NORTHERN TRUST CORP
For the period ended Jun 30, 2024. Filed Aug 1, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 1, 2024
NTRS$172.76+0.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-04-23.
0000073124-24-000159
Items 2 and 3. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures about Market RiskCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-01.
0000073124-24-000206
Items 2 and 3. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures about Market RiskThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 284 previous paragraphs and 347 current paragraphs.
195 unchanged; 69 reworded; 61 added; 19 removed; 1 previous and 22 current paragraphs rearranged.
Tables are not compared: 32 previous and 38 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (61)
Current report
SECOND QUARTER CONSOLIDATED RESULTS OF OPERATIONS
Current report
Revenue for the three months ended June 30, 2024 increased $958.4 million, or 55%, to $2.72 billion in the current quarter from $1.76 billion in the prior-year quarter. The current-quarter results include a $878.4 million net gain related to the Visa transactions. For further detail on the Visa transactions, refer to Note 20—Commitments and Contingent Liabilities for further information.
Current report
Other Noninterest Income increased $877.2 million from $149.3 million in the prior-year quarter to $1.03 billion in the current quarter. The increase in Other Noninterest Income in the current quarter reflects the net gain related to the Visa transactions, partially offset by a loss recognized as a result of a securities repositioning related to the supplemental pension plan and impairment charges taken on certain investments.
Current report
Net Interest Income increased $11.4 million, or 2%, to $522.9 million in the current quarter as compared to $511.5 million in the prior-year quarter, primarily due to higher client deposits, partially offset by higher funding costs.
Current report
Noninterest Expense increased $202.0 million, or 15%, from $1.33 billion in the prior-year quarter to $1.53 billion in the current quarter, primarily attributable to $182.2 million of restructuring charges and other notable items, including severance-related charges of $85.2 million, a $70 million charitable commitment to the Northern Trust Foundation, higher software amortization acceleration and dispositions, and a legal settlement recorded in the current quarter.
Current report
Other Operating Income increased compared to the prior-year quarter, primarily driven by the $878.4 million gain related to the net impact from the Visa transactions in the current quarter, partially offset by a loss recognized as a result of a securities repositioning related to the supplemental pension plan, and impairment charges taken on certain investments.
Current report
The negative Provision for Credit Losses in the prior-year quarter was primarily due to a decrease in the reserve evaluated on a collective basis, primarily driven by improved credit quality in certain C&I and certain CRE loans, partially offset by expectations for higher economic stress in the CRE market, particularly Office CRE.
Current report
Compensation expense, the largest component of Noninterest Expense, increased compared to the prior-year quarter, primarily due to the current quarter $81.8 million severance-related charge, compared to a $36.7 million severance-related charge in the prior-year quarter, and higher base pay adjustments.
Current report
Outside Services expense increased compared to the prior-year quarter, primarily due to an increase in consulting, technical, and legal services.
Current report
Equipment and Software expense increased compared to the prior-year quarter, primarily due to software disposition charges in the current quarter, higher software amortization, and higher software support expense.
Current report
Other Operating Expense increased compared to the prior-year quarter, primarily due to a $70.0 million charitable commitment and a legal settlement in the current quarter, partially offset by the $25.6 million charge related to an investment in a client capability recorded in the prior-year quarter.
Current report
The effective tax rate decreased compared to the prior-year quarter primarily due to a lower state effective tax rate as a result of tax legislation enacted in the quarter and the resolution of state income tax audits.
Current report
SIX-MONTH CONSOLIDATED RESULTS OF OPERATIONS
Current report
Overview of Financial Results
Current report
Revenue for the six months ended June 30, 2024 increased $860.6 million from $3.50 billion in the prior-year period to $4.36 billion in the current period. The current-quarter results include a $878.4 million net gain related to the Visa transactions. For further detail on the Visa transactions, refer to Note 20—Commitments and Contingent Liabilities for further information.
Current report
Trust, Investment and Other Servicing Fees increased $149.1 million, or 7%, from $2.16 billion in the prior-year period to $2.31 billion in the current period, primarily driven by favorable markets and new business.
Current report
Other Noninterest Income increased $703.2 million from $299.1 million in the prior-year period to $1.00 billion in the current period, primarily driven by the net gain related to the Visa transactions and higher Foreign Exchange Trading Income primarily driven by higher client volumes, partially offset by the loss on the sale of available for sale debt securities recognized in the first quarter of 2024 and losses recognized in the current period as a result of a securities repositioning related to the supplemental pension plan and impairment charges taken on certain investments.
Current report
Net Interest Income increased $8.3 million, or 1%, to $1.05 billion in the current period from $1.04 billion in the prior-year period, primarily due to higher client deposits, partially offset by higher funding costs.
Current report
In both the current and prior-year periods, there was a negative $0.5 million Provision for Credit Losses. For additional information, refer to the Provision for Credit Losses within “Second Quarter Consolidated Results of Operations” section.
Current report
Noninterest Expense increased $281.1 million, or 11%, from $2.62 billion in the prior-year period to $2.90 billion in the current period, primarily attributable to $182.2 million of restructuring charges and other notable items, including severance-related charges of $89.5 million, a $70 million charitable commitment to the Northern Trust Foundation, higher software amortization acceleration and dispositions, and a legal settlement recorded in the current period, partially offset by lower Occupancy Expense.
Current report
The Provision for Income Taxes for the six months ended June 30, 2024 totaled $353.4 million, representing an effective tax rate of 24.1%. The Provision for Income Taxes for the six months ended June 30, 2023 totaled $218.3 million, representing an effective tax rate of 24.7%.
Current report
Net Income per diluted common share increased in the current period to $5.28 from $3.07 in the prior-year period. Net Income increased $444.4 million, or 67%, to $1.11 billion in the current period from $666.4 million in the prior-year period. Annualized return on average common equity was 19.6% in the current period and 12.4% in the prior-year period. The annualized return on average assets was 1.52% in the current period compared to 0.91% in the prior-year period.
Current report
Custody and Fund Administration fees, the largest component of Asset Servicing fees, increased from the prior-year period, primarily driven by favorable markets and new business. Investment Management fees increased from the prior-year period, primarily due to favorable markets. Securities Lending decreased from the prior-year period, primarily driven by lower spreads.
Current report
TABLE 17: OTHER NONINTEREST INCOME
Current report
Foreign Exchange Trading Income increased from the prior-year period, primarily driven by higher client volumes.
Current report
Other Operating Income increased from the prior-year period primarily driven by the $878.4 million gain related to the net impact from the Visa transactions, partially offset by a loss recognized as a result of a securities repositioning related to the supplemental pension plan, and impairment charges taken on certain investments.
Current report
Net Interest Income
Current report
Net Interest Income, stated on an FTE basis, decreased from the prior-year period, primarily due to higher funding costs, partially offset by higher client deposits. Average earning assets decreased from the prior-year period, primarily due to lower borrowing activity, partially offset by deposit growth and the proceeds from the sale of Visa shares.
Current report
Federal Reserve and Other Central Bank Deposits averaged $35.9 billion and increased $0.4 billion, or 1%, from $35.5 billion in the prior-year period. Interest-Bearing Due from and Deposits with Banks averaged $4.7 billion in the current period and $4.4 billion in the prior-year period.
Current report
Securities Purchased under Agreements to Resell averaged $624.9 million, a decrease of $518.0 million, or 45% from $1,142.9 million in the prior-year period, primarily due to a shift in investments in higher interest earning assets.
Current report
Loans and leases averaged $41.3 billion and decreased $0.9 billion, or 2%, from $42.2 billion in the prior-year period, primarily reflecting lower levels of commercial and institutional, non-U.S., private client, and residential real estate, partially offset by higher levels of commercial real estate loans. Commercial real estate loans averaged $5.0 billion and increased $116.6 million, or 2%, from $4.9 billion for the prior-year period. Commercial and institutional loans averaged $9.6 billion and decreased $3.0 billion, or 24%, from $12.7 billion for the prior-year period. Non-U.S. loans averaged $2.8 billion and decreased $632.7 million, or 18%, from $3.5 billion for the prior-year period. Private client loans averaged $13.2 billion and decreased $584.4 million from $13.8 billion for the prior-year period. Residential real estate loans averaged $6.1 billion and decreased $288.3 million, or 5%, from $6.4 billion for the prior-year period.
Current report
Average Other Interest-Earning Assets include collateral deposits with certain securities depositories and clearing houses, certain community development investments, Federal Home Loan Bank stock, a money market investment, and Federal Reserve stock of $1.5 billion, $866.8 million, $327.4 million, $95.0 million, and $70.0 million respectively, which are recorded in Other Assets on the consolidated balance sheets.
Current report
Provision for Credit Losses
Current report
There was a negative Provision for Credit Losses of $0.5 million for both the six months ended June 30, 2024 and for the prior-year period. The negative provision in the current-year period was primarily due to a decrease in the collective basis reserve, driven by one Commercial loan charge-off. The reserve evaluated on a collective basis relates to pooled financial assets sharing similar risk characteristics.
Current report
Net charge-offs in the current-year period totaled $10.3 million resulting from $11.4 million of charge-offs and $1.1 million of recoveries, compared to net charge-offs of $2.9 million in the prior-year period resulting from $4.8 million of charge-offs and $1.9 million of recoveries.
Current report
Noninterest Expense
Current report
TABLE 20: NONINTEREST EXPENSE
Current report
Noninterest Expense (continued)
Current report
Provision for Income Taxes
Current report
Income tax expense for the six months ended June 30, 2024 was $353.4 million, representing an effective tax rate of 24.1%, compared to $218.3 million for the six months ended June 30, 2023, representing an effective tax rate of 24.7%.
Showing the first 40 of 61 passages. Open the source sections for the rest.
Removed paragraphs (19)
Previous report
FIRST QUARTER CONSOLIDATED RESULTS OF OPERATIONS
Previous report
Revenue decreased $97.8 million, or 6%, to $1.65 billion in the current quarter from $1.74 billion in the prior-year quarter. Trust, Investment and Other Servicing Fees increased $79.3 million, or 7%, from $1.06 billion in the prior-year quarter to $1.14 billion in the current quarter, primarily due to favorable markets and new business. Other Noninterest Income (Loss) decreased $174.0 million from $149.8 million in the prior-year quarter to a loss of $24.2 million in the current quarter, primarily due to the $189.4 million available for sale debt security loss reflected in Investment Security Gains (Losses) in the current quarter, partially offset by higher Other Operating Income. Net Interest Income decreased $3.1 million, or 1%, to $528.1 million in the current quarter as compared to $531.2 million in the prior-year quarter, primarily due to higher funding costs.
Previous report
Noninterest Expense increased $79.1 million, or 6%, from $1.29 billion in the prior-year quarter to $1.36 billion in the current quarter, primarily attributable to higher Compensation and Equipment and Software Expenses, as well as the $12.5 million FDIC special assessment recorded in the current quarter.
Previous report
FDIC Special Assessment
Previous report
In November 2023, the Federal Deposit Insurance Corporation (FDIC) issued a final rule to implement a special assessment to recoup losses to the deposit insurance fund associated with bank failures in the first half of 2023. In conjunction with the special assessment, $84.6 million was recognized as an accrued liability and related expense in the fourth quarter of 2023. During the current quarter, the FDIC published revised estimated losses as well as expected recoveries from the related bank failures. As a result, Northern Trust recognized an additional cost of $12.5 million in the current quarter, recorded to Other Operating Expense.
Previous report
Asset Servicing
Previous report
Wealth Management
Previous report
Other Operating Income increased compared to the prior-year quarter, primarily driven by higher income associated with a market value increase in supplemental compensation plans and lower expense associated with existing swap agreements related to Visa Inc. Class B common shares.
Previous report
REPORTING SEGMENTS (continued)
Previous report
Asset Servicing
Previous report
For the quarter ended March 31, 2024, Other Noninterest Income increased $7.6 million, or 12%, from the prior-year quarter, primarily due to higher brokerage related revenue and higher income allocations.
Previous report
For the quarter ended March 31, 2024, there was a negative Provision for Credit Losses of $5.8 million compared to a $2.9 million negative Provision for Credit Losses in the prior-year quarter. The decrease of credit reserves in the current quarter resulted from decreases in both collective and individual reserves. The decrease in collective reserve was driven by improved macroeconomic factors and portfolio quality. The decrease in individual reserves was driven by one loan that was moved back to the collective reserve.
Previous report
REPORTING SEGMENTS (continued)
Previous report
Wealth Management
Previous report
For the quarter ended March 31, 2024, there was a negative Provision for Credit Losses of $1.7 million compared to a $17.9 million Provision for Credit Losses in the prior-year quarter. The decrease of credit reserves in the current quarter resulted from decreases in both individual and collective reserves. The decrease in individual reserves was driven by one Commercial and Institutional (C&I) loan that was charged-off in the current quarter. The decrease in the collective reserve was primarily in the Commercial Real Estate (CRE) portfolio, driven by improved macroeconomic factors.
Previous report
For the quarter ended March 31, 2024, Other Noninterest Expense increased $4.9 million, or 32%, from the prior-year quarter, primarily due to the $12.5 million FDIC special assessment, partially offset by lower non-allocated occupancy expense primarily arising from early lease exits.
Previous report
CONSOLIDATED BALANCE SHEETS (continued)
Previous report
In March 2024, the FASB issued ASU No. 2024-01, “Compensation—Stock Compensation (Topic 718): Scope Applications of Profits Interests and Similar Awards” (ASU 2024-01). ASU 2024-01 adds an example to Topic 718 which illustrates how to apply the scope guidance to determine whether profits interests and similar awards should be accounted for as share-based payment arrangements under Topic 718 or under other U.S. GAAP. ASU 2024-01 is effective for annual periods beginning after December 15, 2024, although early adoption is permitted. Upon adoption, ASU 2024-01 is not expected to have an impact on Northern Trust’s consolidated balance sheets or consolidated statements of income.
Previous report
TABLE 28: GLOBAL FOREIGN CURRENCY VALUE-AT-RISK
Reworded paragraphs (69)
Previous wording
The following is management’s discussion and analysis of the financial condition and results of operations (MD&A) of Northern Trust Corporation (Corporation) for the first quarter of 2024. The following should be read in conjunction with the consolidated financial statements and related footnotes included in this report as well as the Annual Report on Form 10-K for the year ended December 31, 2023. Investors also should read the section entitled “Forward-Looking Statements.”
Current wording
The following is management’s discussion and analysis of the financial condition and results of operations (MD&A) of Northern Trust Corporation (Corporation) for the second quarter of 2024. The following should be read in conjunction with the consolidated financial statements and related footnotes included in this report as well as the Annual Report on Form 10-K for the year ended December 31, 2023. Investors also should read the section entitled “Forward-Looking Statements.”
Previous wording
Trust, Investment and Other Servicing Fees
Current wording
Trust, Investment and Other Servicing Fees increased $69.8 million, or 6%, from $1.10 billion in the prior-year quarter to $1.17 billion in the current quarter, primarily due to favorable markets and new business.
Previous wording
In the current quarter, there was a negative Provision for Credit Losses of $8.5 million, as compared to a $15.0 million Provision for Credit Losses in the prior-year quarter. The negative provision in the current quarter resulted from decreases in both individual and collective reserves. For additional information, refer to the Provision for Credit Losses within “First Quarter Consolidated Results of Operations” section.
Current wording
In the current quarter, there was a Provision for Credit Losses of $8.0 million, as compared to a negative Provision for Credit Losses of $15.5 million in the prior-year quarter. For additional information, refer to the Provision for Credit Losses within “Second Quarter Consolidated Results of Operations” section.
Previous wording
The Provision for Income Taxes in the current quarter totaled $75.9 million, representing an effective tax rate of 26.1%. The Provision for Income Taxes in the prior-year quarter totaled $109.4 million, representing an effective tax rate of 24.6%.
Current wording
The Provision for Income Taxes in the current quarter totaled $277.5 million, representing an effective tax rate of 23.6%. The Provision for Income Taxes in the prior-year quarter totaled $108.9 million, representing an effective tax rate of 24.7%.
Previous wording
Net Income per diluted common share was $0.96 in the current quarter and $1.51 in the first quarter of 2023. Net Income decreased $119.9 million to $214.7 million in the current quarter from $334.6 million in the prior-year quarter. Annualized return on average common equity was 7.3% in the current quarter and 12.4% in the prior-year quarter. The annualized return on average assets was 0.60% in the current quarter as compared to 0.92% in the prior-year quarter.
Current wording
Net Income per diluted common share was $4.34 in the current quarter and $1.56 in the second quarter of 2023. Net Income increased $564.3 million to $896.1 million in the current quarter from $331.8 million in the prior-year quarter. Annualized return on average common equity was 31.2% in the current quarter and 12.4% in the prior-year quarter. The annualized return on average assets was 2.44% in the current quarter as compared to 0.91% in the prior-year quarter.
Previous wording
Custody and Fund Administration fees increased from the prior-year quarter, primarily due to favorable markets and new business. Investment Management fees increased from the prior-year quarter, primarily due to favorable markets.
Current wording
Custody and Fund Administration fees increased from the prior-year quarter, primarily due to favorable markets and new business, partially offset by lower transaction volumes. Investment Management fees increased from the prior-year quarter, primarily due to favorable markets. Securities Lending decreased from the prior-year quarter, primarily due to lower spreads and lower volumes.
Previous wording
As noted above, AUC/A and assets under management are two of the primary drivers of our Trust, Investment and Other Servicing Fees. For the purposes of disclosing AUC/A, to the extent that both custody and administration services are provided, the value of the assets is included only once in this amount. The following table presents AUC/A by reporting segment.
Current wording
As noted above, AUC/A and assets under management (AUM) are two of the primary drivers of our Trust, Investment and Other Servicing Fees. For the purposes of disclosing AUC/A, to the extent that both custody and administration services are provided, the value of the assets is included only once in this amount. The following table presents AUC/A by reporting segment.
Previous wording
Consolidated assets under custody increased from the prior quarter, primarily reflecting favorable markets and client asset inflows, partially offset by unfavorable currency translation. Consolidated assets under custody increased from the prior-year quarter, primarily reflecting the impact of favorable markets and favorable currency translation, partially offset by client asset outflows.
Current wording
Consolidated assets under custody increased from the prior quarter, primarily reflecting favorable markets, partially offset by unfavorable currency translation. Consolidated assets under custody increased from the prior-year quarter, primarily reflecting the impact of favorable markets and client asset inflows, partially offset by unfavorable currency translation.
Previous wording
(2)Includes the impact of balance sheet netting under master netting arrangements of approximately $60.2 billion and $10.0 billion for the three months ended March 31, 2024 and 2023, respectively. Excluding the impact of netting for the three months ended March 31, 2024 and 2023, the average interest rate on Securities Purchased under Agreements to Resell would be approximately 5.46% and 4.63%, respectively. Excluding the impact of netting for the three months ended March 31, 2024 and 2023, the average interest rate on Securities Sold under Agreements to Repurchase would be approximately 5.39% and 4.56%, respectively. Northern Trust nets securities sold under repurchase agreements against those purchased under resale agreements when there is a legally enforceable master netting agreement.
Current wording
(2)Includes the impact of balance sheet netting under master netting arrangements of approximately $62.9 billion and $21.3 billion for the three months ended June 30, 2024 and 2023, respectively. Excluding the impact of netting for the three months ended June 30, 2024 and 2023, the average interest rate on Securities Purchased under Agreements to Resell would be approximately 5.46% and 5.06%, respectively. Excluding the impact of netting for the three months ended June 30, 2024 and 2023, the average interest rate on Securities Sold under Agreements to Repurchase would be approximately 5.39% and 5.04%, respectively. Northern Trust nets securities sold under repurchase agreements against those purchased under resale agreements when there is a legally enforceable master netting agreement.
Previous wording
Notes: Net Interest Income (FTE), a non-GAAP financial measure, includes adjustments to a fully taxable equivalent basis for loans, securities and other interest-earning assets. The adjustments are based on a federal income tax rate of 21.0%, where the rate is adjusted for applicable state income taxes, net of related federal tax benefit. Total taxable equivalent interest adjustments amounted to $7.3 million and $13.2 million for the three months ended March 31, 2024 and 2023, respectively. A reconciliation of Net Interest Income and net interest margin on a GAAP basis to Net Interest Income and net interest margin on an FTE basis (each of which is a non-GAAP financial measure) is provided in “Reconciliation to Fully Taxable Equivalent” within this MD&A. Net interest margin is calculated by dividing annualized Net Interest Income by average interest-earning assets.
Current wording
Notes: Net Interest Income (FTE), a non-GAAP financial measure, includes adjustments to a fully taxable equivalent basis for loans, securities and other interest-earning assets. The adjustments are based on a federal income tax rate of 21.0%, where the rate is adjusted for applicable state income taxes, net of related federal tax benefit. Total taxable equivalent interest adjustments amounted to $6.9 million and $13.1 million for the three months ended June 30, 2024 and 2023, respectively. A reconciliation of Net Interest Income and net interest margin on a GAAP basis to Net Interest Income and net interest margin on an FTE basis (each of which is a non-GAAP financial measure) is provided in “Reconciliation to Fully Taxable Equivalent” within this MD&A. Net interest margin is calculated by dividing annualized Net Interest Income by average interest-earning assets.
Previous wording
Interest Income on cash collateral positions is reported above in Interest-Bearing Due from and Deposits with Banks, Loans and in Other Interest-Earning Assets. Interest Expense on cash collateral positions is reported above in Savings, Money Market and Other and in Non-U.S. Offices Interest-Bearing Deposits. Where it can be net, related cash collateral received from and deposited with derivative counterparties is recorded net of the associated derivative contract in Other Assets and Other Liabilities, respectively.
Current wording
Interest Income on cash collateral positions is reported above in Interest-Bearing Due from and Deposits with Banks, Loans and in Other Interest-Earning Assets. Interest Expense on cash collateral positions is reported above in Savings, Money Market and Other and in Non-U.S. Offices Interest-Bearing Deposits. Where it can be netted, related cash collateral received from and deposited with derivative counterparties is recorded net of the associated derivative contract in Other Assets and Other Liabilities, respectively.
Previous wording
Net Interest Income, stated on a FTE basis, decreased from the prior-year quarter, primarily due to higher funding costs. Average earning assets decreased from the prior-year quarter, primarily due to lower borrowing activity.
Current wording
Net Interest Income, stated on a FTE basis, increased from the prior-year quarter, primarily due to higher client deposits, partially offset by higher funding costs. Average earning assets increased from the prior-year quarter, primarily due to deposit growth and the proceeds from the sale of Visa shares, partially offset by lower borrowing activity.
Previous wording
Federal Reserve and Other Central Bank Deposits averaged $35.9 billion and decreased $0.7 billion, or 2%, from $36.6 billion in the prior-year quarter. Interest-Bearing Due from and Deposits with Banks averaged $4.4 billion and increased $0.2 billion, or 5%, from $4.2 billion in the prior-year quarter.
Current wording
Federal Reserve and Other Central Bank Deposits averaged $35.9 billion and increased $1.5 billion, or 4%, from $34.4 billion in the prior-year quarter. Interest-Bearing Due from and Deposits with Banks averaged $5.0 billion and increased $0.4 billion, or 9%, from $4.6 billion in the prior-year quarter.
Previous wording
Average Securities were $48.5 billion and decreased $1.9 billion, or 4%, from $50.4 billion in the prior-year quarter. Average taxable Securities were $43.3 billion in the current quarter and $47.4 billion in the prior-year quarter. Average nontaxable Securities, which represent securities that are primarily exempt from U.S. federal and state income taxes, were $5.2 billion in the current quarter and $3.0 billion in the prior-year quarter.
Current wording
Average Securities were $50.0 billion and increased $0.4 billion, or 1%, from $49.6 billion in the prior-year quarter. Average taxable Securities were $43.9 billion in the current quarter and $46.7 billion in the prior-year quarter. Average nontaxable Securities, which represent securities that are primarily exempt from U.S. federal and state income taxes, were $6.1 billion in the current quarter and $2.9 billion in the prior-year quarter.
Previous wording
Securities Purchased under Agreements to Resell averaged $517.9 million and decreased $528.2 million, or 50%, from $1,046.1 million in the prior-year quarter, primarily due to a shift to investments in higher interest earning assets.
Current wording
Securities Purchased under Agreements to Resell averaged $731.9 million and decreased $506.7 million, or 41%, from $1.2 billion in the prior-year quarter, primarily due to a shift to investments in higher interest-earning assets.
Previous wording
Loans averaged $41.6 billion and decreased $0.4 billion, or 1%, from $42.0 billion in the prior-year quarter, primarily reflecting lower levels of commercial and institutional, non-U.S, private client, and residential real estate loans, partially offset by higher levels of commercial real estate loans. Commercial and institutional loans averaged $10.6 billion and decreased $1.8 billion, or
Current wording
Loans averaged $41.0 billion and decreased $1.4 billion, or 3%, from $42.4 billion in the prior-year quarter, primarily reflecting lower levels of commercial and institutional, residential real estate, non-U.S, private client, and commercial real estate loans, partially offset by increases in other loans. Commercial and institutional loans averaged $8.7 billion and decreased $4.3 billion, or 33%, from $12.9 billion for the prior-year quarter. Non-U.S. loans averaged $2.8 billion and decreased $551.4 million, or
Previous wording
15%, from $12.4 billion for the prior-year quarter. Non-U.S. loans averaged $2.8 billion and decreased $714.8 million, or 20%, from $3.6 billion for the prior-year quarter. Private client loans averaged $13.4 billion and decreased $492.3 million, or 4%, from $13.9 billion for the prior-year quarter. Residential real estate loans averaged $6.3 billion and decreased $155.0 million, or 2%, from $6.4 billion for the prior-year quarter. Commercial real estate loans averaged $5.2 billion and increased $288.2 million, or 6%, from $4.9 billion for the prior-year quarter.
Current wording
16%, from $3.4 billion for the prior-year quarter. Private client loans averaged $13.1 billion and decreased $675.5 million, or 5%, from $13.8 billion for the prior-year quarter. Residential real estate loans averaged $6.0 billion and decreased $421.7 million, or 7%, from $6.4 billion for the prior-year quarter. Commercial real estate loans averaged $4.9 billion and decreased $55.0 million, or 1%, from $4.9 billion for the prior-year quarter.
Previous wording
Average Other Interest-Earning Assets include collateral deposits with certain securities depositories and clearing houses, certain community development investments, Federal Home Loan Bank stock, Federal Reserve stock, and money market investments of $1,516.6 million, $878.8 million, $312.0 million, $70.0 million, and $64.7 million, respectively, which are recorded in Other Assets on the consolidated balance sheets.
Current wording
Average Other Interest-Earning Assets include collateral deposits with certain securities depositories and clearing houses, certain community development investments, Federal Home Loan Bank stock, a money market investment, and Federal Reserve stock of $1.5 billion, $854.8 million, $342.7 million, $95.0 million, and $70.0 million, respectively, which are recorded in Other Assets on the consolidated balance sheets.
Previous wording
Northern Trust utilizes a diverse mix of funding sources. Average Interest-Bearing Deposits increased $3.7 billion, or 4%, to an average of $95.7 billion in the current quarter from $92.0 billion in the prior-year quarter. Interest expense for Interest-Bearing Deposits in the current quarter was driven by higher interest rates. Average Non-U.S. Offices Interest-Bearing Deposits comprised 67% and 68% of total average Interest-Bearing Deposits for the three months ended March 31, 2024 and 2023, respectively. Other average interest-bearing liabilities decreased $3.3 billion, or 17%, to an average of $16.8 billion in the current quarter from $20.1 billion in the prior-year quarter. The balances within short-term borrowing classifications vary based on funding requirements and strategies, interest rate levels, changes in the volume of lower-cost deposit sources, and the availability of collateral to secure these borrowings.
Current wording
Northern Trust utilizes a diverse mix of funding sources. Average Interest-Bearing Deposits increased $8.8 billion, or 10%, to an average of $96.8 billion in the current quarter from $88.0 billion in the prior-year quarter. Interest expense for Interest-Bearing Deposits in the current quarter was driven by higher interest rates. Average Non-U.S. Offices Interest-Bearing Deposits comprised 65% and 70% of total average Interest-Bearing Deposits for the three months ended June 30, 2024 and 2023, respectively. Average other interest-bearing liabilities decreased $7.1 billion, or 29%, to an average of $17.4 billion in the current quarter from $24.5 billion in the prior-year quarter. The balances within short-term borrowing classifications vary based on funding requirements and strategies, interest rate levels, changes in the volume of lower-cost deposit sources, and the availability of collateral to secure these borrowings.
Previous wording
In the current quarter, there was a negative Provision for Credit Losses of $8.5 million, as compared to a $15.0 million Provision for Credit Losses in the prior-year quarter. The negative provision in the current quarter resulted from decreases in both individual and collective reserves. The decrease in individual reserves was driven by one Commercial and Institutional (C&I) loan that was charged-off in the current quarter. The decrease in collective reserve was primarily in the C&I portfolio, driven by improvement in the quality of the portfolio, and in the Commercial Real Estate (CRE) portfolio, driven by improved macroeconomic factors. The reserve evaluated on a collective basis relates to pooled financial assets sharing similar risk characteristics.
Current wording
In the current quarter, there was a Provision for Credit Losses of $8.0 million, as compared to a negative Provision for Credit Losses of $15.5 million in the prior-year quarter.The Provision for Credit Losses in the current quarter resulted from an increase in collective reserves. The increase in collective reserves was primarily in the Commercial and Institutional (C&I) portfolio, driven by modest deterioration in credit quality, and, the Commercial Real Estate (CRE) portfolio, driven by expectations for weaker CRE prices. The reserve evaluated on a collective basis relates to pooled financial assets sharing similar risk characteristics.
Previous wording
Net charge-offs in the current quarter were $10.4 million, reflecting $0.7 million of recoveries and $11.1 million of charge-offs. The prior-year quarter included $2.9 million of net charge-offs, reflecting $1.1 million of recoveries and $4.0 million of charge-offs.
Current wording
Net recoveries in the current quarter were $0.1 million, reflecting $0.4 million of recoveries and $0.3 million of charge-offs. The prior-year quarter included de minimis net charge-offs, reflecting $0.8 million of recoveries and $0.8 million of charge-offs.
Previous wording
Income tax expense for the three months ended March 31, 2024 was $75.9 million, representing an effective tax rate of 26.1%, compared to $109.4 million in the prior-year quarter, representing an effective tax rate of 24.6%.
Current wording
Income tax expense for the three months ended June 30, 2024 was $277.5 million, representing an effective tax rate of 23.6%, compared to $108.9 million in the prior-year quarter, representing an effective tax rate of 24.7%.
Previous wording
Investment Security Gains (Losses), net reflects the $189.4 million available for sale debt security loss as compared to the $6.9 million gain on the sale of available for sale debt securities in the prior-year quarter, each arising from a repositioning of the portfolio.
Current wording
Investment Security Gains (Losses), net reflects the $189.3 million available for sale debt security loss as compared to the $6.9 million gain on the sale of available for sale debt securities in the prior-year, each arising from a repositioning of the portfolio.
Previous wording
The net interest margin on an FTE basis decreased from the prior-year quarter, primarily due to higher funding costs.
Current wording
The net interest margin on an FTE basis decreased from the prior-year period, primarily due to higher funding costs and unfavorable deposit mix.
Previous wording
The Provision for Credit Losses in the prior-year quarter was primarily due to an increase in the reserve evaluated on a collective basis, driven by growth in the size and duration of the commercial real estate portfolio, primarily in multi-family properties, partially offset by improvement in credit quality for the commercial and institutional segment.
Current wording
The negative provision in the prior-year period was primarily due to a decrease in the collective basis reserve, driven by improvements in credit quality within the C&I portfolio, partially offset by growth in the size and duration of the CRE portfolio and expectations of higher economic stress in the CRE market, particularly office CRE.
Previous wording
Compensation expense, the largest component of Noninterest Expense, increased compared to the prior-year quarter, primarily due to higher salary expenses and higher incentives.
Current wording
Compensation expense, the largest component of Noninterest Expense increased compared to the prior-year period, primarily due to $81.8 million of severance-related charges, higher salary related expenses, and higher incentives.
Previous wording
Outside Services expense increased compared to the prior-year quarter, primarily due to higher technical services and consulting fees, partially offset by lower subcustodian expense.
Current wording
Outside Services expense increased compared to the prior-year period, primarily reflecting higher technical services and higher legal services, partially offset by lower consulting services and lower subcustodian expense.
Previous wording
Equipment and Software expense increased compared to the prior-year quarter, primarily due to higher software amortization, partially offset by lower equipment depreciation.
Current wording
Equipment and Software expense increased compared to the prior-year period, primarily due to higher software amortization, software disposition charges, and higher software support expense.
Previous wording
Occupancy expense decreased compared to the prior-year quarter, primarily due to a $9.8 million charge related to early lease exits recorded in the first quarter of 2023.
Current wording
Occupancy expense decreased compared to the prior-year period, primarily due to a $9.8 million charge related to early lease exits recorded during the prior-year period.
Previous wording
Other Operating Expense increased compared to the prior-year quarter, primarily due to the $12.5 million FDIC special assessment in the current quarter, partially offset by the impact of reclassifying certain investment amortization to the Provision for Income Taxes from Other Operating Expense in accordance with a new accounting standard.
Current wording
Other Operating Expense increased compared to the prior-year period, primarily due to the $70 million charitable commitment and $14.7 million additional expense related to the FDIC special assessment in the current period, partially offset by the impact of reclassifying certain investment amortization to the Provision for Income Taxes from Other Operating Expense in accordance with a new accounting standard.
Previous wording
Effective January 2024, Northern Trust implemented certain enhancements to its FTP methodology, impacting the allocation of Net Interest Income to the Asset Servicing and Wealth Management segments. As a result, the approximate impact on the Asset Servicing and Wealth Management segments was a $31 million decrease and a $31 million increase in Net Interest Income, respectively, for the three months ended March 31, 2024. Prior-period segment results have not been revised to reflect this methodology change.
Current wording
Effective January 2024, Northern Trust implemented certain enhancements to its FTP methodology, impacting the allocation of Net Interest Income to the Asset Servicing and Wealth Management segments. As a result, the approximate impact on the Asset Servicing and Wealth Management segments was a $32 million decrease and a $32 million increase in Net Interest Income, respectively, for the three months ended June 30, 2024. The approximate impact on the Asset Servicing and Wealth Management segments was a $63 million decrease and a $63 million increase in Net Interest Income, respectively, for the six months ended June 30, 2024. Prior-period segment results have not been revised to reflect this methodology change.
Previous wording
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.
Current wording
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. For further details, please refer to Note 9—Reporting Segments.
Previous wording
The following table presents the earnings contributions and average assets of Northern Trust’s reporting segments for the three month periods ended March 31, 2024 and 2023.
Current wording
The following table presents the earnings contributions and average assets of Northern Trust’s reporting segments for the three- and six-month periods ended June 30, 2024 and 2023.
Previous wording
For the quarter ended March 31, 2024, Foreign Exchange Trading Income increased $5.0 million, or 9%, from the prior-year quarter, primarily driven by higher client volumes.
Current wording
For the three and six months ended June 30, 2024, Foreign Exchange Trading Income increased $10.2 million, or 20%, from the prior-year quarter and $15.2 million, or 14%, from the prior-year period, primarily driven by higher client volumes.
Previous wording
For the quarter ended March 31, 2024, Other Noninterest Income increased $4.2 million, or 12%, from the prior-year quarter, primarily due to higher income allocations.
Current wording
For the quarter ended June 30, 2024, Other Noninterest Income decreased $8.6 million, or 12%, from the prior-year quarter, primarily due to impairment charges taken on certain investments.
Previous wording
For the quarter ended March 31, 2024, Net Interest Income stated on an FTE basis decreased $18.3 million, or 6%, from the prior-year quarter, primarily due to the change in reporting segment allocation methodology beginning in 2024 noted above. Average earning assets decreased $5.6 billion, or 5%.
Current wording
For the three and six months ended June 30, 2024, Net Interest Income stated on an FTE basis decreased $24.0 million, or 8%, from the prior-year quarter and $42.3 million, or 7%, from the prior-year period, primarily due to the change in reporting segment allocation methodology beginning in 2024 noted above. Average earning assets decreased $4.9 billion, or 5%, from the prior-year quarter and $5.2 billion, or 5%, from the prior-year period.
Previous wording
For the quarter ended March 31, 2024, Noninterest Expense, which includes the direct expense of the reporting segment, indirect expense allocations for product and operating support and indirect expense allocations for certain corporate support services, increased $51.7 million, or 6%, from the prior-year quarter primarily due to higher expense allocations.
Current wording
For the three and six months ended June 30, 2024, Noninterest Expense, which includes the direct expense of the reporting segment, indirect expense allocations for product and operating support and indirect expense allocations for certain corporate support services, increased $71.2 million, or 8%, from the prior-year quarter and $122.9 million, or 7%, from the prior-year period primarily due to severance related-charges and higher expense allocations.
Previous wording
For the quarter ended March 31, 2024, Net Income increased $37.0 million, or 21%, from the prior-year quarter, primarily due to higher Trust, Investment and Other Servicing Fees and higher Net Interest Income, partially offset by higher Noninterest Expense.
Current wording
For the six months ended June 30, 2024, Net Income increased $40.0 million, or 11%, from the prior-year period primarily due to higher Trust, Investment and Other Servicing Fees and higher Net Interest Income, partially offset by higher Noninterest Expense.
Previous wording
For the quarter ended March 31, 2024, Net Interest Income stated on an FTE basis increased $9.3 million, or 4%, from the prior-year quarter, primarily due to the change in reporting segment allocation methodology beginning in 2024 and higher average earning assets. Average earning assets increased $3.4 billion, or 10%, primarily due to higher client deposits.
Current wording
For the three and six months ended June 30, 2024, Net Interest Income stated on an FTE basis increased $29.2 million, or 14%, from the prior-year quarter and $38.5 million, or 9%, from the prior-year period, primarily due to the change in reporting segment allocation methodology beginning in 2024 noted above. Average earning assets increased $6.2 billion, or 19%, from the prior-year quarter and $4.8 billion, or 14%, from the prior-year period.
Previous wording
For the quarter ended March 31, 2024, Noninterest Expense, which includes the direct expenses of the reporting segment, indirect expense allocations for product and operating support and indirect expense allocations for certain corporate support services, increased $22.5 million, or 5%, from the prior-year quarter primarily reflecting higher indirect expense allocations.
Current wording
For the three and six months ended June 30, 2024, Noninterest Expense, which includes the direct expenses of the reporting segment, indirect expense allocations for product and operating support and indirect expense allocations for certain corporate support services, increased $45.6 million, or 10%, from the prior-year quarter and $68.1 million, or 7%, from the prior-year period, primarily reflecting higher indirect expense allocations.
Showing the first 40 of 69 pairs. Open the source sections for the rest.
Rearranged current paragraphs (22)
Current report — wording carried from elsewhere
Trust, Investment and Other Servicing Fees are based primarily on the market value of assets held in custody, managed or serviced; the volume of transactions; securities lending volume and spreads; and fees for other services rendered. Certain market value calculations on which fees are based are performed on a monthly or quarterly basis in arrears. The components of Trust, Investment and Other Servicing Fees are provided in the table below.
Current report — wording carried from elsewhere
TABLE 16: TRUST, INVESTMENT AND OTHER SERVICING FEES
Current report — wording carried from elsewhere
Fee income in the regions (Central, East and West) increased from the prior-year period, primarily due to favorable markets. Global Family Office fee income increased from the prior-year period, primarily due to favorable markets and asset inflows.
Current report — wording carried from elsewhere
The components of other noninterest income are provided in the following table.
Current report — wording carried from elsewhere
The following tables present an analysis of average daily balances and interest rate changes affecting Net Interest Income and an analysis of Net Interest Income changes.
Current report — wording carried from elsewhere
TABLE 18: AVERAGE CONSOLIDATED BALANCE SHEETS WITH ANALYSIS OF NET INTEREST INCOME
Current report — wording carried from elsewhere
(1)Interest-Bearing Due from and Deposits with Banks includes the interest-bearing component of Cash and Due from Banks and Interest-Bearing Deposits with Banks as presented on the consolidated balance sheets.
Current report — wording carried from elsewhere
(2)Includes the impact of balance sheet netting under master netting arrangements of approximately $61.6 billion and $15.7 billion for the six months ended June 30, 2024 and 2023, respectively. Excluding the impact of netting for the six months ended June 30, 2024 and 2023, the average interest rate on Securities Purchased under Agreements to Resell would be approximately 5.46% and 4.92%, respectively. Excluding the impact of netting for the six months ended June 30, 2024 and 2023, the average interest rate on Securities Sold under Agreements to Repurchase would be approximately 5.39% and 4.88%, respectively. Northern Trust nets securities sold under repurchase agreements against those purchased under resale agreements when there is a legally enforceable master netting agreement.
Current report — wording carried from elsewhere
(3)Average balances include nonaccrual loans.
Current report — wording carried from elsewhere
(4)Other Interest-Earning Assets include certain community development investments, collateral deposits with certain securities depositories and clearing houses, Federal Home Loan Bank and Federal Reserve stock, and money market investments which are classified in Other Assets on the consolidated balance sheets.
Current report — wording carried from elsewhere
(5)Cash and Due from Banks and Other Central Bank Deposits includes the noninterest-bearing component of Federal Reserve and Other Central Bank Deposits on the consolidated balance sheets.
Current report — wording carried from elsewhere
(6)Other Borrowings primarily includes advances from the Federal Home Loan Bank of Chicago.
Current report — wording carried from elsewhere
(7)Rate calculations are based on actual balances rather than the rounded amounts presented in the average consolidated balance sheets with analysis of Net Interest Income.
Current report — wording carried from elsewhere
TABLE 19: ANALYSIS OF NET INTEREST INCOME CHANGES DUE TO VOLUME AND RATE(1)
Current report — wording carried from elsewhere
(1)Changes not due solely to average balance changes or rate changes are allocated proportionately to average balance and rate based on their relative absolute magnitudes.
Current report — wording carried from elsewhere
Notes: Net Interest Income (FTE Adjusted), a non-GAAP financial measure, includes adjustments to a fully taxable equivalent basis for loans and securities. The adjustments are based on a federal income tax rate of 21.0%, where the rate is adjusted for applicable state income taxes, net of related federal tax benefit. Total taxable equivalent interest adjustments amounted to $14.2 million and $26.3 million for the six months ended June 30, 2024 and 2023, respectively. A reconciliation of Net Interest Income and net interest margin on a GAAP basis to Net Interest Income and net interest margin on an FTE basis (each of which is a non-GAAP financial measure) is provided in “Reconciliation to Fully Taxable Equivalent” within this MD&A. Net interest margin is calculated by dividing annualized net interest income by average interest-earning assets.
Current report — wording carried from elsewhere
Interest Income on cash collateral positions is reported above in Interest-Bearing Due from and Deposits with Banks, Loans and in Other Interest-Earning Assets. Interest Expense on cash collateral positions is reported above in Savings, Money Market and Other and in Non-U.S. Offices Interest-Bearing Deposits. Where it can be netted, related cash collateral received from and deposited with derivative counterparties is recorded net of the associated derivative contract in Other Assets and Other Liabilities, respectively.
Current report — wording carried from elsewhere
Average Securities were $49.3 billion and decreased $0.7 billion, or 1%, from $50.0 billion in the prior-year period. Average taxable Securities were $43.6 billion in the current period and $47.0 billion in the prior-year period. Average nontaxable Securities, which represent securities that are primarily exempt from U.S. federal and state income taxes, were $5.7 billion in the current period and $3.0 billion in the prior-year period.
Current report — wording carried from elsewhere
Northern Trust utilizes a diverse mix of funding sources. Average Interest-Bearing Deposits increased $6.2 billion, or 7%, to an average of $96.2 billion in the current period from $90.0 billion in the prior-year period. Other average interest-related funding decreased $5.2 billion, to an average of $17.1 billion in the current period from $22.3 billion in the prior-year period. The balances within short-term borrowing classifications vary based on funding requirements and strategies, interest rate levels, changes in the volume of lower-cost deposit sources, and the availability of collateral to secure these borrowings.
Current report — wording carried from elsewhere
Interest expense for Interest-Bearing Deposits in the current period was driven by higher interest rates. Average non-U.S. offices interest-bearing deposits comprised 66% and 69% of total average interest-bearing deposits for the six months ended June 30, 2024 and 2023, respectively.
Current report — wording carried from elsewhere
For additional discussion of the allowance for credit losses, refer to the “Asset Quality” section in this MD&A.
Current report — wording carried from elsewhere
The components of Noninterest Expense are provided in the following table.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
The effective tax rate increased compared to the prior-year quarter primarily due to a higher net tax impact from international operations and lower net tax benefits from tax-credit investments, including the impact of reclassifying certain investment amortization to the Provision for Income Taxes from Other Operating Expense in accordance with a new accounting standard.