Allowance for Credit Losses

The allowance for credit losses, which represents management’s estimate of probable losses related to specific borrower relationships and inherent in the various loan and lease portfolios, undrawn commitments, and standby letters of credit, is determined by management through a disciplined credit review process. Northern Trust’s accounting policies related to the estimation of the allowance for credit losses and the charging off of loans, leases and other extensions of credit deemed uncollectible are consistent across both loan and lease segments.

Loans, leases and other extensions of credit deemed uncollectible are charged to the allowance for credit losses. Subsequent recoveries, if any, are credited to the allowance. Determinations as to whether an uncollectible loan is charged off or a specific allowance is established are based on management’s assessment as to the level of certainty regarding the amount of loss.

Changes in the allowance for credit losses by segment were as follows:

TABLE 68: CHANGES IN THE ALLOWANCE FOR CREDIT LOSSES



	2018									2017									2016
(In Millions)	COMMERCIAL			PERSONAL			TOTAL			COMMERCIAL			PERSONAL			TOTAL			COMMERCIAL			PERSONAL			TOTAL
Balance at Beginning of Year	$	80.8		$	73.0		$	153.8		$	104.9		$	87.1		$	192.0		$	114.8		$	118.5		$	233.3
Charge-Offs	(0.9		)	(9.2		)	(10.1		)	(11.4		)	(10.1		)	(21.5		)	(16.6		)	(10.7		)	(27.3		)
Recoveries	1.7			7.3			9.0			5.5			5.8			11.3			4.8			7.3			12.1

Net (Charge-Offs) Recoveries	0.8			(1.9		)	(1.1		)	(5.9		)	(4.3		)	(10.2		)	(11.8		)	(3.4		)	(15.2		)
Provision for Credit Losses	(2.9		)	(11.6		)	(14.5		)	(18.2		)	(9.8		)	(28.0		)	2.0			(28.0		)	(26.0		)
Effects of Foreign Exchange Rates	—			—			—			—			—			—			(0.1		)	—			(0.1		)

Balance at End of Year	$	78.7		$	59.5		$	138.2		$	80.8		$	73.0		$	153.8		$	104.9		$	87.1		$	192.0

Allowance for Credit Losses Assigned to:
Loans and Leases	$	57.6		$	55.0		$	112.6		$	63.5		$	67.7		$	131.2		$	83.7		$	77.3		$	161.0
Undrawn Commitments and Standby Letters of Credit	21.1			4.5			25.6			17.3			5.3			22.6			21.2			9.8			31.0

Total Allowance for Credit Losses	$	78.7		$	59.5		$	138.2		$	80.8		$	73.0		$	153.8		$	104.9		$	87.1		$	192.0

The following table provides information regarding the recorded investments in loans and leases and the allowance for credit losses by segment as of December 31, 2018 and 2017.

TABLE 69: RECORDED INVESTMENTS IN LOANS AND LEASES



(In Millions)	COMMERCIAL		PERSONAL		TOTAL
December 31, 2018
Loans and Leases
Specifically Evaluated for Impairment	$	15.0	$	101.2	$	116.2
Evaluated for Inherent Impairment	15,160.2		17,213.6		32,373.8

Total Loans and Leases	15,175.2		17,314.8		32,490.0
Allowance for Credit Losses on Credit Exposures
Specifically Evaluated for Impairment	4.1		3.1		7.2
Evaluated for Inherent Impairment	53.5		51.9		105.4

Allowance Assigned to Loans and Leases	57.6		55.0		112.6
Allowance for Undrawn Exposures
Commitments and Standby Letters of Credit	21.1		4.5		25.6

Total Allowance for Credit Losses	$	78.7	$	59.5	$	138.2



(In Millions)	COMMERCIAL		PERSONAL		TOTAL
December 31, 2017
Loans and Leases
Specifically Evaluated for Impairment	$	33.9	$	105.9	$	139.8
Evaluated for Inherent Impairment	14,524.1		17,928.3		32,452.4

Total Loans and Leases	14,558.0		18,034.2		32,592.2
Allowance for Credit Losses on Credit Exposures
Specifically Evaluated for Impairment	1.1		4.3		5.4
Evaluated for Inherent Impairment	62.4		63.4		125.8

Allowance Assigned to Loans and Leases	63.5		67.7		131.2
Allowance for Undrawn Exposures
Commitments and Standby Letters of Credit	17.3		5.3		22.6

Total Allowance for Credit Losses	$	80.8	$	73.0	$	153.8