Securities

6 Months Ended

Jun. 30, 2022

Investments, Debt and Equity Securities [Abstract]

Securities

Securities

Available for Sale Debt Securities. The following tables provide the amortized cost and fair values as of June 30, 2022 and December 31, 2021, and remaining maturities of AFS debt securities as of June 30, 2022.

TABLE 39: RECONCILIATION OF AMORTIZED COST TO FAIR VALUE OF AVAILABLE FOR SALE DEBT SECURITIES

	JUNE 30, 2022
(In Millions)	AMORTIZED COST		GROSS UNREALIZED GAINS		GROSS UNREALIZED LOSSES		FAIR VALUE
U.S. Government	$	2,645.2	$	4.4	$	61.2	$	2,588.4
Obligations of States and Political Subdivisions	3,883.1		0.2		430.0		3,453.3
Government Sponsored Agency	17,151.3		13.5		751.6		16,413.2
Non-U.S. Government	396.2		—		28.9		367.3
Corporate Debt	2,163.4		0.8		76.3		2,087.9
Covered Bonds	541.6		0.3		12.9		529.0
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds	2,939.6		1.7		147.5		2,793.8
Other Asset-Backed	5,663.2		—		271.7		5,391.5
Commercial Mortgage-Backed	1,468.6		—		75.1		1,393.5
Total	$	36,852.2	$	20.9	$	1,855.2	$	35,017.9

	DECEMBER 31, 2021
(In Millions)	AMORTIZED COST		GROSS UNREALIZED GAINS		GROSS UNREALIZED LOSSES		FAIR VALUE
U.S. Government	$	2,406.2	$	29.3	$	9.4	$	2,426.1
Obligations of States and Political Subdivisions	3,841.0		73.7		38.6		3,876.1
Government Sponsored Agency	18,092.1		93.7		110.2		18,075.6
Non-U.S. Government	383.4		0.1		9.5		374.0
Corporate Debt	2,319.8		31.6		9.7		2,341.7
Covered Bonds	502.6		3.9		0.9		505.6
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds	3,052.4		28.1		35.4		3,045.1
Other Asset-Backed	5,962.0		11.3		31.7		5,941.6
Commercial Mortgage-Backed	1,389.0		38.9		3.2		1,424.7
Total	$	37,948.5	$	310.6	$	248.6	$	38,010.5

TABLE 40: REMAINING MATURITY OF AVAILABLE FOR SALE DEBT SECURITIES

JUNE 30, 2022	ONE YEAR OR LESS				ONE TO FIVE YEARS				FIVE TO TEN YEARS				OVER TEN YEARS				TOTAL
(In Millions)	AMORTIZED COST		FAIR VALUE		AMORTIZED COST		FAIR VALUE		AMORTIZED COST		FAIR VALUE		AMORTIZED COST		FAIR VALUE		AMORTIZED COST		FAIR VALUE
U.S. Government	$	494.8	$	495.9	$	1,901.8	$	1,873.4	$	248.6	$	219.1	$	—	$	—	$	2,645.2	$	2,588.4
Obligations of States and Political Subdivisions	28.3		28.2		721.7		689.0		3,008.0		2,632.3		125.1		103.8		3,883.1		3,453.3
Government Sponsored Agency	2,633.7		2,578.1		7,043.5		6,852.2		5,752.9		5,398.1		1,721.2		1,584.8		17,151.3		16,413.2
Non-U.S. Government	104.2		103.9		214.9		196.8		77.1		66.6		—		—		396.2		367.3
Corporate Debt	486.5		484.2		1,655.9		1,585.7		18.2		15.6		2.8		2.4		2,163.4		2,087.9
Covered Bonds	178.4		178.4		363.2		350.6		—		—		—		—		541.6		529.0
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds	506.1		506.8		2,083.1		1,979.7		350.4		307.3		—		—		2,939.6		2,793.8
Other Asset-Backed	694.9		676.0		3,563.1		3,382.1		1,291.3		1,223.5		113.9		109.9		5,663.2		5,391.5
Commercial Mortgage-Backed	49.4		47.4		1,115.5		1,068.5		303.7		277.6		—		—		1,468.6		1,393.5
Total	$	5,176.3	$	5,098.9	$	18,662.7	$	17,978.0	$	11,050.2	$	10,140.1	$	1,963.0	$	1,800.9	$	36,852.2	$	35,017.9

Note: Mortgage-backed and asset-backed securities are included in the above table taking into account anticipated future prepayments.

Available for Sale Debt Securities with Unrealized Losses. The following table provides information regarding AFS debt securities with no credit losses reported that had been in a continuous unrealized loss position for less than twelve months and for twelve months or longer as of June 30, 2022 and December 31, 2021.

TABLE 41: AVAILABLE FOR SALE DEBT SECURITIES IN UNREALIZED LOSS POSITION WITH NO CREDIT LOSSES REPORTED

JUNE 30, 2022	LESS THAN 12 MONTHS				12 MONTHS OR LONGER				TOTAL
(In Millions)	FAIR VALUE		UNREALIZED LOSSES		FAIR VALUE		UNREALIZED LOSSES		FAIR VALUE		UNREALIZED LOSSES
U.S. Government	$	988.2	$	31.7	$	219.1	$	29.5	$	1,207.3	$	61.2
Obligations of States and Political Subdivisions	2,492.4		261.3		871.9		168.7		3,364.3		430.0
Government Sponsored Agency	11,012.3		348.4		3,833.4		403.2		14,845.7		751.6
Non-U.S. Government	168.4		3.4		198.9		25.5		367.3		28.9
Corporate Debt	1,653.9		57.9		53.3		5.6		1,707.2		63.5
Covered Bonds	407.2		12.9		—		—		407.2		12.9
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds	1,238.1		58.7		731.4		82.1		1,969.5		140.8
Other Asset-Backed	5,120.4		253.0		271.1		18.7		5,391.5		271.7
Commercial Mortgage-Backed	1,346.5		69.3		47.0		5.8		1,393.5		75.1
Total	$	24,427.4	$	1,096.6	$	6,226.1	$	739.1	$	30,653.5	$	1,835.7

Note: Five corporate debt AFS securities with a fair value of $144.4 million and unrealized losses of $12.8 million and one sub-sovereign, supranational and non-U.S. agency bonds AFS securities with a fair value of $70.7 million and unrealized losses of $6.7 million have been excluded from the table above as these AFS securities have a $1.7 million allowance for credit losses reported as of June 30, 2022. Refer to the discussion further below and Note 7 - Allowance for Credit Losses for further information.

DECEMBER 31, 2021	LESS THAN 12 MONTHS				12 MONTHS OR LONGER				TOTAL
(In Millions)	FAIR VALUE		UNREALIZED LOSSES		FAIR VALUE		UNREALIZED LOSSES		FAIR VALUE		UNREALIZED LOSSES
U.S. Government	$	239.0	$	9.4	$	—	$	—	$	239.0	$	9.4
Obligations of States and Political Subdivisions	1,699.5		37.4		31.6		1.2		1,731.1		38.6
Government Sponsored Agency	8,207.3		90.2		1,821.4		20.0		10,028.7		110.2
Non-U.S. Government	230.0		9.5		—		—		230.0		9.5
Corporate Debt	693.7		9.7		—		—		693.7		9.7
Covered Bonds	92.1		0.9		—		—		92.1		0.9
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds	1,116.8		31.9		172.3		3.5		1,289.1		35.4
Other Asset-Backed	3,815.5		31.4		11.7		0.3		3,827.2		31.7
Commercial Mortgage-Backed	566.8		3.2		—		—		566.8		3.2
Total	$	16,660.7	$	223.6	$	2,037.0	$	25.0	$	18,697.7	$	248.6

As of June 30, 2022, 2,484 AFS debt securities with a combined fair value of $30.7 billion were in an unrealized loss position, with their unrealized losses totaling $1.8 billion. As of June 30, 2022, unrealized losses related to AFS debt securities of $751.6 million and $430.0 million related to government-sponsored agency securities and obligations of states and political subdivisions, respectively, are primarily attributable to changes in market interest rates and credit spreads since their purchase.

As of December 31, 2021, 1,233 AFS debt securities with a combined fair value of $18.7 billion were in an unrealized loss position, with their unrealized losses totaling $248.6 million. As of December 31, 2021, unrealized losses related to AFS debt securities of $110.2 million related to government-sponsored agency securities, which are primarily attributable to changes in market interest rates and credit spreads since their purchase.

12% and 14% of the AFS corporate debt securities portfolio were backed by guarantees provided by U.S. and non-U.S. governmental entities as of June 30, 2022 and December 31, 2021, respectively. The remaining unrealized losses on Northern Trust’s AFS debt securities portfolio as of June 30, 2022 and December 31, 2021 are attributable to changes in overall market interest rates or credit spreads.

As of June 30, 2022, Northern Trust did not intend to sell any AFS debt securities in an unrealized loss position and it was more likely than not that Northern Trust would not be required to sell any such investment before the recovery of its amortized cost basis, which may be maturity.

AFS debt securities impairment reviews are conducted quarterly to identify and evaluate securities that have indications of possible credit losses. A determination as to whether a security’s decline in market value is related to credit impairment takes into consideration numerous factors and the relative significance of any single factor can vary by security. Factors Northern Trust considers in determining whether impairment is credit-related include, but are not limited to, the severity of the impairment; the cause of the impairment and the financial condition and near-term prospects of the issuer; activity in the market

of the issuer, which may indicate adverse credit conditions; Northern Trust’s intent regarding the sale of the security as of the balance sheet date; and the likelihood that Northern Trust will not be required to sell the security for a period of time sufficient to allow for the recovery of the security’s amortized cost basis. For each security meeting the requirements of Northern Trust’s internal screening process, an extensive review is conducted to determine if a credit loss has occurred.

There was a $1.3 million and a $1.7 provision for credit losses for AFS securities for the three and six months ended June 30, 2022, respectively. There was no provision for credit losses for AFS securities for the three and six months ended June 30, 2021. There was a $1.7 million allowance for credit losses for AFS securities as of June 30, 2022 which was primarily corporate debt securities and no allowance for credit losses for AFS securities as of December 31, 2021. The process for identifying credit losses for AFS securities is based on the best estimate of cash flows to be collected from the security, discounted using the security’s effective interest rate. If the present value of the expected cash flows is found to be less than the current amortized cost of the security, an allowance for credit losses is generally recorded equal to the difference between the two amounts, limited to the amount the amortized cost basis exceeds the fair value of the security. For additional information, please refer to Note 7 — Allowance for Credit Losses.

Held to Maturity Debt Securities. The following tables provide the amortized cost and fair values as of June 30, 2022 and December 31, 2021, and remaining maturities of held to maturity (HTM) debt securities as of June 30, 2022.

TABLE 42: RECONCILIATION OF AMORTIZED COST TO FAIR VALUE OF HELD TO MATURITY DEBT SECURITIES

	JUNE 30, 2022
(In Millions)	AMORTIZED COST		GROSS UNREALIZED GAINS		GROSS UNREALIZED LOSSES		FAIR VALUE
U.S Government	$	56.9	$	0.1	$	0.5	$	56.5
Government Sponsored Agency	5,806.7		0.1		582.5		5,224.3
Non-U.S. Government	3,097.0		0.1		79.5		3,017.6
Corporate Debt	873.2		—		32.6		840.6
Covered Bonds	2,678.3		0.4		101.5		2,577.2
Certificates of Deposit	554.3		—		—		554.3
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds	6,065.8		1.9		273.6		5,794.1
Other Asset-Backed	496.1		—		1.4		494.7
Other	484.3		—		118.1		366.2
Total	$	20,112.6	$	2.6	$	1,189.7	$	18,925.5

	DECEMBER 31, 2021
(In Millions)	AMORTIZED COST		GROSS UNREALIZED GAINS		GROSS UNREALIZED LOSSES		FAIR VALUE
U.S. Government	$	47.0	$	—	$	—	$	47.0
Obligations of States and Political Subdivisions	0.8		—		—		0.8
Government Sponsored Agency	5,927.6		1.1		106.1		5,822.6
Non-U.S. Government	5,773.3		3.9		9.8		5,767.4
Corporate Debt	901.8		2.5		6.5		897.8
Covered Bonds	2,942.4		8.3		9.6		2,941.1
Certificates of Deposit	674.7		—		—		674.7
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds	6,098.0		14.3		80.0		6,032.3
Other Asset-Backed	682.6		1.0		—		683.6
Other	516.3		3.4		71.6		448.1
Total	$	23,564.5	$	34.5	$	283.6	$	23,315.4

As of June 30, 2022, the $20.1 billion HTM debt securities portfolio had unrealized losses of $582.5 million and $273.6 million related to government-sponsored agency and sub-sovereign, supranational and non-U.S. agency bonds, respectively, which are primarily attributable to changes in overall market interest rates and credit spreads since their purchase. As of December 31, 2021, the $23.6 billion HTM debt securities portfolio had unrealized losses of $106.1 million, $80.0 million and $71.6 million related to government-sponsored agency, sub-sovereign, supranational and non-U.S. agency bonds, and other residential mortgage-backed securities, respectively, which are primarily attributable to changes in overall market interest rates and credit spreads since their purchase.

TABLE 43: REMAINING MATURITY OF HELD TO MATURITY DEBT SECURITIES

JUNE 30, 2022	ONE YEAR OR LESS				ONE TO FIVE YEARS				FIVE TO TEN YEARS				OVER TEN YEARS				TOTAL
(In Millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
U.S. Government	$	56.9	$	56.5	$	—	$	—	$	—	$	—	$	—	$	—	$	56.9	$	56.5
Government Sponsored Agency	640.5		583.4		1,865.3		1,689.6		2,094.9		1,872.7		1,206.0		1,078.6		5,806.7		5,224.3
Non-U.S. Government	1,615.6		1,614.0		1,335.0		1,269.4		146.4		134.2		—		—		3,097.0		3,017.6
Corporate Debt	228.8		228.0		629.6		600.0		14.8		12.6		—		—		873.2		840.6
Covered Bonds	489.6		489.5		1,678.4		1,630.4		510.3		457.3		—		—		2,678.3		2,577.2
Certificates of Deposit	554.3		554.3		—		—		—		—		—		—		554.3		554.3
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds	932.8		931.7		4,752.8		4,523.6		380.2		338.8		—		—		6,065.8		5,794.1
Other Asset-Backed	58.1		58.0		344.8		344.0		93.2		92.7		—		—		496.1		494.7
Other	24.5		23.9		286.1		258.2		57.5		45.4		116.2		38.7		484.3		366.2
Total	$	4,601.1	$	4,539.3	$	10,892.0	$	10,315.2	$	3,297.3	$	2,953.7	$	1,322.2	$	1,117.3	$	20,112.6	$	18,925.5

Note: Mortgage-backed and asset-backed securities are included in the above table taking into account anticipated future prepayments.

HTM debt securities consist of securities that management intends to, and Northern Trust has the ability to, hold until maturity. During the three and six months ended June 30, 2022, no securities were transferred from AFS to HTM. During the three and six months ended June 30, 2021, $6.9 billion of government sponsored agency securities were transferred from AFS to HTM for capital management purposes, all of which were transferred in the second quarter of 2021. Upon transfer of a debt security from the AFS to HTM classification, the amortized cost is reset to fair value. Any net unrealized gain or loss at the date of transfer will remain in Accumulated Other Comprehensive Income (Loss) (AOCI) and be amortized into net interest income over the remaining life of the securities using the effective interest method. The amortization of amounts retained in AOCI will offset the effect on interest income of the amortization of the premium or discount resulting from transferring the securities at fair value.

Credit Quality Indicators. The following table provides the amortized cost of HTM debt securities by credit rating.

TABLE 44: AMORTIZED COST OF HELD TO MATURITY DEBT SECURITIES BY CREDIT RATING

	JUNE 30, 2022
(In Millions)	AAA			AA			A			BBB			NOT RATED			TOTAL
U.S. Government	$	56.9		$	—		$	—		$	—		$	—		$	56.9
Government Sponsored Agency	5,806.7			—			—			—			—			5,806.7
Non-U.S. Government	720.4			923.9			1,136.7			316.0			—			3,097.0
Corporate Debt	2.1			353.4			517.7			—			—			873.2
Covered Bonds	2,678.3			—			—			—			—			2,678.3
Certificates of Deposit	—			—			—			—			554.3			554.3
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds	4,380.3			1,656.0			28.4			1.1			—			6,065.8
Other Asset-Backed	496.1			—			—			—			—			496.1
Other	69.8			—			—			—			414.5			484.3
Total	$	14,210.6		$	2,933.3		$	1,682.8		$	317.1		$	968.8		$	20,112.6
Percent of Total	71		%	15		%	8		%	1		%	5		%	100		%

	DECEMBER 31, 2021
(In Millions)	AAA			AA			A			BBB			NOT RATED			TOTAL
U.S. Government	$	47.0		$	—		$	—		$	—		$	—		$	47.0
Obligations of States and Political Subdivisions	—			0.8			—			—			—			0.8
Government Sponsored Agency	5,927.6			—			—			—			—			5,927.6
Non-U.S. Government	398.0			942.6			4,088.8			343.9			—			5,773.3
Corporate Debt	2.3			386.7			512.8			—			—			901.8
Covered Bonds	2,942.4			—			—			—			—			2,942.4
Certificates of Deposit	—			—			—			—			674.7			674.7
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds	4,207.6			1,858.0			31.3			1.1			—			6,098.0
Other Asset-Backed	682.6			—			—			—			—			682.6
Other	—			—			—			—			516.3			516.3
Total	$	14,207.5		$	3,188.1		$	4,632.9		$	345.0		$	1,191.0		$	23,564.5
Percent of Total	60		%	14		%	20		%	1		%	5		%	100		%

Credit quality indicators are metrics that provide information regarding the relative credit risk of debt securities. Northern Trust maintains a high quality debt securities portfolio, with 94% of the HTM portfolio at both June 30, 2022 and December 31, 2021, respectively, comprised of securities rated A or higher. The remaining HTM debt securities portfolio was comprised of 1% rated BBB at both June 30, 2022 and December 31, 2021, respectively, and 5% not rated by Moody’s, S&P Global, or Fitch Ratings at both June 30, 2022 and December 31, 2021, respectively. Securities not explicitly rated were grouped where possible under the credit rating of the issuer of the security.

Investment Security Gains and Losses. There were no sales of debt securities during the three and six months ended June 30, 2022 and 2021. There were no net investment security (losses) gains for the three and six months ended June 30, 2022 and 2021.