Loans and Leases

6 Months Ended

Jun. 30, 2020

Amounts outstanding for loans and leases, by segment and class, are shown in the following table. During the first quarter of 2020, the Corporation implemented a change in the classification of certain loans and leases to specific segments to enhance the consistency of its reporting across various regulatory regimes. As a result, the loan and lease balances as of December 31, 2019 below have been adjusted to conform to the presentation for periods ended after such date. The adjustments generally reflected reclassification of loans from the commercial real estate class to commercial and institutional, residential real estate, and private client classes. There was no impact on total loans and leases previously reported.

TABLE 46: LOANS AND LEASES


(In Millions)	JUNE 30, 2020		DECEMBER 31, 2019
Commercial
Commercial and Institutional	$	10,745.8	$	9,091.1
Commercial Real Estate	3,262.7		3,104.3
Non-U.S.	1,324.8		1,576.3
Lease Financing, net	51.4		65.6
Other	385.1		164.0
Total Commercial	15,769.8		14,001.3
Personal
Private Client	11,621.3		11,071.4
Residential Real Estate	5,942.5		6,095.0
Non-U.S.	369.9		174.8
Other	53.8		67.1
Total Personal	17,987.5		17,408.3
Total Loans and Leases	$	33,757.3	$	31,409.6

Residential real estate loans consist of traditional first lien mortgages and equity credit lines that generally require a loan-to-collateral value of no more than 65% to 80% at inception. Northern Trust’s equity credit line products generally have draw periods of up to 10 years and a balloon payment of any outstanding balance is due at maturity. Payments are interest-only with variable interest rates. Northern Trust does not offer equity credit lines that include an option to convert the outstanding balance to an amortizing payment loan. As of June 30, 2020 and December 31, 2019, equity credit lines totaled $384.7 million and $448.5 million, respectively, and equity credit lines for which first liens were held by Northern Trust represented 97% of the total equity credit lines as of both June 30, 2020 and December 31, 2019.

Included within the non-U.S., commercial-other and personal-other classes are short-duration advances primarily related to the processing of custodied client investments, totaling $1.4 billion at June 30, 2020 and $1.1 billion at December 31, 2019, respectively. Demand deposit overdrafts reclassified as loan balances totaled $12.7 million and $90.4 million at June 30, 2020 and December 31, 2019, respectively.

As of June 30, 2020 and December 31, 2019, there were $39.5 million and $53.6 million of leases, respectively, classified as held for sale related to the decision to sell substantially all of the lease portfolio. As of June 30, 2020 and December 31, 2019, there were no loans classified as held for sale.

Paycheck Protection Program. In response to the COVID-19 pandemic, Northern Trust became a lender under the Paycheck Protection Program (PPP), which was created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act and is administered by the U.S. Small Business Administration (SBA). Loans issued under the PPP are funded by Northern Trust directly to participating borrowers. The PPP loans are guaranteed by the SBA and borrowers are eligible to apply for PPP loan forgiveness for up to the full principal amount and accrued interest of the PPP loan. To the extent that the borrower has used the PPP loan proceeds to cover eligible costs and has met all other SBA loan forgiveness requirements, the SBA will determine loan forgiveness under the CARES Act within 90 days after receiving a forgiveness application from Northern Trust, and will pay to Northern Trust the eligible PPP loan forgiven amount, which will be credited to the borrower’s loan to repay or pay down the PPP loan.

As of June 30, 2020, Northern Trust originated, net of repayments, $213.8 million or 1,081 loans, under the PPP in the commercial and institutional portfolio with an average loan balance of $0.2 million.

Northern Trust accounts for loans originated under the PPP as loan receivables in accordance with Accounting Standards Codification (ASC) 310 and recognizes such loans at the principal amount less the net amount of loan origination fees. PPP loans are reported in Total Loans and Leases on the consolidated balance sheets.

As of June 30, 2020, for its origination efforts Northern Trust had received approximately $2.5 million in SBA fees, net of service charges. As of June 30, 2020, the SBA was still working to finalize a portal to accept forgiveness applications, so no PPP loans of the total $213.8 million PPP loans have been approved for forgiveness by the SBA.

The SBA provides a 100% guarantee on PPP loans covering principal and interest. Northern Trust considers the risk mitigating effects of these guarantees, and accounts for them as a credit enhancement embedded in the contract. As a result, no allowance for credit losses is measured for Northern Trust’s exposure under the PPP.

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

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

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

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

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

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

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

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

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

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

Loan and lease segment and class balances as of June 30, 2020 are provided in the following table, segregated by borrower ratings into “1 to 3,” “4 to 5” and “6 to 9” (watch list and nonaccrual status) categories by year of origination at amortized cost basis. Loans that are held for investment are reported at the principal amount outstanding, net of unearned income.

TABLE 47: CREDIT QUALITY INDICATOR AT AMORTIZED COST BASIS BY ORIGINATION YEAR


June 30, 2020	TERM LOANS AND LEASES																		REVOLVING LOANS	REVOLVING LOANS CONVERTED TO TERM LOANS
(In Millions)	2020		2019		2018		2017		2016		PRIOR						TOTAL
Commercial
Commercial and Institutional
Risk Rating:
1 to 3 Category	$	288.0	$	595.8	$	252.4	$	209.8	$	517.6	$	473.4	$	4,219.5	$	2.1	$	6,558.6
4 to 5 Category	366.6		674.9		383.1		494.9		96.7		199.0		1,376.7		51.2		3,643.1
6 to 9 Category	27.8		127.2		45.6		15.6		39.3		20.5		265.9		2.2		544.1
Total Commercial and Institutional	682.4		1,397.9		681.1		720.3		653.6		692.9		5,862.1		55.5		10,745.8
Commercial Real Estate
Risk Rating:
1 to 3 Category	235.7		199.9		65.7		52.8		70.5		157.3		128.7		8.7		919.3
4 to 5 Category	352.3		820.2		330.8		113.1		160.4		396.5		56.9		20.9		2,251.1
6 to 9 Category	1.3		14.8		3.7		33.7		7.1		31.7		—		—		92.3
Total Commercial Real Estate	589.3		1,034.9		400.2		199.6		238.0		585.5		185.6		29.6		3,262.7
Non-U.S.
Risk Rating:
1 to 3 Category	825.1		21.4		10.0		12.2		—		13.5		34.2		—		916.4
4 to 5 Category	103.1		2.7		1.8		—		—		65.6		37.9		1.8		212.9
6 to 9 Category	1.2		23.1		—		—		—		—		171.2		—		195.5
Total Non-U.S.	929.4		47.2		11.8		12.2		—		79.1		243.3		1.8		1,324.8
Lease Financing, net
Risk Rating:
1 to 3 Category	—		—		—		—		—		39.5		—		—		39.5
4 to 5 Category	—		—		—		—		—		11.9		—		—		11.9
6 to 9 Category	—		—		—		—		—		—		—		—		—
Total Lease Financing, net	—		—		—		—		—		51.4		—		—		51.4
Other
Risk Rating:
1 to 3 Category	123.7		—		—		—		—		—		—		—		123.7
4 to 5 Category	261.4		—		—		—		—		—		—		—		261.4
6 to 9 Category	—		—		—		—		—		—		—		—		—
Total Other	385.1		—		—		—		—		—		—		—		385.1
Total Commercial	2,586.2		2,480.0		1,093.1		932.1		891.6		1,408.9		6,291.0		86.9		15,769.8
Personal
Private Client
Risk Rating:
1 to 3 Category	275.3		442.7		43.9		67.4		27.3		143.7		4,551.9		24.9		5,577.1
4 to 5 Category	332.0		527.1		155.5		64.9		92.8		103.4		4,377.0		284.8		5,937.5
6 to 9 Category	0.5		7.4		22.8		3.2		0.1		—		64.4		8.3		106.7
Total Private Client	607.8		977.2		222.2		135.5		120.2		247.1		8,993.3		318.0		11,621.3
Residential Real Estate
Risk Rating:
1 to 3 Category	903.6		504.5		91.6		119.4		244.2		798.2		201.6		1.3		2,864.4
4 to 5 Category	460.3		359.1		156.8		214.1		323.7		1,088.1		300.2		4.0		2,906.3
6 to 9 Category	13.1		11.0		0.9		1.4		2.9		109.3		33.2		—		171.8
Total Residential Real Estate	1,377.0		874.6		249.3		334.9		570.8		1,995.6		535.0		5.3		5,942.5
Non-U.S.
Risk Rating:
1 to 3 Category	9.3		22.1		—		—		—		0.9		61.5		—		93.8
4 to 5 Category	7.2		28.2		13.9		0.5		0.5		9.6		210.9		5.1		275.9
6 to 9 Category	—		—		—		—		—		0.2		—		—		0.2
Total Non-U.S.	16.5		50.3		13.9		0.5		0.5		10.7		272.4		5.1		369.9
Other
Risk Rating:
1 to 3 Category	37.4		—		—		—		—		—		—		—		37.4
4 to 5 Category	16.4		—		—		—		—		—		—		—		16.4
6 to 9 Category	—		—		—		—		—		—		—		—		—
Total Other	53.8		—		—		—		—		—		—		—		53.8
Total Personal	2,055.1		1,902.1		485.4		470.9		691.5		2,253.4		9,800.7		328.4		17,987.5
Total Loans and Leases	$	4,641.3	$	4,382.1	$	1,578.5	$	1,403.0	$	1,583.1	$	3,662.3	$	16,091.7	$	415.3	$	33,757.3

Loans and leases in the “1 to 3” category are expected to exhibit minimal to modest probabilities of default and are characterized by borrowers having the strongest financial qualities, including above average financial flexibility, cash flows and capital levels. Borrowers assigned these ratings are anticipated to experience very little to moderate financial pressure in adverse down-cycle scenarios. As a result of these characteristics, borrowers within this category exhibit a minimal to modest likelihood of loss.

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

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

For credit quality indicator information that was required under the former provisions of ASC Topic 310, please refer to Note 6 — Loans and Leases included under Item 8. Financial Statements and Supplementary Data in the Annual Report on Form 10-K for the year ended December 31, 2019.

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

The following table provides balances and delinquency status of accrual and nonaccrual loans and leases by segment and class, as well as the other real estate owned and nonaccrual asset balances, as of June 30, 2020 and December 31, 2019.

TABLE 48: DELINQUENCY STATUS


	ACCRUAL																		NONACCRUAL WITH NO ALLOWANCE
(In Millions)	CURRENT		30 – 59 DAYS PAST DUE		60 – 89 DAYS PAST DUE		90 DAYS OR MORE PAST DUE		TOTAL ACCRUAL		NONACCRUAL		TOTAL LOANS AND LEASES
June 30, 2020
Commercial
Commercial and Institutional	$	10,707.2	$	3.8	$	2.5	$	0.6	$	10,714.1	$	31.7	$	10,745.8	$	6.9
Commercial Real Estate	3,254.7		0.8		—		4.6		3,260.1		2.6		3,262.7		2.6
Non-U.S.	1,324.8		—		—		—		1,324.8		—		1,324.8		—
Lease Financing, net	51.4		—		—		—		51.4		—		51.4		—
Other	385.1		—		—		—		385.1		—		385.1		—
Total Commercial	15,723.2		4.6		2.5		5.2		15,735.5		34.3		15,769.8		9.5
Personal
Private Client	11,573.4		36.0		5.7		6.2		11,621.3		—		11,621.3		—
Residential Real Estate	5,872.2		0.4		4.3		1.4		5,878.3		64.2		5,942.5		63.8
Non-U.S.	365.6		—		4.3		—		369.9		—		369.9		—
Other	53.8		—		—		—		53.8		—		53.8		—
Total Personal	17,865.0		36.4		14.3		7.6		17,923.3		64.2		17,987.5		63.8
Total Loans and Leases	$	33,588.2	$	41.0	$	16.8	$	12.8	$	33,658.8	$	98.5	$	33,757.3	$	73.3
	Other Real Estate Owned																$	0.9
	Total Nonaccrual Assets																$	99.4


	ACCRUAL																		NONACCRUAL WITH NO ALLOWANCE
(In Millions)	CURRENT		30 – 59 DAYS PAST DUE		60 – 89 DAYS PAST DUE		90 DAYS OR MORE PAST DUE		TOTAL ACCRUAL		NONACCRUAL		TOTAL LOANS AND LEASES
December 31, 2019
Commercial
Commercial and Institutional	$	9,068.3	$	4.1	$	9.9	$	1.2	$	9,083.5	$	7.6	$	9,091.1	$	0.8
Commercial Real Estate	3,089.6		2.3		4.1		4.7		3,100.7		3.6		3,104.3		2.4
Non-U.S.	1,576.3		—		—		—		1,576.3		—		1,576.3		—
Lease Financing, net	65.6		—		—		—		65.6		—		65.6		—
Other	164.0		—		—		—		164.0		—		164.0		—
Total Commercial	13,963.8		6.4		14.0		5.9		13,990.1		11.2		14,001.3		3.2
Personal
Private Client	11,027.9		33.2		9.5		0.3		11,070.9		0.5		11,071.4		0.5
Residential Real Estate	5,997.7		19.8		4.9		1.2		6,023.6		71.4		6,095.0		66.4
Non-U.S	174.1		0.2		—		—		174.3		0.5		174.8		0.5
Other	67.1		—		—		—		67.1		—		67.1		—
Total Personal	17,266.8		53.2		14.4		1.5		17,335.9		72.4		17,408.3		67.4
Total Loans and Leases	$	31,230.6	$	59.6	$	28.4	$	7.4	$	31,326.0	$	83.6	$	31,409.6	$	70.6
	Other Real Estate Owned																$	3.2
	Total Nonaccrual Assets																$	86.8

Recognition of Income. Interest income on loans and leases is recorded on an accrual basis unless, in the opinion of management, there is a question as to the ability of the debtor to meet the terms of the loan agreement, or interest or principal is more than 90 days contractually past due and the loan is not well-secured and in the process of collection. Loans meeting such criteria are classified as nonaccrual and interest income is recorded on a cash basis. At the time a loan is determined to be nonaccrual, interest accrued but not collected is reversed against interest income in the current period. Interest collected on

nonaccrual loans is applied to principal unless, in the opinion of management, collectability of principal is not in doubt. Management’s assessment of the indicators of loan and lease collectability, and its policies relative to the recognition of interest income, including the suspension and subsequent resumption of income recognition, do not meaningfully vary between loan and lease classes. Nonaccrual loans are returned to accrual status when factors indicating doubtful collectability no longer exist. Factors considered in returning a loan to accrual status are consistent across all classes of loans and leases and, in accordance with regulatory guidance, relate primarily to expected payment performance. Loans are eligible to be returned to accrual status when: (i) no principal or interest that is due is unpaid and repayment of the remaining contractual principal and interest is expected or (ii) the loan has otherwise become well-secured (possessing realizable value sufficient to discharge the debt, including accrued interest, in full) and is in the process of collection (through action reasonably expected to result in debt repayment or restoration to a current status in the near future). A loan that has not been brought fully current may be restored to accrual status provided there has been a sustained period of repayment performance (generally a minimum of six payment periods) by the borrower in accordance with the contractual terms, and Northern Trust is reasonably assured of repayment within a reasonable period of time. Additionally, a loan that has been formally restructured so as to be reasonably assured of repayment and performance according to its modified terms may be returned to accrual status, provided there was a well-documented credit evaluation of the borrower’s financial condition and prospects of repayment under the revised terms and there has been a sustained period of repayment performance (generally a minimum of six payment periods) under the revised terms.

Nonaccrual Loans and Troubled Debt Restructurings (TDRs). A loan that has been modified as a concession by Northern Trust or a bankruptcy court resulting from the debtor’s financial difficulties is referred to as a troubled debt restructuring (TDR). All TDRs are reported as TDRs starting in the calendar year of their restructuring. In subsequent years, a TDR may cease being reported as a TDR if the loan was modified at a market rate and has performed according to the modified terms for at least six payment periods. A loan that has been modified at a below market rate will return to accrual status if it satisfies the six-payment-period performance requirement.

The expected credit loss is measured based upon the present value of expected future cash flows, discounted at the effective interest rate based on the original contractual rate. If a loan’s contractual interest rate varies based on subsequent changes in an independent factor, such as an index or rate, the loan’s effective interest rate is calculated based on the factor as it changes over the life of the loan. Northern Trust elected not to project changes in the factor for purposes of estimating expected future cash flows. Further, Northern Trust elected not to adjust the effective interest rate for prepayments. If the loan is collateral dependent, the expected loss is measured based on the fair value of the collateral at the reporting date.

If the loan valuation is less than the recorded value of the loan, either an allowance is established, or a charge-off is recorded, for the difference. Smaller balance (individually less than $1 million) homogeneous loans are collectively evaluated. Northern Trust’s accounting policies for material nonaccrual loans is consistent across all classes of loans and leases.

All loans and leases with TDR modifications are evaluated for additional expected credit losses. The nature and extent of further deterioration in credit quality, including a subsequent default, is considered in the determination of an appropriate level of allowance for credit losses.

Included within nonaccrual loans were $58.6 million and $54.9 million of nonaccrual TDRs, and $24.6 million and $27.7 million of accrual TDRs as of June 30, 2020 and December 31, 2019, respectively.

There were $10.4 million and $8.2 million of aggregate undrawn loan commitments and standby letters of credit at June 30, 2020 and December 31, 2019, respectively, issued to borrowers with TDR modifications of loans.

The following table provides, by segment and class, the number of TDR modifications of loans and leases during the three- and six-month periods ended June 30, 2020 and 2019, and the recorded investments and unpaid principal balances as of June 30, 2020 and 2019.

TABLE 49: TROUBLED DEBT RESTRUCTURINGS


	THREE MONTHS ENDED JUNE 30, 2020								SIX MONTHS ENDED JUNE 30, 2020
($ In Millions)	NUMBER OF LOANS AND LEASES	RECORDED INVESTMENT		UNPAID PRINCIPAL BALANCE		NUMBER OF LOANS AND LEASES	RECORDED INVESTMENT		UNPAID PRINCIPAL BALANCE
Commercial
Commercial and Institutional	—	$	—	$	—	2	$	24.3	$	24.5
Total Commercial	—	—		—		2	24.3		24.5
Personal
Residential Real Estate	—	—		—		6	1.0		1.2
Total Personal	—	—		—		6	1.0		1.2
Total Loans and Leases	—	$	—	$	—	8	$	25.3	$	25.7

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


	THREE MONTHS ENDED JUNE 30, 2019								SIX MONTHS ENDED JUNE 30, 2019
($ In Millions)	NUMBER OF LOANS AND LEASES	RECORDED INVESTMENT		UNPAID PRINCIPAL BALANCE		NUMBER OF LOANS AND LEASES	RECORDED INVESTMENT		UNPAID PRINCIPAL BALANCE
Commercial
Commercial and Institutional	—	$	—	$	—	1	$	7.6	$	8.8
Commercial Real Estate	2	—		—		2	—		—
Total Commercial	2	—		—		3	7.6		8.8
Personal
Residential Real Estate	13	7.7		7.8		26	17.5		17.7
Total Personal	13	7.7		7.8		26	17.5		17.7
Total Loans and Leases	15	$	7.7	$	7.8	29	$	25.1	$	26.5

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

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

During the six months ended June 30, 2020, the TDR modifications of loans within residential real estate were extensions of term, other modifications, interest rate concessions, and deferred principal. During the six months ended June 30, 2020, the TDR modifications within commercial and institutional were other modifications.

During the three and six months ended June 30, 2019, the TDR modifications of loans within residential real estate were extensions of term, other modifications, deferred principal and interest rate concessions. During the six months ended June 30, 2019, the TDR modification within commercial and institutional was an other modification.

There was no residential real estate loan TDR modifications during the twelve months ended March 31, 2020, which subsequently had a payment default during the three and six months ended June 30, 2020.

There were two residential real estate loan TDR modifications during the twelve months ended March 31, 2019, which subsequently had a payment default during the three and six months ended June 30, 2019. The total recorded investment for these loans was approximately $4.6 million and the unpaid principal balance for these loans was approximately $4.6 million.

Northern Trust may obtain physical possession of real estate via foreclosure on an in-substance repossession. As of June 30, 2020, Northern Trust held foreclosed real estate properties with a carrying value of $0.9 million as a result of obtaining physical possession. In addition, as of June 30, 2020, Northern Trust had loans with a carrying value of $11.8 million for which formal foreclosure proceedings were in process.

TDR Relief — COVID-19. Due to the economic environment arising from the COVID-19 pandemic, there have been two forms of relief provided for classifying loans as TDRs: the Interagency Guidance (as defined below) and the CARES Act.

Various banking regulators, including the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Consumer Financial Protection Bureau, have issued guidance in the April 7, 2020 Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (revised) on loan modification

treatment (Interagency Guidance) pursuant to which financial institutions can apply ASC 310-40 Receivables – Troubled Debt Restructurings by Creditors. In accordance with the Interagency Guidance, a loan modification is not considered a TDR if the modification is related to COVID-19; the borrower had been current (not more than 29 days past due) when the modification program was implemented; and the modification includes payment deferrals for not more than 6 months.

Under section 4013 of the CARES Act, relief provided to lenders exempting certain loan modifications which would otherwise be classified as TDRs from such classification applies for loans that were current and existing as of December 31, 2019. The TDR relief under the CARES Act applies to COVID-19-related modifications that were made from March 1, 2020 until the earlier of (a) December 31, 2020 or (b) 60 days from the date the COVID-19 national emergency officially ends.

Financial institutions may account for eligible loan modifications either under the Interagency Guidance or the CARES Act. Northern Trust has elected to apply both the CARES Act and the Interagency Guidance, as applicable, in providing borrowers with loan modification relief in response to the COVID-19 pandemic. All other types of modifications which do not meet the CARES Act or Interagency Guidance requirements continue to be governed by existing regulations and accounting policies.

The following table provides, by segment and class, the number of total COVID-19-related loan modifications including the recorded investment and deferred principal and interest balances as of June 30, 2020, for which Northern Trust applied an exemption from TDR classification.

TABLE 50: COVID-19 LOAN MODIFICATIONS NOT CONSIDERED TDRS


	JUNE 30, 2020
($ In Millions)	NUMBER OF COVID-19 RELATED MODIFICATIONS	LOAN VOLUME		DEFERRED PRINCIPAL AMOUNT		DEFERRED INTEREST AMOUNT
Commercial
Commercial and Institutional	119	$	275.5	$	4.3	$	1.5
Commercial Real Estate	108	481.6		2.2		2.8
Total Commercial	227	$	757.1	$	6.5	$	4.3

Personal
Private Client	34	$	174.8	$	1.7	$	0.9
Residential Real Estate	522	225.9		1.1		2.2
Total Personal	556	$	400.7	$	2.8	$	3.1
Total Loans	783	$	1,157.8	$	9.3	$	7.4

Northern Trust continues to accrue and recognize interest income during the loan deferral period, and hence has not moved these loans to nonaccrual or reported them as past due. Further, these loan balances continue to be assessed on a collective basis for purposes of measuring an allowance for expected credit losses.

Collateral Dependent Financial Assets. A financial asset is collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. Most of Northern Trust’s collateral dependent credit exposure relates to its residential real estate portfolio for which the collateral is usually the underlying real estate property. For collateral dependent financial assets, it is Northern Trust’s policy to reserve or charge-off the difference between the amortized cost basis of the loan and the value of the collateral. The collateral dependent financial asset balance as of June 30, 2020 was immaterial to Northern Trust’s financial statements.