Reporting Segments and Related Information

12 Months Ended

Dec. 31, 2022

Segment Reporting [Abstract]

Reporting Segments and Related Information

Reporting Segments and Related Information

Segment Information. In 2022, the Corporation changed the name of its Corporate and Institutional Services segment to “Asset Servicing.” This change has not had, and is not expected in the future to have, any impact upon the methodology by which the Corporation allocates revenue and expense to each of its reporting segments.

Northern Trust is organized around its two client-focused reporting segments: Asset Servicing and Wealth Management. Asset management and related services are provided to Asset Servicing and Wealth Management clients primarily by the Asset Management business. The revenue and expenses of Asset Management and certain other support functions are allocated fully to Asset Servicing and Wealth Management.

Reporting segment financial information, presented on an internal management-reporting basis, is determined by accounting systems used to allocate revenue and expense to each segment, and incorporates processes for allocating assets, liabilities, equity and the applicable interest income and expense utilizing a funds transfer pricing (FTP) methodology. Under the methodology, assets and liabilities receive a funding charge or credit that considers interest rate risk, liquidity risk, and other product characteristics on an instrument level. Additionally, segment information is presented on an FTE basis as management believes an FTE presentation provides a clearer indication of net interest income. The adjustment to an FTE basis has no impact on Net Income.

Equity is allocated to the reporting segments based on a variety of factors including, but not limited to, risk, regulatory considerations, and internal metrics. Allocations of capital and certain corporate expense may not be representative of levels that would be required if the segments were independent entities. The accounting policies used for management reporting are consistent with those described in Note 1, “Summary of Significant Accounting Policies.” Transfers of income and expense items are recorded at cost; there is no consolidated profit or loss on sales or transfers between reporting segments. Northern Trust’s presentations are not necessarily consistent with similar information for other financial institutions.

Revenues, expenses and average assets are allocated to Asset Servicing and Wealth Management, with the exception of non-recurring activities such as certain costs associated with acquisitions, divestitures, litigation, restructuring, and tax adjustments not directly attributable to a specific reporting segment, which are reported within the Other segment.

Reporting segment results are subject to reclassification when organizational changes are made. The results are also subject to refinements in revenue and expense allocation methodologies, which are typically reflected on a prospective basis.

Asset Servicing. Asset Servicing is a leading global provider of asset servicing and related services to corporate and public retirement funds, foundations, endowments, fund managers, insurance companies, sovereign wealth funds, and other institutional investors around the globe. Asset servicing and related services encompass a full range of capabilities including but not limited to: custody; fund administration; investment operations outsourcing; investment management; investment risk and analytical services; employee benefit services; securities lending; foreign exchange; treasury management; brokerage services; transition management services; banking; and cash management. Client relationships are managed through the Bank and the Bank’s and the Corporation’s other subsidiaries, including support from locations in North America, Europe, the Middle East, and the Asia-Pacific region.

Wealth Management. Wealth Management focuses on high-net-worth individuals and families, business owners, executives, professionals, retirees, and established privately-held businesses in its target markets. In supporting these targeted segments, Wealth Management provides trust, investment management, custody, and philanthropic services; financial consulting; guardianship and estate administration; family business consulting; family financial education; brokerage services; and private and business banking. Wealth Management also includes Global Family Office, which provides customized services, including but not limited to: investment consulting; global custody; fiduciary; and private banking; family office consulting, and technology solutions, to meet the complex financial and reporting needs of ultra-high-net-worth individuals and family offices across the globe. Wealth Management services are delivered by multidisciplinary teams through a network of offices in 19 U.S. states and Washington, D.C., as well as offices in London, Guernsey, and Abu Dhabi.

Other. Income and expenses associated with non-recurring activities such as certain costs associated with acquisitions, divestitures, litigation, restructuring, and tax adjustments are included within Other.

The following tables reflect the earnings contribution and average assets of Northern Trust’s reporting segments for the years ended December 31, 2022, 2021, and 2020. Segment results are stated on an FTE basis which has no impact on net income. Financial measures stated on an FTE basis includes FTE adjustments of $45.6 million, $35.6 million, and $34.4 million for 2022, 2021, and 2020, respectively.

TABLE 132: ASSET SERVICING RESULTS OF OPERATIONS

	FOR THE YEAR ENDED DECEMBER 31,
($ In Millions)	2022			2021			2020
Noninterest Income
Trust, Investment and Other Servicing Fees	$	2,496.3		$	2,487.3		$	2,321.6
Foreign Exchange Trading Income	281.0			279.0			276.3
Other Noninterest Income	250.7			261.2			222.5
Total Noninterest Income	3,028.0			3,027.5			2,820.4
Net Interest Income(1)	1,072.7			637.2			665.5
Revenue(1)	4,100.7			3,664.7			3,485.9
Provision for Credit Losses	2.4			(33.8)			38.1
Noninterest Expense	3,092.7			2,863.0			2,752.7
Income before Income Taxes(1)	1,005.6			835.5			695.1
Provision for Income Taxes(1)	243.2			194.1			174.4
Net Income	$	762.4		$	641.4		$	520.7
Percentage of Consolidated Net Income	57		%	41		%	43		%
Average Assets	$	115,646.4		$	120,883.2		$	104,790.6

(1) Financial measures stated on an FTE basis.

TABLE 133: WEALTH MANAGEMENT RESULTS OF OPERATIONS

	FOR THE YEAR ENDED DECEMBER 31,
($ In Millions)	2022			2021			2020
Noninterest Income
Trust, Investment and Other Servicing Fees	$	1,936.3		$	1,873.8		$	1,673.4
Foreign Exchange Trading Income	7.6			13.6			14.1
Other Noninterest Income	137.7			188.2			168.0
Total Noninterest Income	2,081.6			2,075.6			1,855.5
Net Interest Income(1)	860.1			781.1			812.1
Revenue(1)	2,941.7			2,856.7			2,667.6
Provision for Credit Losses	9.6			(47.7)			86.9
Noninterest Expense	1,815.5			1,651.1			1,559.7
Income before Income Taxes(1)	1,116.6			1,253.3			1,021.0
Provision for Income Taxes(1)	310.0			317.0			291.8
Net Income	$	806.6		$	936.3		$	729.2
Percentage of Consolidated Net Income	60		%	61		%	60		%
Average Assets	$	36,905.5		$	35,480.0		$	32,020.5

(1) Financial measures stated on an FTE basis.

TABLE 134: OTHER RESULTS OF OPERATIONS

	FOR THE YEAR ENDED DECEMBER 31,
($ In Millions)	2022			2021			2020
Noninterest Income	$	(235.6)		$	(21.3)		$	(18.3)
Net Interest Income(1)	—			—			—
Revenue(1)	(235.6)			(21.3)			(18.3)
Noninterest Expense	74.7			21.8			35.8
Income (Loss) before Income Taxes(1)	(310.3)			(43.1)			(54.1)
Provision (Benefit) for Income Taxes(1)	(77.3)			(10.7)			(13.5)
Net Income	$	(233.0)		$	(32.4)		$	(40.6)
Percentage of Consolidated Net Income	(17)		%	(2)		%	(3)		%
Average Assets	$	—		$	—		$	—

(1) Financial measures stated on an FTE basis.

TABLE 135: CONSOLIDATED FINANCIAL INFORMATION

	FOR THE YEAR ENDED DECEMBER 31,
(In Millions)	2022		2021		2020
Noninterest Income
Trust, Investment and Other Servicing Fees	$	4,432.6	$	4,361.1	$	3,995.0
Foreign Exchange Trading Income	288.6		292.6		290.4
Other Noninterest Income	152.8		428.1		372.2
Total Noninterest Income	4,874.0		5,081.8		4,657.6
Net Interest Income	1,887.2		1,382.7		1,443.2
Revenue	6,761.2		6,464.5		6,100.8
Provision for Credit Losses	12.0		(81.5)		125.0
Noninterest Expense	4,982.9		4,535.9		4,348.2
Income before Income Taxes	1,766.3		2,010.1		1,627.6
Provision for Income Taxes	430.3		464.8		418.3
Net Income	$	1,336.0	$	1,545.3	$	1,209.3
Average Assets	$	152,551.9	$	156,363.2	$	136,811.1

Geographic Area Information. Northern Trust’s non-U.S. activities are primarily related to its asset servicing, asset management, foreign exchange, cash management, and commercial banking businesses. The operations of Northern Trust are managed on a reporting segment basis and include components of both U.S and non-U.S. source income and assets. Non-U.S. source income and assets are not separately identified in Northern Trust’s internal management reporting system. However, Northern Trust is required to disclose non-U.S. activities based on the domicile of the customer. Due to the complex and integrated nature of Northern Trust’s activities, it is difficult to segregate with precision revenues, expenses and assets between U.S. and non-U.S.-domiciled customers. Therefore, certain subjective estimates and assumptions have been made to allocate revenues, expenses and assets between U.S. and non-U.S. operations.

For purposes of this disclosure, all foreign exchange trading income has been allocated to non-U.S. operations. Interest expense is allocated to non-U.S. operations based on specifically matched or pooled funding. Allocations of indirect noninterest expenses, when made, are based on various methods such as time, space, and number of employees.

The following table summarizes Northern Trust’s performance based on the allocation process described above without regard to guarantors or the location of collateral.

TABLE 136: DISTRIBUTION OF TOTAL ASSETS AND OPERATING PERFORMANCE

(In Millions)	TOTAL ASSETS		% OF TOTAL		TOTAL REVENUE(1)		% OF TOTAL		INCOME BEFORE INCOME TAXES		% OF TOTAL		NET INCOME		% OF TOTAL
2022
Non-U.S.	$	35,991.3	23	%	$	2,273.3	34	%	$	560.9	32	%	$	420.2	31	%
U.S.	119,045.4		77	%	4,487.9		66	%	1,205.4		68	%	915.8		69	%
Total	$	155,036.7	100	%	$	6,761.2	100	%	$	1,766.3	100	%	$	1,336.0	100	%
2021
Non-U.S.	$	38,555.3	21	%	$	2,017.5	31	%	$	569.4	28	%	$	426.7	28	%
U.S.	145,334.5		79	%	4,447.0		69	%	1,440.7		72	%	1,118.6		72	%
Total	$	183,889.8	100	%	$	6,464.5	100	%	$	2,010.1	100	%	$	1,545.3	100	%
2020
Non-U.S.	$	38,393.8	23	%	$	1,737.6	28	%	$	404.0	25	%	$	302.6	25	%
U.S.	131,610.1		77	%	4,363.2		72	%	1,223.6		75	%	906.7		75	%
Total	$	170,003.9	100	%	$	6,100.8	100	%	$	1,627.6	100	%	$	1,209.3	100	%

(1) Total revenue is comprised of net interest income and noninterest income.