Northern Trust Corporation (NASDAQ:NTRS) Q3 2021 Results Conference Call October 20, 2021 10:00 AM ET Company Participants Mark Bette - SVP and Director IR Mike O???Grady - Chairman and CEO Jason Tyler - CFO Conference Call Participants Glenn Schorr - Evercore Steven Chubak - Wolfe Research Brennan Hawken - UBS Mike Mayo - Wells Fargo Securities Gerard Cassidy - RBC Betsy Graseck - Morgan Stanley Ken Usdin - Jefferies Jim Mitchell - Seaport Research Brian Bedell - Deutsche Bank Rob Wildhack - Autonomous Res ...

Financial Performance - Net income increased by 18% to $368.1 million for the quarter, compared to $313.3 million in the prior year[17]. - Total revenue rose by 5% to $1.58 billion, up from $1.51 billion in the same quarter last year[18]. - The annualized return on average common equity improved to 13.7% from 12.2% year-over-year[17]. - Net Income increased by $69.3 million, or 10%, to $743.2 million, with diluted earnings per share rising to $3.42 from $3.02[73]. - For the quarter ended June 30, 2021, Net Income for Corporate & Institutional Services increased by $18.4 million, or 13%, compared to the prior-year quarter[118]. - For the six months ended June 30, 2021, Net Income for Corporate & Institutional Services decreased, primarily due to higher Noninterest Expense and lower Net Interest Income, despite higher Trust, Investment and Other Servicing Fees[119]. - For the quarter ended June 30, 2021, Net Income for Wealth Management increased by $43.4 million, or 24%, primarily due to higher Trust, Investment and Other Servicing Fees and a release of credit reserves[129]. Revenue Sources - Trust, Investment and Other Servicing Fees increased by 12% to $1.08 billion, driven by favorable markets and new business[18]. - Total C&IS Trust, Investment and Other Servicing Fees increased by 8% to $611.5 million in Q2 2021 from $566.2 million in Q2 2020, driven by a 21% increase in Custody and Fund Administration fees[26]. - Wealth Management Trust, Investment and Other Servicing Fees rose by 17% to $463.9 million in Q2 2021 compared to $395.3 million in Q2 2020, with notable increases across all regions[26]. - Total Other Noninterest Income remained stable at $348.9 million, with a slight increase of 0.4% compared to $348.5 million in 2020[86]. - Total Noninterest Income for Corporate & Institutional Services for the six months ended June 30, 2021, was $1,503.6 million, an increase of $98.8 million, or 7%, from the prior-year period[119]. Expenses - Noninterest expense rose by 8% to $1.12 billion, attributed to higher employee benefits and compensation expenses[22]. - Noninterest Expense increased by $83.9 million, or 8%, totaling $1.12 billion, primarily due to higher compensation and employee benefits[68]. - Total Noninterest Expense increased by $135.8 million, or 6%, to $2,238.3 million, primarily due to higher compensation and employee benefits expenses[103]. - For the quarter ended June 30, 2021, Noninterest Expense for Corporate & Institutional Services increased by $48.0 million, or 7%, primarily due to higher expense allocations and compensation expenses[126]. Interest Income and Margin - Net interest income decreased by 10% to $335.6 million, primarily due to a lower net interest margin[20]. - Net Interest Income (FTE) decreased by $35.9 million, or 41.6%, primarily due to lower average interest rates and a decrease in net interest margin[57]. - The net interest margin (FTE adjusted) was 0.97%, down from 1.22% year-over-year, indicating a decline in profitability from interest-earning assets[53]. - Net Interest Income for Corporate & Institutional Services decreased by $12.3 million, or 7%, for the quarter ended June 30, 2021, and by $62.9 million, or 17%, for the six months ended June 30, 2021[123]. Assets and Investments - Total assets increased by 1% to $172.3 billion as of June 30, 2021[9]. - Assets under custody/administration grew by 8% to $15.73 billion[9]. - Total Assets Under Custody/Administration reached $15,727.1 billion, a 30% increase year-over-year from $12,098.3 billion[35]. - Total Assets Under Management increased by 22% to $1,539.4 billion in Q2 2021 from $1,257.8 billion in Q2 2020, reflecting favorable markets and net inflows[41]. - The ending balance of Assets Under Management (AUM) increased to $1,539.4 billion as of June 30, 2021, up from $1,449.1 billion at the end of the previous quarter, representing a growth of 6.2%[46]. Credit and Reserves - A release of credit reserves of $27.0 million occurred, compared to a provision of $66.0 million in the prior year[21]. - The provision for credit losses released $27.0 million in the current quarter, compared to a provision of $66.0 million in the prior-year quarter[64]. - The allowance for credit losses was maintained at a ratio of 1.4 times the nonaccrual loans and leases as of June 30, 2021[162]. - The total allowance for credit losses was $195.3 million, down from $251.8 million as of December 31, 2020, reflecting a decrease of approximately 22.4%[170]. Market Performance - The S&P 500 index increased by 43% year-over-year, impacting the Corporation's results positively[32]. - Market performance contributed $78.2 billion to the AUM, with a notable increase from $31.5 billion in the previous quarter[46]. - The company experienced a significant increase in cash and other assets inflows, totaling $197.2 billion for the quarter, compared to $165.6 billion in the previous quarter[46]. Taxation - The Provision for Income Taxes in the current quarter totaled $118.4 million, with an effective tax rate of 24.3%, up from $89.9 million and 22.3% in the prior-year quarter[23]. - The effective tax rate increased to 24.3% from 22.3%, primarily due to the deferred tax impact of the UK statutory tax rate increase[72]. - Income tax expense for the six months ended June 30, 2021, was $239.2 million, with an effective tax rate of 24.3%, compared to 22.0% in the prior-year period[108]. Shareholder Returns - The company declared cash dividends totaling $148.1 million to common stockholders for the three months ended June 30, 2021[143]. - The company repurchased 252,304 shares of common stock at a total cost of $30.2 million during the three months ended June 30, 2021, with an average price of $119.59 per share[145]. Regulatory Capital - The Common Equity Tier 1 Capital ratio for Northern Trust Corporation was 12.0% as of June 30, 2021, consistent with the 12.0% reported on March 31, 2021, and above the minimum requirement of 4.5%[183]. - The Total Capital ratio for Northern Trust Corporation was 14.5% as of June 30, 2021, remaining stable compared to 14.5% on March 31, 2021, and exceeding the minimum requirement of 8.0%[183]. Risk Management - Northern Trust's market risk management includes measuring daily the risk of loss associated with non-U.S. currency positions using a Value-at-Risk (VaR) model[190]. - The total regulatory Value-at-Risk (VaR) for global foreign currency, as of June 30, 2021, shows an average of $0.1 million for FX and IR drivers combined[32]. - The reconciliation to fully taxable equivalent (FTE) shows that net interest income on a GAAP basis for the three months ended June 30, 2021, was $335.6 million, while the FTE-adjusted net interest income was $343.9 million[204].

Financial Data and Key Metrics Changes - The company reported second quarter net income of $368.1 million, with earnings per share at $1.72 and a return on common equity of 13.7% [12] - Year-over-year revenue increased by 5%, with noninterest income up 10% and net interest income down 9% [13] - Expenses rose by 8%, while net income increased by 18% [13] - Assets under custody and administration grew to $15.7 trillion, up 30% year-over-year [13] Business Line Data and Key Metrics Changes - In Wealth Management, trust investment and other servicing fees were $464 million, up 17% year-over-year [17] - Asset Management saw strong growth in liquidity products and FlexShares ETFs, with assets under management reaching $1.5 trillion, up 22% year-over-year [8][13] - Corporate & Institutional Services (C&IS) fees totaled $612 million, up 8% year-over-year, with custody and fund administration fees at $455 million, up 21% year-over-year [15] Market Data and Key Metrics Changes - The company experienced a favorable market environment, contributing to a 12% year-over-year growth in trust fees despite headwinds from money market fee waivers [9] - Average one month and three month LIBOR rates were stable during the quarter, with modest declines noted [12] Company Strategy and Development Direction - The company is focused on executing growth strategies across its businesses, including expanding sustainable investment solutions and enhancing digital capabilities [6][8] - The launch of the Tax Policy Resource Center aims to generate new business opportunities [7] - The company continues to invest in technology and staff to build a diverse workforce for future growth [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the low interest rate environment while focusing on efficiency and organic growth [10] - The company is operating in "resiliency mode" due to the public health environment, with plans for staff to return to offices [10] - Management highlighted the importance of a strong capital base and liquidity profile to support client needs [22] Other Important Information - The company repurchased 252,000 shares of common stock at a cost of $30 million and declared cash dividends of $0.70 per share totaling $148 million [22] - The corporate social responsibility report was published, marking a decade of transparent reporting [9] Q&A Session Summary Question: Can you unpack some of the trends on expenses? - Management noted that compensation expenses were controlled, with a focus on reinvesting savings into technology [25][26] Question: How does the company view share repurchases in the current environment? - Management indicated that share repurchases are tied to various factors, including dividends and capital required for RWA growth [29][30] Question: What is the outlook on net interest income and fee waivers? - Management expects fee waivers to decline sequentially, with recent Fed actions positively impacting the run rate [39] Question: Can you provide context on loan growth? - Loan growth was driven by proactive client engagement and episodic large client borrowing needs [42] Question: How is the company positioned for the OCIO market? - Management expressed confidence in their OCIO business, highlighting strong expertise and client relationships [59][60]

Northern Trust Corporation .Second Quarter 2021 Quarterly Earnings Review . July 21, 2021 northerntrust.com | © 2021 NorthernTrust 1 EXECUTIVE SUMMARY 2Q21 End of Period Month Lag1 Quarter Lag2 Net income of $368.1 million, diluted earnings per common share of $1.72 Return on average common equity of 13.7% The current quarter included a $17.6 million pre-tax pension settlement charge Key Macroeconomic Factors YoY Seq YoY Seq YoY Seq | --- | --- | --- | --- | --- | --- | --- | |-----------------------|------ ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________________________________ FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 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) Delaware 36-2 ...

Northern Trust Corporation (NASDAQ:NTRS) Q1 2021 Earnings Conference Call April 20, 2021 9:00 AM ET Company Participants Mark Bette - Director, Investor Relations Mike O'Grady - Chairman and CEO Jason Tyler - Chief Financial Officer Lauren Allnutt - Controller Kelly Lernihan - Investor Relations Conference Call Participants Glenn Schorr - Evercore Mike Mayo - Wells Fargo Brennan Hawken - UBS Alex Blostein - Goldman Sachs Brian Bedell - Deutsche Bank Steven Chubak - Wolfe Research Mike Carrier - Bank of Amer ...

Northern Trust Corporation .First Quarter 2021 Quarterly Earnings Review . April 20, 2021 northerntrust.com | © 2021 Northern northerntrust.com | © 2021 NorthernTrust 1 EXECUTIVE SUMMARY 1Q21 End of Period Month Lag1 Quarter Lag2 1 month Libor (Avg) (128) bps (3) bps 3 month Libor (Avg) (133) bps (2) bps EUR / USD (6.6)% 4.1% GBP / USD (10.1)% (0.9)% Net income of $375.1 million, diluted earnings per common share of $1.70 Return on average common equity of 13.7% Key Macroeconomic Factors | --- | --- | --- | ...

PART I [Item 1. Business](index=3&type=section&id=Item%201%20Business) Northern Trust Corporation is a financial holding company providing wealth management, asset servicing, asset management, and banking solutions through two primary segments: Corporate & Institutional Services (C&IS) and Wealth Management [Business Overview](index=3&type=section&id=Business%20Overview) Northern Trust operates through two main client-focused segments: Corporate & Institutional Services (C&IS) and Wealth Management, with the Asset Management business supporting both Assets by Business Segment (as of December 31, 2020) | Segment | Assets Under Custody/Administration | Assets Under Custody | Assets Under Management | | :--- | :--- | :--- | :--- | | **Corporate & Institutional Services (C&IS)** | $13.65 trillion | $10.39 trillion | $1.06 trillion | | **Wealth Management** | $879.4 billion | $875.1 billion | $347.8 billion | - The Asset Management business provides investment solutions including active and passive equity and fixed income, cash management, and alternative assets, with its revenue and expenses **fully allocated** to the C&IS and Wealth Management segments[18](index=18&type=chunk) [Supervision and Regulation](index=4&type=section&id=Supervision%20and%20Regulation) Northern Trust is subject to **extensive regulation** as a financial holding company, classified as a Category II institution under the Dodd-Frank Act's tailoring rules - Under the Federal Reserve Board's tailoring rule, Northern Trust is **classified** as a **Category II institution**, **subjecting it to enhanced prudential standards** such as annual capital plans, stress tests, and **enhanced risk and liquidity management**[30](index=30&type=chunk)[31](index=31&type=chunk) Risk-Based and Leverage Capital Ratios (as of December 31, 2020) | Entity | Common Equity Tier 1 (Standardized) | Tier 1 Capital (Standardized) | Total Capital (Standardized) | Tier 1 Leverage (Standardized) | | :--- | :--- | :--- | :--- | :--- | | **Northern Trust Corporation** | 12.8% | 13.9% | 15.6% | 7.6% | | **The Northern Trust Company** | 13.0% | 13.0% | 14.5% | 7.0% | | **Minimum Required Ratio** | 4.5% | 6.0% | 8.0% | 4.0% | | **"Well Capitalized" Minimum** | N/A (Corp) / 6.5% (Bank) | 6.0% (Corp) / 8.0% (Bank) | 10.0% | N/A (Corp) / 5.0% (Bank) | - The Corporation's stress capital buffer requirement for the 2020 capital plan cycle was set at **2.5%**, **effective** October 1, 2020, **resulting in a minimum** Common Equity Tier 1 capital ratio requirement of **7.0%**[58](index=58&type=chunk) - The company is **subject to** the U.S. Liquidity Coverage Ratio (LCR) and will be **required to comply** with the Net Stable Funding Ratio (NSFR) beginning July 1, 2021[59](index=59&type=chunk)[60](index=60&type=chunk) [Human Capital Management](index=12&type=section&id=Human%20Capital%20Management) Northern Trust employed approximately **20,900 full-time equivalent staff** globally as of December 31, 2020, with a **key** human capital strategy focusing on talent, rewards, and DE&I Workforce by Region (as of December 31, 2020) | Region | Percentage of Workforce | | :--- | :--- | | North America | 46% | | Asia Pacific | 35% | | Europe, Middle East, and Africa | 19% | - The company's talent management process includes **comprehensive onboarding**, **continuous learning and development**, and annual talent reviews **focused on diversity**, promotion readiness, and succession planning[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk) Board and Executive Officer Diversity (as of December 31, 2020) | Group | Female | Male | White | Black | Hispanic | Asian | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Board of Directors** | 23% | 77% | 61% | 23% | 8% | 8% | | **Executive Officers** | 33% | 67% | 83% | 17% | —% | —% | [Item 1A. Risk Factors](index=14&type=section&id=Item%201A.%20Risk%20Factors) Northern Trust faces a **variety of significant risks** that could **adversely affect** its business, including pandemic impacts, market volatility, operational failures, and regulatory changes - The COVID-19 pandemic has **adversely affected** business through **lower** net interest income, **increased** provisions for credit losses, and **potential operational disruptions** from remote work arrangements[112](index=112&type=chunk)[113](index=113&type=chunk) - A **majority** of revenues are fee-based and tied to the market value of assets, making earnings **susceptible to downturns** in equity and debt markets[116](index=116&type=chunk) - **Low interest rate environments negatively impact** net interest margin and may require fee waivers on money market mutual funds, **directly reducing** earnings[119](index=119&type=chunk) - **Failures of technological systems** or security breaches from cyber-attacks are **significant risks** that could lead to financial losses, regulatory penalties, and reputational damage[132](index=132&type=chunk)[133](index=133&type=chunk)[136](index=136&type=chunk) - The transition away from LIBOR to alternative reference rates creates **uncertainty** and could **adversely impact** the cost of funding, the value of loans and derivatives, and lead to **operational disruptions** or **litigation**[153](index=153&type=chunk) - The company's ability to pay dividends and repurchase stock is **subject to regulatory approval** and capital plan rules, which were **restricted** by the Federal Reserve in 2020 to **preserve capital** during the pandemic[183](index=183&type=chunk)[184](index=184&type=chunk) [Item 2. Properties](index=27&type=section&id=Item%202.%20Properties) The executive offices are located in a company-owned building in Chicago, with a global network of mostly leased offices across 22 U.S. states and 22 international locations - The Corporation's **main executive offices** are located at 50 South La Salle Street in Chicago, a building **owned** by its subsidiary, The Northern Trust Company[188](index=188&type=chunk) - Northern Trust operates through a network of offices in **22 U.S. states** and **22 locations** across Canada, Europe, the Middle East, and the Asia-Pacific region, with the **majority** of these facilities being leased[188](index=188&type=chunk) [Item 3. Legal Proceedings](index=27&type=section&id=Item%203.%20Legal%20Proceedings) This section incorporates by reference information regarding legal proceedings from Note 26 of the Financial Statements - Information regarding legal proceedings is **incorporated by reference** from Note 26, "Commitments and Contingent Liabilities," in Item 8 of the report[191](index=191&type=chunk) [Supplemental Item. Information About Our Executive Officers](index=28&type=section&id=Supplemental%20Item.%20Information%20About%20Our%20Executive%20Officers) This section provides biographical information for Northern Trust Corporation's executive officers, including Chairman and CEO Michael G. O'Grady and CFO Jason J. Tyler - Michael G. O'Grady serves as **Chairman of the Board**, **Chief Executive Officer**, and **President**[194](index=194&type=chunk) - Jason J. Tyler serves as **Executive Vice President** and **Chief Financial Officer**[205](index=205&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=30&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Northern Trust's common stock trades on The NASDAQ Stock Market under "NTRS," with its share repurchase program suspended in 2020 due to Federal Reserve restrictions but restarted in 2021 - The Corporation **suspended** its share repurchase program on March 16, 2020. No shares were repurchased in Q4 2020 due to Federal Reserve restrictions, but the program **restarted** in Q1 2021[209](index=209&type=chunk) Five-Year Cumulative Total Return Comparison (2015-2020) | Company/Index | 2015 | 2020 | Cumulative Return | | :--- | :--- | :--- | :--- | | **Northern Trust** | \$100 | \$146 | 46% | | **S&P 500** | \$100 | \$203 | 103% | | **KBW Bank Index** | \$100 | \$153 | 53% | [Item 6. Selected Financial Data](index=32&type=section&id=Item%206.%20Selected%20Financial%20Data) This section presents a five-year summary of **key financial data** for Northern Trust Corporation, highlighting changes in net income, assets, and client assets Selected Financial Data (2018-2020) | Metric (\$ in Millions, except per share) | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Total Revenue** | \$6,100.8 | \$6,073.1 | \$5,960.2 | | **Net Income** | \$1,209.3 | \$1,492.2 | \$1,556.4 | | **Net Income - Diluted EPS** | \$5.46 | \$6.63 | \$6.64 | | **Total Assets (EOP)** | \$170,003.9 | \$136,828.4 | \$132,212.5 | | **Assets Under Custody/Administration (EOP, \$B)** | \$14,532.5 | \$12,050.4 | \$10,125.3 | | **Assets Under Management (EOP, \$B)** | \$1,405.3 | \$1,231.3 | \$1,069.4 | | **Return on Average Common Equity** | 11.2% | 14.9% | 16.2% | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2020, Northern Trust's financial performance was **significantly impacted** by the COVID-19 pandemic, leading to a **19% decline** in net income despite **growth** in fee-based revenue, while maintaining a **strong capital position** [Financial Overview](index=34&type=section&id=Financial%20Overview) For 2020, Net Income **decreased 19%** to **\$1.21 billion**, and diluted EPS **fell** to **\$5.46** from **\$6.63** in 2019, with client assets **growing** due to **net inflows** and **favorable markets** 2020 vs. 2019 Financial Highlights | Metric | 2020 | 2019 | % Change | | :--- | :--- | :--- | :--- | | **Net Income** | \$1.21 billion | \$1.49 billion | (19%) | | **Diluted EPS** | \$5.46 | \$6.63 | (18%) | | **Total Revenue** | \$6.10 billion | \$6.07 billion | 0.5% | | **Trust, Investment & Other Servicing Fees** | \$4.00 billion | \$3.85 billion | 4% | | **Net Interest Income** | \$1.44 billion | \$1.68 billion | (14%) | | **Provision for Credit Losses** | \$125.0 million | (\$14.5 million) | N/M | - Client assets under custody/administration (AUC/A) **increased by 21%** to **\$14.53 trillion**, and assets under management (AUM) **grew by 14%** to **\$1.41 trillion**, **primarily due to net inflows and favorable markets**[230](index=230&type=chunk) [Consolidated Results of Operations](index=35&type=section&id=Consolidated%20Results%20of%20Operations) Consolidated revenue for 2020 **increased slightly** to **\$6.10 billion**, driven by **growth** in noninterest income but **offset by a 14% decline** in Net Interest Income and a **sharp reversal** in the Provision for Credit Losses Revenue Components (\$ in Millions) | Revenue Component | 2020 | 2019 | % Change | | :--- | :--- | :--- | :--- | | **Trust, Investment and Other Servicing Fees** | \$3,995.0 | \$3,852.1 | 4% | | **Foreign Exchange Trading Income** | \$290.4 | \$250.9 | 16% | | **Security Commissions and Trading Income** | \$133.2 | \$103.6 | 29% | | **Other Operating Income** | \$194.0 | \$145.5 | 33% | | **Net Interest Income** | \$1,443.2 | \$1,677.9 | (14%) | | **Total Revenue** | **\$6,100.8** | **\$6,073.1** | **0.5%** | - The company **voluntarily waived** **\$29.3 million** of money market mutual fund fees in 2020 due to the **low-interest-rate environment**, which **adversely impacted** Trust, Investment and Other Servicing Fees[249](index=249&type=chunk) - Noninterest expense in 2020 included **\$55.0 million** in **severance-related charges**, a **\$43.4 million charge** for a corporate action **processing error**, and **\$11.9 million** for an **early lease exit**[305](index=305&type=chunk) [Reporting Segments and Related Information](index=47&type=section&id=Reporting%20Segments%20and%20Related%20Information) In 2020, the Wealth Management segment **generated 60%** of consolidated net income, while Corporate & Institutional Services (C&IS) **contributed 43%**, with both segments experiencing net income **declines** Net Income by Segment (\$ in Millions) | Segment | 2020 Net Income | 2019 Net Income | % Change | % of 2020 Consolidated Net Income | | :--- | :--- | :--- | :--- | :--- | | **Corporate & Institutional Services (C&IS)** | \$520.7 | \$713.8 | (27%) | 43% | | **Wealth Management** | \$729.2 | \$796.1 | (8%) | 60% | | **Treasury and Other** | (\$40.6) | (\$17.7) | N/M | (3%) | - C&IS revenue **decreased 2%** as an **8% rise** in noninterest income was **more than offset by a 28% decline** in net interest income[330](index=330&type=chunk) - Wealth Management revenue **grew 3%**, but a provision for credit losses of **\$86.9 million** (versus a credit of **\$16.4 million** in 2019) **drove the decline** in net income[340](index=340&type=chunk) [Consolidated Balance Sheet Review](index=53&type=section&id=Consolidated%20Balance%20Sheet%20Review) Total assets **increased 24%** to **\$170.0 billion** at year-end 2020, **primarily driven by a significant rise** in customer deposits and Federal Reserve deposits Selected Balance Sheet Data (Year-End, \$ in Billions) | Account | Dec 31, 2020 | Dec 31, 2019 | % Change | | :--- | :--- | :--- | :--- | | **Total Assets** | \$170.0 | \$136.8 | 24% | | Federal Reserve and Other Central Bank Deposits | \$55.4 | \$33.8 | 64% | | Total Securities | \$61.1 | \$52.3 | 17% | | Loans and Leases | \$33.8 | \$31.4 | 7% | | **Total Deposits** | \$143.9 | \$109.1 | 32% | | **Total Stockholders' Equity** | \$11.7 | \$11.1 | 5% | - The **growth** in the balance sheet was **primarily driven by higher customer deposit balances**[360](index=360&type=chunk) [Asset Quality](index=54&type=section&id=Asset%20Quality) Asset quality **weakened** in 2020, with nonaccrual assets **increasing 53%** and the Allowance for Credit Losses **surging** due to CECL adoption and **deteriorating economic forecasts** Nonaccrual Assets (\$ in Millions) | Category | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | **Total Nonaccrual Loans and Leases** | \$131.7 | \$83.6 | | Other Real Estate Owned | \$0.7 | \$3.2 | | **Total Nonaccrual Assets** | **\$132.4** | **\$86.8** | Allowance for Credit Losses (\$ in Millions) | Component | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | **Allowance Assigned to Loans and Leases** | \$190.7 | \$104.5 | | **Allowance Assigned to Undrawn Commitments** | \$61.1 | \$19.9 | | **Total Allowance for Credit Losses** | **\$251.8** | **\$124.4** | - The **increase** in the allowance for credit losses was **primarily driven by the adoption** of ASU 2016-13 (CECL) and the **economic impact** of the COVID-19 pandemic[386](index=386&type=chunk)[396](index=396&type=chunk) [Capital Management](index=63&type=section&id=Capital%20Management) Northern Trust **maintained a strong capital position** in 2020, with all capital ratios **exceeding** 'well-capitalized' regulatory requirements, and **returned \$891.8 million** to common stockholders Capital Ratios (Standardized Approach, as of Dec 31, 2020) | Ratio | Corporation | Minimum Requirement | | :--- | :--- | :--- | | **Common Equity Tier 1 (CET1)** | 12.8% | 7.0% (incl. buffer) | | **Tier 1 Capital** | 13.9% | 8.5% (incl. buffer) | | **Total Capital** | 15.6% | 10.5% (incl. buffer) | | **Tier 1 Leverage** | 7.6% | 4.0% | - In 2020, the Corporation **returned \$891.8 million** to common stockholders through **\$592.0 million** in dividends and **\$299.8 million** in share repurchases[415](index=415&type=chunk)[299](index=299&type=chunk) [Risk Management](index=70&type=section&id=Risk%20Management) Northern Trust employs an **integrated, three-lines-of-defense risk management framework** covering seven **primary risk categories**, including **liquidity stress testing** and **managing interest rate risk** - The risk management framework is **structured around** a "**three lines of defense**" model: business units (1st line), the Risk Management function (2nd line), and Audit Services (3rd line)[458](index=458&type=chunk) - The company **maintains a strong liquidity position**, with cash, central bank deposits, and securities representing **73%** of total assets. It **satisfied all** U.S. Liquidity Coverage Ratio (LCR) **requirements** during 2020[521](index=521&type=chunk)[522](index=522&type=chunk) Net Interest Income Sensitivity (as of Dec 31, 2020) | Interest Rate Change (Ramp over 12 months) | Estimated Impact on NII (\$ in Millions) | | :--- | :--- | | **+100 bps** | \$249 | | **+200 bps** | \$451 | | **-100 bps** | \$114 | - The **average** Value-at-Risk (VaR) for Global Foreign Currency trading in 2020 was **\$0.3 million**, with a **high** of **\$1.8 million**[557](index=557&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=89&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for Northern Trust Corporation, including the **unqualified opinion** from KPMG LLP and detailed notes on accounting policies and financial data - The independent auditor, KPMG LLP, issued an **unqualified opinion** on the consolidated financial statements and the **effectiveness of internal control over financial reporting** as of December 31, 2020[575](index=575&type=chunk)[576](index=576&type=chunk) - A **critical audit matter** identified by the auditor was the assessment of the allowance for credit losses for commercial loans and leases, due to the **significant measurement uncertainty** and **subjective judgment** required under the newly adopted CECL accounting standard (ASC Topic 326)[580](index=580&type=chunk)[581](index=581&type=chunk)[582](index=582&type=chunk) [Consolidated Financial Statements](index=92&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements detail Northern Trust's financial position and performance, reporting **\$170.0 billion** in total assets and **\$1.21 billion** in net income for 2020 Key Financial Statement Data (Year Ended Dec 31, 2020) | Metric (\$ in Millions) | Amount | | :--- | :--- | | **Balance Sheet:** | | | Total Assets | \$170,003.9 | | Total Loans and Leases | \$33,759.7 | | Total Deposits | \$143,878.0 | | Total Stockholders' Equity | \$11,688.3 | | **Income Statement:** | | | Total Noninterest Income | \$4,657.6 | | Net Interest Income | \$1,443.2 | | Net Income | \$1,209.3 | [Notes to Consolidated Financial Statements](index=96&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide **detailed explanations** of accounting policies and financial data, including the **adoption** of the CECL standard and the composition of various financial portfolios - The company **adopted** ASU 2016-13 (CECL) on January 1, 2020, recording a **\$13.7 million increase** in the allowance for credit losses and a **corresponding \$10.1 million decrease** to retained earnings, net of tax[672](index=672&type=chunk) - As of December 31, 2020, the company had **\$28.9 billion** in **undrawn commitments** to extend credit and **\$157.5 billion** in **custody securities lent** with indemnification[938](index=938&type=chunk) - The company's **non-U.S. operations** accounted for **\$38.4 billion** in total assets and **\$302.6 million** in net income for 2020[1014](index=1014&type=chunk) [Item 9A. Controls and Procedures](index=171&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were **effective** as of December 31, 2020, with an **unqualified attestation report** from KPMG LLP - Management **concluded** that the Corporation's disclosure controls and procedures were **effective** as of December 31, 2020[1031](index=1031&type=chunk) - Management **assessed internal control over financial reporting as effective**, and the independent auditor, KPMG LLP, issued an **unqualified attestation report** on its **effectiveness**[1033](index=1033&type=chunk)[1037](index=1037&type=chunk) PART III [Items 10-14](index=173&type=section&id=Items%2010-14) Information for Items 10 through 14, covering Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, Certain Relationships, and Principal Accountant Fees, is **incorporated by reference** from the 2021 Proxy Statement - The information for Items 10, 11, 12, 13, and 14 is **incorporated by reference** from the company's 2021 Proxy Statement[1045](index=1045&type=chunk)[1046](index=1046&type=chunk)[1047](index=1047&type=chunk)[1048](index=1048&type=chunk)[1049](index=1049&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=174&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all financial statements and schedules filed as part of the Form 10-K, including **key corporate governance documents** and **compensatory plans** - This section lists all financial statements and exhibits filed with the Form 10-K, including **key corporate governance documents** and compensatory plans[1051](index=1051&type=chunk)[1053](index=1053&type=chunk)

Northern Trust Corporation (NASDAQ:NTRS) Q4 2020 Earnings Conference Call January 21, 2021 10:00 AM ET Company Participants Mark Bette - Director-IR Mike O???Grady - Chairman & CEO Jason Tyler - CFO Conference Call Participants Glenn Schorr - Evercore Alex Blostein - Goldman Sachs Brennan Hawken - UBS Steven Chubak - Wolfe Research Mike Mayo - Wells Fargo Securities Betsy Graseck - Morgan Stanley Mike Carrier - Bank of America Brian Bedell - Deutsche Bank Jim Mitchell - Seaport Global Securities Brian Klein ...

Northern Trust Corporation .Fourth Quarter 2020 Quarterly Earnings Review . January 21, 2021 northerntrust.com | © 2021 NorthernTrust 1 4Q20 End of Period Month Lag1 Quarter Lag2 1 month Libor (Avg) (165) Bps (2) bps 3 month Libor (Avg) (171) bps (3) bps EUR / USD (8.3)% (4.2)% GBP / USD (3.1)% (5.4)% EXECUTIVE SUMMARY Net income of $240.9 million, diluted earnings per common share of $1.12 Return on average common equity of 8.8% The fourth quarter included: $55.0 million pre-tax severance-related charges ( ...