6. 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.

In establishing the inherent portion of the allowance for credit losses, Northern Trust’s Loan Loss Reserve Committee assesses a common set of qualitative factors applicable to both the commercial and personal loan segments. The risk characteristics underlying these qualitative factors, and management’s assessments as to the relative importance of a qualitative factor, can vary between loan segments and between classes within loan segments. Factors evaluated include those related to external matters, such as economic conditions and changes in collateral value, and those related to internal matters, such as changes in asset quality metrics and loan review activities. In addition to the factors noted above, risk characteristics such as portfolio delinquencies, percentage of portfolio on the watch list and on nonperforming status, and average borrower ratings are assessed in the determination of the inherent allowance.

Loan-to-value levels are considered for collateral-secured loans and leases in both the personal and commercial segments. Borrower debt service coverage is evaluated in the personal segment, and cash flow coverage is analyzed in the commercial segment.

Similar risk characteristics by type of exposure are analyzed when determining the allowance for undrawn commitments and standby letters of credit. These qualitative factors, together with historical loss rates, serve as the basis for the allowance for credit losses.

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.

The following tables provide information regarding changes in the total allowance for credit losses by segment during the three months ended March 31, 2015, and 2014.

Table 39: Changes in the Allowance for Credit Losses


	2015									2014
(In Millions)	Commercial			Personal			Total			Commercial			Personal			Total
Balance at Beginning of Period	$	169.7		$	126.2		$	295.9		$	168.0		$	139.9		$	307.9
Charge-Offs		(2.7	)		(4.8	)		(7.5	)		(4.2	)		(7.3	)		(11.5	)
Recoveries		1.7			1.2			2.9			8.5			1.5			10.0

Net (Charge-Offs) Recoveries		(1.0	)		(3.6	)		(4.6	)		4.3			(5.8	)		(1.5	)
Provision for Credit Losses		(4.3	)		(0.2	)		(4.5	)		0.8			2.2			3.0
Effect of Foreign Exchange Rates		(0.1	)		—			(0.1	)		—			—			—

Balance at End of Period	$	164.3		$	122.4		$	286.7		$	173.1		$	136.3		$	309.4

The following table provides information regarding the balances of the recorded investments in loans and leases and the allowance for credit losses by segment as of March 31, 2015, and December 31, 2014.

Table 40: Information about the Recorded Investments in Loans and Leases


	March 31, 2015						December 31, 2014
(In Millions)	Commercial		Personal		Total		Commercial		Personal		Total
Loans and Leases
Specifically Evaluated for Impairment	$	85.3	$	159.9	$	245.2	$	78.9	$	163.3	$	242.2
Evaluated for Inherent Impairment		15,406.0		16,979.0		32,385.0		14,274.7		17,123.3		31,398.0

Total Loans and Leases		15,491.3		17,138.9		32,630.2		14,353.6		17,286.6		31,640.2

Allowance for Loans and Leases
Specifically Evaluated for Impairment		6.8		1.6		8.4		5.8		0.8		6.6
Evaluated for Inherent Impairment		132.7		117.9		250.6		138.0		122.4		260.4

Allowance Assigned to Loans and Leases		139.5		119.5		259.0		143.8		123.2		267.0

Allowance for Unfunded Exposures
Commitments and Standby Letters of Credit		24.8		2.9		27.7		25.9		3.0		28.9

Total Allowance for Credit Losses	$	164.3	$	122.4	$	286.7	$	169.7	$	126.2	$	295.9