Management’s estimates utilized in establishing an appropriate level of allowance for credit losses are not dependent on any single assumption. In determining an appropriate allowance level, management evaluates numerous variables, many of which are interrelated or dependent on other assumptions and estimates, and takes into consideration past events, current conditions and reasonable and supportable forecasts. Northern Trust employs multiple scenarios over a reasonable and supportable period of currently two years to project future conditions. For periods beyond the reasonable and supportable period, Northern Trust reverts to its own historical loss experiences on a straight-line basis over four quarters. The primary forecast, consistent with Northern Trust’s economic outlook publications, assumes continued economic recovery from the challenges of COVID-19, with steady growth and a falling unemployment rate over the forecast horizon. An alternative scenario is also considered, which reflects a gradual and prolonged recession that incorporates the experiences of a wider set of historical economic cycles.

The results of the credit reserve estimation methodology are reviewed quarterly by Northern Trust’s Credit Loss Reserve Committee, which receives input from Credit Risk Management, Treasury, Corporate Finance, the Economic Research group, and each of Northern Trust’s business units. The Credit Loss Reserve Committee determines the probability weights applied to each forecast approved by Northern Trust’s Macroeconomic Scenario Development Committee, and also reviews and approves qualitative adjustments to the collective allowance in line with Northern Trust’s qualitative adjustment framework.


	2021
(In Millions)	LOANS AND LEASES		UNDRAWN LOAN COMMITMENTS AND STANDBY LETTERS OF CREDIT		HELD TO MATURITY DEBT SECURITIES		OTHER FINANCIAL ASSETS		TOTAL
Balance at Beginning of Period	$	190.7	$	61.1	$	7.3	$	0.8	$	259.9
Charge-Offs	(0.7)		—		—		—		(0.7)
Recoveries	7.0		—		—		—		7.0
Net Recoveries (Charge-Offs)	6.3		—		—		—		6.3
Provision for Credit Losses	(58.6)		(27.0)		3.9		0.2		(81.5)
Balance at End of Period	$	138.4	$	34.1	$	11.2	$	1.0	$	184.7


	2020
(In Millions)	LOANS AND LEASES		UNDRAWN LOAN COMMITMENTS AND STANDBY LETTERS OF CREDIT		HELD TO MATURITY DEBT SECURITIES		OTHER FINANCIAL ASSETS		TOTAL
Balance at End of Prior Period	$	104.5	$	19.9	$	—	$	—	$	124.4
Cumulative Effect Adjustment	(2.2)		8.9		6.6		0.4		13.7
Balance at Beginning of Period	102.3		28.8		6.6		0.4		138.1
Charge-Offs	(9.7)		—		—		—		(9.7)
Recoveries	6.5		—		—		—		6.5
Net Recoveries (Charge-Offs)	(3.2)		—		—		—		(3.2)
Provision for Credit Losses	91.6		32.3		0.7		0.4		125.0
Balance at End of Period	$	190.7	$	61.1	$	7.3	$	0.8	$	259.9


	2019
(In Millions)	LOANS AND LEASES		UNDRAWN LOAN COMMITMENTS AND STANDBY LETTERS OF CREDIT		TOTAL
Balance at Beginning of Period	$	112.6	$	25.6	$	138.2
Charge-Offs	(6.5)		—		(6.5)
Recoveries	7.2		—		7.2
Net Recoveries (Charge-Offs)	0.7		—		0.7
Provision for Credit Losses	(8.8)		(5.7)		(14.5)
Balance at End of Period	$	104.5	$	19.9	$	124.4

There was a $81.5 million release of credit reserves for the year ended December 31, 2021, as compared to a $125.0 million provision for the year ended December 31, 2020. There were net recoveries of $6.3 million for the year ended December 31, 2021, as compared to net charge-offs of $3.2 million for the year ended December 31, 2020. The release of credit reserves during 2021 mostly related to loans and leases and undrawn loan commitments and standby letters of credit. For further detail, please see the following Allowance for the Loan and Lease Portfolio section.

For credit exposure and the associated allowance related to fee receivables, please refer to Note 18, “Revenue from Contracts with Clients.” For information related to the allowance for AFS debt securities, please refer to Note 4, “Securities.” For the allowance pertaining to all other financial assets recognized at amortized cost, which include Cash and Due from Banks, Other Central Bank Deposits, Interest Bearing Deposits with Banks, and Other Assets, please refer to the Allowance for Other Financial Assets section within this footnote.


	2021
	LOANS AND LEASES						UNDRAWN LOAN COMMITMENTS AND STANDBY LETTERS OF CREDIT
(In Millions)	COMMERCIAL		PERSONAL		TOTAL		COMMERCIAL		PERSONAL		TOTAL
Balance at Beginning of Period	$	142.2	$	48.5	$	190.7	$	57.6	$	3.5	$	61.1
Charge-Offs	(0.3)		(0.4)		(0.7)		—		—		—
Recoveries	0.9		6.1		7.0		—		—		—
Net Recoveries (Charge-Offs)	0.6		5.7		6.3		—		—		—
Provision for Credit Losses	(37.2)		(21.4)		(58.6)		(26.2)		(0.8)		(27.0)
Balance at End of Period	$	105.6	$	32.8	$	138.4	$	31.4	$	2.7	$	34.1


	2020
	LOANS AND LEASES						UNDRAWN LOAN COMMITMENTS AND STANDBY LETTERS OF CREDIT
(In Millions)	COMMERCIAL		PERSONAL		TOTAL		COMMERCIAL		PERSONAL		TOTAL
Balance at End of Prior Period	$	58.1	$	46.4	$	104.5	$	15.8	$	4.1	$	19.9
Cumulative Effect Adjustment	(5.9)		3.7		(2.2)		11.9		(3.0)		8.9
Balance at Beginning of Period	$	52.2	$	50.1	$	102.3	$	27.7	$	1.1	$	28.8
Charge-Offs	(6.3)		(3.4)		(9.7)		—		—		—
Recoveries	2.4		4.1		6.5		—		—		—
Net Recoveries (Charge-Offs)	(3.9)		0.7		(3.2)		—		—		—
Provision for Credit Losses	93.9		(2.3)		91.6		29.9		2.4		32.3
Balance at End of Period	$	142.2	$	48.5	$	190.7	$	57.6	$	3.5	$	61.1


	2019
	LOANS AND LEASES						UNDRAWN LOAN COMMITMENTS AND STANDBY LETTERS OF CREDIT
(In Millions)	COMMERCIAL		PERSONAL		TOTAL		COMMERCIAL		PERSONAL		TOTAL
Balance at Beginning of Period	$	57.6	$	55.0	$	112.6	$	21.1	$	4.5	$	25.6
Charge-Offs	(3.0)		(3.5)		(6.5)		—		—		—
Recoveries	0.9		6.3		7.2		—		—		—
Net Recoveries (Charge-Offs)	(2.1)		2.8		0.7		—		—		—
Provision for Credit Losses	2.6		(11.4)		(8.8)		(5.3)		(0.4)		(5.7)
Balance at End of Period	$	58.1	$	46.4	$	104.5	$	15.8	$	4.1	$	19.9

The decrease to the allowance for both loans and leases and undrawn loan commitments and standby letters of credit for 2021 was primarily due to a decrease in the reserve evaluated on a collective basis, which relates to pooled financial assets sharing similar risk characteristics, and was driven by improvements in projected economic conditions and portfolio credit quality, partially offset by portfolio growth. The decrease in the collective basis reserve was primarily reflected in the commercial and institutional portfolio.

The following table provides information regarding the recorded investments in loans and leases and the allowance for credit losses for loans and leases and undrawn loan commitments and standby letters of credit by segment as of December 31, 2021 and 2020.


	DECEMBER 31, 2021						DECEMBER 31, 2020
(In Millions)	COMMERCIAL		PERSONAL		TOTAL		COMMERCIAL		PERSONAL		TOTAL
Loans and Leases
Evaluated on an Individual Basis	$	92.1	$	74.5	$	166.6	$	66.6	$	65.1	$	131.7
Evaluated on a Collective Basis	18,395.3		21,918.7		40,314.0		15,195.4		18,432.6		33,628.0
Total Loans and Leases	18,487.4		21,993.2		40,480.6		15,262.0		18,497.7		33,759.7
Allowance for Credit Losses on Credit Exposures
Evaluated on an Individual Basis	10.1		—		10.1		8.8		0.3		9.1
Evaluated on a Collective Basis	95.5		32.8		128.3		133.4		48.2		181.6
Allowance Assigned to Loans and Leases	105.6		32.8		138.4		142.2		48.5		190.7
Allowance for Undrawn Loan Commitments and Standby Letters of Credit
Evaluated on an Individual Basis	—		—		—		1.6		—		1.6
Evaluated on a Collective Basis	31.4		2.7		34.1		56.0		3.5		59.5
Allowance Assigned to Undrawn Loan Commitments and Standby Letters of Credit	31.4		2.7		34.1		57.6		3.5		61.1
Total Allowance Assigned to Loans and Leases and Undrawn Loan Commitments and Standby Letters of Credit	$	137.0	$	35.5	$	172.5	$	199.8	$	52.0	$	251.8


	2021
(In Millions)	CORPORATE DEBT		NON-U.S. GOVERNMENT		SUB-SOVEREIGN, SUPRANATIONAL, AND NON-U.S. AGENCY BONDS		COVERED BONDS		OTHER		TOTAL
Balance at Beginning of Period	$	0.8	$	0.2	$	1.2	$	0.1	$	5.0	$	7.3
Provision for Credit Losses	0.6		1.7		1.8		—		(0.2)		3.9
Balance at End of Period	$	1.4	$	1.9	$	3.0	$	0.1	$	4.8	$	11.2


	2020
(In Millions)	CORPORATE DEBT		NON-U.S. GOVERNMENT		SUB-SOVEREIGN, SUPRANATIONAL, AND NON-U.S. AGENCY BONDS		COVERED BONDS		OTHER		TOTAL
Balance at End of Prior Period	$	—	$	—	$	—	$	—	$	—	$	—
Cumulative Effect Adjustment	0.8		0.3		0.9		—		4.6		6.6
Balance at Beginning of Period	0.8		0.3		0.9		—		4.6		6.6
Provision for Credit Losses	—		(0.1)		0.3		0.1		0.4		0.7
Balance at End of Period	$	0.8	$	0.2	$	1.2	$	0.1	$	5.0	$	7.3

Prior to the adoption of ASU 2016-13 on January 1, 2020, Northern Trust recognized $4.4 million of cumulative Other-Than-Temporary-Impairment (OTTI) losses on the debt securities classified as other as of December 31, 2019. For debt securities with previous OTTI losses recorded, Northern Trust applied ASU 2016-13 on a prospective basis whereby the amortized cost basis of the impaired security remains unchanged immediately before and after adopting ASU 2016-13. The allowance recorded at January 1, 2020 for HTM debt securities equals the difference between the calculated expected loss and the amount of OTTI loss previously recorded and represents the cumulative effect adjustment required upon the adoption of ASU 2016-13.

The increase in the allowance attributable to HTM debt securities for 2021 was due to an increase in the reserve evaluated on a collective basis, which relates to pooled financial assets sharing similar risk characteristics, and was driven by an increase in exposure.

Allowance for Other Financial Assets. The allowance for Other Financial Assets consists of the allowance for Due from Banks, Other Central Bank Deposits, Interest Bearing Deposits with Banks, and Other Assets. Northern Trust’s portfolio is composed mostly of institutions within the “1 to 3” internal borrower rating category and is expected to exhibit minimal to modest likelihood of loss. The allowance for credit losses related to Other Financial Assets was $1.0 million and $0.8 million as of December 31, 2021 and 2020, respectively.

Accrued Interest. Accrued interest balances are reported within Other Assets on the consolidated balance sheets. Northern Trust elected not to measure an allowance for credit losses for accrued interest receivables related to its loan and securities portfolios as its policy is to write-off uncollectible accrued interest receivable balances in a timely manner. Accrued interest is written off by reversing interest income during the period the financial asset is moved from an accrual to a nonaccrual status.

The amount of accrued interest reversed through interest income for loans and leases was immaterial and there was no accrued interest reversed through interest income related to any other financial assets during the years ended 2021 and 2020.