Allowance and Provision for Credit Losses. The allowance for credit losses—which represents management’s best estimate of lifetime expected credit losses related to various portfolios subject to credit risk, off-balance sheet credit exposures, and specific borrower relationships—is determined by management through a disciplined credit review process. Northern Trust measures expected credit losses of financial assets with similar risk characteristics on a collective basis. A financial asset is measured individually if it does not share similar risk characteristics with other financial assets and the related allowance is determined through an individual evaluation.

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 and takes into consideration past events, current conditions, and reasonable and supportable forecasts. The primary forecast reflects an outlook of steady growth, with interest rate cuts continuing as inflation and unemployment rates stabilize. An alternative scenario is also considered, which reflects a 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 Financial Risk Management, Treasury, Corporate Finance, the Economic Research Department, and each of Northern Trust’s reporting business units. The Credit Loss Reserve Committee determines the probability weights applied to each forecast approved by Northern Trust’s Macroeconomic Scenario Development Committee, as well as, reviews and approves qualitative adjustments to the collective allowance in line with Northern Trust’s qualitative adjustment framework.

Material qualitative adjustments in 2024 relate to a higher likelihood of a recession within the CRE portfolio due to continued concerns around office occupancy rates and high interest rates, the potential impact of climate-related risks on underlying property values within the CRE and RRE portfolios, and the potential for higher-than-expected losses on large individual exposures. Relative to the quantitative reserve, the qualitative component increased slightly year-over-year, primarily due to higher adjustments related to the CRE portfolio.


	2024
(In Millions)	LOANS		UNDRAWN LOAN COMMITMENTS AND STANDBY LETTERS OF CREDIT		HELD TO MATURITY DEBT SECURITIES		OTHER FINANCIAL ASSETS		TOTAL
Balance at Beginning of Period	$	178.7	$	26.9	$	12.7	$	0.9	$	219.2
Charge-Offs	(15.5)		—		—		—		(15.5)
Recoveries	4.2		—		—		—		4.2
Net Recoveries (Charge-Offs)	(11.3)		—		—		—		(11.3)
Provision for Credit Losses(1)	0.6		3.5		(6.2)		0.1		(2.0)
Balance at End of Period	$	168.0	$	30.4	$	6.5	$	1.0	$	205.9

(1) The table excludes a negative provision for credit losses of $1.0 million for the year ended December 31, 2024 for AFS debt securities. See further detail in Note 4, “Securities.”


	2023
(In Millions)	LOANS		UNDRAWN LOAN COMMITMENTS AND STANDBY LETTERS OF CREDIT		HELD TO MATURITY DEBT SECURITIES		OTHER FINANCIAL ASSETS		TOTAL
Balance at Beginning of Period	$	144.3	$	38.5	$	16.0	$	0.8	$	199.6
Charge-Offs	(7.5)		—		(1.2)		—		(8.7)
Recoveries	3.7		—		—		—		3.7
Net Recoveries (Charge-Offs)	(3.8)		—		(1.2)		—		(5.0)
Provision for Credit Losses(1)	38.2		(11.6)		(2.1)		0.1		24.6
Balance at End of Period	$	178.7	$	26.9	$	12.7	$	0.9	$	219.2


	2022
(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	$	138.4	$	34.1	$	11.2	$	1.0	$	184.7
Charge-Offs	(6.0)		—		—		—		(6.0)
Recoveries	10.2		—		—		—		10.2
Net Recoveries (Charge-Offs)	4.2		—		—		—		4.2
Provision for Credit Losses(1)	1.7		4.4		4.8		(0.2)		10.7
Balance at End of Period	$	144.3	$	38.5	$	16.0	$	0.8	$	199.6

Excluding the negative provisions for AFS debt securities, Northern Trust recognized a negative Provision for Credit Losses of $2.0 million for the year ended December 31, 2024, as compared to a Provision for Credit Losses of $24.6 million and $10.7 million for the year ended December 31, 2023 and 2022, respectively. The negative provision in 2024 was due to decreases in both individual and collective reserves. The decrease in individual reserves was driven by one commercial loan charge-off. The decrease in collective reserves related primarily to the HTM debt securities portfolio and was driven by methodology updates and changes in portfolio quality, partially offset by an increase in the reserve for the CRE portfolio, due to changes in portfolio quality during the year. There were net charge-offs of $11.3 million and $5.0 million for the year ended December 31, 2024 and December 31, 2023, respectively, and net recoveries of $4.2 million for the year ended December 31, 2022. For further detail, please see the Allowance for the Loan Portfolio and the Allowance for Held to Maturity Debt Securities Portfolio sections below.

For credit exposure and the associated allowance related to fee receivables, please refer to Note 16, “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 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.

Allowance for the Loan Portfolio. The following table provides information regarding changes in the total allowance for credit losses related to loans, including undrawn loan commitments and standby letters of credit, by segment.


	2024
	LOANS						UNDRAWN LOAN COMMITMENTS AND STANDBY LETTERS OF CREDIT
(In Millions)	COMMERCIAL		PERSONAL		TOTAL		COMMERCIAL		PERSONAL		TOTAL
Balance at Beginning of Period	$	146.8	$	31.9	$	178.7	$	24.9	$	2.0	$	26.9
Charge-Offs	(15.1)		(0.4)		(15.5)		—		—		—
Recoveries	—		4.2		4.2		—		—		—
Net Recoveries (Charge-Offs)	(15.1)		3.8		(11.3)		—		—		—
Provision for Credit Losses	6.8		(6.2)		0.6		3.4		0.1		3.5
Balance at End of Period	$	138.5	$	29.5	$	168.0	$	28.3	$	2.1	$	30.4


	2023
	LOANS						UNDRAWN LOAN COMMITMENTS AND STANDBY LETTERS OF CREDIT
(In Millions)	COMMERCIAL		PERSONAL		TOTAL		COMMERCIAL		PERSONAL		TOTAL
Balance at Beginning of Period	$	116.2	$	28.1	$	144.3	$	36.3	$	2.2	$	38.5
Charge-Offs	(5.7)		(1.8)		(7.5)		—		—		—
Recoveries	0.2		3.5		3.7		—		—		—
Net Recoveries (Charge-Offs)	(5.5)		1.7		(3.8)		—		—		—
Provision for Credit Losses	36.1		2.1		38.2		(11.4)		(0.2)		(11.6)
Balance at End of Period	$	146.8	$	31.9	$	178.7	$	24.9	$	2.0	$	26.9


	2022
	LOANS AND LEASES						UNDRAWN LOAN COMMITMENTS AND STANDBY LETTERS OF CREDIT
(In Millions)	COMMERCIAL		PERSONAL		TOTAL		COMMERCIAL		PERSONAL		TOTAL
Balance at Beginning of Period	$	105.6	$	32.8	$	138.4	$	31.4	$	2.7	$	34.1
Charge-Offs	(5.3)		(0.7)		(6.0)		—		—		—
Recoveries	2.7		7.5		10.2		—		—		—
Net Recoveries (Charge-Offs)	(2.6)		6.8		4.2		—		—		—
Provision for Credit Losses	13.2		(11.5)		1.7		4.9		(0.5)		4.4
Balance at End of Period	$	116.2	$	28.1	$	144.3	$	36.3	$	2.2	$	38.5

The following table provides information regarding the recorded investments in loans and the allowance for credit losses for loans and undrawn loan commitments and standby letters of credit by segment as of December 31, 2024 and 2023.


	DECEMBER 31, 2024						DECEMBER 31, 2023
(In Millions)	COMMERCIAL		PERSONAL		TOTAL		COMMERCIAL		PERSONAL		TOTAL
Loans
Evaluated on an Individual Basis	$	35.9	$	30.0	$	65.9	$	33.7	$	62.6	$	96.3
Evaluated on a Collective Basis	20,242.9		23,081.8		43,324.7		25,379.1		22,141.6		47,520.7
Total Loans	20,278.8		23,111.8		43,390.6		25,412.8		22,204.2		47,617.0
Allowance for Credit Losses on Loans
Evaluated on an Individual Basis	1.2		2.0		3.2		11.4		2.0		13.4
Evaluated on a Collective Basis	137.3		27.5		164.8		135.4		29.9		165.3
Allowance Assigned to Loans	138.5		29.5		168.0		146.8		31.9		178.7



Allowance Assigned to Undrawn Loan Commitments and Standby Letters of Credit - Evaluated on a Collective Basis	28.3		2.1		30.4		24.9		2.0		26.9
Total Allowance Assigned to Loans and Undrawn Loan Commitments and Standby Letters of Credit	$	166.8	$	31.6	$	198.4	$	171.7	$	33.9	$	205.6


	2024
(In Millions)	CORPORATE DEBT		NON-U.S. GOVERNMENT		SUB-SOVEREIGN, SUPRANATIONAL, AND NON-U.S. AGENCY BONDS		OBLIGATIONS OF STATES AND POLITICAL SUBDIVISIONS(1)		COVERED BONDS		OTHER		TOTAL
Balance at Beginning of Period	$	0.9	$	3.5	$	2.2	$	1.2	$	0.1	$	4.8	$	12.7



Provision for Credit Losses	(0.6)		(1.5)		(1.1)		(0.3)		(0.1)		(2.6)		(6.2)
Balance at End of Period	$	0.3	$	2.0	$	1.1	$	0.9	$	—	$	2.2	$	6.5


	2023
(In Millions)	CORPORATE DEBT		NON-U.S. GOVERNMENT		SUB-SOVEREIGN, SUPRANATIONAL, AND NON-U.S. AGENCY BONDS		OBLIGATIONS OF STATES AND POLITICAL SUBDIVISIONS(1)		COVERED BONDS		OTHER		TOTAL
Balance at Beginning of Period	$	1.9	$	3.6	$	4.0	$	1.5	$	0.1	$	4.9	$	16.0
Charge-Offs	—		—		—		—		—		(1.2)		(1.2)
Recoveries	—		—		—		—		—		—		—
Net Recoveries (Charge-Offs)	—		—		—		—		—		(1.2)		(1.2)
Provision for Credit Losses	(1.0)		(0.1)		(1.8)		(0.3)		—		1.1		(2.1)
Balance at End of Period	$	0.9	$	3.5	$	2.2	$	1.2	$	0.1	$	4.8	$	12.7


	2022
(In Millions)	CORPORATE DEBT		NON-U.S. GOVERNMENT		SUB-SOVEREIGN, SUPRANATIONAL, AND NON-U.S. AGENCY BONDS		OBLIGATIONS OF STATES AND POLITICAL SUBDIVISIONS(1)		COVERED BONDS		OTHER		TOTAL
Balance at Beginning of Period	$	1.4	$	1.9	$	3.0	$	—	$	0.1	$	4.8	$	11.2
Provision for Credit Losses	0.5		1.7		1.0		1.5		—		0.1		4.8
Balance at End of Period	$	1.9	$	3.6	$	4.0	$	1.5	$	0.1	$	4.9	$	16.0

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 $0.9 million as of December 31, 2024 and 2023, 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 loans 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 securities was immaterial and there was no accrued interest reversed through interest income related to any other financial assets during the years ended 2024 and 2023.