NORTHERN TRUST CORP
For the period ended Sep 30, 2024. Filed Oct 29, 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.
Sep 30, 2024 · Filed Oct 29, 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 2024-06-30; 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 RiskCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-29.
0000073124-24-000257
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 347 previous paragraphs and 348 current paragraphs.
225 unchanged; 91 reworded; 27 added; 31 removed; 0 previous and 5 current paragraphs rearranged.
Tables are not compared: 38 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 (27)
Current report
THIRD QUARTER CONSOLIDATED RESULTS OF OPERATIONS
Current report
Trust, Investment and Other Servicing Fees increased $84.7 million, or 8%, from $1.11 billion in the prior-year quarter to $1.20 billion in the current quarter, primarily due to favorable markets.
Current report
Other Noninterest Income increased $51.2 million, or 32%, from $158.4 million in the prior-year quarter to $209.6 million in the current quarter. The increase in Other Noninterest Income in the current quarter was primarily driven by the current quarter gain on the sale of an equity investment, partially offset by mark-to-market activity on existing Visa Class B swap agreements and a decrease in banking and credit-related service fees.
Current report
Noninterest Expense increased $81.2 million, or 6%, from $1.28 billion in the prior-year quarter to $1.36 billion in the current quarter, primarily due to higher Compensation expense, higher software amortization and software support expense, higher Outside Services expense, and higher Employee Benefits expense, partially offset by a decrease in Other Operating Expense.
Current report
Net Interest Income, stated on an FTE basis, increased from the prior-year quarter, primarily driven by higher deposits, securities repositioning, and a higher than average impact of other items, partially offset by a decrease in the loan portfolio. Average earning assets increased from the prior-year quarter, primarily driven by an increase in deposits, partially offset by a decrease in borrowing activity.
Current report
Securities Purchased under Agreements to Resell averaged $977.2 million and increased $26.4 million, or 3%, from $950.8 million in the prior-year quarter. The increase in Securities Purchased under Agreements to Resell interest income and expense is primarily driven by sponsored member program activity due to increased client demand and wider spreads with the market presenting consistent opportunities to achieve higher rates.
Current report
Loans averaged $39.9 billion and decreased $2.3 billion, or 6%, from $42.2 billion in the prior-year quarter, primarily reflecting lower levels of Non-U.S. loans and other loans, partially offset by average loan increases in commercial and institutional, residential real estate, private client, and commercial real estate loans. Non-U.S. loans averaged $3.3 billion and decreased $126.8 million, or 4%, from $3.4 billion for the prior-year quarter. Private client loans averaged $15.8 billion and increased $1.8 billion, or 13%, from $14.0 billion for the prior-year quarter. Commercial and institutional loans averaged $14.4 billion and increased $2.0 billion, or 16%, from $12.4 billion for the prior-year quarter. Residential real estate loans averaged $6.5 billion and increased $149.4 million, or 2%, from $6.4 billion for the prior-year quarter. Commercial real estate loans averaged $5.9 billion and increased $914.0 million, or 18%, from $5.0 billion for the prior-year quarter.
Current report
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 a small number of large new loans and renewals and credit quality deterioration of certain Commercial Real Estate (CRE) and C&I loans, partially offset by a net improvement in the overall macroeconomic outlook.
Current report
Employee Benefits expense increased compared to the prior-year quarter, primarily driven by higher medical costs.
Current report
Revenue for the nine months ended September 30, 2024 increased $1.1 billion from $5.23 billion in the prior-year period to $6.33 billion in the current period. The increase was driven by a $878.4 million net gain related to the Visa transactions in the second quarter of 2024, as well as a $68.1 million pre-tax gain related to the sale of an equity investment (after-tax $51.4 million) in the third quarter of 2024, recorded in Other Operating Income, partially offset by a $189.4 million loss on the sale of available for sale debt securities recognized in the first quarter of 2024, recorded in Investment Security Gains (Losses), net. For further detail on the Visa transactions, refer to Note 20—Commitments and Contingent Liabilities.
Current report
Net Interest Income increased $114.4 million, or 8%, from $1.5 billion in the prior-year period to $1.61 billion in the current period, primarily due to higher client deposits and securities repositioning, partially offset by higher funding costs in the first half of the year and a decrease in the loan portfolio.
Current report
Noninterest Expense increased $362.3 million, or 9%, from $3.90 billion in the prior-year period to $4.26 billion in the current period, primarily attributable to higher severance-related charges recorded in Compensation expense, higher Other Operating Expense, higher Equipment and Software expense, and higher Outside Services expense, partially offset by lower Occupancy Expense.
Current report
The net interest margin on an FTE basis increased from the prior-year period, primarily driven by higher deposits and securities repositioning, partially offset by higher funding costs.
Current report
Securities Purchased under Agreements to Resell averaged $743.2 million, a decrease of $335.0 million, or 31%, from $1.1 billion in the prior-year period. The increase in Securities Purchased under Agreements to Resell interest income and expense is primarily driven by sponsored member program activity due to increased client demand and wider spreads with the market presenting consistent opportunities to achieve higher rates.
Current report
There was a Provision for Credit Losses of $7.5 million for the nine months ended September 30, 2024, as compared to a $13.5 million provision in the prior-year period. The provision in the current-year period was primarily due to an increase in collective reserves, partially offset by a decrease in individual reserves. The increase in collective reserves was primarily driven by a small number of downgrades and extensions in the C&I portfolio and by expectations for weaker prices in the CRE portfolio. The decrease in individual reserves was driven by one C&I loan charge-off in the first quarter, partially offset by the default of one C&I loan in the current quarter.
Current report
Employee Benefits expense increased compared to the prior-year period, primarily driven by higher medical costs.
Current report
(1)Includes the current quarter gain related to the sale of an equity investment.
Current report
(1)Includes the current quarter gain related to the sale of an equity investment. Includes the gain related to the net impact from the Visa transactions in the second quarter of 2024, refer to Note 20—Commitments and Contingent Liabilities for further information.
Current report
For the quarter ended September 30, 2024, there was a negative Provision for Credit Losses of $0.6 million compared to a $3.1 million Provision for Credit Losses in the prior-year quarter. The Provision for Credit Losses for the three months ended September 30, 2024 reflected a decrease in the collective and individual reserves. The decrease in collective reserve was primarily in the C&I portfolio. The decrease in individual reserves was driven by the paydown of one C&I loan.
Current report
For the nine months ended September 30, 2024, there was a negative Provision for Credit Losses of $1.9 million compared to a $3.3 million negative Provision for Credit Losses in the prior-year period. The Provision for Credit Losses for the nine months ended September 30, 2024 reflected a decrease in the individual reserve, partially offset by an increase in the collective reserve. The decrease in individual reserves was driven by one loan moved back to the collective reserve in the first quarter and the paydown of one C&I loan in the current quarter. The increase in collective reserve was primarily in the C&I portfolio, driven by a small number of downgrades.
Current report
Wealth Management Foreign Exchange Trading Income
Current report
For the nine months ended September 30, 2024, Foreign Exchange Trading Income decreased $5.8 million, or 92%, from the prior-year period primarily driven by lower allocations.
Current report
For the quarter ended September 30, 2024, there was a Provision for Credit Losses of $12.4 million compared to a $10.9 million Provision for Credit Losses in the prior-year quarter. The Provision for Credit Losses for the three months ended September 30, 2024 resulted from increases in both collective and individual reserves. The increase in collective reserve was primarily in the C&I portfolio, driven by a small number of downgrades and extensions. The increase in individual reserves was driven by the default of one C&I loan.
Current report
For the nine months ended September 30, 2024, there was a Provision for Credit Losses of $15.7 million compared to a $16.8 million Provision for Credit Losses in the prior-year period. The Provision for Credit Losses for the nine months ended September 30, 2024 reflected an increase in the collective reserve, partially offset by a decrease in the individual reserve. The increase in collective reserve was primarily driven by a small number of downgrades and extensions in the C&I portfolio and expectations for weaker prices in the CRE portfolio. The decrease in individual reserves was driven by one C&I loan that was charged off in the first quarter, partially offset by the default of one C&I loan in the current quarter.
Current report
For the quarter ended September 30, 2024, Other Noninterest Income increased $50.1 million from the prior-year quarter, primarily due to the gain related to the sale of an equity investment, partially offset by higher expenses related to existing Visa Class B swap agreements in the current quarter.
Current report
CONSOLIDATED BALANCE SHEETS (continued)
Current report
Net cash provided by investing activities of $9.6 billion for the nine months ended September 30, 2023, was primarily attributable to decreased levels of Federal Reserve and other central bank deposits.
Removed paragraphs (31)
Previous report
SECOND QUARTER CONSOLIDATED RESULTS OF OPERATIONS
Previous 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.
Previous 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.
Previous report
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 report
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 report
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 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.
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous report
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 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.
Previous 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.
Previous report
The effective tax rate decreased compared to the prior-year period 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.
Previous report
Asset Servicing Other Noninterest Income
Previous report
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 report
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 report
For the quarter ended June 30, 2024, there was a Provision for Credit Losses of $4.5 million compared to a $3.5 million negative Provision for Credit Losses in the prior-year quarter. The Provision for Credit Losses for the three months ended June 30, 2024 reflected an increase in collective reserves, driven by a modest deterioration in credit quality.
Previous report
For the six months ended June 30, 2024, there was a negative Provision for Credit Losses of $1.3 million compared to a $6.4 million negative Provision for Credit Losses in the prior-year period. The Provision for Credit Losses for the six months ended June 30, 2024 resulted from improved macroeconomic factors.
Previous report
For the quarter ended June 30, 2024, Other Noninterest Income decreased $9.3 million, or 23%, from the prior-year quarter, primarily due to lower income allocations.
Previous report
For the quarter ended June 30, 2024, there was a Provision for Credit Losses of $5.0 million compared to a $12.0 million negative Provision for Credit Losses in the prior-year quarter. The Provision for Credit Losses for the three months ended June 30, 2024 was driven primarily by weaker CRE prices.
Previous report
For the six months ended June 30, 2024, there was a Provision for Credit Losses of $3.3 million compared to a $5.9 million Provision for Credit Losses in the prior-year period. The Provision for Credit Losses for the six months ended June 30, 2024 was driven primarily by charge-offs in the CRE and C&I portfolios in the first quarter of 2024.
Previous report
For the quarter ended June 30, 2024, Other Noninterest Income increased $886.8 million from the prior-year quarter, primarily due to the gain related to the net impact from the Visa transactions in the current quarter.
Previous report
ASSET QUALITY
Previous report
Securities Portfolio
Previous report
Net cash used in investing activities of $431.4 million for the six months ended June 30, 2023, was primarily attributable to increased levels of Federal Reserve and other central bank deposits and other net investing activities, partially offset by net proceeds associated with AFS debt securities.
Previous report
Note: Amounts in the table above for the three months ended March 31, 2024 and June 30, 2024 reflect VaR and its subcomponents for the total trading book combined whereas amounts shown for the three months ended June 30, 2023 reflect VaR for the GFX portfolio specifically.
Previous report
VaR measures for interest rate derivatives (IRDs), historically immaterial, became temporarily inflated during the second quarter of 2023 as a result of transitions of IRD contracts from London Interbank Offered Rate (LIBOR) to Secured Overnight Finance Rate (SOFR) referencing. Although they remained elevated relative to historical levels, the risk measures declined in the third quarter of 2023.
Previous report
Reconciliation to Fully Taxable Equivalent
Reworded paragraphs (91)
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 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.”
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 third 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 titled “Forward-Looking Statements.”
Previous 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.
Current wording
Net Income per diluted common share was $2.22 in the current quarter and $1.49 in the third quarter of 2023. Net Income increased $137.1 million to $464.9 million in the current quarter from $327.8 million in the prior-year quarter. Annualized return on average common equity was 15.4% in the current quarter and 11.6% in the prior-year quarter. The annualized return on average assets was 1.26% in the current quarter as compared to 0.93% in the prior-year quarter.
Previous wording
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 wording
Revenue for the three months ended September 30, 2024 increased $242.0 million, or 14%, to $1.97 billion in the current quarter from $1.73 billion in the prior-year quarter. The current-quarter results include a $68.1 million pre-tax gain related to the sale of an equity investment (after-tax $51.4 million), partially offset by mark-to-market activity on existing Visa Class B swap agreements, including a $12.8 million expense related to litigation escrow funding, both recorded in Other Operating income. For further detail on the Visa transactions, refer to Note 20—Commitments and Contingent Liabilities.
Previous wording
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 wording
Net Interest Income increased $106.1 million, or 23%, to $562.3 million in the current quarter as compared to $456.2 million in the prior-year quarter, primarily driven by higher deposits, securities repositioning, and a higher than average impact of other items, partially offset by a decrease in the loan portfolio.
Previous 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.
Current wording
In the current quarter, there was a Provision for Credit Losses of $8.0 million, as compared to a Provision for Credit Losses of $14.0 million in the prior-year quarter. For additional information, refer to the Provision for Credit Losses within the “Third Quarter Consolidated Results of Operations” section.
Previous 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%.
Current wording
The Provision for Income Taxes in the current quarter totaled $136.2 million, representing an effective tax rate of 22.7%. The Provision for Income Taxes in the prior-year quarter totaled $106.5 million, representing an effective tax rate of 24.5%.
Previous 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.
Current wording
Trust, Investment and Other Servicing Fees
Previous 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.
Current wording
Custody and Fund Administration fees increased from the prior-year quarter, primarily due to favorable markets and favorable currency translation. Investment Management fees increased from the prior-year quarter, primarily due to favorable markets and new business.
Previous 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.
Current wording
Consolidated assets under custody increased from the prior quarter, primarily reflecting favorable markets and favorable currency translation, partially offset by client asset outflows. Consolidated assets under custody increased from the prior-year quarter, primarily reflecting the impact of favorable markets, client asset inflows, and favorable currency translation.
Previous wording
Foreign Exchange Trading Income increased compared to the prior-year quarter primarily driven by higher client volumes.
Current wording
Other Operating Income increased compared to the prior-year quarter, primarily driven by a $68.1 million gain on the sale of an equity investment in the current quarter, partially offset by higher expenses related to existing Visa Class B swap agreements, including $12.8 million related to litigation escrow funding in the current quarter, and a decrease in banking and credit-related service fees.
Previous 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.
Current wording
(2)Includes the impact of balance sheet netting under master netting arrangements of approximately $64.3 billion and $33.5 billion for the three months ended September 30, 2024 and 2023, respectively. Excluding the impact of netting for the three months ended September 30, 2024 and 2023, the average interest rate on Securities Purchased under Agreements to Resell would be approximately 5.43% and 5.34%, respectively. Excluding the impact of netting for the three months ended September 30, 2024 and 2023, the average interest rate on Securities Sold under Agreements to Repurchase would be approximately 5.34% and 5.30%, 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
(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 wording
(7)Rate calculations are based on actual balances rather than the rounded amounts presented in the table above.
Previous wording
(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 wording
(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. Changes due to average rates includes the impact of balance sheet netting as noted in Table 13: Average Consolidated Balance Sheets with Analysis of Net Interest Income.
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 $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.
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 $7.1 million and $13.2 million for the three months ended September 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
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.
Current wording
Federal Reserve and Other Central Bank Deposits averaged $36.1 billion and increased $8.1 billion, or 29%, from $28.0 billion in the prior-year quarter. Interest-Bearing Due from and Deposits with Banks averaged $4.8 billion and increased $0.5 billion, or 12%, from $4.3 billion in the prior-year quarter.
Previous 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.
Current wording
Average Securities were $50.3 billion and decreased $0.1 billion, from $50.4 billion in the prior-year quarter. Average taxable Securities were $44.0 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 $6.3 billion in the current quarter and $3.0 billion in 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, 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.
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 $1.4 billion, $836.7 million, $342.7 million, $94.3 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 $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.
Current wording
Northern Trust utilizes a diverse mix of funding sources. Average Interest-Bearing Deposits increased $11.2 billion, or 13%, to an average of $96.2 billion in the current quarter from $85.0 billion in the prior-year quarter. Interest expense for Interest-Bearing Deposits in the current quarter was driven by higher deposit costs. Average Non-U.S. Offices Interest-Bearing Deposits comprised 67% and 69% of total average Interest-Bearing Deposits for the three months ended September 30, 2024 and 2023, respectively. Average other interest-bearing liabilities decreased $5.4 billion, or 24%, to an average of $16.8 billion in the current quarter from $22.2 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 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.
Current wording
In the current quarter, there was a Provision for Credit Losses of $8.0 million, as compared to a Provision for Credit Losses of $14.0 million in the prior-year quarter. The Provision for Credit Losses in the current quarter resulted from an increase in both the collective and individual reserves. The increase in collective reserves was primarily driven by a small number of downgrades and extensions in the Commercial and Institutional (C&I) portfolio. The reserve evaluated on a collective basis relates to pooled financial assets sharing similar risk characteristics. The increase in individual reserves was driven by the default of one C&I loan.
Previous 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.
Current wording
Net recoveries in the current quarter were $2.4 million, reflecting $2.4 million of recoveries and de minimis charge-offs. The prior-year quarter included $0.3 million net recoveries, reflecting $1.1 million of recoveries and $0.8 million of charge-offs.
Previous wording
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 wording
Compensation expense, the largest component of Noninterest Expense, increased compared to the prior-year quarter, primarily due to higher base pay adjustments.
Previous wording
Outside Services expense increased compared to the prior-year quarter, primarily due to an increase in consulting, technical, and legal services.
Current wording
Outside Services expense increased compared to the prior-year quarter, primarily due to an increase in consulting services.
Previous 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.
Current wording
Equipment and Software expense increased compared to the prior-year quarter, primarily due to higher software amortization and higher software support and rental expense.
Previous 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.
Current wording
Other Operating Expense decreased compared to the prior-year quarter, primarily due to a decrease in account servicing activities and the impact of reclassifying the amortization of certain investments from Other Operating Expense to the Provision for Income Taxes, in accordance with a new accounting standard that took effect in 2024.
Previous 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%.
Current wording
Income tax expense for the three months ended September 30, 2024 was $136.2 million, representing an effective tax rate of 22.7%, compared to $106.5 million in the prior-year quarter, representing an effective tax rate of 24.5%.
Previous wording
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 wording
The effective tax rate decreased compared to the prior-year quarter primarily due to higher current year benefits.
Previous wording
SIX-MONTH CONSOLIDATED RESULTS OF OPERATIONS
Current wording
NINE-MONTH CONSOLIDATED RESULTS OF OPERATIONS
Previous wording
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 wording
Net Income per diluted common share increased in the current period to $7.51 from $4.56 in the prior-year period. Net Income increased $581.5 million, or 59%, to $1.58 billion in the current period from $994.2 million in the prior-year period. Annualized return on average common equity was 18.2% in the current period and 12.1% in the prior-year period. The annualized return on average assets was 1.44% in the current period compared to 0.92% in the prior-year period.
Previous wording
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 wording
Trust, Investment and Other Servicing Fees increased $233.8 million, or 7%, from $3.27 billion in the prior-year period to $3.51 billion in the current period, primarily driven by favorable markets and net new business.
Previous wording
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 wording
Other Noninterest Income increased $754.4 million or 165%, from $457.5 million in the prior-year period to $1.21 billion in the current period, primarily driven by the net gain related to the Visa transactions in the second quarter of 2024 as well as the current quarter gain on the sale of an equity investment, partially offset by the loss on the sale of available for sale debt securities recognized in the first quarter of 2024.
Previous wording
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 wording
There was a $7.5 million Provision for Credit Losses in the current period, as compared to a $13.5 million Provision for Credit Losses in the prior-year period. For additional information, refer to the Provision for Credit Losses within “Third Quarter Consolidated Results of Operations” section.
Previous wording
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 wording
The Provision for Income Taxes for the nine months ended September 30, 2024 totaled $489.6 million, representing an effective tax rate of 23.7%. The Provision for Income Taxes for the nine months ended September 30, 2023 totaled $324.8 million, representing an effective tax rate of 24.6%.
Previous wording
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 wording
Custody and Fund Administration fees, increased from the prior-year period, primarily driven by favorable markets and net new business. Investment Management fees increased from the prior-year period, primarily due to favorable markets and new business. Securities Lending decreased from the prior-year period, primarily driven by lower spreads. The Other fees increased from the prior-year period, primarily due to new business.
Previous wording
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 wording
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 in the second quarter of 2024 and the current quarter gain of $68.1 million on the sale of an equity investment, partially offset by losses recognized in the second quarter of 2024 as a result of securities repositioning related to the supplemental pension plan and impairment charges taken on certain investments.
Previous 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.
Current wording
Investment Security Gains (Losses), net reflects the $189.4 million loss on the sale of available for sale debt securities in the current period 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
(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 wording
(2)Includes the impact of balance sheet netting under master netting arrangements of approximately $62.5 billion and $21.7 billion for the nine months ended September 30, 2024 and 2023, respectively. Excluding the impact of netting for the nine months ended September 30, 2024 and 2023, the average interest rate on Securities Purchased under Agreements to Resell would be approximately 5.45% and 5.13%, respectively. Excluding the impact of netting for the nine months ended September 30, 2024 and 2023, the average interest rate on Securities Sold under Agreements to Repurchase would be approximately 5.37% and 5.10%, 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
(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 wording
(7)Rate calculations are based on actual balances rather than the rounded amounts presented in the table above.
Previous wording
(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 wording
(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. Changes due to average rates includes the impact of balance sheet netting as noted in Table 18: Average Consolidated Balance Sheets with Analysis of Net Interest Income.
Previous wording
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 wording
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 $21.3 million and $39.5 million for the nine months ended September 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
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.
Current wording
Net Interest Income, stated on an FTE basis, increased from the prior-year period, primarily driven by higher deposits, securities repositioning, and a higher than average impact of other items, partially offset by higher funding costs and a decrease in the loan portfolio. Average earning assets increased from the prior-year period primarily due to higher client deposits and the proceeds from the sale of Visa shares in the second quarter of 2024.
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Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
Trust, Investment and Other Servicing Fees
Current report — wording carried from elsewhere
The effective tax rate decreased compared to the prior-year period primarily due to higher current-year benefits.
Current report — wording carried from elsewhere
For the quarter ended September 30, 2024, Net Interest Income stated on an FTE basis increased $40.2 million, or 14%, from the prior-year quarter, primarily driven by deposit balances and higher spreads, partially offset by the change in reporting segment allocation methodology beginning in 2024 noted above.
Current report — wording carried from elsewhere
portfolio, refer to the “Asset Quality” section in this MD&A and to Note 4—Securities to the consolidated financial statements provided in Item 1. Consolidated Financial Statements (unaudited).
Current report — wording carried from elsewhere
$20.1 million and $2.3 billion of gross unrealized gains and losses, respectively. $245.5 million of the $1.6 billion gross unrealized losses relate to AFS debt securities as of September 30, 2024, and $582.4 million of the $2.3 billion gross unrealized losses relate to AFS debt securities as of December 31, 2023.