Loans and Leases

12 Months Ended

Dec. 31, 2022

Amounts outstanding for Loans and Leases, by segment and class, are shown in the following table.

TABLE 68: LOANS AND LEASES


	DECEMBER 31,
(In Millions)	2022		2021
Commercial
Commercial and Institutional(1)	$	12,415.0	$	11,489.2
Commercial Real Estate	4,773.0		4,326.3
Non-U.S.(1)	3,131.1		1,990.2
Lease Financing, net	—		11.0
Other	1,316.5		670.7
Total Commercial	21,635.6		18,487.4
Personal
Private Client	14,119.0		15,256.3
Residential Real Estate	6,413.5		6,319.9
Non-U.S.	510.0		381.8
Other	215.2		35.2
Total Personal	21,257.7		21,993.2
Total Loans and Leases	$	42,893.3	$	40,480.6

(1) Commercial and institutional and commercial-non-U.S. combined include $5.6 billion and $4.9 billion of private equity capital call finance loans at December 31, 2022 and 2021, respectively.

Residential real estate loans consist of traditional first lien mortgages and equity credit lines that generally require a loan-to-collateral value ratio of no more than 65% to 80% at inception. Northern Trust’s equity credit line products generally have draw periods of up to 10 years and a balloon payment of any outstanding balance is due at maturity. Payments are interest-only with variable interest rates. Northern Trust does not offer equity credit lines that include an option to convert the outstanding balance to an amortizing payment loan. As of December 31, 2022 and 2021, equity credit lines totaled $248.6 million and $258.2 million, respectively. Equity credit lines for which first liens were held by Northern Trust represented 98% and 97% of the total equity credit lines as of December 31, 2022 and 2021, respectively.

Included within the commercial-non-U.S., commercial-other, and personal-other classes are short duration advances, primarily related to the processing of custodied client investments, totaling $2.9 billion and $1.6 billion at December 31, 2022 and 2021, respectively. Demand deposit overdrafts reclassified as loan balances, primarily in personal-other, totaled $24.4 million and $8.0 million at December 31, 2022 and 2021, respectively. There were no loans classified as held for sale at December 31, 2022. There were $12.3 million loans classified as held for sale at December 31, 2021 related to the decision to exit a non-strategic loan portfolio primarily within residential real estate. Loans classified as held for sale are recorded at the lower of cost or fair value. There was $11.2 million and $118.8 million loans sold during the year ended December 31, 2022 and 2021, respectively, which were primarily residential real estate loans.

As of December 31, 2022 and 2021, there were no leases classified as held for sale. As of December 31, 2022, there were no leases outstanding.

Credit Quality Indicators. Credit quality indicators are statistics, measurements or other metrics that provide information regarding the relative credit risk of loans and leases. Northern Trust utilizes a variety of credit quality indicators to assess the credit risk of loans and leases at the segment, class, and individual credit exposure levels.

As part of its credit process, Northern Trust utilizes an internal borrower risk rating system to support identification, approval, and monitoring of credit risk. Borrower risk ratings are used in credit underwriting and management reporting. Risk ratings are used for ranking the credit risk of borrowers and the probability of their default. Each borrower is rated using one of a number of ratings models, which consider both quantitative and qualitative factors. The ratings models vary among classes of loans and leases in order to capture the unique risk characteristics inherent within each particular type of credit exposure. Provided below are the more significant performance indicator attributes considered within Northern Trust’s borrower rating models, by loan and lease class.

•Commercial and Institutional: leverage, profit margin, liquidity, asset size and capital levels;

•Commercial Real Estate: debt service coverage, loan-to-value ratio, leasing status and guarantor support;

•Lease Financing and Commercial-Other: leverage, profit margin, liquidity, asset size and capital levels;

•Non-U.S.: leverage, profit margin, liquidity, return on assets and capital levels;

•Residential Real Estate: payment history, credit bureau scores and loan-to-value ratio;

•Private Client: cash-flow-to-debt and net worth ratios, leverage and liquidity; and

•Personal-Other: cash-flow-to-debt and net worth ratios.

While the criteria vary by model, the objective is for the borrower ratings to be consistent in both the measurement and ranking of risk. Each model is calibrated to a master rating scale to support this consistency. Ratings for borrowers not in default range from “1” for the strongest credits to “7” for the weakest non-defaulted credits. Ratings of “8” or “9” are used for defaulted borrowers. Borrower risk ratings are monitored and are revised when events or circumstances indicate a change is required. Risk ratings are generally validated at least annually.

Loan and lease segment and class balances as of December 31, 2022 are provided in the following table, segregated by borrower ratings into “1 to 3,” “4 to 5” and “6 to 9” (watch list and nonaccrual status) categories by year of origination at amortized cost basis. Loans that are held for investment are reported at the principal amount outstanding, net of unearned income.

TABLE 69: CREDIT QUALITY INDICATOR AT AMORTIZED COST BASIS BY ORIGINATION YEAR


DECEMBER 31, 2022	TERM LOANS AND LEASES												REVOLVING LOANS		REVOLVING LOANS CONVERTED TO TERM LOANS
(In Millions)	2022		2021		2020		2019		2018		PRIOR						TOTAL
Commercial
Commercial and Institutional
Risk Rating:
1 to 3 Category	$	753.3	$	1,087.5	$	209.8	$	159.3	$	45.9	$	511.3	$	6,032.8	$	17.7	$	8,817.6
4 to 5 Category	744.1		740.6		300.8		191.1		151.4		174.7		1,102.3		32.9		3,437.9
6 to 9 Category	50.8		30.5		—		13.7		—		—		64.5		—		159.5
Total Commercial and Institutional	1,548.2		1,858.6		510.6		364.1		197.3		686.0		7,199.6		50.6		12,415.0
Commercial Real Estate
Risk Rating:
1 to 3 Category	318.7		227.4		123.6		123.5		39.8		39.1		113.4		3.0		988.5
4 to 5 Category	968.5		1,040.0		637.8		447.3		153.0		256.9		181.5		17.5		3,702.5
6 to 9 Category	7.7		22.7		—		49.1		—		—		2.5		—		82.0
Total Commercial Real Estate	1,294.9		1,290.1		761.4		619.9		192.8		296.0		297.4		20.5		4,773.0
Non-U.S.
Risk Rating:
1 to 3 Category	991.9		46.2		109.6		14.8		—		6.5		1,158.3		—		2,327.3
4 to 5 Category	459.0		—		—		—		—		214.9		89.5		1.8		765.2
6 to 9 Category	0.1		—		—		23.1		—		—		15.4		—		38.6
Total Non-U.S.	1,451.0		46.2		109.6		37.9		—		221.4		1,263.2		1.8		3,131.1




Other
Risk Rating:
1 to 3 Category	993.9		—		—		—		—		—		—		—		993.9
4 to 5 Category	322.6		—		—		—		—		—		—		—		322.6
Total Other	1,316.5		—		—		—		—		—		—		—		1,316.5
Total Commercial	5,610.6		3,194.9		1,381.6		1,021.9		390.1		1,203.4		8,760.2		72.9		21,635.6
Personal
Private Client
Risk Rating:
1 to 3 Category	395.5		159.9		50.5		313.6		13.4		18.5		5,352.5		28.2		6,332.1
4 to 5 Category	430.3		755.1		192.4		191.3		38.7		160.0		5,728.6		267.2		7,763.6
6 to 9 Category	0.9		—		0.1		—		18.6		—		3.7		—		23.3
Total Private Client	826.7		915.0		243.0		504.9		70.7		178.5		11,084.8		295.4		14,119.0
Residential Real Estate
Risk Rating:
1 to 3 Category	871.6		666.7		567.7		168.1		102.9		750.8		128.4		7.9		3,264.1
4 to 5 Category	354.3		656.7		597.6		290.0		170.9		838.2		180.4		1.0		3,089.1
6 to 9 Category	—		6.8		1.5		1.1		3.7		35.9		11.3		—		60.3
Total Residential Real Estate	1,225.9		1,330.2		1,166.8		459.2		277.5		1,624.9		320.1		8.9		6,413.5
Non-U.S.
Risk Rating:
1 to 3 Category	3.0		3.7		—		—		4.6		2.3		124.6		—		138.2
4 to 5 Category	24.2		40.3		—		21.3		3.2		2.9		272.0		7.8		371.7
6 to 9 Category	—		—		—		—		—		0.1		—		—		0.1
Total Non-U.S.	27.2		44.0		—		21.3		7.8		5.3		396.6		7.8		510.0
Other
Risk Rating:
1 to 3 Category	190.8		—		—		—		—		—		—		—		190.8
4 to 5 Category	24.4		—		—		—		—		—		—		—		24.4
Total Other	215.2		—		—		—		—		—		—		—		215.2
Total Personal	2,295.0		2,289.2		1,409.8		985.4		356.0		1,808.7		11,801.5		312.1		21,257.7
Total Loans and Leases	$	7,905.6	$	5,484.1	$	2,791.4	$	2,007.3	$	746.1	$	3,012.1	$	20,561.7	$	385.0	$	42,893.3


December 31, 2021	TERM LOANS AND LEASES												REVOLVING LOANS		REVOLVING LOANS CONVERTED TO TERM LOANS
(In Millions)	2021		2020		2019		2018		2017		PRIOR						TOTAL
Commercial
Commercial and Institutional
Risk Rating:
1 to 3 Category	$	1,042.0	$	310.2	$	468.9	$	163.9	$	55.4	$	541.6	$	4,946.0	$	0.1	$	7,528.1
4 to 5 Category	993.4		441.7		406.7		193.6		243.3		230.2		1,217.8		33.1		3,759.8
6 to 9 Category	44.0		6.0		47.1		30.2		9.9		1.9		62.2		—		201.3
Total Commercial and Institutional	2,079.4		757.9		922.7		387.7		308.6		773.7		6,226.0		33.2		11,489.2
Commercial Real Estate
Risk Rating:
1 to 3 Category	472.0		298.7		279.8		65.8		16.6		79.5		67.5		2.9		1,282.8
4 to 5 Category	912.7		644.8		491.5		205.4		89.6		390.6		182.3		20.5		2,937.4
6 to 9 Category	50.1		—		50.6		—		—		2.9		2.5		—		106.1
Total Commercial Real Estate	1,434.8		943.5		821.9		271.2		106.2		473.0		252.3		23.4		4,326.3
Non-U.S.
Risk Rating:
1 to 3 Category	816.5		68.9		38.4		—		9.1		—		582.0		—		1,514.9
4 to 5 Category	167.0		—		—		1.9		—		191.9		73.3		1.8		435.9
6 to 9 Category	2.9		—		23.1		—		—		—		13.4		—		39.4
Total Non-U.S.	986.4		68.9		61.5		1.9		9.1		191.9		668.7		1.8		1,990.2
Lease Financing, net
Risk Rating:
6 to 9 Category	—		—		—		—		—		11.0		—		—		11.0
Total Lease Financing, net	—		—		—		—		—		11.0		—		—		11.0
Other
Risk Rating:
1 to 3 Category	551.5		—		—		—		—		—		—		—		551.5
4 to 5 Category	119.2		—		—		—		—		—		—		—		119.2
Total Other	670.7		—		—		—		—		—		—		—		670.7
Total Commercial	5,171.3		1,770.3		1,806.1		660.8		423.9		1,449.6		7,147.0		58.4		18,487.4
Personal
Private Client
Risk Rating:
1 to 3 Category	432.5		116.6		90.3		14.9		39.3		129.8		7,592.8		44.7		8,460.9
4 to 5 Category	567.8		335.2		396.9		213.3		55.0		39.9		4,979.8		178.3		6,766.2
6 to 9 Category	1.9		2.4		3.0		20.4		—		—		1.5		—		29.2
Total Private Client	1,002.2		454.2		490.2		248.6		94.3		169.7		12,574.1		223.0		15,256.3
Residential Real Estate
Risk Rating:
1 to 3 Category	1,018.1		660.3		213.0		110.4		139.8		763.1		161.5		—		3,066.2
4 to 5 Category	434.0		676.6		325.5		190.9		172.1		1,145.9		218.1		2.2		3,165.3
6 to 9 Category	0.3		9.9		6.5		5.3		6.3		55.1		5.0		—		88.4
Total Residential Real Estate	1,452.4		1,346.8		545.0		306.6		318.2		1,964.1		384.6		2.2		6,319.9
Non-U.S.
Risk Rating:
1 to 3 Category	27.5		—		1.2		—		—		1.0		44.1		—		73.8
4 to 5 Category	36.1		—		20.6		10.4		—		3.8		229.1		7.8		307.8
6 to 9 Category	—		—		—		—		—		0.2		—		—		0.2
Total Non-U.S.	63.6		—		21.8		10.4		—		5.0		273.2		7.8		381.8
Other
Risk Rating:
1 to 3 Category	13.4		—		—		—		—		—		—		—		13.4
4 to 5 Category	21.8		—		—		—		—		—		—		—		21.8
Total Other	35.2		—		—		—		—		—		—		—		35.2
Total Personal	2,553.4		1,801.0		1,057.0		565.6		412.5		2,138.8		13,231.9		233.0		21,993.2
Total Loans and Leases	$	7,724.7	$	3,571.3	$	2,863.1	$	1,226.4	$	836.4	$	3,588.4	$	20,378.9	$	291.4	$	40,480.6

Loans and leases in the “1 to 3” category are expected to exhibit minimal to modest probabilities of default and are characterized by borrowers having the strongest financial qualities, including above average financial flexibility, cash flows

and capital levels. Borrowers assigned these ratings are anticipated to experience very little to moderate financial pressure in adverse down-cycle scenarios. As a result of these characteristics, borrowers within this category exhibit a minimal to modest likelihood of loss.

Loans and leases in the “4 to 5” category are expected to exhibit moderate to acceptable probabilities of default and are characterized by borrowers with less financial flexibility than those in the “1 to 3” category. Cash flows and capital levels are generally sufficient to allow for borrowers to meet current requirements, but have fewer financial resources to manage through economic downturns. As a result of these characteristics, borrowers within this category exhibit a moderate likelihood of loss.

Loans and leases in the watch list category have elevated credit risk profiles that are monitored through internal watch lists, and consist of credits with borrower ratings of “6 to 9.” These credits, which include all nonaccrual credits, are expected to exhibit probabilities of default, elevated risk of default, or are currently in default. Borrowers associated with these risk profiles that are not currently in default have limited financial flexibility. Cash flows and capital levels range from acceptable to potentially insufficient to meet current requirements, particularly in adverse down cycle scenarios. As a result of these characteristics, borrowers in this category exhibit an elevated to probable likelihood of loss.

Past Due Status. Past due status is based on the length of time from the contractual due date a principal or interest payment has been past due. For disclosure purposes, loans and leases that are 29 days past due or less are reported as current.

The following table provides balances and delinquency status of accrual and nonaccrual loans and leases by segment and class, as well as the other real estate owned and nonaccrual asset balances, as of December 31, 2022 and 2021.

TABLE 70: DELINQUENCY STATUS


	ACCRUAL														NONACCRUAL WITH NO ALLOWANCE
(In Millions)	CURRENT		30 – 59 DAYS PAST DUE		60 – 89 DAYS PAST DUE		90 DAYS OR MORE PAST DUE		TOTAL ACCRUAL		NONACCRUAL		TOTAL LOANS AND LEASES
December 31, 2022
Commercial
Commercial and Institutional	$	12,353.7	$	40.2	$	3.0	$	0.7	$	12,397.6	$	17.4	$	12,415.0	$	4.4
Commercial Real Estate	4,761.5		1.3		—		—		4,762.8		10.2		4,773.0		6.2
Non-U.S.	3,131.1		—		—		—		3,131.1		—		3,131.1		—

Other	1,316.5		—		—		—		1,316.5		—		1,316.5		—
Total Commercial	21,562.8		41.5		3.0		0.7		21,608.0		27.6		21,635.6		10.6
Personal
Private Client	13,843.5		192.3		29.9		53.3		14,119.0		—		14,119.0		—
Residential Real Estate	6,373.2		9.6		12.3		0.1		6,395.2		18.3		6,413.5		18.3
Non-U.S.	509.9		—		—		0.1		510.0		—		510.0		—
Other	215.2		—		—		—		215.2		—		215.2		—
Total Personal	20,941.8		201.9		42.2		53.5		21,239.4		18.3		21,257.7		18.3
Total Loans and Leases	$	42,504.6	$	243.4	$	45.2	$	54.2	$	42,847.4	$	45.9	$	42,893.3	$	28.9
					Other Real Estate Owned						$	—
					Total Nonaccrual Assets						$	45.9


	ACCRUAL														NONACCRUAL WITH NO ALLOWANCE
(In Millions)	CURRENT		30 – 59 DAYS PAST DUE		60 – 89 DAYS PAST DUE		90 DAYS OR MORE PAST DUE		TOTAL ACCRUAL		NONACCRUAL		TOTAL LOANS AND LEASES
December 31, 2021
Commercial
Commercial and Institutional	$	11,434.7	$	32.5	$	2.1	$	0.4	$	11,469.7	$	19.5	$	11,489.2	$	8.8
Commercial Real Estate	4,256.6		3.1		—		—		4,259.7		66.6		4,326.3		52.3
Non-U.S.	1,990.2		—		—		—		1,990.2		—		1,990.2		—
Lease Financing, net	11.0		—		—		—		11.0		—		11.0		—
Other	670.7		—		—		—		670.7		—		670.7		—
Total Commercial	18,363.2		35.6		2.1		0.4		18,401.3		86.1		18,487.4		61.1
Personal
Private Client	14,927.3		229.5		71.8		27.7		15,256.3		—		15,256.3		—
Residential Real Estate	6,273.2		7.0		3.3		0.2		6,283.7		36.2		6,319.9		36.2
Non-U.S	381.6		0.2		—		—		381.8		—		381.8		—
Other	35.2		—		—		—		35.2		—		35.2		—
Total Personal	21,617.3		236.7		75.1		27.9		21,957.0		36.2		21,993.2		36.2
Total Loans and Leases	$	39,980.5	$	272.3	$	77.2	$	28.3	$	40,358.3	$	122.3	$	40,480.6	$	97.3
					Other Real Estate Owned						$	3.0
					Total Nonaccrual Assets						$	125.3

Interest income that would have been recorded for nonaccrual loans and leases in accordance with their original terms was $4.1 million in 2022, $4.6 million in 2021, and $4.6 million in 2020.

Collateral Dependent Financial Assets. A financial asset is collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. Most of Northern Trust’s collateral dependent credit exposure relates to its residential real estate portfolio for which the collateral is usually the underlying real estate property. For collateral-dependent financial assets, it is Northern Trust’s policy to reserve or charge-off the difference between the amortized cost basis of the loan and the value of the collateral. The collateral-dependent financial asset balance as of December 31, 2022 was immaterial to Northern Trust’s financial statements.

Nonaccrual Loans and Troubled Debt Restructurings (TDRs). A loan that has been modified as a concession by Northern Trust or a bankruptcy court resulting from the debtor’s financial difficulties is referred to as a troubled debt restructuring. There were $35.3 million and $76.7 million of nonaccrual TDRs included within nonaccrual loans as of December 31, 2022 and 2021, respectively. There were $39.7 million and $16.5 million of accrual TDRs included within nonaccrual loans as of December 31, 2022 and 2021, respectively. There were $0.2 million of aggregate undrawn loan commitments and standby letters of credit at both December 31, 2022 and 2021, issued to borrowers with TDR modifications of loans.

The following table provides, by segment and class, the number of TDR modifications of loans and leases during the years ended December 31, 2022, and 2021, and the recorded investments and unpaid principal balances as of December 31, 2022 and 2021.

TABLE 71: TROUBLED DEBT RESTRUCTURINGS


($ In Millions)	LOAN MODIFICATION DETAIL	NUMBER OF LOANS AND LEASES	RECORDED INVESTMENT		UNPAID PRINCIPAL BALANCE
December 31, 2022
Commercial
Commercial and Institutional	Interest rate concession, extension of term, and other modification	2	$	0.6	$	0.6
Commercial Real Estate	Interest rate concession and other modification	1	31.6		32.5
Total Commercial		3	32.2		33.1
Personal
Residential Real Estate	Interest rate concession, deferrals of principal, extension of term, and other modification	3	0.2		0.2
Private Client	Interest rate concession and extension of term	1	0.4		0.4
Total Personal		4	0.6		0.6
Total Loans and Leases		7	$	32.8	$	33.7

Note: Period-end balances reflect all paydowns and charge-offs during the year.


($ In Millions)	LOAN MODIFICATION DETAIL	NUMBER OF LOANS AND LEASES	RECORDED INVESTMENT		UNPAID PRINCIPAL BALANCE
December 31, 2021
Commercial
Commercial and Institutional	Deferrals of principal	6	$	19.6	$	19.6
Commercial Real Estate	Deferrals of principal, interest rate concessions, other modifications, and extension of term	3	36.0		42.4
Total Commercial		9	55.6		62.0
Personal
Residential Real Estate	Deferrals of principal, extension of term, and other modifications	10	1.3		1.5
Total Personal		10	1.3		1.5
Total Loans and Leases		19	$	56.9	$	63.5

Note: Period-end balances reflect all paydowns and charge-offs during the year.

TDR modifications involve extensions of term, deferrals of principal, interest rate concessions, and other modifications. Other modifications typically reflect other nonstandard terms which Northern Trust would not offer in non-troubled situations.

There were no loan or lease TDR modifications during the previous twelve-month period which subsequently had a payment default during the year ended December 31, 2022.

There were two loan or lease TDR modifications during the previous twelve-month period which subsequently had a payment default during the year ended December 31, 2021. The total recorded investment for these loans was approximately $5.6 million and the unpaid principal balance for these loans was approximately $5.6 million.

Northern Trust may obtain physical possession of real estate via foreclosure on an in-substance repossession. As of December 31, 2022 and 2021, Northern Trust held foreclosed real estate properties with an immaterial carrying value for both years as a result of obtaining physical possession. In addition, as of December 31, 2022 and 2021, Northern Trust had loans with a carrying value of $1.1 million and $2.6 million, respectively, for which formal foreclosure proceedings were in process.