.3)(13.2)(12.3)106.5 129.7 
Net Income$160.9 $209.7 $174.2 $201.3 $(7.3)$(16.2)$ $— $327.8 $394.8 
Percentage of Consolidated Net Income49 %53 %53 %51 %(2)%(4)%N/AN/A100 %100 %
Average Assets$108,656.7 $109,677.2 $31,544.9 $36,725.0 $ $— N/AN/A$140,201.6 $146,402.2 
($ In Millions)ASSET SERVICINGWEALTH MANAGEMENTOTHERRECONCILING ITEMSTOTAL CONSOLIDATED
NINE MONTHS ENDED SEPTEMBER 30,2023202220232022202320222023202220232022
Noninterest Income
Trust, Investment and Other Servicing Fees$1,850.2 $1,908.4 $1,421.6 $1,482.1 $ $— $ $ $3,271.8 $3,390.5 
Foreign Exchange Trading Income (Loss)161.2 215.9 (6.3)7.3  —   154.9 223.2 
Other Noninterest Income (Loss)199.0 185.4 112.8 101.6 (9.2)(11.2)  302.6 275.8 
Total Noninterest Income (Loss)2,210.4 2,309.7 1,528.1 1,591.0 (9.2)(11.2)  3,729.3 3,889.5 
Net Interest Income902.6 748.5 635.8 634.3  — (39.5)(30.1)1,498.9 1,352.7 
Revenue3,113.0 3,058.2 2,163.9 2,225.3 (9.2)(11.2)(39.5)(30.1)5,228.2 5,242.2 
Provision for (Release of) Credit Losses(3.3)3.8 16.8 3.2  —  — 13.5 7.0 
Noninterest Expense2,459.7 2,269.4 1,402.4 1,333.2 33.6 56.7  — 3,895.7 3,659.3 
Income before Income Taxes656.6 785.0 744.7 888.9 (42.8)(67.9)(39.5)(30.1)1,319.0 1,575.9 
Provision for Income Taxes167.4 194.0 207.5 248.6 (10.6)(16.9)(39.5)(30.1)324.8 395.6 
Net Income$489.2 $591.0 $537.2 $640.3 $(32.2)$(51.0)$ $— $994.2 $1,180.3 
Percentage of Consolidated Net Income49 %50 %54 %54 %(3)%(4)%N/AN/A100 %100 %
Average Assets$110,380.4 $117,251.0 $34,311.2 $36,901.1 $ $— N/AN/A$144,691.6 $154,152.1 
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.

18

REPORTING SEGMENTS (continued)
Asset Servicing
Asset Servicing Net Income
For the quarter ended September 30, 2023, Net Income decreased $48.8 million, or 23%, from the prior-year quarter, primarily reflecting higher Noninterest Expense.
For the nine months ended September 30, 2023, Net Income decreased $101.8 million, or 17%, from the prior-year period, primarily reflecting higher Noninterest Expense and lower Trust, Investment and Other Servicing Fees, partially offset by higher Net Interest Income.
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 three and nine months ended September 30, 2023, Foreign Exchange Trading Income decreased $9.4 million, or 15%, from the prior-year quarter and decreased $54.7 million, or 25%, from the prior-year period, respectively, in each case primarily driven by lower client volumes and an unfavorable impact from foreign exchange swap activity within Treasury.
Asset Servicing Other Noninterest Income
For the quarter ended September 30, 2023, Other Noninterest Income increased $3.6 million, or 6%, from the prior-year quarter, primarily due to higher Other Operating Income.
For the nine months ended September 30, 2023, Other Noninterest Income increased $13.6 million, or 7%, from the prior-year period, primarily due to higher allocations.
Asset Servicing Net Interest Income
For the quarter ended September 30, 2023, Net Interest Income stated on an FTE basis decreased $22.1 million, or 7%, from the prior-year quarter, primarily due to higher funding costs and lower deposit balances.
For the nine months ended September 30, 2023, Net Interest Income stated on an FTE basis increased $154.1 million, or 21%, from the prior-year period, primarily due to higher average interest rates.
Average earning assets increased $1.1 billion, or 1%, to $99.5 billion in the current quarter from $98.4 billion in the prior-year quarter, primarily due to increased borrowing activity. Average earning assets decreased $5.3 billion, or 5%, to $101.2 billion for the nine months ended September 30, 2023 from $106.5 billion in the prior-year period, primarily due to lower client deposits, partially offset by increased borrowing activity.
Asset Servicing Provision for Credit Losses
For the quarter ended September 30, 2023, there was a $3.1 million Provision for Credit Losses compared to a $5.1 million release of credit reserves in the prior-year quarter. The provision was primarily due to an increase in the reserve evaluated on a collective basis, driven by a small number of large new loans and renewals and credit quality deterioration of certain C&I loans, partially offset by a net improvement in the overall macroeconomic outlook.
For the nine months ended September 30, 2023, there was a $3.3 million release of credit reserves compared to a $3.8 million Provision for Credit Losses in the prior-year period. The release of credit reserves was primarily due to a decrease in the reserve evaluated on a collective basis, driven by a net improvement in the overall macroeconomic outlook and lower loss projections for certain large C&I loans.
Asset Servicing Noninterest Expense
For the three and nine months ended September 30, 2023, 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 $48.9 million, or 6%, from the prior-year quarter, and increased $190.3 million, or 8%, from the prior-year period, in each case primarily due to higher expense allocations.
Wealth Management
Wealth Management Net Income
For the quarter ended September 30, 2023, Net Income decreased $27.1 million, or 13%, from the prior-year quarter, primarily due to lower Net Interest Income.
For the nine months ended September 30, 2023, Net Income decreased $103.1 million, or 16%, from the prior-year period, primarily reflecting higher Noninterest Expense and lower Trust, Investment and Other Servicing Fees, partially offset by a lower Provision for Income Taxes.
19

REPORTING SEGMENTS (continued)
Wealth Management (continued)
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 Foreign Exchange Trading Income
For the quarter ended September 30, 2023, Foreign Exchange Trading Income decreased $3.5 million from the prior-year quarter, primarily driven by lower client volumes and an unfavorable impact from foreign exchange swap activity within Treasury.
For the nine months ended September 30, 2023, Foreign Exchange Trading Income decreased $13.6 million from the prior-year period, primarily driven by allocations.
Wealth Management Other Noninterest Income
For the nine months ended September 30, 2023, Other Noninterest Income increased $11.2 million, or 11%, from the prior-year period, primarily due to higher income allocations.
Wealth Management Net Interest Income
For the quarter ended September 30, 2023, Net Interest Income stated on an FTE basis decreased $33.8 million, or 15%, from the prior-year quarter, primarily due to higher funding costs and lower average earning assets.
Average earning assets decreased $5.0 billion, or 15%, to $28.7 billion in the current quarter from $33.7 billion in the prior-year quarter and decreased $2.5 billion, or 7%, to $31.6 billion for the nine months ended September 30, 2023 from $34.0 billion in the prior-year period. Average earning assets decreased in Wealth Management for the three and nine months ended September 30, 2023 primarily due to lower client deposits.
Wealth Management Provision for Credit Losses
For the quarter ended September 30, 2023, there was a $10.9 million Provision for Credit Losses compared to a $5.6 million Provision for Credit Losses in the prior-year quarter. The provision reflected an increase in the reserve evaluated on a collective basis, driven by expectations of higher economic stress in the CRE market and a small number of large new loans and renewals.
For the nine months ended September 30, 2023, there was a $16.8 million Provision for Credit Losses compared to a $3.2 million Provision for Credit Losses in the prior-year period. The provision was driven by an increase in the reserve evaluated on a collective basis, primarily due to new loans and renewals in the CRE portfolio and expectations of higher economic stress in the CRE market, partially offset by a net improvement in the overall macroeconomic outlook and lower loss projections for certain large C&I loans.
Wealth Management Noninterest Expense
For the quarter ended September 30, 2023, 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 $7.9 million, or 2%, from the prior-year quarter and increased $69.2 million, or 5%, from the prior-year period, in each case primarily reflecting higher expense allocations.
Other
Other—Noninterest Income
For the quarter ended September 30, 2023, Other Noninterest Income increased $3.5 million from the prior-year quarter, primarily due to higher income for existing swap agreements related to Visa Inc. Class B common shares.
Other—Noninterest Expense
For the quarter ended September 30, 2023, Other Noninterest Expense decreased $8.4 million, or 41%, from the prior-year quarter, primarily due to a $17.0 million pension settlement charge in the prior-year quarter, partially offset by higher non-allocated occupancy expense primarily arising from early lease exits.
For the nine months ended September 30, 2023, Other Noninterest Expense decreased $23.1 million, or 41%, from the prior-year period, primarily due to a $37.3 million pension settlement charge in the prior-year period and other miscellaneous expense in the prior-year period, partially offset by higher non-allocated occupancy expense primarily arising from early lease exits.
20

CONSOLIDATED BALANCE SHEETS
The following tables summarize selected consolidated balance sheet information.
TABLE 22: SELECT CONSOLIDATED BALANCE SHEET INFORMATION
($ In Billions)SEPTEMBER 30, 2023DECEMBER 31, 2022CHANGE
Assets
Federal Reserve and Other Central Bank Deposits$32.3 $40.0 $(7.7)(19)%
Interest-Bearing Due from and Deposits with Banks(1)
5.2 4.9 0.3 
Securities Purchased under Agreements to Resell0.4 1.1 (0.7)(64)
Total Debt Securities49.3 51.8 (2.5)(5)
Loans43.6 42.9 0.7 
Other Interest-Earning Assets(2)
3.3 1.8 1.5 89 
Total Earning Assets134.1 142.5 (8.4)(6)
Total Assets146.3 155.0 (8.7)(6)
Liabilities and Stockholders' Equity
Total Interest-Bearing Deposits89.2 98.6 (9.4)(9)
Demand and Other Noninterest-Bearing Deposits20.9 25.3 (4.4)(17)
Federal Funds Purchased5.5 1.9 3.6 N/M
Securities Sold under Agreements to Repurchase0.5 0.6 (0.1)(4)
Other Borrowings(3)
6.9 7.6 (0.7)(10)
Total Stockholders’ Equity11.8 11.3 0.5 
(1)    Interest-Bearing Due from and Deposits with Banks includes the interest-bearing component of Cash and Due from Banks and Interest-Bearing Deposits with Banks as presented on the consolidated balance sheets.
(2)    Other Interest-Earning Assets includes certain community development investments, collateral deposits with certain securities depositories and clearing houses, Federal Home Loan Bank and Federal Reserve stock, and money market investments which are classified in Other Assets on the consolidated balance sheets.
(3)    Other Borrowings primarily includes advances from the Federal Home Loan Bank of Chicago.
N/M - Not meaningful
TABLE 23: SELECT AVERAGE CONSOLIDATED BALANCE SHEET INFORMATION
THREE MONTHS ENDED SEPTEMBER 30,NINE MONTHS ENDED SEPTEMBER 30,
($ In Billions)20232022CHANGE20232022CHANGE
Assets
Federal Reserve and Other Central Bank Deposits$28.0 $30.5 $(2.5)(8)%$33.0 $37.4 $(4.4)(12)%
Interest-Bearing Due from and Deposits with Banks(1)
4.3 4.0 0.3 4.4 4.2 0.2 
Securities Purchased under Agreements to Resell1.0 1.3 (0.3)(25)1.1 1.0 0.1 
Total Debt Securities50.4 53.6 (3.2)(6)50.1 56.1 (6.0)(11)
Loans and Leases42.2 41.5 0.7 42.2 40.5 1.7 
Other Interest-Earning Assets(2)
2.4 1.3 1.1 92 2.0 1.3 0.7 71 
Total Earning Assets128.3 132.2 (3.9)(3)132.8 140.5 (7.7)(6)
Total Assets140.2 146.4 (6.2)(4)144.7 154.2 (9.5)(6)
Liabilities and Stockholders' Equity
Total Interest-Bearing Deposits85.0 94.1 (9.1)(10)88.3 97.0 (8.7)(9)
Demand and Other Noninterest-Bearing Deposits16.8 24.4 (7.6)(31)18.2 31.7 (13.5)(43)
Federal Funds Purchased5.9 2.0 3.9 N/M5.6 1.0 4.6 N/M
Securities Sold under Agreements to Repurchase0.4 0.5 (0.1)(13)0.4 0.4 — (8)
Other Borrowings(3)
11.0 6.0 5.0 83 11.5 4.6 6.9 148 
Total Stockholders’ Equity11.5 10.9 0.6 11.4 11.1 0.3 
(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.
N/M - Not meaningful
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 and prior-year period, primarily due to lower client deposits, partially offset by higher borrowing activity.
Select Earning Assets. Average securities decreased from the prior-year quarter and prior-year period, reflecting the impact of repositioning and reinvesting in short-term securities that will mature usually in one year or less. For additional discussion
21

CONSOLIDATED BALANCE SHEETS (continued)
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 and Demand and Other Noninterest-Bearing Deposits decreased from the prior-year quarter and prior-year period 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 increase in average Other Borrowings from the prior-year quarter and prior-year period was primarily due to strategic utilization of balance sheet capacity.
Stockholders’ Equity. During the three and nine months ended September 30, 2023, the Corporation declared cash dividends totaling $157.6 million and $474.0 million to common stockholders, and cash dividends totaling $16.2 million and $37.1 million to preferred stockholders, respectively. During the three and nine months ended September 30, 2022, the Corporation declared cash dividends totaling $158.4 million and $454.2 million to common stockholders, and cash dividends totaling $16.2 million and $37.1 million to preferred stockholders, respectively.
For the three and nine months ended September 30, 2023, the Corporation repurchased 14,738 and 2,426,793 shares of common stock, respectively, at a total cost of $1.1 million ($77.39 average price per share) and $201.3 million ($82.95 average price per share), respectively, including 14,738 and 356,145 shares, respectively, withheld to satisfy tax withholding obligations related to share-based compensation.
For the three and nine months ended September 30, 2022, the Corporation repurchased 11,080 and 309,334 shares of common stock, respectively, at a total cost of $1.2 million ($96.43 average price per share) and $35.2 million ($113.89 average price per share), respectively, all of which were shares withheld to satisfy tax withholding obligations related to share-based compensation.
ASSET QUALITY
Securities Portfolio
Northern Trust maintains a high quality debt securities portfolio. Debt securities not explicitly rated were grouped where possible under the credit rating of the issuer of the security. The following tables provide the fair value of available for sale (AFS) debt securities and amortized cost of held to maturity (HTM) debt securities by credit rating.
TABLE 24: FAIR VALUE OF AVAILABLE FOR SALE DEBT SECURITIES BY CREDIT RATING
SEPTEMBER 30, 2023
($ In Millions)AAAAAABBBNOT RATEDTOTAL
U.S. Government$2,879.4 $ $ $ $ $2,879.4 
Obligations of States and Political Subdivisions36.1 246.0    282.1 
Government Sponsored Agency11,656.8     11,656.8 
Non-U.S. Government246.9     246.9 
Corporate Debt82.6 82.3 202.2  13.8 380.9 
Covered Bonds259.6  20.8   280.4 
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds2,289.0 403.0 267.8   2,959.8 
Other Asset-Backed4,771.5     4,771.5 
Commercial Mortgage-Backed884.3     884.3 
Total$23,106.2 $731.3 $490.8 $ $13.8 $24,342.1 
Percent of Total95 %3 %2 % % %100 %
22

ASSET QUALITY (continued)
Securities Portfolio (continued)
DECEMBER 31, 2022
($ In Millions)AAAAAABBBNOT RATEDTOTAL
U.S. Government$2,747.4 $— $— $— $— $2,747.4 
Obligations of States and Political Subdivisions136.4 651.2 — — — 787.6 
Government Sponsored Agency11,545.2 — — — — 11,545.2 
Non-U.S. Government360.0 — — — — 360.0 
Corporate Debt302.5 462.6 938.7 19.6 24.2 1,747.6 
Covered Bonds367.0 — 21.7 — — 388.7 
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds1,816.3 451.5 211.6 — — 2,479.4 
Other Asset-Backed5,256.2 — — — — 5,256.2 
Commercial Mortgage-Backed1,387.8 — — — — 1,387.8 
Total$23,918.8 $1,565.3 $1,172.0 $19.6 $24.2 $26,699.9 
Percent of Total90 %%%— %— %100 %
As of both September 30, 2023 and December 31, 2022, the less than 1% of AFS debt securities not rated by Moody’s Investors Service, Inc. (Moody’s), S&P Global Ratings (S&P Global) or Fitch Ratings, Inc. (Fitch Ratings) consisted of corporate debt securities.
TABLE 25: AMORTIZED COST OF HELD TO MATURITY DEBT SECURITIES BY CREDIT RATING
SEPTEMBER 30, 2023
($ In Millions)AAAAAABBBNOT RATEDTOTAL
Obligations of States and Political Subdivisions$918.0 $1,659.7 $ $ $ $2,577.7 
Government Sponsored Agency9,159.9     9,159.9 
Non-U.S. Government894.1 879.0 1,619.7 319.0  3,711.8 
Corporate Debt2.2 299.2 337.7   639.1 
Covered Bonds2,116.9     2,116.9 
Certificates of Deposit367.4    38.0 405.4 
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds4,162.6 1,251.3 28.8 1.1  5,443.8 
Other Asset-Backed246.6     246.6 
Commercial Mortgage-Backed37.6     37.6 
Other56.0    525.6 581.6 
Total$17,961.3 $4,089.2 $1,986.2 $320.1 $563.6 $24,920.4 
Percent of Total72 %17 %8 %1 %2 %100 %
DECEMBER 31, 2022
(In Millions)AAAAAABBBNOT RATEDTOTAL
U.S. Government$50.0 $— $— $— $— $50.0 
Obligations of States and Political Subdivisions926.8 1,638.5 — — — 2,565.3 
Government Sponsored Agency9,407.7 — — — — 9,407.7 
Non-U.S. Government762.2 926.5 1,223.0 322.3 — 3,234.0 
Corporate Debt2.1 305.7 405.5 — — 713.3 
Covered Bonds2,530.3 — — — — 2,530.3 
Certificates of Deposit— — — — 35.9 35.9 
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds4,171.3 1,502.0 28.9 1.1 — 5,703.3 
Other Asset-Backed263.7 — — — — 263.7 
Other65.8 — — — 466.8 532.6 
Total$18,179.9 $4,372.7 $1,657.4 $323.4 $502.7 $25,036.1 
Percent of Total73 %17 %%%%100 %
As of both September 30, 2023 and December 31, 2022, the 2% 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.
Net unrealized losses within the investment securities portfolio totaled $3.4 billion and $3.2 billion at September 30, 2023 and December 31, 2022, respectively. Net unrealized losses as of September 30, 2023 were comprised of $12.0 million and $3.4
23

ASSET QUALITY (continued)
Securities Portfolio (continued)
billion of gross unrealized gains and losses, respectively. Net unrealized losses as of December 31, 2022 were comprised of $9.1 million and $3.2 billion of gross unrealized gains and losses, respectively. $913.1 million of the $3.4 billion gross unrealized losses relate to AFS debt securities as of September 30, 2023, and $1.1 billion of the $3.2 billion gross unrealized losses relate to AFS debt securities as of December 31, 2022.
As of September 30, 2023, the $24.3 billion AFS debt securities portfolio had unrealized losses of $338.1 million, $195.6 million, and $140.4 million related to government-sponsored agency securities, other asset-backed and sub-sovereign, supranational and non-U.S. agency bonds respectively, which are primarily attributable to higher intermediate rates. As of December 31, 2022, the $26.7 billion AFS debt securities portfolio had unrealized losses of $351.6 million, $288.1 million, and $157.6 million related to government sponsored agency, other asset-backed, and sub-sovereign, supranational and non-U.S. agency bonds, respectively, which were primarily attributable to changes in overall market interest rates and credit spreads since their purchase.
As of December 31, 2022, the Corporation intended to sell certain AFS debt securities that were in an unrealized loss position. The securities were written down to their fair value of $2.1 billion with a $213.0 million loss recognized in Investment Security Gains (Losses), net on the consolidated statements of income for the period ended December 31, 2022. In January 2023, the securities were subsequently sold resulting in an incremental $6.9 million gain upon sale as compared to the fair value recorded on the consolidated balance sheets at December 31, 2022.
As of September 30, 2023, the $24.9 billion HTM debt securities portfolio had unrealized losses of $1.4 billion and $400.3 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, 2022, the $25.0 billion HTM debt securities portfolio had an unrealized loss of $1.1 billion and $436.1 million related to government-sponsored agency and sub-sovereign, supranational and non-U.S. agency bonds, respectively, which were primarily attributable to changes in overall market interest rates and credit spreads since their purchase.
HTM debt securities consist of securities that management intends to, and Northern Trust has the ability to, hold until maturity.
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.
24

ASSET QUALITY (continued)
Nonaccrual Loans and Other Real Estate Owned (continued)
TABLE 26: NONACCRUAL ASSETS
SEPTEMBER 30, 2023DECEMBER 31, 2022
($ In Millions)AMOUNT% OF NONACCRUAL LOANS TO TOTAL NONACCRUAL LOANSAMOUNT% OF NONACCRUAL LOANS TO TOTAL NONACCRUAL LOANS
Nonaccrual Loans
Commercial
Commercial and Institutional$16.3 24 %$17.4 38 %
Commercial Real Estate3.2 4 10.2 22 
Total Commercial$19.5 28 %$27.6 60 %
Personal
Private Client$19.8 29 %$— — %
Residential Real Estate29.5 43 18.3 40 
Total Personal$49.3 72 %$18.3 40 %
Total Nonaccrual Loans68.8 45.9 
Other Real Estate Owned0.3 — 
Total Nonaccrual Assets$69.1 $45.9 
90 Day Past Due Loans Still Accruing$36.2 $54.2 
Nonaccrual Loans to Total Loans0.16 %0.11 %
Allowance for Credit Losses Assigned to Loans to Nonaccrual Loans2.4 x3.1 x
Nonaccrual assets of $69.1 million as of September 30, 2023 increased $23.2 million or 51% from December 31, 2022, primarily due to the addition of eight new nonaccrual loans, partially offset by a commercial real estate upgrade and a commercial real estate charge-off. The eight new nonaccrual loans were composed of five residential real estate, two private client, and one commercial real estate loan. 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 Credit Risk Management, Treasury, Corporate Finance, the Economic Research Department, and each of Northern Trust’s reporting segments.
25

ASSET QUALITY (continued)
Allowance for Credit Losses (continued)
As of September 30, 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 $166.8 million, $28.3 million, $14.9 million, and $1.1 million, respectively. As of December 31, 2022, the Allowance for Credit Losses related to loans, undrawn loan commitments and standby letters of credit, HTM debt securities, and other financial assets, was $144.3 million, $38.5 million, $16.0 million, and $0.8 million, respectively. There was a $0.7 million and $1.3 million allowance for credit losses related to AFS debt securities as of September 30, 2023 and December 31, 2022, respectively. For additional information relating to the allowance for credit losses and the changes in the allowance for credit losses during the three and nine months ended September 30, 2023 and September 30, 2022 due to charge-offs, recoveries and provisions for credit losses, refer to Note 6—Allowance for Credit Losses to the consolidated financial statements provided in Item 1. Consolidated Financial Statements (unaudited).
The table provides the allowance evaluated on an individual and collective basis for the loan portfolio by segment and class.
TABLE 27: ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES FOR LOANS
SEPTEMBER 30, 2023DECEMBER 31, 2022
($ In Millions)ALLOWANCE AMOUNTPERCENT OF LOANS TO TOTAL LOANSALLOWANCE AMOUNTPERCENT OF LOANS TO TOTAL LOANS
Evaluated on an Individual Basis$10.3  %$10.4 — %
Evaluated on a Collective Basis
Commercial
Commercial and Institutional50.5 28 57.0 29 
Commercial Real Estate102.5 12 76.5 11 
Non-U.S.1.6 6 8.3 
Other 5 0.3 
Total Commercial154.6 51 142.1 50 
Personal
Private Client11.2 32 11.2 33 
Residential Real Estate18.3 14 18.0 15 
Non-U.S.0.7 1 1.1 
Other 2 — 
Total Personal30.2 49 30.3 50 
Total Allowance Evaluated on a Collective Basis$184.8 $172.4 
Total Allowance for Credit Losses$195.1 $182.8 
Allowance Assigned to
Loans$166.8 $144.3 
Undrawn Commitments and Standby Letters of Credit28.3 38.5 
Total Allowance for Credit Losses$195.1 $182.8 
Allowance Assigned to Loans to Total Loans0.38 %0.34 %
Commercial Real Estate Loans
The table below provides additional detail regarding commercial real estate loan types.
TABLE 28: COMMERCIAL REAL ESTATE LOANS
(In Millions)SEPTEMBER 30, 2023DECEMBER 31, 2022
Commercial Mortgages
Apartment/ Multi-family$1,623.0 $1,392.7 
Office1,016.9 1,054.0 
Industrial/ Warehouse668.6 596.2 
Retail623.0 572.2 
Other582.1 548.0 
Total Commercial Mortgages4,513.6 4,163.1 
Construction, Acquisition and Development Loans549.5 609.9 
Total Commercial Real Estate Loans$5,063.1 $4,773.0 
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).


26

STATEMENTS OF CASH FLOWS
The following discusses the statement of cash flow activities for the nine months ended September 30, 2023 and 2022.
TABLE 29: CASH FLOW ACTIVITY SUMMARY
NINE MONTHS ENDED SEPTEMBER 30,
(In Millions)20232022
Net cash provided by (used in):
Operating activities$(177.6)$(1,759.6)
Investing activities9,647.1 21,773.5 
Financing activities(8,890.7)(18,156.8)
Effect of Foreign Currency Exchange Rates on Cash(277.3)(421.1)
Change in Cash and Due from Banks$301.5 $1,436.0 
Operating Activities
Net cash used in operating activities of $177.6 million for the nine months ended September 30, 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 an increase in interest payable.
Net cash used in operating activities of $1.8 billion for the nine months ended September 30, 2022, was primarily attributable to higher net collateral deposited with derivative counterparties, partially offset by period earnings.
Investing Activities
Net cash provided by investing activities of $9.6 billion for the nine months ended September 30, 2023, was primarily attributable to decreased levels of Federal Reserve and other central bank deposits.
Net cash provided by investing activities of $21.8 billion for the nine months ended September 30, 2022, was primarily attributable to decreased levels of Federal Reserve and other central bank deposits and net proceeds from HTM debt securities, partially offset by higher levels of loans.
Financing Activities
Net cash used in financing activities of $8.9 billion for the nine months ended September 30, 2023, was primarily attributable to the decreased levels of total deposits, partially offset by increased levels of federal funds purchased and proceeds from long-term debt. The decrease in total deposits was primarily attributable to lower levels of savings, money market, and other interest-bearing deposits and lower levels of non-U.S. office interest-bearing deposits.
Net cash used in financing activities of $18.2 billion for the nine months ended September 30, 2022, was primarily attributable to the decreased levels of total deposits, partially offset by increased levels of federal funds purchased and short-term other borrowings. The decrease in total deposits was primarily attributable to lower levels of non-U.S. office noninterest-bearing and interest-bearing deposits.

27

CAPITAL RATIOS
The capital ratios of Northern Trust Corporation and its principal subsidiary, The Northern Trust Company, remained strong at September 30, 2023, 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 stringent 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 a notice of proposed rulemaking, known as Basel III endgame, which would change how risk-based capital requirements are determined for banking organizations including Northern Trust. The proposed rule would eliminate the existing advanced approach for determining risk weighted assets 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. The Corporation is evaluating the impact of the proposed rule on our regulatory capital requirements.
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 30: REGULATORY CAPITAL RATIOS
Capital Ratios —
Northern Trust Corporation
SEPTEMBER 30, 2023JUNE 30, 2023SEPTEMBER 30, 2022
STANDARDIZED APPROACHADVANCED APPROACHSTANDARDIZED APPROACHADVANCED APPROACHSTANDARDIZED APPROACHADVANCED APPROACHWELL-CAPITALIZED RATIOSMINIMUM CAPITAL RATIOS
Common Equity Tier 1 Capital11.4 %13.2 %11.3 %13.0 %10.1 %11.4 %N/A4.5 %
Tier 1 Capital12.4 14.3 12.3 14.1 11.1 12.5 6.06.0 
Total Capital14.5 16.5 14.4 16.3 12.2 13.5 10.08.0 
Tier 1 Leverage7.9 7.9 7.4 7.4 7.0 7.0 N/A4.0 
Supplementary LeverageN/A8.4 N/A8.3 N/A7.7 N/A3.0 
Capital Ratios — The Northern Trust CompanySEPTEMBER 30, 2023JUNE 30, 2023SEPTEMBER 30, 2022
STANDARDIZED APPROACHADVANCED APPROACHSTANDARDIZED APPROACHADVANCED APPROACHSTANDARDIZED APPROACHADVANCED APPROACHWELL-CAPITALIZED RATIOSMINIMUM CAPITAL RATIOS
Common Equity Tier 1 Capital12.3 %14.5 %12.1 %14.3 %10.7 %12.2 %6.5 %4.5 %
Tier 1 Capital12.3 14.5 12.1 14.3 10.7 12.2 8.0 6.0 
Total Capital14.2 16.4 13.9 16.2 11.6 13.0 10.0 8.0 
Tier 1 Leverage7.8 7.8 7.4 7.4 6.7 6.7 5.0 4.0 
Supplementary LeverageN/A8.3 N/A8.2 N/A7.4 3.0 3.0 



28

RECENT ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS
In March 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-02, “Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method—a consensus of the Emerging Issues Task Force” (ASU 2023-02). The amendments in ASU 2023-02 permit reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the income tax credits and other income tax benefits received and recognizes the net amortization and income tax credits and other income tax benefits in the income statement as a component of income tax expense (benefit). In addition, ASU 2023-02 requires specific disclosures that must be applied to all investments that generate income tax credits and other income tax benefits from a tax credit program for which the entity has elected to apply the proportional amortization method in accordance with Subtopic 323-740. ASU 2023-02 is effective for interim and annual periods beginning after December 15, 2023, although early adoption is permitted. Upon adoption, ASU 2023-02 is not expected to have a significant impact on Northern Trust’s consolidated balance sheets or consolidated statements of income.
In August 2023, the FASB issued ASU No. 2023-05, “Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement” (ASU 2023-05). ASU 2023-05 addresses the accounting for contributions made to a joint venture by requiring all contributions received by the joint venture to be measured at fair value upon its formation. Prior to the issuance of ASU 2023-05, U.S. GAAP did not contain specific guidance on how a joint venture should recognize contributions received. ASU 2023-05 is effective for interim and annual periods beginning after December 15, 2024, although early adoption is permitted. Upon adoption, ASU 2025-03 is not expected to have a significant 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 stringent liquidity standards as Category I institutions. 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 60% and 63% of total assets as of September 30, 2023 and December 31, 2022, respectively. 83% and 81% of Northern Trust’s securities portfolio is composed of U.S. Treasury, government sponsored agency and triple-A rated securities as of September 30, 2023 and December 31, 2022, 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, 2022.
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).
29

RISK MANAGEMENT (continued)
Market Risk (continued)


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
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