Northern Trust : Forth Quarter 2021 Earnings Release

NEWS RELEASE

www.northerntrust.com

INVESTOR CONTACT: Mark Bette | 312-444-2301 | [e-mail]

MEDIA CONTACT: Doug Holt | 312-557-1571 | [e-mail]

NORTHERN TRUST CORPORATION REPORTS FOURTH QUARTER NET INCOME OF $406.4 MILLION, EARNINGS PER DILUTED COMMON SHARE OF $1.91

Trust, Investment and		Return on Average		Common Equity Tier 1
Other Servicing Fees
	Common Equity 14.5%		Capital 12.1%
up 8% YoY

CHICAGO, JANUARY 20, 2022 - Northern Trust Corporation today reported fourth quarter net income per diluted common share of $1.91, compared to $1.80 in the third quarter of 2021 and $1.12 in the fourth quarter of 2020. Net income was $406.4 million, compared to $395.7 million in the prior quarter and $240.9 million in the prior-year quarter.

MICHAEL O'GRADY, CHAIRMAN AND CHIEF EXECUTIVE OFFICER:

"Northern Trust's performance in the fourth quarter of 2021 generated a 9% increase in revenue versus last year and a return on average common equity of 14.5%. Revenue growth reflected strong organic growth across each of our businesses, which also contributed to full year earnings growth and a return on average common equity of 13.9%. During the year we executed on our key growth initiatives and enhanced our foundational strength through advancements in our data and digital efforts, while also improving our productivity. The year also benefited from an improved outlook in projected economic conditions driving a release of reserves for credit losses. I want to commend the efforts of our employees around the world, whose commitment, expertise and professionalism in serving our clients and communities continue to be extraordinary. As we enter 2022, we remain focused on our long-term priorities and investing wisely for future profitable growth to deliver long-term value to our various stakeholders."

FINANCIAL SUMMARY & KEY METRICS

								% Change
								Q4 2021 vs.
($ In Millions except per share data)		Q4 2021		Q3 2021		Q4 2020		Q3 2021	Q4 2020
Trust, Investment and Other Servicing Fees	$	1,111.0	$	1,111.0	$	1,026.1		- %	8 %
Other Noninterest Income		195.4		176.4		161.4	11	21
Net Interest Income (FTE*)		370.6		357.1		345.1	4	7
Total Revenue (FTE*)	$	1,677.0	$	1,644.5	$	1,532.6		2 %	9 %
Noninterest Expense	$	1,168.9	$	1,128.7	$	1,151.0	4 %	2 %
Provision for Credit Losses		(11.5)		(13.0)		(2.5)		N/M	N/M
Provision for Income Taxes		103.2		122.4		132.5	(16)	(22)
FTE Adjustment*		10.0		10.7		10.7	(7)	(7)
Net Income	$	406.4	$	395.7	$	240.9		3 %	69 %
Earnings Allocated to Common and	$	398.7	$	376.5	$	234.7	6 %	70 %
Potential Common Shares
Diluted Earnings per Common Share	$	1.91	$	1.80	$	1.12		6 %	70 %
Return on Average Common Equity		14.5 %		13.7 %		8.8 %
Return on Average Assets		1.00 %		1.00 %		0.67 %
Average Assets	$	161,353.8	$	156,452.8	$	143,262.0		3 %	13 %

N/M - Not meaningful

1. Net interest income and total revenue presented on a fully taxable equivalent (FTE) basis are non-generally accepted accounting principle financial measures that facilitate the analysis of asset yields. Please refer to the Reconciliation to Fully Taxable Equivalent section for further detail.

NORTHERN TRUST CORPORATION FOURTH QUARTER 2021 RESULTS

CLIENT ASSETS

Assets under custody/administration (AUC/A) and assets under management are a driver of the Corporation's trust, investment and other servicing fees, the largest component of noninterest income.

				As of				% Change December 31, 2021 vs.
($ In Billions)		December 31,		September 30,		December 31,		September 30,	December 31,
	2021*		2021		2020		2021	2020
Assets Under Custody/Administration
Corporate & Institutional Services (C&IS)	$	15,183.2	$	14,800.2	$	13,653.1	3 %	11 %
Wealth Management		1,065.6		976.0		879.4	9	21
Total Assets Under Custody/Administration	$	16,248.8	$	15,776.2	$	14,532.5		3 %	12 %
Assets Under Custody(1)
Corporate & Institutional Services	$	11,554.8	$	11,283.6	$	10,387.7	2 %	11 %
Wealth Management		1,057.5		962.9		875.1	10	21
Total Assets Under Custody	$	12,612.3	$	12,246.5	$	11,262.8		3 %	12 %
Assets Under Management
Corporate & Institutional Services	$	1,191.0	$	1,159.5	$	1,057.5	3 %	13 %
Wealth Management		416.1		372.9		347.8	12	20
Total Assets Under Management	$	1,607.1	$	1,532.4	$	1,405.3		5 %	14 %

1. Assets Under Custody are a component of Assets Under Custody/Administration.

1. Client assets for the current quarter are considered preliminary until the Form 10-K is filed with the Securities and Exchange Commission.

TRUST, INVESTMENT AND OTHER SERVICING FEES

								% Change Q4 2021 vs.
($ In Millions)		Q4 2021		Q3 2021		Q4 2020		Q3 2021	Q4 2020
C&IS Trust, Investment and Other Servicing Fees
Custody and Fund Administration	$	457.7	$	460.2	$	419.9	(1)%	9 %
Investment Management		113.3		113.6		125.1		-	(9)
Securities Lending		18.8		20.2		17.6	(6)	8
Other		35.3		36.2		33.5	(2)	5
Total C&IS	$	625.1	$	630.2	$	596.1		(1)%	5 %
Wealth Management Trust, Investment and Other Servicing Fees
Central	$	181.4	$	178.8	$	154.7	1 %	17 %
East		132.9		130.2		115.5	2	15
West		98.6		97.0		86.0	2	15
Global Family Office (GFO)		73.0		74.8		73.8	(2)	(1)
Total Wealth Management	$	485.9	$	480.8	$	430.0		1 %	13 %
Total Consolidated Trust, Investment and Other Servicing Fees	$	1,111.0	$	1,111.0	$	1,026.1		- %	8 %

C&IS and Wealth Management trust, investment and other servicing fees are impacted by both one-month and one-quarter lagged asset values.

Total C&IS trust, investment and other servicing fees decreased sequentially and increased from the prior-year quarter.

• Custody and fund administration fees decreased sequentially primarily due to lower transaction-based fees and currency translation, partially offset by favorable markets and new business. Custody and fund administration fees increased from the prior-year quarter primarily due to favorable markets and new business, partially offset by lower transaction-based fees.
• Investment management fees decreased from the prior-year quarter primarily due to higher money market mutual fund fee waivers, partially offset by new business and favorable markets.

Total Wealth Management trust, investment and other servicing fees increased sequentially and from the prior-year quarter.

• Fees in the regions (Central, East and West) increased sequentially primarily due to new business. Fees in the regions increased from the prior-year quarter primarily due to favorable markets and new business, partially offset by higher money market mutual fund fee waivers.
• Fees in GFO decreased sequentially primarily due to higher money market mutual fund fee waivers. Fees in GFO decreased from the prior-year quarter primarily due to higher money market mutual fund fee waivers, partially offset by favorable markets and new business.

2

NORTHERN TRUST CORPORATION FOURTH QUARTER 2021 RESULTS

OTHER NONINTEREST INCOME

								% Change Q4 2021 vs.
($ In Millions)		Q4 2021		Q3 2021		Q4 2020		Q3 2021	Q4 2020
Other Noninterest Income
Foreign Exchange Trading Income	$	76.9	$	66.4	$	68.6	16 %	12 %
Treasury Management Fees		10.6		11.2		11.4	(6)	(8)
Security Commissions and Trading Income		35.9		36.5		32.3	(1)	11
Other Operating Income		72.3		62.3		49.6	16	46
Investment Security Gains (Losses), net		(0.3)		-		(0.5)		N/M	N/M
Total Other Noninterest Income	$	195.4	$	176.4	$	161.4		11 %	21 %

N/M - Not meaningful

Foreign exchange trading income increased sequentially primarily due to higher client volumes and market volatility. Foreign exchange trading income increased from the prior-year quarter primarily due to higher client volumes, partially offset by decreased market volatility.

Security commissions and trading income increased compared to the prior-year quarter primarily due to higher revenue from core brokerage.

Other operating income increased sequentially primarily due to gains from property sales, partially offset by lower miscellaneous income. Other operating income increased compared to the prior-year quarter primarily driven by gains from property sales, distributions from investments in community development projects and higher banking and credit-related service charges, partially offset by lower miscellaneous income. The lower miscellaneous income in both the sequential and prior-year comparison was primarily associated with a market value decrease in the supplemental compensation plans, which also resulted in a related decrease in supplemental compensation plan expense reported in other operating expense.

NET INTEREST INCOME

								% Change Q4 2021 vs.
($ In Millions)		Q4 2021		Q3 2021		Q4 2020		Q3 2021		Q4 2020
Net Interest Income
Interest Income (FTE*)	$	372.2	$	362.0	$	363.3	3	%	2	%
Interest Expense		1.6		4.9		18.2	(66)		(91)
Net Interest Income (FTE*)	$	370.6	$	357.1	$	345.1		4	%	7	%
Average Earning Assets	$	148,834	$	143,953	$	131,235	3	%	13	%
Net Interest Margin (FTE*)		0.99 %		0.98 %		1.05 %		1 bps	(6)bps

1. Interest income, net interest income and net interest margin presented on an FTE basis are non-generally accepted accounting principle financial measures that facilitate the analysis of asset yields. Please refer to the Reconciliation to Fully Taxable Equivalent section for further detail.

Net interest income on an FTE basis increased sequentially primarily due to higher average earning assets and a slightly higher net interest margin. Net interest income on an FTE basis increased from the prior-year quarter primarily due to higher average earning assets, partially offset by a lower net interest margin.

The net interest margin on an FTE basis increased sequentially primarily due to a favorable balance sheet volume and mix shift. The net interest margin on an FTE basis decreased from the prior-year quarter primarily driven by lower average interest rates, partially offset by a favorable balance sheet volume and mix shift.

Average earning assets increased sequentially primarily due to higher levels of securities and loans. Average earning assets increased from the prior-year quarter primarily due to higher levels of short-terminterest-bearing deposits with banks, loans, and securities. Funding of the balance sheet reflected higher levels of client deposits.

3

NORTHERN TRUST CORPORATION FOURTH QUARTER 2021 RESULTS

PROVISION FOR CREDIT LOSSES

		As of and for the three-months ended,		% Change December 31, 2021 vs.
($ In Millions)	December 31,	September 30,	December 31,		September 30,	December 31,
	2021		2021		2020		2021	2020
Allowance for Credit Losses
Beginning Allowance for Credit Losses	$	195.1	$	207.0	$	267.9	(6)%	(27)%
Provision for Credit Losses		(11.5)		(13.0)		(2.5)		N/M	N/M
Net Recoveries (Charge-Offs)		1.1		1.1		(5.5)		N/M	N/M
Ending Allowance for Credit Losses	$	184.7	$	195.1	$	259.9	(5)%	(29)%
Allowance assigned to:
Loans and Leases	$	138.4	$	143.9	$	190.7	(4)%	(27)%
Undrawn Loan Commitments and		34.1		39.8		61.1	(14)	(44)
Standby Letters of Credit
Debt Securities and Other Financial Assets		12.2		11.4		8.1		7	51
Ending Allowance for Credit Losses	$	184.7	$	195.1	$	259.9		(5)%	(29)%

N/M - Not meaningful

Q4 2021

The release of credit reserves in the current quarter was primarily due to a decrease in the reserve evaluated on a collective basis, which relates to pooled financial assets sharing similar risk characteristics. The decrease in the collective basis reserve was driven by continued improvements in projected economic conditions and portfolio credit quality, partially offset by portfolio growth. Decreases in the collective basis reserve were primarily in the commercial and institutional and commercial real estate portfolios, partially offset by an increase in the private client portfolio.

Q3 2021

The release of credit reserves in the prior quarter was primarily due to a decrease in the reserve evaluated on a collective basis, driven by continued improvements in projected economic conditions at the time and portfolio credit quality, partially offset by portfolio growth. Decreases in the collective basis reserve were primarily in the commercial and institutional and commercial real estate portfolios.

Q4 2020

The release of credit reserves in the prior-year quarter was primarily due to a decrease in the reserve evaluated on a collective basis driven by improved projected economic conditions at the time, with decreases primarily in the private client, residential real estate, and commercial real estate portfolios, partially offset by an increase in the commercial and institutional portfolio.

4

NORTHERN TRUST CORPORATION FOURTH QUARTER 2021 RESULTS

NONINTEREST EXPENSE

								% Change Q4 2021 vs.
($ In Millions)		Q4 2021		Q3 2021		Q4 2020		Q3 2021	Q4 2020
Noninterest Expense
Compensation	$	510.2	$	496.0	$	525.3	3 %	(3)%
Employee Benefits		107.9		101.7		101.9	6	6
Outside Services		224.2		210.7		208.1	6	8
Equipment and Software		196.1		185.2		176.4	6	11
Occupancy		51.8		53.9		67.2	(4)	(23)
Other Operating Expense		78.7		81.2		72.1	(3)	9
Total Noninterest Expense	$	1,168.9	$	1,128.7	$	1,151.0		4 %	2 %
End of Period Full-Time Equivalent Staff		21,100		20,800		20,900	1 %	1 %

Compensation expense increased sequentially primarily due to higher salary and severance expense, primarily offset by lower incentives. Compensation expense decreased compared to the prior-year quarter primarily due to severance-related charges of $52.5 million in the prior-year quarter, partially offset by higher incentives and salary expense.

Employee benefits expense increased sequentially primarily due to higher medical expenses, partially offset by a lower pension settlement charge. A $3.4 million pension settlement charge was included in the current quarter compared to a $6.9 million charge in the prior quarter. Employee benefits expense increased compared to the prior-year quarter primarily due to higher payroll taxes and medical costs.

Outside services expense increased sequentially primarily due to higher technical services costs, consulting and legal expenses, partially offset by lower sub-custodian expenses. Outside services expense increased compared to the prior-year quarter primarily due to higher technical services costs and third-party advisory fees, partially offset by lower legal services.

Equipment and software expense increased sequentially and compared to the prior-year quarter primarily due to higher software support and rental costs and higher amortization.

Occupancy expense decreased compared to the prior-year quarter primarily due to a prior-year quarter early lease exit arising from a workplace real estate strategy.

Other operating expense decreased sequentially primarily due to higher costs associated with the Northern Trust-sponsored golf tournament in the prior quarter and lower supplemental compensation plan expense, partially offset by an increase in advertising and other miscellaneous expenses. Other operating expense increased compared to the prior-year quarter primarily due to higher business promotion expense, partially offset by lower other miscellaneous expenses, including lower supplemental compensation plan expense. The lower supplemental compensation plan expense in both the sequential and prior-year comparison resulted in a related decrease in miscellaneous income reported in noninterest income.

PROVISION FOR INCOME TAX

								% Change Q4 2021 vs.
($ In Millions)		Q4 2021		Q3 2021		Q4 2020		Q3 2021		Q4 2020
Net Income
Income before Income Taxes	$	509.6	$	518.1	$	373.4	(2)	%	36	%
Provision for Income Taxes		103.2		122.4		132.5		(16)		(22)
Net Income	$	406.4	$	395.7	$	240.9		3	%	69	%
Effective Tax Rate		20.2 %		23.6 %		35.5 %		(338)bps	(1,524)bps

The effective tax rate decreased sequentially primarily due to a lower net tax impact from international operations. The effective tax rate decreased compared to the prior-year quarter primarily due to a lower net tax impact from international operations and $26.8 million of prior-year quarter tax expense related to the reversal of tax benefits previously recognized through earnings.

5