Financial Trends

Second Quarter 2020

July 22, 2020

Please direct inquiries to:

Mark Bette

Senior Vice President, Director of Investor Relations (312) 444-2301 or mark_bette@ntrs.com

Kelly Moen Lernihan

Vice President, Investor Relations (312) 444-7214 or km235@ntrs.com

The historical financial results and trends reflected in this report are not indicative of future financial results and trends for Northern Trust Corporation. This report should be read in conjunction with the Corporation's Second Quarter 2020 earnings press release, 2019 Annual Report to Shareholders, and periodic reports to the Securities and Exchange Commission, all of which contain additional information about factors that could affect the Corporation's future financial results and trends. The Corporation assumes no obligation to update this report.

TABLE OF CONTENTS

1

7

Financial Summary

Balance Sheet Mix Trends

2

8

Income Statement

Interest Rate Trends

3

9

Net Income Trends

Asset Quality

4

10

Fee Detail

Trust Assets

5

11

Balance Sheet (EOP)

Reconciliation to FTE

6

12

Balance Sheet Trends

Reconciliation to FTE (Ratios)

Northern Trust Corporation

FINANCIAL SUMMARY

($ in Millions except per share information)

2019

2020

2015

2016

2017

2018

2019

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

1st Qtr

2nd Qtr*

3rd Qtr

4th Qtr

Profitability:

$

973.8

$

1,032.5

$

1,199.0

$

1,556.4

$

1,492.2

Net Income

$

347.1

$

389.4

$

384.6

$

371.1

$

360.6

$

313.3

935.0

990.4

1,130.4

1,489.9

1,428.9

Earnings Allocated to Common and Potential

325.5

379.7

362.7

361.0

326.2

305.1

Common Shares

$

4.03

$

4.35

$

4.95

$

6.68

$

6.66

Basic Earnings Per Share

$

1.49

$

1.76

$

1.70

$

1.71

$

1.56

$

1.47

3.99

4.32

4.92

6.64

6.63

Diluted Earnings Per Share

1.48

1.75

1.69

1.70

1.55

1.46

20%

8%

14%

35%

-%

Diluted EPS Growth over Previous Year

(6%)

4%

7%

(5%)

5%

(17%)

11.5 %

11.9 %

12.6 %

16.2 %

14.9 %

Return on Average Common Equity

14.0 %

15.9 %

14.9 %

14.8 %

13.4 %

12.2 %

0.88 %

0.89 %

1.00 %

1.27 %

1.27 %

Return on Average Assets

1.18 %

1.34 %

1.31 %

1.25 %

1.17 %

0.91 %

31.5 %

30.9 %

31.0 %

33.3 %

32.4 %

Profit Margin (pre-tax) (FTE**)

30.9 %

34.0 %

33.4 %

31.2 %

29.4 %

27.1 %

20.6 %

20.7 %

22.1 %

25.9 %

24.4 %

Profit Margin (after-tax) (FTE**)

23.3 %

25.7 %

24.9 %

23.8 %

22.6 %

20.7 %

76.8 %

74.7 %

72.8 %

72.3 %

72.0 %

Noninterest Income to Total Revenue (FTE**)

71.1 %

71.9 %

72.5 %

72.4 %

73.9 %

74.9 %

63.0 %

62.3 %

63.4 %

62.5 %

63.1 %

Trust Fees to Total Revenue (FTE**)

62.4 %

63.1 %

63.1 %

63.7 %

62.9 %

63.5 %

33.5 %

31.9 %

26.6 %

20.5 %

23.2 %

Effective Tax Rate (US GAAP)

23.2 %

23.2 %

24.4 %

22.1 %

21.8 %

22.3 %

34.7 %

33.1 %

28.6 %

22.1 %

24.5 %

Effective Tax Rate (FTE**)

24.5 %

24.3 %

25.5 %

23.7 %

23.1 %

23.8 %

Capital Ratios:

Standardized Approach

10.8 %

11.8 %

12.6 %

12.9 %

12.7 %

Common Equity Tier 1 Capital

13.0 %

13.2 %

12.9 %

12.7 %

11.7 %

13.4 %

11.4 %

12.9 %

13.8 %

14.1 %

14.5 %

Tier 1 Capital

14.3 %

14.5 %

14.1 %

14.5 %

12.8 %

14.6 %

13.2 %

14.5 %

15.8 %

16.1 %

16.3 %

Total Capital

16.3 %

16.4 %

16.0 %

16.3 %

14.5 %

16.5 %

7.5 %

8.0 %

7.8 %

8.0 %

8.7 %

Tier 1 Leverage

8.2 %

8.6 %

8.6 %

8.7 %

8.1 %

7.6 %

Advanced Approach

11.9 %

12.4 %

13.5 %

13.7 %

13.3 %

Common Equity Tier 1 Capital

13.4 %

13.5 %

13.6 %

13.3 %

12.9 %

13.9 %

12.5 %

13.7 %

14.8 %

15.0 %

15.2 %

Tier 1 Capital

14.7 %

14.8 %

14.9 %

15.2 %

14.1 %

15.2 %

14.2 %

15.1 %

16.7 %

16.9 %

16.9 %

Total Capital

16.5 %

16.5 %

16.6 %

16.9 %

15.7 %

16.8 %

7.5 %

8.0 %

7.8 %

8.0 %

8.7 %

Tier 1 Leverage

8.2 %

8.6 %

8.6 %

8.7 %

8.1 %

7.6 %

6.2 %

6.8 %

6.8 %

7.0 %

7.6 %

Supplementary Leverage (a)

7.2 %

7.6 %

7.6 %

7.6 %

7.2 %

9.0 %

Per Share Information / Ratios:

$

1.41

$

1.48

$

1.60

$

1.94

$

2.60

Cash Dividends Declared Per Common Share

$

0.60

$

0.60

$

0.70

$

0.70

$

0.70

$

0.70

35 %

34 %

33 %

29 %

39 %

Dividend Payout Ratio

41 %

34 %

41 %

41 %

45 %

48 %

$

72.09

$

89.05

$

99.89

$

83.59

$

106.24

Market Value Per Share (End of Period)

$

90.41

$

90.00

$

93.32

$

106.24

$

75.46

$

79.34

18.1

20.6

20.3

12.6

16.0

Stock Price Multiple of Earnings

13.8

13.6

13.9

16.0

11.3

12.4

(based on trailing 4 quarters of diluted EPS)

$

36.27

$

38.88

$

41.28

$

43.95

$

46.82

Book Value Per Common Share (End of Period)

$

44.72

$

46.18

$

46.86

$

46.82

$

48.04

$

50.45

* Capital ratios for the current quarter are considered preliminary until the Form 10-Q is filed with the Securities and Exchange Commission.

  • Fully taxable equivalent (FTE). Presentation on an FTE basis is a non-generally accepted accounting principle financial measure. Please refer to the Reconciliation to Fully Taxable Equivalent - Ratios on page 12 for further detail.
  1. Effective January 1, 2018, the Corporation and Bank are subject to a minimum supplementary leverage ratio of 3 percent.

1

Northern Trust Corporation

INCOME STATEMENT

($ in Millions except per share information)

SIX MONTHS

CHANGE

SECOND QUARTER

CHANGE

2020

2019

$

%

2020

2019

$

%

$

1,140.6

$

1,084.6

$

56.0

5 %

C&IS Trust, Investment and Other Servicing Fees

$

566.2

$

549.4

$

16.8

3 %

824.5

799.8

24.7

3 %

WM Trust, Investment and Other Servicing Fees

395.3

406.1

(10.8)

(3)%

1,965.1

1,884.4

80.7

4 %

Total Fees

961.5

955.5

6.0

1 %

160.2

126.7

33.5

26 %

Foreign Exchange Trading Income

71.3

60.5

10.8

18 %

22.4

22.9

(0.5)

(2)%

Treasury Management Fees

11.4

11.2

0.2

2 %

74.9

46.7

28.2

60 %

Security Commissions and Trading Income

33.2

23.4

9.8

41 %

90.9

67.9

23.0

34 %

Other Operating Income

56.5

38.9

17.6

46 %

0.1

(0.5)

0.6

N/M

Investment Security Gains (Losses), net

0.1

(0.3)

0.4

N/M

2,313.6

2,148.1

165.5

8 %

Total Noninterest Income

1,134.0

1,089.2

44.8

4 %

951.3

1,318.5

(367.2)

(28)%

Interest Income (FTE*)

414.0

647.9

(233.9)

(36)%

155.3

463.6

(308.3)

(67)%

Interest Expense

34.2

222.8

(188.6)

(85)%

796.0

854.9

(58.9)

(7)%

Net Interest Income (FTE*)

379.8

425.1

(45.3)

(11)%

3,109.6

3,003.0

106.6

4 %

Total Revenue (FTE*)

1,513.8

1,514.3

(0.5)

- %

127.0

(6.5)

133.5

N/M

Provision for Credit Losses

66.0

(6.5)

72.5

N/M

960.1

937.5

22.6

2 %

Compensation

460.3

455.5

4.8

1 %

188.3

175.0

13.3

8 %

Employee Benefits

90.4

89.3

1.1

1 %

369.0

374.8

(5.8)

(2)%

Outside Services

176.2

186.4

(10.2)

(5)%

326.4

295.5

30.9

10 %

Equipment and Software

164.2

147.2

17.0

12 %

111.1

102.5

8.6

8 %

Occupancy

60.0

50.9

9.1

18 %

147.6

149.6

(2.0)

(1)%

Other Operating Expense

85.8

76.9

8.9

12 %

2,102.5

2,034.9

67.6

3 %

Total Noninterest Expense

1,036.9

1,006.2

30.7

3 %

880.1

974.6

(94.5)

(10)%

Income before Income Taxes (FTE*)

410.9

514.6

(103.7)

(20)%

190.4

222.6

(32.2)

(14)%

Provision for Income Taxes

89.9

117.5

(27.6)

(23)%

15.8

15.5

0.3

2 %

Taxable Equivalent Adjustment

7.7

7.7

-

1 %

206.2

238.1

(31.9)

(13)%

Total Taxes (FTE*)

97.6

125.2

(27.6)

(22)%

$

673.9

$

736.5

$

(62.6)

(8)%

Net Income

$

313.3

$

389.4

$

(76.1)

(20)%

$

35.3

$

23.2

$

12.1

52 %

Dividends on Preferred Stock**

$

4.8

$

5.9

$

(1.1)

(20)%

7.3

8.1

(0.8)

(9)%

Earnings Allocated to Participating Securities

3.4

3.8

(0.4)

(8)%

631.3

705.2

(73.9)

(10)%

Earnings Allocated to Common and Potential Common Shares

305.1

379.7

(74.6)

(20)%

$

3.03

$

3.25

$

(0.22)

(7)%

Earnings Per Share - Basic

$

1.47

$

1.76

$

(0.29)

(17)%

$

3.02

$

3.23

$

(0.21)

(7)%

Earnings Per Share - Diluted

$

1.46

$

1.75

$

(0.29)

(16)%

208,475

217,182

Average Basic Shares (000s)

208,069

216,139

209,193

218,214

Average Diluted Shares (000s)

208,568

217,170

208,093

214,891

End of Period Shares Outstanding (000s)

208,093

214,891

N/M - Not meaningful

* Fully taxable equivalent (FTE). Presentation on an FTE basis is a non-generally accepted accounting principle financial measure. Please refer to the Reconciliation to Fully Taxable Equivalent on page 11 for further detail.

  • Dividends on Preferred Stock in the first quarter of 2020 includes $11.5 million related to the difference between the redemption amount of the Corporation's Series C Non-Cumulative Perpetual Preferred Stock, which was redeemed in the first quarter of 2020, and its carrying value.

2

Northern Trust Corporation

NET INCOME TRENDS

($ in Millions except per share information)

2019

2020

2015

2016

2017

2018

2019

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

$

1,696.9

$

1,787.8

$ 1,984.5

$

2,173.1

$

2,211.5

C&IS Trust, Investment and Other Servicing Fees

$

535.2

$

549.4

$

559.9

$

567.0

$

574.4

$

566.2

1,283.6

1,320.3

1,449.8

1,580.6

1,640.6

WM Trust, Investment and Other Servicing Fees

393.7

406.1

415.6

425.2

429.2

395.3

2,980.5

3,108.1

3,434.3

3,753.7

3,852.1

Total Fees

928.9

955.5

975.5

992.2

1,003.6

961.5

261.8

236.6

209.9

307.2

250.9

Foreign Exchange Trading Income

66.2

60.5

59.7

64.5

88.9

71.3

64.7

62.8

56.4

51.8

44.5

Treasury Management Fees

11.7

11.2

11.2

10.4

11.0

11.4

78.7

81.4

89.6

98.3

103.6

Security Commissions and Trading Income

23.3

23.4

29.1

27.8

41.7

33.2

247.1

241.2

157.5

127.5

145.5

Other Operating Income

29.0

38.9

45.1

32.5

34.4

56.5

(0.3)

(3.2)

(1.6)

(1.0)

(1.4)

Investment Security Gains (Losses), net

(0.2)

(0.3)

(0.4)

(0.5)

-

0.1

3,632.5

3,726.9

3,946.1

4,337.5

4,395.2

Total Noninterest Income

1,058.9

1,089.2

1,120.2

1,126.9

1,179.6

1,134.0

1,095.4

1,260.0

1,475.0

1,663.9

1,710.7

Net Interest Income (FTE*)

429.8

425.1

425.3

430.5

416.2

379.8

4,727.9

4,986.9

5,421.1

6,001.4

6,105.9

Total Revenue (FTE*)

1,488.7

1,514.3

1,545.5

1,557.4

1,595.8

1,513.8

(43.0)

(26.0)

(28.0)

(14.5)

(14.5)

Provision for Credit Losses

-

(6.5)

(7.0)

(1.0)

61.0

66.0

1,443.3

1,541.1

1,733.7

1,806.9

1,859.0

Compensation

482.0

455.5

458.0

463.5

499.8

460.3

285.3

293.3

319.9

356.7

355.2

Employee Benefits

85.7

89.3

87.6

92.6

97.9

90.4

595.7

627.1

668.4

739.4

774.5

Outside Services

188.4

186.4

194.0

205.7

192.8

176.2

454.8

467.4

524.0

582.2

612.1

Equipment and Software

148.3

147.2

151.7

164.9

162.2

164.2

173.5

177.4

191.8

201.1

212.9

Occupancy

51.6

50.9

53.0

57.4

51.1

60.0

328.0

364.4

331.6

330.6

329.8

Other Operating Expense

72.7

76.9

92.0

88.2

61.8

85.8

3,280.6

3,470.7

3,769.4

4,016.9

4,143.5

Total Noninterest Expense

1,028.7

1,006.2

1,036.3

1,072.3

1,065.6

1,036.9

1,490.3

1,542.2

1,679.7

1,999.0

1,976.9

Income before Income Taxes (FTE*)

460.0

514.6

516.2

486.1

469.2

410.9

491.2

484.6

434.9

401.4

451.9

Provision for Income Taxes

105.1

117.5

124.0

105.3

100.5

89.9

25.3

25.1

45.8

41.2

32.8

Taxable Equivalent Adjustment

7.8

7.7

7.6

9.7

8.1

7.7

516.5

509.7

480.7

442.6

484.7

Total Taxes (FTE*)

112.9

125.2

131.6

115.0

108.6

97.6

$

973.8

$

1,032.5

$ 1,199.0

$

1,556.4

$

1,492.2

Net Income

$

347.1

$

389.4

$

384.6

$

371.1

$

360.6

$

313.3

$

4.03

$

4.35

$

4.95

$

6.68

$

6.66

Earnings Per Share - Basic

$

1.49

$

1.76

$

1.70

$

1.71

$

1.56

$

1.47

3.99

4.32

4.92

6.64

6.63

Earnings Per Share - Diluted

1.48

1.75

1.69

1.70

1.55

1.46

234,222

229,151

229,654

224,488

215,601

Average Diluted Shares (000s)

219,270

217,170

214,207

211,855

209,817

208,568

$

23.4

$

23.4

$

49.8

$

46.4

$

46.4

Preferred Dividends**

$

17.3

$

5.9

$

17.4

$

5.8

$

30.5

$

4.8

* Fully taxable equivalent (FTE). Presentation on an FTE basis is a non-generally accepted accounting principle financial measure. Please refer to the Reconciliation to Fully Taxable Equivalent on page 11 for further detail.

  • Dividends on Preferred Stock in the first quarter of 2020 includes $11.5 million related to the difference between the redemption amount of the Corporation's Series C Non-Cumulative Perpetual Preferred Stock, which was redeemed in the first quarter of 2020, and its carrying value.

3

Northern Trust Corporation

TRUST, INVESTMENT AND OTHER SERVICING FEES DETAIL

($ in Millions)

2019

2020

2015

2016

2017

2018

2019

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Corporate & Institutional Services

$

1,150.8

$

1,182.2

$

1,342.1

$

1,501.1

$

1,549.3

Custody & Fund Administration

$

375.1

$

385.1

$

392.2

$

396.9

$

394.9

$

376.3

325.2

371.8

403.5

436.8

445.7

Investment Management

104.3

110.8

114.7

115.9

120.8

128.4

90.5

97.7

96.4

102.0

87.2

Securities Lending

22.7

21.8

20.1

22.6

23.4

27.3

130.4

136.1

142.6

133.2

129.3

Other

33.1

31.7

32.9

31.6

35.3

34.2

$

1,696.9

$

1,787.8

$

1,984.6

$

2,173.1

$

2,211.5

Total Trust, Investment and Other Servicing Fees

$

535.2

$

549.4

$

559.9

$

567.0

$

574.4

$

566.2

Wealth Management

$

514.3

$

523.8

$

575.5

$

607.8

$

619.3

Central

$

150.7

$

153.1

$

157.3

$

158.2

$

159.4

$

142.1

332.7

334.4

356.2

401.7

422.2

East

100.9

104.3

106.8

110.2

111.5

104.2

267.7

268.9

291.7

320.0

330.9

West

79.5

82.8

83.6

85.0

87.0

80.0

168.9

193.2

226.3

251.1

268.2

Global Family Office

62.6

65.9

67.9

71.8

71.3

69.0

$

1,283.6

$

1,320.3

$

1,449.7

$

1,580.6

$

1,640.6

Total Trust, Investment and Other Servicing Fees

$

393.7

$

406.1

$

415.6

$

425.2

$

429.2

$

395.3

4

Northern Trust Corporation

BALANCE SHEET

END OF PERIOD

($ in Millions)

CHANGE

Assets

6/30/2020

6/30/2019

$

%

Federal Reserve and Other Central Banks Deposits and Other(2)

$

42,213.9

$

27,530.3

$

14,683.6

53 %

Interest-Bearing Due from and Deposits with Banks(3)

4,918.8

6,619.3

(1,700.5)

(26)%

Federal Funds Sold and Securities Purchased under Agreements to Resell

1,505.5

660.5

845.0

128 %

Securities:(1)

U.S. Government

4,274.3

5,197.1

(922.8)

(18)%

Obligations of States and Political Subdivisions

2,033.0

769.4

1,263.6

164 %

Government Sponsored Agency

23,409.1

22,509.6

899.5

4 %

Other(4)

26,622.4

20,782.6

5,839.8

28 %

Total Securities

56,338.8

49,258.7

7,080.1

14 %

Loans and Leases

33,757.3

30,982.3

2,775.0

9 %

Total Earning Assets

138,734.3

115,051.1

23,683.2

21 %

Allowance for Credit Losses

(218.0)

(110.8)

(107.2)

97 %

Cash and Due From Banks and Other Central Bank Deposits(5)

2,417.9

2,965.9

(548.0)

(18)%

Buildings and Equipment

501.0

407.5

93.5

23 %

Client Security Settlement Receivables

2,069.9

1,311.1

758.8

58 %

Goodwill

690.6

682.0

8.6

1 %

Other Assets

7,237.2

6,244.1

993.1

16 %

Total Assets

$

151,432.9

$

126,550.9

$

24,882.0

20 %

Liabilities and Stockholders' Equity

Savings, Money Market and Other

$

24,657.6

$

18,197.2

$

6,460.4

36 %

Savings Certificates and Other Time

1,505.7

897.3

608.4

68 %

Non- U.S. Offices - Interest-Bearing

67,277.5

59,028.0

8,249.5

14 %

Total Interest-Bearing Deposits

93,440.8

78,122.5

15,318.3

20 %

Short-Term Borrowings

8,229.1

8,259.6

(30.5)

- %

Senior Notes

3,667.3

2,565.6

1,101.7

43 %

Long-Term Debt

1,200.4

1,147.6

52.8

5 %

Floating Rate Capital Debt

277.7

277.6

0.1

- %

Total Interest-Related Funds

106,815.3

90,372.9

16,442.4

18 %

Demand and Other Noninterest-Bearing Deposits

28,613.3

22,107.9

6,505.4

29 %

Other Liabilities

4,622.1

3,264.6

1,357.5

42 %

Total Liabilities

140,050.7

115,745.4

24,305.3

21 %

Common Equity

10,497.3

9,923.5

573.8

6 %

Preferred Equity

884.9

882.0

2.9

- %

Total Stockholders' Equity

11,382.2

10,805.5

576.7

5 %

Total Liabilities and Stockholders' Equity

$

151,432.9

$

126,550.9

$

24,882.0

20 %

(1)

Memo - at 6/30/2020:

Debt Securities Held to Maturity

$ 15,241.9

Debt Securities Available for Sale

39,968.9

Trading Securities

1.0

Other Earning Assets

1,127.0

    • 56,338.8
  2. Federal Reserve and Other Central Bank Deposits and Other includes collateral deposits with certain securities depositories and clearing houses for the purpose of presenting earning assets; such deposits are presented in Other Assets on the consolidated balance sheets in our periodic filings with the SEC.
  3. Interest-BearingDue 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 in our periodic filings with the SEC.
  4. Other securities include certain community development investments and Federal Home Loan Bank and Federal Reserve stock, which are classified in Other Assets on the consolidated balance sheets in our periodic filings with the SEC.
  5. Cash and Due from Banks and Other Central Bank Deposits includes the noninterest-bearing component of Federal Reserve and Other Central Bank Deposits as presented on the consolidated balance sheets in our periodic filings with the SEC.

5

Northern Trust Corporation

BALANCE SHEET TRENDS

PERIOD AVERAGES(1)

($ in Millions)

2015

2016

2017

2018

2019

Assets

$

19,950

$

20,434

$

23,904

$

23,899

$

18,528

Federal Reserve and Other Central Banks Deposits and Other (2)

10,713

8,743

7,143

6,023

5,997

Interest-Bearing Due from and Deposits with Banks (3)

1,163

1,776

1,850

1,499

848

Federal Funds Sold and Securities Purchased

under Agreements to Resell

4,986

7,073

6,342

5,737

5,297

Securities:

U.S. Government

113

586

887

725

981

Obligations of States and Political Subdivisions

16,459

17,421

17,987

20,683

22,634

Government Sponsored Agency

15,850

16,961

19,499

23,136

21,773

Other(4)

37,408

42,041

44,716

50,281

50,684

Total Securities

33,016

34,044

33,565

32,029

31,053

Loans and Leases

102,250

107,038

111,178

113,731

107,109

Total Earning Assets

(256)

(193)

(157)

(126)

(111)

Allowance for Credit Losses

2,139

2,035

2,583

2,534

2,394

Cash and Due From Banks and Other Central Bank Deposits (5)

443

446

466

439

426

Buildings and Equipment

1,002

1,137

892

1,002

1,070

Client Security Settlement Receivables

531

525

544

643

683

Goodwill

4,607

4,583

4,101

4,725

5,981

Other Assets

$

110,715

$

115,570

$

119,607

$

122,947

$

117,551

Total Assets

2019

2020

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

$

20,163

$

19,236

$

17,525

$

17,230

$

19,826

$

30,299

6,452

5,812

5,657

6,074

5,838

5,506

978

651

817

946

668

986

5,239

5,150

5,507

5,288

4,639

4,472

771

770

907

1,468

1,723

1,835

22,439

22,397

22,494

23,199

23,366

23,398

23,441

20,593

21,118

21,964

22,235

23,179

51,889

48,911

50,025

51,919

51,963

52,884

31,189

31,099

30,936

30,991

32,316

35,507

110,672

105,709

104,959

107,160

110,611

125,182

(114)

(115)

(111)

(106)

(110)

(160)

1,941

2,784

2,552

2,293

2,723

2,967

424

413

412

454

501

507

982

1,045

1,090

1,163

1,531

1,298

675

681

680

693

693

690

4,836

5,842

6,771

6,449

8,221

8,288

$

119,417

$

116,359

$

116,352

$

118,105

$

124,171

$

138,771

Liabilities and Equity

$

15,307

$

15,142

$

15,576

$

15,149

$

16,578

Savings, Money Market and Other

$

14,373

$

15,951

$

17,803

$

18,130

$

20,251

$

24,017

1,610

1,432

1,273

871

868

Savings Certificates and Other Time

761

889

899

919

960

1,404

49,377

50,808

56,583

58,557

54,885

Non- U.S. Offices - Interest-Bearing

58,377

54,680

53,632

52,926

54,543

63,593

66,294

67,383

73,432

74,577

72,331

Total Interest-Bearing Deposits

73,511

71,519

72,333

71,975

75,754

89,013

4,758

6,337

6,696

10,784

9,359

Short-Term Borrowings

10,494

9,428

8,769

8,771

9,701

7,360

1,497

1,497

1,497

1,704

2,389

Senior Notes

2,014

2,361

2,588

2,585

2,615

3,333

1,426

1,392

1,519

1,297

1,139

Long-Term Debt

1,113

1,132

1,157

1,154

1,169

1,198

277

277

277

278

278

Floating Rate Capital Debt

278

278

278

278

278

278

74,253

76,886

83,422

88,638

85,495

Total Interest-Related Funds

87,410

84,718

85,124

84,762

89,517

101,182

24,474

26,231

23,073

20,527

17,456

Demand and Other Noninterest-Bearing Deposits

17,858

17,827

16,687

17,463

19,332

21,857

3,364

3,368

3,132

3,553

3,952

Other Liabilities

3,720

3,277

3,853

4,948

4,535

4,690

102,091

106,485

109,627

112,718

106,903

Total Liabilities

108,988

105,821

105,664

107,173

113,384

127,729

8,236

8,500

9,099

9,347

9,705

Common Equity

9,547

9,656

9,806

9,808

9,898

10,157

389

585

882

882

943

Preferred Equity

882

882

882

1,124

889

885

8,625

9,085

9,981

10,229

10,648

Total Stockholders' Equity

10,429

10,538

10,688

10,933

10,787

11,041

$

110,715

$

115,570

$

119,607

$

122,947

$

117,551

Total Liabilities and Stockholders' Equity

$

119,417

$

116,359

$

116,352

$

118,105

$

124,171

$

138,771

$

27,997

$

30,152

$

27,756

$

25,093

$

21,614

Net Noninterest-Related Funds

$

23,262

$

20,991

$

19,835

$

22,398

$

21,094

$

24,000

  1. Summations may not equal due to rounding
  2. Federal Reserve and Other Central Bank Deposits and Other includes collateral deposits with certain securities depositories and clearing houses for the purpose of presenting earning assets; such deposits are presented in Other Assets on the consolidated balance sheets in our periodic filings with the SEC.
  3. Interest-BearingDue 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 in our periodic filings with the SEC.
  4. Other securities include certain community development investments and Federal Home Loan Bank and Federal Reserve stock, which are classified in Other Assets on the consolidated balance sheets in our periodic filings with the SEC.
  5. Cash and Due from Banks and Other Central Bank Deposits includes the noninterest-bearing component of Federal Reserve and Other Central Bank Deposits as presented on the consolidated balance sheets in our periodic filings with the SEC.

6

Northern Trust Corporation

BALANCE SHEET MIX TRENDS

PERIOD AVERAGES(1)

2019

2020

2015

2016

2017

2018

2019

Assets

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

18.0 %

17.7 %

20.0 %

19.4 %

15.8 %

Federal Reserve and Other Central Banks Deposits and Other(2)

16.9 %

16.5 %

15.1 %

14.6 %

16.0 %

21.8 %

9.7

7.6

6.0

4.9

5.1

Interest-Bearing Due from and Deposits with Banks(3)

5.4

5.0

4.9

5.1

4.7

4.0

Federal Funds Sold and Securities Purchased

1.1

1.5

1.5

1.2

0.7

under Agreements to Resell

0.8

0.6

0.7

0.8

0.5

0.7

Securities:

4.5

6.1

5.3

4.7

4.5

U.S. Government

4.4

4.4

4.7

4.5

3.7

3.2

0.1

0.5

0.7

0.6

0.8

Obligations of States and Political Subdivisions

0.6

0.7

0.8

1.2

1.4

1.3

14.9

15.1

15.0

16.8

19.3

Government Sponsored Agency

18.8

19.2

19.3

19.6

18.8

16.9

14.3

14.7

16.3

18.8

18.5

Other(4)

19.6

17.7

18.1

18.6

17.9

16.7

33.8

36.4

37.4

40.9

43.1

Total Securities

43.5

42.0

43.0

44.0

41.8

38.1

29.8

29.5

28.1

26.1

26.4

Loans and Leases

26.1

26.7

26.6

26.2

26.0

25.6

92.4

92.6

93.0

92.5

91.1

Total Earning Assets

92.7

90.8

90.2

90.7

89.1

90.2

(0.2)

(0.2)

(0.1)

(0.1)

(0.1)

Allowance for Credit Losses

(0.1)

(0.1)

(0.1)

(0.1)

(0.1)

(0.1)

1.9

1.8

2.2

2.1

2.0

Cash and Due From Banks and Other Central Bank Deposits(5)

1.6

2.4

2.2

1.9

2.2

2.1

0.4

0.4

0.4

0.4

0.4

Buildings and Equipment

0.4

0.4

0.4

0.4

0.4

0.4

0.9

1.0

0.7

0.8

0.9

Client Security Settlement Receivables

0.8

0.9

0.9

1.0

1.2

0.9

0.5

0.5

0.5

0.5

0.6

Goodwill

0.6

0.6

0.6

0.6

0.6

0.5

4.2

4.0

3.4

3.8

5.1

Other Assets

4.1

5.0

5.8

5.5

6.6

6.0

100.0 %

100.0 %

100.0 %

100.0 %

100.0 %

Total Assets

100.0 %

100.0 %

100.0 %

100.0 %

100.0 %

100.0 %

Liabilities and Equity

13.8 %

13.1 %

13.0 %

12.3 %

14.1 %

Savings, Money Market and Other

12.0 %

13.7 %

15.3 %

15.4 %

16.3 %

17.3 %

1.5

1.2

1.1

0.7

0.7

Savings Certificates and Other Time

0.6

0.8

0.8

0.8

0.8

1.0

44.6

44.0

47.3

47.6

46.7

Non- U.S. Offices - Interest-Bearing

48.9

47.0

46.1

44.8

43.9

45.8

59.9

58.3

61.4

60.7

61.5

Total Interest-Bearing Deposits

61.6

61.5

62.2

60.9

61.0

64.1

4.3

5.5

5.6

8.8

8.0

Short-Term Borrowings

8.8

8.1

7.5

7.4

7.8

5.3

1.4

1.3

1.3

1.4

2.0

Senior Notes

1.7

2.0

2.2

2.2

2.1

2.4

1.3

1.2

1.3

1.1

1.0

Long-Term Debt

0.9

1.0

1.0

1.0

0.9

0.9

0.3

0.2

0.2

0.2

0.2

Floating Rate Capital Debt

0.2

0.2

0.2

0.2

0.2

0.2

67.1

66.5

69.7

72.1

72.7

Total Interest-Related Funds

73.2

72.8

73.2

71.8

72.1

72.9

22.1

22.7

19.3

16.7

14.8

Demand and Other Noninterest-Bearing Deposits

15.0

15.3

14.3

14.8

15.6

15.8

3.0

2.9

2.6

2.9

3.4

Other Liabilities

3.1

2.8

3.3

4.2

3.7

3.4

92.2

92.1

91.7

91.7

90.9

Total Liabilities

91.3

90.9

90.8

90.7

91.3

92.0

7.4

7.4

7.6

7.6

8.3

Common Equity

8.0

8.3

8.4

8.3

8.0

7.3

0.4

0.5

0.7

0.7

0.8

Preferred Equity

0.7

0.8

0.8

1.0

0.7

0.6

7.8

7.9

8.3

8.3

9.1

Total Stockholders' Equity

8.7

9.1

9.2

9.3

8.7

8.0

100.0 %

100.0 %

100.0 %

100.0 %

100.0 %

Total Liabilities and Stockholders' Equity

100.0 %

100.0 %

100.0 %

100.0 %

100.0 %

100.0 %

  1. Summations may not equal due to rounding
  2. Federal Reserve and Other Central Bank Deposits and Other includes collateral deposits with certain securities depositories and clearing houses for the purpose of presenting earning assets; such deposits are presented in Other Assets on the consolidated balance sheets in our periodic filings with the SEC.
  3. Interest-BearingDue 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 in our periodic filings with the SEC.
  4. Other securities include certain community development investments and Federal Home Loan Bank and Federal Reserve stock, which are classified in Other Assets on the consolidated balance sheets in our periodic filings with the SEC.
  5. Cash and Due from Banks and Other Central Bank Deposits includes the noninterest-bearing component of Federal Reserve and Other Central Bank Deposits as presented on the consolidated balance sheets in our periodic filings with the SEC.

7

Northern Trust Corporation

INTEREST RATE TRENDS (FTE(1) Basis)

PERIOD AVERAGES

Net Interest Income (FTE Adjusted), a non-GAAP financial measure, includes adjustments to a fully taxable equivalent basis for loans and securities. A reconciliation of net interest income, net interest margin, and net interest spread on a GAAP basis to net interest income, net interest margin, and net interest spread on an FTE basis, respectively, (each of which is a non-GAAP financial measure) is provided on pages 11 and 12. Net interest margin is calculated by dividing annualized net interest income by average interest-earning assets. Net interest spread is calculated as the difference between the interest rate earned (annualized interest income divided by average interest-earning assets) and the interest rate incurred (annualized interest expense divided by average interest-related funds).

2019

2020

2015

2016

2017

2018

2019

Earnings Assets

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

0.32 %

0.45 %

0.65 %

0.87 %

0.98 %

Federal Reserve and Other Central Banks Deposits and

1.23 %

0.96 %

0.91 %

0.78 %

0.47 %

0.05 %

Other(2)

0.79

0.73

0.89

1.16

1.21

Interest-Bearing Due from and Deposits with Banks(3)

1.13

1.33

1.31

1.09

0.88

0.33

Federal Funds Sold and Securities Purchased under

0.54

1.04

1.48

2.22

2.11

Agreements to Resell

2.84

2.62

1.93

1.18

0.97

0.22

Securities:

1.11

1.10

1.41

1.89

2.09

U.S. Government

2.22

2.16

2.03

1.94

1.88

1.60

6.58

1.94

1.48

1.91

2.49

Obligations of States and Political Subdivisions

2.57

2.68

2.46

2.38

2.46

2.43

0.87

1.02

1.57

2.20

2.58

Government Sponsored Agency

2.69

2.69

2.60

2.34

2.13

1.88

0.94

1.12

1.30

1.59

1.75

Other(4)

1.77

1.81

1.72

1.73

1.67

1.34

0.95

1.09

1.43

1.88

2.17

Total Securities

2.22

2.26

2.16

2.04

1.92

1.64

2.24

2.38

2.77

3.45

3.74

Loans and Leases

3.90

3.90

3.75

3.40

3.13

2.15

1.22 %

1.35 %

1.63 %

2.08 %

2.36 %

Total Earning Assets

2.46 %

2.46 %

2.38 %

2.17 %

1.95 %

1.33 %

Interest-Bearing Funds

0.06 %

0.08 %

0.16 %

0.54 %

0.97 % Savings, Money Market and Other

0.99 %

1.07 %

1.03 %

0.81 %

0.61 %

0.12 %

0.47

0.58

0.74

0.90

1.86

Savings Certificates and Other Time

1.48

1.89

2.01

2.00

1.91

1.42

0.12

0.12

0.26

0.50

0.57

Non- U.S. Offices - Interest-Bearing

0.76

0.64

0.53

0.33

0.19

(0.08)

0.11

0.12

0.25

0.52

0.68

Total Interest-Bearing Deposits

0.81

0.75

0.67

0.47

0.32

-

0.13

0.34

1.00

1.93

2.29

Short-Term Borrowings

2.52

2.48

2.26

1.84

1.34

0.35

3.13

3.13

3.13

3.13

3.04

Senior Notes

3.19

3.14

3.00

2.86

2.76

2.39

1.71

1.90

2.58

3.47

3.36

Long-Term Debt

3.64

3.54

3.21

3.07

2.90

2.35

0.86

1.25

1.75

2.72

2.98

Floating Rate Capital Debt

3.27

3.17

2.89

2.59

2.41

2.24

0.21 %

0.24 %

0.41 %

0.79 %

0.96 %

Total Interest-Related Funds

1.12 %

1.06 %

0.95 %

0.73 %

0.54 %

0.14 %

1.01 %

1.11 %

1.22 %

1.29 %

1.40 %

Net Interest Spread

1.34 %

1.40 %

1.43 %

1.44 %

1.41 %

1.19 %

1.07 %

1.18 %

1.33 %

1.46 %

1.60 %

Net Interest Margin

1.58 %

1.61 %

1.61 %

1.59 %

1.51 %

1.22 %

  1. Fully taxable equivalent. The 2018 through 2020 FTE adjustments are based on a federal income tax rate of 21% and the 2015 through 2017 FTE adjustments are based on a federal income tax rate of 35%, where the rate is adjusted for applicable state income taxes, net of related federal tax benefit.
  2. Federal Reserve and Other Central Bank Deposits and Other includes collateral deposits with certain securities depositories and clearing houses for the purpose of presenting earning assets; such deposits are presented in Other Assets on the consolidated balance sheets in our periodic filings with the SEC.
  3. Interest-BearingDue 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 in our periodic filings with the SEC.
  4. Other securities include certain community development investments and Federal Home Loan Bank and Federal Reserve stock, which are classified in Other Assets on the consolidated balance sheets in our periodic filings with the SEC.

Note The yields on the US Government, Government Sponsored Agency and Other lines in the Securities Portfolio for 2015 and 2016 have been restated to reflect a reclassification in the interest income ascribed to each category. The yield for the Total Securities portfolio was not impacted by the aforementioned reclassification.

8

Northern Trust Corporation

ASSET QUALITY

END OF PERIOD

($ in Millions)

2019

2020

2015

2016

2017

2018

2019

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

$ 295.9

$ 233.3

$ 192.0

$ 153.8

$

138.2

Beginning Allowance for Credit Losses

$ 138.2

$ 139.4

$ 134.1

$

127.7

$ 124.4

$

198.4

-

-

-

-

-

Cumulative Effect Adjustment*

-

-

-

-

13.7

-

(43.0)

(26.0)

(28.0)

(14.5)

(14.5)

Provision for Credit Losses

-

(6.5)

(7.0)

(1.0)

61.0

66.0

(Charge-offs) Recoveries

(30.7)

(27.3)

(21.5)

(10.1)

(6.5)

Charge-offs

(1.0)

(0.6)

(1.1)

(3.8)

(1.8)

(0.4)

11.2

12.1

11.3

9.0

7.2

Recoveries

2.2

1.8

1.7

1.5

1.1

3.0

(19.5)

(15.2)

(10.2)

(1.1)

0.7

Net (Charge-offs) Recoveries

1.2

1.2

0.6

(2.3)

(0.7)

2.6

(0.1)

(0.1)

-

-

-

Effect of Foreign Exchange Rates

-

-

-

-

-

-

$ 233.3

$ 192.0

$ 153.8

$ 138.2

$

124.4

Ending Allowance for Credit Losses

$ 139.4

$ 134.1

$ 127.7

$

124.4

$ 198.4

$

267.0

Allowance for Credit Losses Assigned to:

$ 193.8

$ 161.0

$ 131.2

$ 112.6

$

104.5

Loans and Leases

$ 114.5

$ 110.8

$ 105.7

$

104.5

$ 147.2

$

210.2

39.5

31.0

22.6

25.6

19.9

Undrawn Loan Commitments and Standby Letters of

24.9

23.3

22.0

19.9

40.4

49.0

Credit

-

-

-

-

-

Debt Securities and Other Financial Assets

-

-

-

-

10.8

7.8

$ 233.3

$ 192.0

$ 153.8

$ 138.2

$

124.4

Total Allowance for Credit Losses

$ 139.4

$ 134.1

$ 127.7

$

124.4

$ 198.4

$

267.0

$33,016

$34,044

$33,565

$32,029

$

31,053

Average Loans and Leases Outstanding

$31,189

$31,099

$30,936

$

30,991

$32,316

$

35,507

Annualized Loan-Related Net (Charge-offs)

Recoveries to

(0.06)%

(0.04)%

(0.03)%

- %

- % Average Loans and Leases

0.02 %

0.02 %

0.01 %

(0.03)%

(0.01)%

0.03 %

$33,181

$33,822

$32,592

$32,490

$

31,410

End of Period Loans and Leases Outstanding

$30,621

$30,982

$30,844

$

31,410

$37,838

$

33,757

Allowance for Credit Losses Assigned to Loans

0.58 %

0.48 %

0.40 %

0.35 %

0.33 % and Leases to Total Loans and Leases

0.37 %

0.36 %

0.34 %

0.33 %

0.39 %

0.62 %

Nonaccrual Assets

$ 180.1

$ 160.2

$ 150.7

$ 109.3

$

83.6

Nonaccrual Loans and Leases

$ 116.1

$ 115.1

$ 113.1

$

83.6

$ 103.9

$

98.5

8.2

5.2

4.6

8.4

3.2

Other Real Estate Owned (OREO)

8.0

3.8

3.2

3.2

1.6

0.9

$ 188.3

$ 165.4

$ 155.3

$ 117.7

$

86.8

Total Nonaccrual Assets

$ 124.1

$ 118.9

$ 116.3

$

86.8

$ 105.5

$

99.4

0.57 %

0.49 %

0.48 %

0.36 %

0.28 % Nonaccrual Assets to Loans and Leases and OREO

0.41 %

0.38 %

0.38 %

0.28 %

0.28 %

0.29 %

Loan and Lease Allowance to Nonaccrual

1.1x

1.0x

0.9x

1.0x

1.3x

Loans and Leases Coverage

1.0x

1.0x

0.9x

1.3x

1.4x

2.1x

* Upon the January 1, 2020 adoption of ASU 2016-13, Northern Trust increased the allowance for credit losses by $13.7 million, with a corresponding cumulative effect adjustment to decrease retained earnings $10.1 million, net of tax.

9

Northern Trust Corporation

ASSETS UNDER MANAGEMENT AND CUSTODY

END OF PERIOD

($ in Billions)

2019

2020

2015

2016

2017

2018

2019

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Assets under Management

$

648.0

$

694.0

$

871.2

$

790.8

$

917.5

Corporate & Institutional Services

$

867.9

$

887.0

$

901.3

$

917.5

$

842.6

$

954.0

Asset allocation:

342.6

363.4

443.3

403.3

483.8

Equities

443.6

460.5

452.6

483.8

377.2

461.2

82.9

91.3

111.9

105.3

114.6

Fixed Income Securities

110.3

112.3

112.7

114.6

113.9

113.9

118.8

127.5

148.5

132.4

156.1

Cash and Other Assets

149.0

150.9

157.7

156.1

184.4

213.2

103.7

111.8

167.5

149.8

163.0

Securities Lending Collateral

165.0

163.3

178.3

163.0

167.1

165.7

$

227.3

$

248.4

$

289.8

$

278.6

$

313.8

Wealth Management

$

294.2

$

293.2

$

300.5

$

313.8

$

276.7

$

303.8

Asset allocation:

104.1

117.2

149.0

130.9

167.0

Equities

148.2

153.3

154.8

167.0

127.3

147.3

64.1

69.2

71.6

73.0

79.2

Fixed Income Securities

74.8

77.1

78.2

79.2

75.9

79.2

58.9

61.8

69.0

74.6

67.5

Cash and Other Assets

71.1

62.7

67.4

67.5

73.5

77.3

0.2

0.2

0.2

0.1

0.1

Securities Lending Collateral

0.1

0.1

0.1

0.1

-

-

$

875.3

$

942.4

$

1,161.0

$

1,069.4

$

1,231.3

Total Assets under Management

$

1,162.1

$

1,180.2

$

1,201.8

$

1,231.3

$

1,119.3

$

1,257.8

Asset allocation:

$

446.7

$

480.6

$

592.3

$

534.2

$

650.8

Equities

$

591.8

$

613.8

$

607.4

$

650.8

$

504.5

$

608.5

147.0

160.5

183.5

178.3

193.8

Fixed Income Securities

185.1

189.4

190.9

193.8

189.8

193.1

177.7

189.3

217.5

207.0

223.6

Cash and Other Assets

220.1

213.6

225.1

223.6

257.9

290.5

103.9

112.0

167.7

149.9

163.1

Securities Lending Collateral

165.1

163.4

178.4

163.1

167.1

165.7

Assets under Custody / Administration

7,279.7

$

7,987.0

$

10,066.8

$

9,490.5

$

11,311.6

Corporate & Institutional Services

$

10,238.9

$

10,623.6

$

10,864.0

$

11,311.6

$

10,236.5

$

11,347.1

517.3

554.3

655.8

634.8

738.8

Wealth Management

688.5

698.4

701.2

738.8

640.1

751.2

$

7,797.0

$

8,541.3

$

10,722.6

$

10,125.3

$

12,050.4

Total Assets under Custody / Administration

$

10,927.4

$

11,322.0

$

11,565.2

$

12,050.4

$

10,876.6

$

12,098.3

Assets under Custody

$

5,565.8

$

6,176.9

$

7,439.1

$

6,971.0

$

8,497.8

Corporate & Institutional Services

$

7,529.1

$

7,820.6

$

8,061.4

$

8,497.8

$

7,620.8

$

8,542.7

Asset allocation:

2,423.4

2,761.6

3,400.1

3,043.0

3,866.6

Equities

3,392.3

3,513.6

3,505.2

3,866.6

3,044.8

3,661.4

2,119.6

2,313.6

2,755.2

2,700.2

3,102.3

Fixed Income Securities

2,857.2

2,977.1

3,111.9

3,102.3

3,006.2

3,211.1

919.1

989.9

1,116.3

1,078.0

1,365.9

Cash and Other Assets

1,114.6

1,166.6

1,266.1

1,365.9

1,402.7

1,504.5

103.7

111.8

167.5

149.8

163.0

Securities Lending Collateral

165.0

163.3

178.2

163.0

167.1

165.7

$

506.3

$

543.6

$

645.5

$

622.9

$

735.7

Wealth Management

$

670.6

$

698.2

$

698.7

$

735.7

$

633.9

$

747.9

Asset allocation:

271.7

296.4

375.6

336.5

432.0

Equities

380.9

402.0

397.2

432.0

331.6

441.4

120.4

120.7

121.3

122.2

134.3

Fixed Income Securities

127.2

135.3

131.6

134.3

126.0

126.0

114.0

126.3

148.4

164.1

169.3

Cash and Other Assets

162.4

160.8

169.8

169.3

176.3

180.5

0.2

0.2

0.2

0.1

0.1

Securities Lending Collateral

0.1

0.1

0.1

0.1

-

-

$

6,072.1

$

6,720.5

$

8,084.6

$

7,593.9

$

9,233.5

Total Assets under Custody

$

8,199.7

$

8,518.8

$

8,760.1

$

9,233.5

$

8,254.7

$

9,290.6

Asset allocation:

$

2,695.1

$

3,058.0

$

3,775.7

$

3,379.5

$

4,298.6

Equities

$

3,773.2

$

3,915.6

$

3,902.4

$

4,298.6

$

3,376.4

$

4,102.8

2,240.0

2,434.3

2,876.5

2,822.4

3,236.6

Fixed Income Securities

2,984.4

3,112.4

3,243.5

3,236.6

3,132.2

3,337.1

1,033.1

1,116.2

1,264.7

1,242.1

1,535.2

Cash and Other Assets

1,277.0

1,327.4

1,435.9

1,535.2

1,579.0

1,685.0

103.9

112.0

167.7

149.9

163.1

Securities Lending Collateral

165.1

163.4

178.3

163.1

167.1

165.7

Memo

$

61.9

$

69.3

$

87.1

$

83.5

$

94.2

WM Global Family Office AUM

$

86.5

$

86.6

$

92.3

$

94.2

$

89.6

$

96.8

321.4

347.7

422.9

405.5

474.1

WM Global Family Office AUC

441.6

451.5

450.3

474.1

409.8

504.1

3,529.9

3,966.0

4,937.6

4,700.3

5,894.6

Global Custody Assets *

5,113.5

5,317.8

5,543.5

5,894.6

5,218.4

5,881.5

* Includes the assets of non-U.S. clients plus global custody assets of U.S. clients

10

Northern Trust Corporation

RECONCILIATION TO FULLY TAXABLE EQUIVALENT

($ in Millions)

Northern Trust presents certain financial measures on a fully taxable equivalent (FTE) basis, which is a non-generally accepted accounting principle (GAAP). Management believes an FTE presentation provides a clearer indication of these financial measures for comparative purposes.

Net interest income (FTE) - Non-GAAP and net interest margin (FTE) - Non-GAAP and other FTE measures include the tax equivalent adjustments on tax-exempt income, consistent with industry practice. The adjustments are based on the federal income tax rate, where the rate is adjusted for applicable state income taxes, net of related federal tax benefit. 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. Below is a reconciliation of the financial measures presented on an FTE basis.

SIX

SIX

2019

2020

MONTHS

MONTHS

2015

2016

2017

2018

2019

2019

2020

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

1st Qtr

2nd Qtr 3rd Qtr

4th Qtr

$1,224.0

$1,416.9

$1,769.4

$2,321.4

$2,499.9

$ 1,303.0

$ 935.5

Interest Income - GAAP

$ 662.8

$ 640.2

$ 620.8

$ 576.1

$ 529.2

$ 406.3

25.3

25.1

45.8

41.2

32.8

15.5

15.8

Add: FTE Adjustment

7.8

7.7

7.6

9.7

8.1

7.7

1,249.3

1,442.0

1,815.2

2,362.6

2,532.7

1,318.5

951.3

Interest Income (FTE) - Non-GAAP

670.6

647.9

628.4

585.8

537.3

414.0

1,070.1

1,234.9

1,429.2

1,622.7

1,677.9

839.4

780.2

Net Interest Income - GAAP

422.0

417.4

417.7

420.8

408.1

372.1

25.3

25.1

45.8

41.2

32.8

15.5

15.8

Add: FTE Adjustment

7.8

7.7

7.6

9.7

8.1

7.7

1,095.4

1,260.0

1,475.0

1,663.9

1,710.7

854.9

796.0

Net Interest Income (FTE) - Non-GAAP

429.8

425.1

425.3

430.5

416.2

379.8

4,702.6

4,961.8

5,375.3

5,960.2

6,073.1

2,987.5

3,093.8

Total Revenue - GAAP

1,480.9

1,506.6

1,537.9

1,547.7

1,587.7

1506.1

25.3

25.1

45.8

41.2

32.8

15.5

15.8

Add: FTE Adjustment

7.8

7.7

7.6

9.7

8.1

7.7

4,727.9

4,986.9

5,421.1

6,001.4

6,105.9

3,003.0

3,109.6

Total Revenue (FTE) - Non-GAAP

1,488.7

1,514.3

1,545.5

1,557.4

1,595.8

1513.8

1,465.0

1,517.1

1,633.9

1,957.8

1,944.1

959.1

864.3

Income before Income Taxes - GAAP

452.2

506.9

508.6

476.4

461.1

403.2

25.3

25.1

45.8

41.2

32.8

15.5

15.8

Add: FTE Adjustment

7.8

7.7

7.6

9.7

8.1

7.7

1,490.3

1,542.2

1,679.7

1,999.0

1,976.9

974.6

880.1

Income before Income Taxes (FTE) - Non-GAAP

460.0

514.6

516.2

486.1

469.2

410.9

491.2

484.6

434.9

401.4

451.9

222.6

190.4

Provision for Income Taxes - GAAP

105.1

117.5

124.0

105.3

100.5

89.9

25.3

25.1

45.8

41.2

32.8

15.5

15.8

Add: FTE Adjustment

7.8

7.7

7.6

9.7

8.1

7.7

516.5

509.7

480.7

442.6

484.7

238.1

206.2

Provision for Income Taxes (FTE) - Non-GAAP

112.9

125.2

131.6

115.0

108.6

97.6

11

Northern Trust Corporation

RECONCILIATION TO FULLY TAXABLE EQUIVALENT

RATIOS

Northern Trust presents certain financial measures on a fully taxable equivalent (FTE) basis, which is a non-generally accepted accounting principle (GAAP). Management believes an FTE presentation provides a clearer indication of these financial measures for comparative purposes.

Net interest income (FTE) - Non-GAAP and net interest margin (FTE) - Non-GAAP and other FTE measures include the tax equivalent adjustments on tax-exempt income, consistent with industry practice. The adjustments are based on the federal income tax rate, where the rate is adjusted for applicable state income taxes, net of related federal tax benefit. 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. Below is a reconciliation of the financial ratios presented on an FTE basis.

2019

2020

2015

2016

2017

2018

2019

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

1st Qtr

2nd Qtr 3rd Qtr 4th Qtr

31.2 %

30.6 %

30.4 %

32.8 %

32.0 %

Profit Margin (pre-tax) - GAAP (1)

30.5 %

33.6 %

33.1 %

30.8 %

29.0 %

26.8 %

31.5 %

30.9 %

31.0 %

33.3 %

32.4 % Profit Margin (pre-tax) (FTE) - Non-GAAP(1)

30.9 %

34.0 %

33.4 %

31.2 %

29.4 %

27.1 %

20.7 %

20.8 %

22.3 %

26.1 %

24.6 %

Profit Margin (after-tax) - GAAP (2)

23.4 %

25.8 %

25.0 %

24.0 %

22.7 %

20.8 %

20.6 %

20.7 %

22.1 %

25.9 %

24.4 % Profit Margin (after-tax) (FTE) - Non-GAAP(2)

23.3 %

25.7 %

24.9 %

23.8 %

22.6 %

20.7 %

33.5 %

31.9 %

26.6 %

20.5 %

23.2 %

Effective Tax Rate - GAAP (3)

23.2 %

23.2 %

24.4 %

22.1 %

21.8 %

22.3 %

34.7 %

33.1 %

28.6 %

22.1 %

24.5 % Effective Tax Rate (FTE) - Non-GAAP(3)

24.5 %

24.3 %

25.5 %

23.7 %

23.1 %

23.8 %

77.2 %

75.1 %

73.4 %

72.8 %

72.4 % Noninterest Income to Total Revenue - GAAP (4)

71.5 %

72.3 %

72.8 %

72.8 %

74.3 %

75.3 %

76.8 %

74.7 %

72.8 %

72.3 %

72.0 % Noninterest Income to Total Revenue (FTE) - Non-GAAP(4)

71.1 %

71.9 %

72.5 %

72.4 %

73.9 %

74.9 %

63.4 %

62.6 %

63.9 %

63.0 %

63.4 % Trust Fees to Total Revenue - GAAP (5)

62.7 %

63.4 %

63.4 %

64.1 %

63.2 %

63.8 %

63.0 %

62.3 %

63.4 %

62.5 %

63.1 % Trust Fees to Total Revenue (FTE) - Non-GAAP(5)

62.4 %

63.1 %

63.1 %

63.7 %

62.9 %

63.5 %

0.99 %

1.08 %

1.18 %

1.25 %

1.37 %

Net Interest Spread - GAAP (6)

1.31 %

1.37 %

1.40 %

1.40 %

1.38 %

1.17 %

1.01 %

1.11 %

1.22 %

1.29 %

1.40 % Net Interest Spread (FTE) - Non-GAAP(6)

1.34 %

1.40 %

1.43 %

1.44 %

1.41 %

1.19 %

1.05 %

1.15 %

1.29 %

1.43 %

1.57 %

Net Interest Margin - GAAP (7)

1.55 %

1.58 %

1.58 %

1.56 %

1.48 %

1.20 %

1.07 %

1.18 %

1.33 %

1.46 %

1.60 % Net Interest Margin (FTE) - Non-GAAP(7)

1.58 %

1.61 %

1.61 %

1.59 %

1.51 %

1.22 %

  1. Profit margin (pre-tax) is calculated by dividing income before income taxes by total revenue. Profit margin (pre-tax) on an FTE basis is calculated by dividing income before income taxes on an FTE basis by total revenue on an FTE basis.
  2. Profit margin (after-tax) is calculated by dividing net income by total revenue. Profit margin (after-tax) on an FTE basis is calculated by dividing net income by total revenue on an FTE basis.
  3. Effective tax rate is calculated by dividing the provision for income taxes by income before income taxes. Effective tax rate on an FTE basis is calculated by dividing the provision for income taxes on an FTE basis by income before income taxes on an FTE basis.
  4. Noninterest income to total revenue is calculated by dividing noninterest income by total revenue. Noninterest income to total revenue on an FTE basis is calculated by dividing noninterest income by total revenue on an FTE basis.
  5. Trust fees to total revenue is calculated by dividing total trust, investment and other servicing fees by total revenue. Trust fees to total revenue on an FTE basis is calculated by dividing total trust, investment and other servicing fees by total revenue on an FTE basis.
  6. Net interest spread is calculated as the difference between the interest rate earned (annualized interest income divided by average interest-earning assets) and the interest rate incurred (annualized interest expense divided by average interest-related funds). Net interest spread on an FTE basis is calculated as the difference between the interest rate earned (annualized interest income on an FTE basis divided by average interest-earning assets) and the interest rate incurred (annualized interest expense divided by average interest-related funds).
  7. Net interest margin is calculated by dividing annualized net interest income by average interest-earning assets. Net interest margin on an FTE basis is calculated by dividing annualized net interest income on an FTE basis by average interest-earning assets.

12

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Northern Trust Corporation published this content on 22 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 July 2020 11:35:08 UTC