THIRD QUARTER CONSOLIDATED RESULTS OF OPERATIONS

Overview

A net loss per common share of $.67 on a diluted basis was reported for the third quarter compared with net income per common share of $.93 earned in last year's third quarter. The reported net loss in the quarter of $148.3 million compared with net income of $208.3 million earned in the third quarter of last year. This performance produced an annualized return on average common equity (ROE) of (11.62%) versus 19.51% reported for the comparable quarter last year and an annualized return on average assets (ROA) of (.80%), compared with 1.35% last year.

Reported earnings included a $30 million pre-tax charge ($.09 per share net of tax) recorded to increase the existing accrual related to certain indemnifications of Visa Inc. ("Visa") as a result of Visa's settlement with Discover Financial Services announced on October 27, 2008. Excluding the effect of this charge, the third quarter net operating loss per common share was $.58 on a diluted basis compared to $.93 earned in last year's third quarter. The current quarter's net operating loss of $129.4 million compares with net income of $208.3 million earned in the third quarter of last year.

                                                      Three Months Ended                Three Months Ended
                                                      September 30, 2008                September 30, 2007
($ In Millions Except Per Share Data)              Amount           Per Share          Amount        Per Share
Reported Earnings (Loss)                         $    (148.3 )     $      (.67 )    $      208.3    $       .93
Visa Indemnification Charge (net of $11.1 tax
effect)                                                 18.9               .09                -              -

Operating Earnings (Loss)                        $    (129.4 )     $      (.58 )    $      208.3    $       .93

Northern Trust is providing operating earnings in addition to its reported results prepared in accordance with generally accepted accounting principles in order to provide investors and others with a clearer indication of the results and trends in Northern Trust's core businesses absent the Visa impacts.

The current quarter's operating results included $561.5 million of pre-tax accounting charges ($353.2 million after-tax or $1.59 per common share) associated with the previously disclosed actions taken to support clients in light of current market conditions.

Northern Trust's third quarter 2008 results were negatively impacted by the following charges.

Client Support-Related Charges

• A pre-tax charge of $313.9 million ($197.5 million after tax, or $.89 per common share) in connection with an increase in support provided to cash investment funds under existing Capital Support Agreements and the establishment of a capital support agreement for one additional fund.

• Pre-tax charges totaling $167.6 million ($105.4 million after tax, or $.47 per common share) in connection with actions taken to provide support for Northern Trust's securities lending clients.

• An $80 million pre-tax charge ($50.3 million after tax, or $.23 per common share) related to the establishment of a program to purchase certain illiquid auction rate securities that were purchased by a limited number of Northern Trust clients.

Additional Charges

• A $9.5 million pre-tax charge ($12.9 million after tax, or $.06 per common share) reducing net interest income and increasing income taxes related to revised estimates regarding the outcome of the Corporation's tax position with respect to certain structured leasing transactions.

• A $16.9 million pre-tax charge ($10.6 million after tax, or $.05 per common share) to reflect the other-than-temporary impairment of two asset-backed securities held within Northern Trust's balance sheet investment portfolio.

Partially offsetting these charges were reductions in performance-based compensation and certain defined contribution benefit expense, primarily reflecting the impact of the above charges on projected full year performance.

Northern Trust's third quarter consolidated revenues stated on a fully taxable equivalent (FTE) basis of $938.5 million were up 5% from $892.5 million in last year's third quarter. Trust, investment and other servicing fees decreased 7% from last year to $474.9 million. Net interest income increased 15% from last year's third quarter to $265.7 million on an FTE basis and foreign exchange trading income increased 54% from a year ago to a record $141.8 million. Noninterest expenses totaled $1.15 billion for the quarter, compared with $566.6 million in the year-ago quarter. The current quarter included the $30.0 million Visa indemnification charge and the $561.5 million of client support-related charges. Without these expense items, noninterest expenses would have totaled $562.5 million, down 1% from last year's third quarter.

Noninterest income of $672.8 million for the quarter accounted for 72% of total taxable equivalent revenue. Trust, investment and other servicing fees represented 51% of total taxable equivalent revenue. The decrease in trust, investment and other servicing fees from the prior year third quarter resulted primarily from a reduction in securities lending fees and lower market valuations, partially offset by new business. Foreign exchange trading income record results reflect exceptionally high levels of currency volatility and increased client volumes. Revenues from security commissions and trading income equaled $19.2 million, up 5% from the prior year, driven by increased revenue from core brokerage services.

The components of noninterest income are provided below.

  Noninterest Income                              Three Months Ended September 30
  (In Millions)                                   2008             2007      % Change
  Trust, Investment and Other Servicing Fees   $    474.9       $    508.8         (7 )%
  Foreign Exchange Trading Income                   141.8             91.9         54
  Security Commissions and Trading Income            19.2             18.2          5
  Treasury Management Fees                           17.6             16.1          9
  Other Operating Income                             36.2             19.2         89
  Investment Security Gains (Losses), net           (16.9 )            6.3         NM

  Total Noninterest Income                     $    672.8       $    660.5          2 %

Assets under custody totaled $3.5 trillion at September 30, 2008. This represents a decrease in assets under custody of 11% from June 30, 2008 and 14% from September 30, 2007. Assets under management totaled $652.4 billion, a 13% decrease from $751.4 billion at June 30, 2008 and a 14% decrease from $761.4 billion at September 30, 2007. The above are in comparison to the twelve month declines in the S&P 500 index of approximately 24% and in the EAFE index (USD) of approximately 32%. As of the current quarter-end, managed assets were invested 37% in equities, 15% in fixed-income securities, and 48% in cash and other assets.

Assets Under Custody                     September 30,     June 30,      December 31,      September 30,
(In Billions)                                2008            2008            2007              2007
Corporate & Institutional               $       3,217.0    $ 3,635.7    $      3,802.9    $       3,787.6
Personal                                          314.2        325.9             332.3              329.2

Total Assets Under Custody              $       3,531.2    $ 3,961.6    $      4,135.2    $       4,116.8


Assets Under Management                  September 30,     June 30,      December 31,      September 30,
(In Billions)                                2008            2008            2007              2007
Corporate & Institutional               $         511.4    $   608.6    $        608.9    $         614.5
Personal                                          141.0        142.8             148.3              146.9

Total Assets Under Management           $         652.4    $   751.4    $        757.2    $         761.4

Trust, investment and other servicing fees are generally based on the market value of assets managed, custodied, and administered, the volume of transactions, securities lending volume and spreads, and fees for other services rendered. Certain market value calculations are performed on a monthly or quarterly basis in arrears. Certain investment management fee arrangements also may provide for performance fees, which are based on client portfolio returns exceeding predetermined levels. In addition, Corporate & Institutional Services (C&IS) client relationships are generally priced to reflect earnings from activities such as foreign exchange trading and custody-related deposits that are not included in trust, investment and other servicing fees. Based on analysis of historical trends and current asset and product mix, management estimates that a 10% rise or fall in overall equity markets would cause a corresponding increase or decrease in trust, investment and other servicing fees of approximately 4% and total revenues of approximately 2%.

Trust, investment and other servicing fees from C&IS in the quarter decreased 13% from the year-ago quarter to $244.5 million, primarily reflecting a decline in securities lending fees and lower market valuations, partially offset by new business. The largest component of C&IS fees is custody and fund administration fees, which increased 3% to $164.4 million. Securities lending fees totaled a negative $4.6 million compared with $33.0 million in the third quarter last year, primarily reflecting asset valuation losses in one mark-to-market investment fund used in our securities lending activities. These valuation losses reduced fees by approximately $96 million in the current quarter and approximately $36 million in the prior year quarter. Fees from asset management in the quarter totaled $68.2 million, down 6%.

C&IS assets under custody totaled $3.2 trillion at September 30, 2008, down 15% from a year ago, and included $1.7 trillion of global custody assets, a 15% decrease compared with a year ago. C&IS assets under management totaled $511.4 billion, a 17% decrease from the prior year. The above are in comparison to the previously noted twelve month declines in the S&P 500 and EAFE (USD) indices. As of the current quarter-end, C&IS managed assets were invested 37% in equities, 12% in fixed-income securities, and 51% in cash and other assets.

Trust, investment and other servicing fees from Personal Financial Services (PFS) in the quarter increased 2% and totaled $230.4 million compared with $226.8 million a year ago. The increase in PFS fees resulted primarily from strong new business, partially offset by lower market valuations. PFS assets under custody totaled $314.2 billion at September 30, 2008, a 5% decrease from $329.2 billion in the prior year quarter. PFS assets under management totaled $141.0 billion, a 4% decrease from $146.9 billion last year. These are in comparison to the twelve month declines in the S&P 500 and EAFE (USD) indices noted above. As of the current quarter-end, PFS managed assets were invested 39% in equities, 25% in fixed-income securities, and 36% in cash and other assets.

Noninterest Income (continued)



The components of other operating income are provided below.



    Other Operating Income                     Three Months Ended September 30
    (In Millions)                           2008         2007            % Change
    Loan Service Fees                     $     7.6    $     4.0                 88 %
    Banking Service Fees                       10.1          9.1                 11
    Loss on Sale of Non-U.S. Subsidiary          -          (1.1 )               -
    Other Income                               18.5          7.2                157

    Total Other Operating Income          $    36.2    $    19.2                 89 %

The increase in the other income component of other operating income primarily reflects $7.2 million of valuation gains recorded on certain credit default swap contracts with outside counterparties used to mitigate credit risk associated with specific commercial credits. Also contributing to the current quarter performance is the foreign exchange rate impact of translating non-U.S. assets and liabilities.

Losses totaling $16.9 million were recognized in connection with the write-down to estimated fair value of two asset-backed securities determined to be other-than-temporarily impaired as of September 30, 2008. In the prior year quarter, an investment security gain of $6.3 million was recognized resulting from the sale of CME Group Inc. stock.

Net interest income for the quarter totaled $253.4 million, 19% higher than the $213.2 million reported in the third quarter of 2007. Net interest income is defined as the total of interest income and amortized fees on earning assets, less interest expense on deposits and borrowed funds, adjusted for the impact of hedging activities. When net interest income is adjusted to an FTE basis, yields on taxable, nontaxable and partially taxable assets are comparable, although the adjustment to an FTE basis has no impact on net income. Net interest income for the quarter, stated on an FTE basis, totaled $265.7 million, up 15% from $232.0 million reported in the prior year quarter.

The current quarter includes the $9.5 million reduction related to revised estimates regarding the Corporation's tax dispute with respect to certain structured lease transactions. Absent this adjustment, net interest income for the current quarter would have increased 19% from the prior year quarter, primarily reflecting higher levels of average earning assets. Average loans and leases increased 19% to $27.7 billion, while money market assets increased 52% from the prior year and averaged $24.8 billion for the quarter. The securities portfolio averaged $12.8 billion, down 9% from last year, with the decrease concentrated primarily in variable rate government sponsored agency securities, partially offset by higher levels of asset-backed securities. The net interest margin equaled 1.62%, down from 1.71% in the prior year quarter. The net interest margin absent the leasing related adjustment would have been 1.68%.

Average U.S. loans outstanding during the quarter totaled $26.3 billion, 23% higher than the $21.4 billion in last year's third quarter. Residential real estate averaged $9.8 billion in the quarter, up 10% from the prior year's third quarter, and represented 35% of the total average loan and lease portfolio. Commercial loans averaged $7.1 billion, up 39% from $5.1 billion last year, while personal loans averaged $4.6 billion, up 40% from last year's third quarter. Loans outside the U.S. decreased $502.6 million on average from the prior year quarter to $1.4 billion.

Northern Trust utilizes a diverse mix of funding sources. Total interest-bearing deposits averaged $49.1 billion, up 31% from the third quarter of 2007. Non-U.S. office interest-bearing deposits increased $11.0 billion or 40% from last year's third quarter, resulting primarily from growth in our international business. Retail deposit levels increased $622.6 million due primarily to higher levels of money market deposit accounts. Other interest-related funds averaged $7.8 billion in the quarter compared with $8.4 billion in last year's third quarter. The balances within these 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. Noninterest-related funds utilized to fund earning assets averaged $8.5 billion compared with $7.9 billion in last year's third quarter.

The provision for credit losses was $25.0 million in the third quarter compared with $6.0 million in the prior year quarter. The current quarter provision primarily reflects loan growth and continued weakness in the broader economic environment. The reserve for credit losses at September 30, 2008 was $207.5 million compared with $160.2 million at December 31, 2007 and $154.5 million at September 30, 2007. For a discussion of the provision and reserve for credit losses, refer to the "Asset Quality" section below.

Noninterest Expense

The components of noninterest expense are provided below.



       Noninterest Expenses                Three Months Ended September 30
       (In Millions)                        2008            2007      % Change
       Compensation                     $       230.3    $    259.5        (11 )%
       Employee Benefits                         52.4          57.1         (8 )
       Outside Services                         106.5          99.3          7
       Equipment and Software Expense            60.7          53.6         13
       Occupancy Expense                         41.8          39.2          7
       Visa Indemnification Charges              30.0            -          NM
       Other Operating Expenses                 632.3          57.9        991

       Total Noninterest Expenses       $     1,154.0    $    566.6        104 %

The current quarter decrease in compensation and employee benefit expenses was driven by a $67.5 million decrease in performance-based compensation and certain defined contribution benefit expense and lower pension and other retirement related expense, offset in part by higher staff levels, annual salary increases, and higher employment taxes. Staff on a full-time equivalent basis at September 30, 2008 totaled 12,100, up 14% from a year ago.

The current quarter increase in outside services expense primarily reflects higher costs for legal services and technical and consulting services.

Noninterest expenses in the current quarter included the $30.0 million Visa indemnification charge. The increase in the other operating expenses component of noninterest expenses is primarily the result of the $561.5 million of client support-related charges. Absent these expenses, the remainder of the increase is the result of higher charges from account servicing activities and legal matters and higher business promotion expenses.

Provision for Income Taxes

An income tax benefit of $104.5 million was recorded in the current quarter due to the pre-tax loss reported for the quarter. This resulted in an effective tax rate of 41.3% as the operating loss resulted primarily from U.S. activities while foreign operations, with lower tax rates, remained profitable. The current quarter effective tax rate excluding the impact of client support, Visa indemnification, and leasing related charges was 32.0%. The prior year quarter's provision for income taxes was $92.8 million, representing an effective tax rate of 30.8%.

The following tables reflect the direct contribution and average assets of Northern Trust's business units for the three and nine month periods ended September 30, 2008 and 2007. Business unit financial information, presented on an internal management-reporting basis, is determined by accounting systems that are used to allocate revenue and direct expenses related to each segment, and which incorporate processes for allocating assets, liabilities, and equity, and the applicable interest income and expense.

In 2008, Northern Trust is transitioning to new management accounting systems. In connection with the implementation of the new systems, enhancements are being made to certain management accounting methodologies used for business unit reporting. These enhancements include changes in the application of funds transfer pricing used in calculating net interest income and revisions to the methodologies for allocating revenue, expense, and capital. These changes have no impact on Northern Trust's consolidated results of operation or financial condition. The majority of the modifications were affected in the first quarter of 2008; however, refinements continue to be implemented. Prior year information on a comparable basis is not available and, as a result, period over period changes are not necessarily indicative of changes in business unit performance from the prior year period.

In this transition year, internal management reporting is centered on business unit direct contribution, defined as revenues less provision for credit losses and direct expenses. Direct expenses are those incurred directly by each business unit and exclude expenses relating to product and operating support provided by Treasury and other support service functions. Although prior year information has not been restated, business unit direct expenses and direct contribution for the prior year have been provided in the table below for comparative purposes.

                                         Corporate and                                       Treasury and
Three Months Ended                       Institutional           Personal Financial          Other Support                   Total
September 30                               Services                   Services                 Services                  Consolidated
($ In Millions)                       2008           2007         2008         2007        2008         2007          2008           2007
Noninterest Income
Trust, Investment and Other
Servicing Fees                     $    244.5     $    282.0   $    230.4   $    226.8   $     -      $     -      $    474.9     $    508.8
Other                                   181.0          123.3         32.3         23.7      (15.4 )        4.7          197.9          151.7
Net Interest Income (FTE) *             116.2          106.8        138.7        128.7       10.8         (3.5 )        265.7          232.0

Revenues (FTE) *                        541.7          512.1        401.4        379.2       (4.6 )        1.2          938.5          892.5
Provision for Credit Losses               3.5            2.4         21.5          3.6         -            -            25.0            6.0
Visa Indemnification Charge                -              -            -            -        30.0           -            30.0             -
Direct Expenses                         575.0           97.0        227.3        128.7      321.7        340.9        1,124.0          566.6

Business Unit Direct
Contribution *                          (36.8 )        412.7        152.6        246.9     (356.3 )     (339.7 )       (240.5 )        319.9

Average Assets                     $ 49,041.5     $ 41,493.6   $ 23,472.6   $ 19,078.7   $  803.3     $  684.3     $ 73,317.4     $ 61,256.6

* Stated on a fully taxable equivalent basis (FTE). Total consolidated includes FTE adjustments of $12.3 million for 2008 and $18.8 million for 2007.

BUSINESS UNIT REPORTING (continued)



                                                   Corporate and                                           Treasury and
Nine Months Ended                                  Institutional             Personal Financial            Other Support                     Total
September 30                                          Services                    Services                   Services                     Consolidated
($ In Millions)                                  2008          2007          2008          2007         2008           2007           2008            2007
Noninterest Income
Trust, Investment and Other Servicing Fees    $    952.1    $    865.2    $    694.7    $    665.2    $      -       $     -       $  1,646.8      $  1,530.4
Gain on Visa Redemption                               -             -             -             -         167.9            -            167.9              -
Other                                              492.6         330.1          91.9          72.6         (1.2 )        10.2           583.3           412.9
Net Interest Income (FTE) *                        349.1         277.0         378.5         383.4         53.0          (5.0 )         780.6           655.4

Revenues (FTE) *                                 1,793.8       1,472.3       1,165.1       1,121.2        219.7           5.2         3,178.6         2,598.7
Provision for Credit Losses                          5.7           1.6          49.3           8.4           -             -             55.0            10.0
Visa Indemnification Charges                          -             -             -             -         (46.1 )          -            (46.1 )            -
Direct Expenses                                    780.2         268.9         498.3         380.0      1,100.2         998.9         2,378.7         1,647.8

Business Unit Direct Contribution *              1,007.9       1,201.8         617.5         732.8       (834.4 )      (993.7 )         791.0           940.9

Average Assets                                $ 46,860.7    $ 39,742.4    $ 22,251.9    $ 18,603.5    $ 1,791.7      $  824.3      $ 70,904.3      $ 59,170.2

* Stated on a fully taxable equivalent basis (FTE). Total consolidated includes FTE adjustments of $37.6 million for 2008 and $47.8 million for 2007.

Corporate and Institutional Services

C&IS direct contribution for the quarter was a negative $36.8 million compared with a direct contribution of $412.7 million reported in the third quarter of 2007. The current quarter results include pre-tax accounting charges of $483.2 million associated with the previously discussed client support-related charges. Noninterest income was $425.5 million, up 5% from $405.3 million in last year's third quarter. Trust, investment and other servicing fees from C&IS in the quarter decreased 13% from the year-ago quarter to $244.5 million, primarily reflecting a decline in securities lending fees and lower market valuations, partially offset by new business. The largest component of C&IS fees is custody and fund administration fees, which increased 3% to $164.4 million. Securities lending fees totaled a negative $4.6 million compared with $33.0 million in the third quarter last year, primarily reflecting asset valuation losses in one mark-to-market investment fund used in our securities lending activities. These valuation losses reduced fees by approximately $96 million in the current quarter and approximately $36 million in the prior year quarter. Fees from asset management in the quarter totaled $68.2 million, down 6%. Other noninterest income was $181.0 million compared with $123.3 million in last year's third quarter. Foreign exchange trading income reached a record $139.8 million, up 55% from last year's third quarter, reflecting exceptionally high levels of currency volatility and increased client volumes.