financial trends second quarter 2020€¦ · financial trends second quarter 2020 july 22, 2020...

Financial Trends Second Quarter 2020 July 22, 2020

Please direct inquiries to:

Mark BetteSenior Vice President, Director of Investor Relations (312) 444-2301 or [email protected]

Kelly Moen LernihanVice President, Investor Relations (312) 444-7214 or [email protected]

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 7Financial Summary Balance Sheet Mix Trends

2 8Income Statement Interest Rate Trends

3 9Net Income Trends Asset Quality

4 10Fee Detail Trust Assets

5 11Balance Sheet (EOP) Reconciliation to FTE

6 12Balance Sheet Trends Reconciliation to FTE (Ratios)

Northern Trust CorporationFINANCIAL 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.

(a) Effective January 1, 2018, the Corporation and Bank are subject to a minimum supplementary leverage ratio of 3 percent.

1

Northern Trust CorporationINCOME STATEMENT


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 CorporationNET INCOME TRENDS


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 CorporationTRUST, INVESTMENT AND OTHER SERVICING FEES DETAIL

($ in Millions)

2019 2020


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 CorporationBALANCE SHEET

END OF PERIOD($ in Millions)

CHANGEAssets 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-Bearing Due from and Deposits with Banks includes the interest-bearing component of Cash and Due from Banks and Interest-Bearing Deposits with Banks as presented on the consolidated balance sheets 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 CorporationBALANCE SHEET TRENDS

PERIOD AVERAGES(1)

($ in Millions)

2019 20202015 2016 2017 2018 2019 Assets 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

$ 19,950 $ 20,434 $ 23,904 $ 23,899 $ 18,528 Federal Reserve and Other Central Banks Deposits and Other (2) $ 20,163 $ 19,236 $ 17,525 $ 17,230 $ 19,826 $ 30,299 10,713 8,743 7,143 6,023 5,997 Interest-Bearing Due from and Deposits with Banks (3) 6,452 5,812 5,657 6,074 5,838 5,506

Federal Funds Sold and Securities Purchased 1,163 1,776 1,850 1,499 848 under Agreements to Resell 978 651 817 946 668 986

Securities: 4,986 7,073 6,342 5,737 5,297 U.S. Government 5,239 5,150 5,507 5,288 4,639 4,472 113 586 887 725 981 Obligations of States and Political Subdivisions 771 770 907 1,468 1,723 1,835 16,459 17,421 17,987 20,683 22,634 Government Sponsored Agency 22,439 22,397 22,494 23,199 23,366 23,398 15,850 16,961 19,499 23,136 21,773 Other(4) 23,441 20,593 21,118 21,964 22,235 23,179 37,408 42,041 44,716 50,281 50,684 Total Securities 51,889 48,911 50,025 51,919 51,963 52,884 33,016 34,044 33,565 32,029 31,053 Loans and Leases 31,189 31,099 30,936 30,991 32,316 35,507 102,250 107,038 111,178 113,731 107,109 Total Earning Assets 110,672 105,709 104,959 107,160 110,611 125,182

(256) (193) (157) (126) (111) Allowance for Credit Losses (114) (115) (111) (106) (110) (160) 2,139 2,035 2,583 2,534 2,394 Cash and Due From Banks and Other Central Bank Deposits (5) 1,941 2,784 2,552 2,293 2,723 2,967 443 446 466 439 426 Buildings and Equipment 424 413 412 454 501 507 1,002 1,137 892 1,002 1,070 Client Security Settlement Receivables 982 1,045 1,090 1,163 1,531 1,298 531 525 544 643 683 Goodwill 675 681 680 693 693 690 4,607 4,583 4,101 4,725 5,981 Other Assets 4,836 5,842 6,771 6,449 8,221 8,288 $ 110,715 $ 115,570 $ 119,607 $ 122,947 $ 117,551 Total Assets $ 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





6

Northern Trust CorporationBALANCE SHEET MIX TRENDS

PERIOD AVERAGES(1)

2019 20202015 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





7

Northern Trust CorporationINTEREST 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 Other(2) 1.23 % 0.96 % 0.91 % 0.78 % 0.47 % 0.05 %

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.




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 CorporationASSET QUALITY

END OF PERIOD($ in Millions)

2019 2020


$ 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 Credit 24.9 23.3 22.0 19.9 40.4 49.0

— — — — — 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 CorporationASSETS UNDER MANAGEMENT AND CUSTODY

END OF PERIOD($ in Billions)

2019 20202015 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 CorporationRECONCILIATION 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 MONTHS

SIX MONTHS 2019 2020

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 CorporationRECONCILIATION 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 20202015 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.

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financial trends second quarter 2020€¦ · financial trends second quarter 2020 july 22, 2020...

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