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Loans and Leases

12 Months Ended

Dec. 31, 2021

Amounts outstanding for Loans and Leases, by segment and class, are shown in the following table.

TABLE 67: LOANS AND LEASES


	DECEMBER 31,
(In Millions)	2021		2020
Commercial
Commercial and Institutional	$	11,489.2	$	10,058.3
Commercial Real Estate	4,326.3		3,558.4
Non-U.S.	1,990.2		1,345.7
Lease Financing, net	11.0		11.4
Other	670.7		288.2
Total Commercial	18,487.4		15,262.0
Personal
Private Client	15,256.3		11,815.1
Residential Real Estate	6,319.9		6,035.7
Non-U.S.	381.8		597.9
Other	35.2		49.0
Total Personal	21,993.2		18,497.7
Total Loans and Leases	$	40,480.6	$	33,759.7

Residential real estate loans consist of traditional first lien mortgages and equity credit lines that generally require a loan-to-collateral value ratio 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 December 31, 2021 and 2020, equity credit lines totaled $258.2 million and $304.4 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 of those dates.

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 $1.6 billion at December 31, 2021 and $1.1 billion at December 31, 2020. Demand deposit overdrafts reclassified as loan balances totaled $8.0 million and $26.4 million at December 31, 2021 and 2020, respectively. Loans classified as held for sale totaled $12.3 million at December 31, 2021 related to the decision to exit a non-strategic loan portfolio. There were no loans classified as held for sale at December 31, 2020. Loans classified as held for sale are recorded at the lower of cost or fair value.

As of December 31, 2021 and 2020, there were no leases classified as held for sale.

The components of the net investment in leveraged leases is as follows:

TABLE 68: LEVERAGED LEASES


	DECEMBER 31,
(In Millions)	2021		2020
Leveraged Leases
Net Rental Receivable	$	11.4	$	11.8
Residual Value	—		—
Unearned Income	(0.4)		(0.4)
Investment in Leveraged Leases	11.0		11.4
Lease Financing, net	$	11.0	$	11.4

Paycheck Protection Program. In response to the COVID-19 pandemic, Northern Trust became a lender under the Paycheck Protection Program, as amended (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 a borrower uses 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 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. The SBA forgiveness portal opened on August 10, 2020 and Northern Trust’s vendor portal opened on September 11, 2020 to begin processing the PPP loan forgiveness applications. When Northern Trust submits forgiveness applications to the SBA, the SBA has at least 90 days to respond as to the approval or denial of such application. 1,301 and 36 loans were forgiven through the PPP loan forgiveness process which resulted in $231.5 million and $6.7 million of loan principal and interest being forgiven during the year ended December 31, 2021 and 2020, respectively.

As of December 31, 2021, Northern Trust had 213 outstanding loans totaling $56.9 million under the PPP in its commercial and institutional portfolio with an average loan balance of $0.3 million. For its origination efforts, Northern Trust received approximately $0.1 million and $2.6 million in SBA fees, net of service charges, during the year ended December 31, 2021 and 2020, respectively.

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.

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 December 31, 2021 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 69: CREDIT QUALITY INDICATOR AT AMORTIZED COST BASIS BY ORIGINATION YEAR


DECEMBER 31, 2021	TERM LOANS AND LEASES												REVOLVING LOANS		REVOLVING LOANS CONVERTED TO TERM LOANS
(In Millions)	2021		2020		2019		2018		2017		PRIOR						TOTAL
Commercial
Commercial and Institutional
Risk Rating:
1 to 3 Category	$	1,057.9	$	469.7	$	313.7	$	156.6	$	48.2	$	535.8	$	4,944.9	$	0.1	$	7,526.9
4 to 5 Category	1,043.6		432.2		377.3		231.6		234.1		190.1		1,219.0		33.1		3,761.0
6 to 9 Category	50.0		20.3		26.8		30.2		9.9		1.9		62.2		—		201.3
Total Commercial and Institutional	2,151.5		922.2		717.8		418.4		292.2		727.8		6,226.1		33.2		11,489.2
Commercial Real Estate
Risk Rating:
1 to 3 Category	485.3		310.2		260.6		60.2		16.8		79.3		67.5		2.9		1,282.8
4 to 5 Category	967.9		638.1		460.1		223.0		81.4		364.1		182.3		20.5		2,937.4
6 to 9 Category	24.5		—		50.6		—		20.0		8.5		2.5		—		106.1
Total Commercial Real Estate	1,477.7		948.3		771.3		283.2		118.2		451.9		252.3		23.4		4,326.3
Non-U.S.
Risk Rating:
1 to 3 Category	824.1		68.9		38.4		—		9.1		—		582.0		—		1,522.5
4 to 5 Category	160.2		—		—		1.9		—		191.1		73.3		1.8		428.3
6 to 9 Category	2.9		—		23.1		—		—		—		13.4		—		39.4
Total Non-U.S.	987.2		68.9		61.5		1.9		9.1		191.1		668.7		1.8		1,990.2
Lease Financing, net
Risk Rating:
4 to 5 Category	—		—		—		—		—		11.0		—		—		11.0
Total Lease Financing, net	—		—		—		—		—		11.0		—		—		11.0
Other
Risk Rating:
1 to 3 Category	551.5		—		—		—		—		—		—		—		551.5
4 to 5 Category	119.2		—		—		—		—		—		—		—		119.2
Total Other	670.7		—		—		—		—		—		—		—		670.7
Total Commercial	5,287.1		1,939.4		1,550.6		703.5		419.5		1,381.8		7,147.1		58.4		18,487.4
Personal
Private Client
Risk Rating:
1 to 3 Category	455.5		97.9		87.0		14.9		38.3		129.8		7,592.8		44.7		8,460.9
4 to 5 Category	579.2		333.9		519.3		81.0		54.8		39.9		4,979.8		178.3		6,766.2
6 to 9 Category	7.1		0.2		—		20.4		—		—		1.5		—		29.2
Total Private Client	1,041.8		432.0		606.3		116.3		93.1		169.7		12,574.1		223.0		15,256.3
Residential Real Estate
Risk Rating:
1 to 3 Category	1,137.8		996.4		201.8		13.5		49.3		505.8		161.5		—		3,066.1
4 to 5 Category	1,137.3		1,002.5		242.7		79.5		113.3		369.8		218.1		2.2		3,165.4
6 to 9 Category	0.4		10.5		5.4		8.4		0.5		58.2		5.0		—		88.4
Total Residential Real Estate	2,275.5		2,009.4		449.9		101.4		163.1		933.8		384.6		2.2		6,319.9
Non-U.S.
Risk Rating:
1 to 3 Category	27.6		—		1.2		—		—		1.0		44.1		—		73.9
4 to 5 Category	36.1		1.9		18.7		10.4		—		3.8		229.0		7.8		307.7
6 to 9 Category	—		—		—		—		—		0.2		—		—		0.2
Total Non-U.S.	63.7		1.9		19.9		10.4		—		5.0		273.1		7.8		381.8
Other
Risk Rating:
1 to 3 Category	13.4		—		—		—		—		—		—		—		13.4
4 to 5 Category	21.8		—		—		—		—		—		—		—		21.8
Total Other	35.2		—		—		—		—		—		—		—		35.2
Total Personal	3,416.2		2,443.3		1,076.1		228.1		256.2		1,108.5		13,231.8		233.0		21,993.2
Total Loans and Leases	$	8,703.3	$	4,382.7	$	2,626.7	$	931.6	$	675.7	$	2,490.3	$	20,378.9	$	291.4	$	40,480.6


December 31, 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	$	663.8	$	546.0	$	204.6	$	96.0	$	396.0	$	448.8	$	3,742.4	$	5.5	$	6,103.1
4 to 5 Category	793.4		505.1		354.1		405.4		134.6		167.3		1,238.7		32.3		3,630.9
6 to 9 Category	34.3		119.8		37.3		42.8		23.0		6.0		61.1		—		324.3
Total Commercial and Institutional	1,491.5		1,170.9		596.0		544.2		553.6		622.1		5,042.2		37.8		10,058.3
Commercial Real Estate
Risk Rating:
1 to 3 Category	406.3		109.2		27.6		36.5		11.8		99.4		124.3		8.7		823.8
4 to 5 Category	703.1		811.8		332.7		107.4		184.5		382.8		60.4		11.4		2,594.1
6 to 9 Category	15.3		55.2		32.0		25.8		—		12.2		—		—		140.5
Total Commercial Real Estate	1,124.7		976.2		392.3		169.7		196.3		494.4		184.7		20.1		3,558.4
Non-U.S.
Risk Rating:
1 to 3 Category	555.2		16.8		—		11.1		—		—		78.5		—		661.6
4 to 5 Category	313.1		0.7		2.0		—		—		157.9		39.2		1.8		514.7
6 to 9 Category	—		23.1		—		—		—		—		146.3		—		169.4
Total Non-U.S.	868.3		40.6		2.0		11.1		—		157.9		264.0		1.8		1,345.7
Lease Financing, net
Risk Rating:
4 to 5 Category	—		—		—		—		—		11.4		—		—		11.4
Total Lease Financing, net	—		—		—		—		—		11.4		—		—		11.4
Other
Risk Rating:
1 to 3 Category	81.7		—		—		—		—		—		—		—		81.7
4 to 5 Category	206.5		—		—		—		—		—		—		—		206.5
Total Other	288.2		—		—		—		—		—		—		—		288.2
Total Commercial	3,772.7		2,187.7		990.3		725.0		749.9		1,285.8		5,490.9		59.7		15,262.0
Personal
Private Client
Risk Rating:
1 to 3 Category	668.6		273.7		51.7		60.4		10.2		136.1		5,392.8		47.9		6,641.4
4 to 5 Category	492.1		479.9		117.3		60.4		77.5		77.5		3,564.7		207.3		5,076.7
6 to 9 Category	6.0		0.5		22.1		3.2		—		—		63.7		1.5		97.0
Total Private Client	1,166.7		754.1		191.1		124.0		87.7		213.6		9,021.2		256.7		11,815.1
Residential Real Estate
Risk Rating:
1 to 3 Category	1,554.3		317.4		42.9		109.9		205.1		627.8		152.8		1.7		3,011.9
4 to 5 Category	854.6		359.5		115.8		163.2		209.7		896.5		273.1		7.4		2,879.8
6 to 9 Category	15.3		8.3		0.7		0.5		1.9		94.8		22.5		—		144.0
Total Residential Real Estate	2,424.2		685.2		159.4		273.6		416.7		1,619.1		448.4		9.1		6,035.7
Non-U.S.
Risk Rating:
1 to 3 Category	23.3		14.9		—		—		—		1.8		275.6		—		315.6
4 to 5 Category	12.7		26.0		11.8		0.5		0.5		7.9		217.5		5.1		282.0
6 to 9 Category	—		—		—		—		—		0.3		—		—		0.3
Total Non-U.S.	36.0		40.9		11.8		0.5		0.5		10.0		493.1		5.1		597.9
Other
Risk Rating:
1 to 3 Category	34.6		—		—		—		—		—		—		—		34.6
4 to 5 Category	14.4		—		—		—		—		—		—		—		14.4
Total Other	49.0		—		—		—		—		—		—		—		49.0
Total Personal	3,675.9		1,480.2		362.3		398.1		504.9		1,842.7		9,962.7		270.9		18,497.7
Total Loans and Leases	$	7,448.6	$	3,667.9	$	1,352.6	$	1,123.1	$	1,254.8	$	3,128.5	$	15,453.6	$	330.6	$	33,759.7

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.

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 December 31, 2021 and 2020.

TABLE 70: 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
December 31, 2021
Commercial
Commercial and Institutional	$	11,434.7	$	32.5	$	2.1	$	0.4	$	11,469.7	$	19.5	$	11,489.2	$	8.8
Commercial Real Estate	4,256.6		3.1		—		—		4,259.7		66.6		4,326.3		52.3
Non-U.S.	1,990.2		—		—		—		1,990.2		—		1,990.2		—
Lease Financing, net	11.0		—		—		—		11.0		—		11.0		—
Other	670.7		—		—		—		670.7		—		670.7		—
Total Commercial	18,363.2		35.6		2.1		0.4		18,401.3		86.1		18,487.4		61.1
Personal
Private Client	14,927.3		229.5		71.8		27.7		15,256.3		—		15,256.3		—
Residential Real Estate	6,273.2		7.0		3.3		0.2		6,283.7		36.2		6,319.9		36.2
Non-U.S.	381.6		0.2		—		—		381.8		—		381.8		—
Other	35.2		—		—		—		35.2		—		35.2		—
Total Personal	21,617.3		236.7		75.1		27.9		21,957.0		36.2		21,993.2		36.2
Total Loans and Leases	$	39,980.5	$	272.3	$	77.2	$	28.3	$	40,358.3	$	122.3	$	40,480.6	$	97.3
					Other Real Estate Owned						$	3.0
					Total Nonaccrual Assets						$	125.3


	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, 2020
Commercial
Commercial and Institutional	$	9,877.0	$	153.7	$	1.2	$	—	$	10,031.9	$	26.4	$	10,058.3	$	9.1
Commercial Real Estate	3,516.2		2.0		—		—		3,518.2		40.2		3,558.4		32.3
Non-U.S.	1,345.7		—		—		—		1,345.7		—		1,345.7		—
Lease Financing, net	11.4		—		—		—		11.4		—		11.4		—
Other	288.2		—		—		—		288.2		—		288.2		—
Total Commercial	15,038.5		155.7		1.2		—		15,195.4		66.6		15,262.0		41.4
Personal
Private Client	11,765.4		29.1		9.9		7.8		11,812.2		2.9		11,815.1		2.9
Residential Real Estate	5,946.0		23.5		2.9		1.1		5,973.5		62.2		6,035.7		53.8
Non-U.S	596.7		1.2		—		—		597.9		—		597.9		—
Other	49.0		—		—		—		49.0		—		49.0		—
Total Personal	18,357.1		53.8		12.8		8.9		18,432.6		65.1		18,497.7		56.7
Total Loans and Leases	$	33,395.6	$	209.5	$	14.0	$	8.9	$	33,628.0	$	131.7	$	33,759.7	$	98.1
					Other Real Estate Owned						$	0.7
					Total Nonaccrual Assets						$	132.4

Interest income that would have been recorded for nonaccrual loans and leases in accordance with their original terms was $4.6 million in 2021, $4.6 million in 2020, and $7.3 million in 2019.

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 December 31, 2021 was immaterial to Northern Trust’s financial statements.

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. There were $76.7 million and $38.9 million of nonaccrual TDRs included within nonaccrual loans as of December 31, 2021 and 2020, respectively. There were $16.5 million and $29.3 million of accrual TDRs included within nonaccrual loans as of December 31, 2021 and 2020, respectively. There were $0.2 million and $10.4 million of aggregate undrawn loan commitments and standby letters of credit at December 31, 2021 and 2020, 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 years ended December 31, 2021, and 2020, and the recorded investments and unpaid principal balances as of December 31, 2021 and 2020.

TABLE 71: TROUBLED DEBT RESTRUCTURINGS


($ In Millions)	NUMBER OF LOANS AND LEASES	RECORDED INVESTMENT		UNPAID PRINCIPAL BALANCE
December 31, 2021
Commercial
Commercial and Institutional	6	$	19.6	$	19.6
Commercial Real Estate	3	36.0		42.4
Total Commercial	9	55.6		62.0
Personal
Residential Real Estate	10	1.3		1.5
Total Personal	10	1.3		1.5
Total Loans and Leases	19	$	56.9	$	63.5

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


($ In Millions)	NUMBER OF LOANS AND LEASES	RECORDED INVESTMENT		UNPAID PRINCIPAL BALANCE
December 31, 2020
Commercial
Commercial and Institutional	3	$	24.3	$	24.5
Total Commercial	3	24.3		24.5
Personal
Residential Real Estate	22	16.2		16.7
Total Personal	22	16.2		16.7
Total Loans and Leases	25	$	40.5	$	41.2

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

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 year ended December 31, 2021, the TDR modifications of loans within residential real estate were primarily deferrals of principal, extension of term, and other modifications. During the year ended December 31, 2021, TDR modifications of loans within commercial and institutional were deferrals of principal. During the year ended December 31, 2021, TDR modifications of loans within commercial real estate were primarily deferrals of principal, interest rate concessions, other modifications, and extension of term.

During the year ended December 31, 2020, the TDR modifications of loans within residential real estate were primarily extensions of term, other modifications, deferrals of principal, and interest rate concessions. During the year ended December 31, 2020, TDR modifications of loans within commercial and institutional were other modifications and extensions of term.

There were two loan or lease TDR modifications during the previous twelve-month period which subsequently had a payment default during the year ended December 31, 2021. The total recorded investment for these loans was approximately $5.6 million and the unpaid principal balance for these loans was approximately $5.6 million.

There were no loan or lease TDR modifications during the previous twelve-month period which subsequently had a payment default during the year ended December 31, 2020.

Northern Trust may obtain physical possession of real estate via foreclosure on an in-substance repossession. As of December 31, 2021 and 2020, Northern Trust held foreclosed real estate properties with a carrying value of $3.0 million and $0.7 million, respectively, as a result of obtaining physical possession. In addition, as of December 31, 2021 and 2020, Northern Trust had loans with a carrying value of $2.6 million and $7.9 million, respectively, 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 (Federal Reserve Board), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Consumer Financial Protection Bureau, 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: (a) the modification is related to COVID-19; (b) the borrower had been current (not more than 29 days past due) when the modification program was implemented; and (c) 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 not more than 30 days past due 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) January 1, 2022 or (b) 60 days from the date the COVID-19 national emergency officially ends.

Financial institutions may account for eligible loan modifications under the Interagency Guidance and/or the CARES Act. Northern Trust 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 provides the number of total COVID-19-related loan modifications including the loan volume and deferred principal and interest balances as of December 31, 2021, for which Northern Trust applied an exemption from TDR classification that are in active deferral (loans currently in the deferral period) or completed deferral (loans that returned to their regular payment schedule). As of December 31, 2021, there were three residential real estate COVID-19-related loan modifications in active deferral status which totaled $2.0 million, with immaterial deferred principal and interest.

TABLE 72: COVID-19 LOAN MODIFICATIONS NOT CONSIDERED TDRS THAT HAVE COMPLETED DEFERRAL


	DECEMBER 31, 2021
($ In Millions)	NUMBER OF COVID-19 RELATED MODIFICATIONS	LOAN VOLUME		DEFERRED PRINCIPAL AMOUNT		DEFERRED INTEREST AMOUNT
Commercial
Commercial and Institutional	73	$	199.8	$	0.1	$	1.6
Commercial Real Estate	80	390.7		—		2.4
Total Commercial	153	$	590.5	$	0.1	$	4.0

Personal
Private Client	29	$	143.1	$	—	$	1.0
Residential Real Estate	208	102.0		1.1		1.3
Total Personal	237	$	245.1	$	1.1	$	2.3
Total Loans	390	$	835.6	$	1.2	$	6.3

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. While these loans are under the COVID-19 loan modification program, this may delay the recognition of nonaccruals and charge-offs. Loans which have exited the COVID-19 loan modification program may be placed on nonaccrual status or charged-off if borrowers were unable to resume their regular payment schedule.

During the year ended December 31, 2021, 148 loans with an aggregate principal amount of $209.4 million that had been granted payment deferrals were paid off. As of December 31, 2021, less than 10% of loans that had been granted payment deferrals were either past due or in nonaccrual status.