Revenue from Contracts with Clients

Trust, Investment, and Other Servicing Fees. Custody and fund administration income is comprised of revenues received from our core asset servicing business for providing custody, fund administration, and middle-office-related services, primarily to C&IS clients. Investment management and advisory income contains revenue received from providing asset management and related services to Wealth Management and C&IS clients and to Northern Trust sponsored funds. Securities lending income represents revenues generated from securities lending arrangements that Northern Trust enters into as agent, mainly with C&IS clients. Other income largely consists of revenues received from providing employee benefit, investment risk and analytic and other services to C&IS and Wealth Management clients.

Other Noninterest Income. Treasury management income represents revenues received from providing cash and liquidity management services to C&IS and Wealth Management clients. The portion of securities commissions and trading income that relates to revenue from contracts with clients is primarily comprised of commissions earned from providing securities brokerage services to Wealth Management and C&IS clients. The portion of other operating income that relates to revenue from contracts with clients is mainly comprised of service fees for banking-related services provided to Wealth Management and C&IS clients.

Performance Obligations. Clients are typically charged monthly or quarterly in arrears based on the fee arrangement agreed to with each client; payment terms will vary depending on the client and services offered.

Substantially all revenues generated from contracts with clients for asset servicing, asset management, securities lending, treasury management and banking-related services are recognized on an accrual basis, over the period in which services are provided. The nature of Northern Trust’s performance obligations is to provide a series of distinct services in which the customer simultaneously receives and consumes the benefits of the promised services as they are performed. Fee arrangements are mainly comprised of variable amounts based on market value of client assets managed and serviced, transaction volumes, number of accounts, and securities lending volume and spreads. Revenue is recognized using the output method in an amount that reflects the consideration to which Northern Trust expects to be entitled in exchange for providing each month or quarter of service. For contracts with multiple performance obligations, revenue is allocated to each performance obligation based on the price agreed to with the client, representing its relative standalone selling price.

Security brokerage revenue is primarily represented by securities commissions received in exchange of providing trade execution related services. Control is transferred at a point in time, on the trade date of the transaction, and fees are typically variable based on transaction volumes and security types.

Northern Trust’s contracts with its clients are typically open ended arrangements. Northern Trust has elected to apply the practical expedient for disclosure requirements allowed in ASU 2014-09 for performance obligations that are included in contracts with an original duration of less than one year.

The following table presents revenues disaggregated by major revenue source.

Table 58: Revenue Disaggregation



(In Millions)	Three Months Ended June 30, 2018		Six Months Ended June 30, 2018
Noninterest Income
Trust, Investment and Other Servicing Fees
Custody and Fund Administration	$	399.1	$	795.0
Investment Management and Advisory	465.0		930.6
Securities Lending	30.4		56.6
Other	48.4		98.4
Total Trust, Investment and Other Servicing Fees	$	942.9	$	1,880.6
Other Noninterest Income
Foreign Exchange Income	$	78.9	$	157.4
Treasury Management	13.5		27.5
Securities Commissions and Trading Income	26.1		53.3
Other Operating Income	31.4		66.2
Investment Security Losses, net	—		(0.2		)
Total Other Noninterest Income	$	149.9	$	304.2
Total Noninterest Income	$	1,092.8	$	2,184.8

Trust, investment and other servicing fees and treasury management fees represent revenue from contracts with clients. For the three months ended June 30, 2018, revenue from contracts with clients also includes $22.3 million of the $26.1 million total securities commissions and trading income and $11.6 million of the $31.4 million total other operating income. For the six months ended June 30, 2018, revenue from contracts with clients also includes $46.3 million of the $53.3 million total securities commissions and trading income and $22.9 million of the $66.2 million total other operating income.

Receivables Balances. The table below represents receivables balances from contracts with clients, which are included in other assets in the consolidated balance sheets, at June 30, 2018 and December 31, 2017.

Table 59: Client Receivables



(In Millions)	June 30, 2018		December 31, 2017
Trust Fees Receivable, net ⁽¹⁾	$	720.1	$	629.7
Other	80.3		79.0
Total Client Receivables	$	800.4	$	708.7


⁽¹⁾	The net trust fees receivable balance at December 31, 2017 does not reflect the reduction for an estate settlement revenue transition adjustment of $2.7 million, which was recorded with an effective date of January 1, 2018.