Securities

Securities Available for Sale. The following tables provide the amortized cost, fair values, and remaining maturities of securities available for sale.

TABLE 48: RECONCILIATION OF AMORTIZED COST TO FAIR VALUE OF SECURITIES AVAILABLE FOR SALE



	DECEMBER 31, 2015
(In Millions)	AMORTIZED COST		GROSS UNREALIZED GAINS		GROSS UNREALIZED LOSSES		FAIR VALUE
U.S. Government	$	6,180.4	$	3.4	$	5.5	$	6,178.3
Obligations of States and Political Subdivisions	36.4		0.1		0.1		36.4
Government Sponsored Agency	16,370.5		42.8		46.5		16,366.8
Non-U.S. Government	309.5		0.1		0.1		309.5
Corporate Debt	3,744.4		0.9		33.1		3,712.2
Covered Bonds	1,873.3		1.8		4.9		1,870.2
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds	860.9		0.5		2.0		859.4
Other Asset-Backed	2,504.2		0.1		4.2		2,500.1
Auction Rate	16.7		0.5		0.1		17.1
Commercial Mortgage-Backed	378.1		—		3.7		374.4
Other	93.4		0.1		—		93.5

Total	$	32,367.8	$	50.3	$	100.2	$	32,317.9



	DECEMBER 31, 2014
(In Millions)	AMORTIZED COST		GROSS UNREALIZED GAINS		GROSS UNREALIZED LOSSES		FAIR VALUE
U.S. Government	$	4,493.5	$	15.1	$	1.7	$	4,506.9
Obligations of States and Political Subdivisions	4.5		0.1		—		4.6
Government Sponsored Agency	16,326.4		82.3		19.5		16,389.2
Non-U.S. Government	309.5		0.9		—		310.4
Corporate Debt	3,617.5		1.8		41.6		3,577.7
Covered Bonds	1,899.9		7.9		0.3		1,907.5
Supranational and Non-U.S. Agency Bonds	360.0		1.5		0.9		360.6
Residential Mortgage-Backed	6.9		—		0.5		6.4
Other Asset-Backed	2,321.8		0.5		1.0		2,321.3
Auction Rate	18.4		0.5		0.8		18.1
Other	155.7		0.3		0.2		155.8

Total	$	29,514.1	$	110.9	$	66.5	$	29,558.5

TABLE 49: REMAINING MATURITY OF SECURITIES AVAILABLE FOR SALE



			DECEMBER 31, 2015					DECEMBER 31, 2014
(In Millions)	AMORTIZED COST			FAIR VALUE		AMORTIZED COST			FAIR VALUE
Due in One Year or Less	$	9,335.0		$	9,332.6	$	7,467.4		$	7,487.9
Due After One Year Through Five Years	17,808.8			17,777.0		17,132.7			17,157.6
Due After Five Years Through Ten Years	4,036.5			4,023.1		3,394.2			3,418.0
Due After Ten Years	1,187.5			1,185.2		1,519.8			1,495.0

Total	$	32,367.8		$	32,317.9	$	29,514.1		$	29,558.5

Note: Mortgage-backed and asset-backed securities are included in the above table taking into account anticipated future prepayments.

Securities Held to Maturity. The following tables provide the amortized cost, fair values and remaining maturities of securities held to maturity.

TABLE 50: RECONCILIATION OF AMORTIZED COST TO FAIR VALUES OF SECURITIES HELD TO MATURITY



	DECEMBER 31, 2015
(In Millions)	AMORTIZED COST		GROSS UNREALIZED GAINS		GROSS UNREALIZED LOSSES		FAIR VALUE
U.S. Government	$	26.0	$	—	$	—	$	26.0
Obligations of States and Political Subdivisions	89.2		5.2		—		94.4
Government Sponsored Agency	9.9		0.7		—		10.6
Covered Bonds	892.4		0.4		1.9		890.9
Non-U.S. Government	1,118.0		4.8		0.5		1,122.3
Certificates of Deposit	691.6		0.1		0.1		691.6
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds	2,326.2		8.3		0.9		2,333.6
Other	95.0		—		36.9		58.1

Total	$	5,248.3	$	19.5	$	40.3	$	5,227.5



	DECEMBER 31, 2014
(In Millions)	AMORTIZED COST		GROSS UNREALIZED GAINS		GROSS UNREALIZED LOSSES		FAIR VALUE
Obligations of States and Political Subdivisions	$	121.9	$	7.4	$	—	$	129.3
Government Sponsored Agency	18.4		1.1		—		19.5
Non-U.S. Government	1,281.6		6.6		0.4		1,287.8
Certificates of Deposit	924.3		0.1		0.1		924.3
Supranational and Non-U.S. Agency Bonds	1,745.8		10.9		0.5		1,756.2
Other	78.8		0.3		20.1		59.0

Total	$	4,170.8	$	26.4	$	21.1	$	4,176.1

TABLE 51: REMAINING MATURITY OF SECURITIES HELD TO MATURITY



			DECEMBER 31, 2015					DECEMBER 31, 2014
(In Millions)	AMORTIZED COST			FAIR VALUE		AMORTIZED COST			FAIR VALUE
Due in One Year or Less	$	1,908.8		$	1,913.2	$	1,503.5		$	1,504.7
Due After One Year Through Five Years	3,271.1			3,278.3		2,602.8			2,622.3
Due After Five Years Through Ten Years	14.9			11.7		23.5			21.5
Due After Ten Years	53.5			24.3		41.0			27.6

Total	$	5,248.3		$	5,227.5	$	4,170.8		$	4,176.1

Note: Mortgage-backed and asset-backed securities are included in the above table taking into account anticipated future prepayments.

Securities held to maturity consist of debt securities that management intends to, and Northern Trust has the ability to, hold until maturity.

Investment Security Gains and Losses. Net investment security losses of $0.3 million were recognized in 2015. Net investment security losses of $4.3 million, and $1.5 million were recognized in 2014, and 2013, respectively. There were no OTTI losses in 2015 or 2013. Losses in 2014 include $4.2 million of charges related to the OTTI of certain Community Reinvestment Act (CRA) eligible held to maturity securities. Proceeds of $262.1 million from the sale of securities in 2015 resulted in gross realized gains and losses of $0.2 million and $0.5 million, respectively. Proceeds of $851.8 million from the sale of securities in 2014 resulted in gross realized gains and losses of $2.8 million and $2.9 million, respectively. Proceeds of $506.3 million from the sale of securities in 2013 resulted in gross realized gains and losses of $0.8 million and $2.3 million, respectively.

Securities with Unrealized Losses. The following tables provide information regarding securities that had been in a continuous unrealized loss position for less than 12 months and for 12 months or longer as of December 31, 2015 and 2014.

TABLE 52: SECURITIES WITH UNREALIZED LOSSES



AS OF DECEMBER 31, 2015	LESS THAN 12 MONTHS				12 MONTHS OR LONGER				TOTAL
(In Millions)	FAIR VALUE		UNREALIZED LOSSES		FAIR VALUE		UNREALIZED LOSSES		FAIR VALUE		UNREALIZED LOSSES
U.S. Government	$	3,888.0	$	5.5	$	—	$	—	$	3,888.0	$	5.5
Obligations of States and Political Subdivisions	15.1		0.1		—		—		15.1		0.1
Government Sponsored Agency	9,208.5		38.7		1,213.6		7.8		10,422.1		46.5
Non-U.S. Government	314.3		0.6		—		—		314.3		0.6
Corporate Debt	2,067.6		10.3		1,057.1		22.8		3,124.7		33.1
Covered Bonds	1,598.4		6.7		10.0		0.1		1,608.4		6.8
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds	1,132.9		2.3		109.3		0.6		1,242.2		2.9
Other Asset-Backed	2,122.7		4.0		170.6		0.2		2,293.3		4.2
Certificates of Deposit	180.3		0.1		—		—		180.3		0.1
Auction Rate	—		—		6.4		0.1		6.4		0.1
Commercial Mortgage-Backed	374.4		3.7		—		—		374.4		3.7
Other	28.7		13.3		50.7		23.6		79.4		36.9

Total	$	20,930.9	$	85.3	$	2,617.7	$	55.2	$	23,548.6	$	140.5



AS OF DECEMBER 31, 2014	LESS THAN 12 MONTHS				12 MONTHS OR LONGER				TOTAL
(In Millions)	FAIR VALUE		UNREALIZED LOSSES		FAIR VALUE		UNREALIZED LOSSES		FAIR VALUE		UNREALIZED LOSSES
U.S. Government	$	998.2	$	1.7	$	—	$	—	$	998.2	$	1.7
Government Sponsored Agency	2,344.9		6.6		1,730.0		12.9		4,074.9		19.5
Non-U.S. Government	292.9		0.4		—		—		292.9		0.4
Corporate Debt	1,244.5		3.9		1,338.8		37.7		2,583.3		41.6
Covered Bonds	142.3		0.2		10.0		0.1		152.3		0.3
Supranational and Non-U.S. Agency Bonds	313.2		0.3		175.5		1.1		488.7		1.4
Residential Mortgage-Backed	—		—		4.5		0.5		4.5		0.5
Other Asset-Backed	1,297.6		1.0		—		—		1,297.6		1.0
Certificates of Deposit	438.6		0.1		—		—		438.6		0.1
Auction Rate	2.4		0.2		4.7		0.6		7.1		0.8
Other	27.1		12.1		45.6		8.2		72.7		20.3

Total	$	7,101.7	$	26.5	$	3,309.1	$	61.1	$	10,410.8	$	87.6

As of December 31, 2015, 897 securities with a combined fair value of $23.5 billion were in an unrealized loss position, with their unrealized losses totaling $140.5 million. Unrealized losses of $46.5 million related to government sponsored agency securities are primarily attributable to changes in market rates since their purchase. Unrealized losses of $33.1 million within corporate debt securities primarily reflect widened credit spreads and higher market rates since purchase; 35% of the corporate debt portfolio is backed by guarantees provided by U.S. and non-U.S. governmental entities.

The majority of the $36.9 million of unrealized losses in securities classified as “other” at December 31, 2015, relate to securities primarily purchased at a premium or par by Northern Trust for compliance with the CRA. Unrealized losses on these CRA related other securities are attributable to yields that are below market rates for the purpose of supporting institutions and programs that benefit low to moderate income communities within Northern Trust’s market area. The remaining unrealized losses on Northern Trust’s securities portfolio as of December 31, 2015, are attributable to changes in overall market interest rates, increased credit spreads, or reduced market liquidity. As of December 31, 2015, Northern Trust does not intend to sell any investment in an unrealized loss position and it is not more likely than not that Northern Trust will be required to sell any such investment before the recovery of its amortized cost basis, which may be maturity.

Security impairment reviews are conducted quarterly to identify and evaluate securities that have indications of possible OTTI. A determination as to whether a security’s decline in market value is other-than-temporary takes into consideration numerous factors and the relative significance of any single factor can vary by security. Factors Northern Trust considers in determining whether impairment is other-than-temporary include, but are not limited to, the length of time the security has been impaired; the severity of the impairment; the cause of the impairment and the financial condition and near-term prospects of the issuer; activity in the market of the issuer which may indicate adverse credit conditions; Northern Trust’s intent regarding the sale of the security as of the balance sheet date; and the likelihood that it will not be required to sell the security for a period of time sufficient to allow for the recovery of the security’s amortized cost basis. For each security meeting the requirements of Northern Trust’s internal screening process, an extensive review is conducted to determine if OTTI has occurred.

While all securities are considered, the process for identifying credit impairment within CRA eligible mortgage-backed securities, the security type for which Northern Trust has recognized all of the OTTI in 2014, incorporates an expected loss approach using discounted cash flows on the underlying collateral pools. To evaluate whether an unrealized loss on CRA mortgage-backed securities is other-than-temporary, a calculation of the security’s present value is made using current pool data, the current delinquency pipeline, default rates and loan loss severities based on the historical performance of like collateral, and Northern Trust’s outlook for the housing market and the overall economy. If the present value of the collateral pools was found to be less than the current amortized cost of the security, a credit-related OTTI loss would be recorded in earnings equal to the difference between the two amounts.

Impairments of CRA mortgage-backed securities are influenced by a number of factors, including but not limited to, U.S. economic and housing market performance, pool credit enhancement level, year of origination, and estimated credit quality of the collateral. The factors used in estimating losses related to CRA mortgage-backed securities vary by vintage of loan origination and collateral quality.

There were no OTTI losses recognized in 2015 or 2013. There were $4.2 million of OTTI losses recognized during the year ended December 31, 2014.

Credit Losses on Debt Securities. The table below provides information regarding total other-than-temporarily impaired securities, including noncredit-related amounts recognized in other comprehensive income and net impairment losses recognized in earnings, for the years ended December 31, 2015, 2014, and 2013.

TABLE 53: NET IMPAIRMENT LOSSES RECOGNIZED IN EARNINGS



	DECEMBER 31,
(In Millions)	2015		2014			2013
Changes in Other-Than-Temporary Impairment Losses⁽¹⁾	$	—	$	(4.9	)	$	—
Noncredit-related Losses Recorded in / (Reclassified from) OCI⁽²⁾	—		0.7			—

Net Impairment Losses Recognized in Earnings	$	—	$	(4.2	)	$	—

(1) For initial other-than-temporary impairments in the respective period, the balance includes the excess of the amortized cost over the fair value of the impaired securities. For subsequent impairments of the same security, the balance includes any additional changes in fair value of the security subsequent to its most recently recorded OTTI.

(2) For initial other-than-temporary impairments in the respective period, the balance includes the portion of the excess of amortized cost over the fair value of the impaired securities that was recorded in OCI. For subsequent impairments of the same security, the balance includes additional changes in OCI for that security subsequent to its most recently recorded OTTI.

Provided in the table below are the cumulative credit-related losses recognized in earnings on debt securities other-than-temporarily impaired.

TABLE 54: CUMULATIVE CREDIT-RELATED LOSSES ON SECURITIES HELD



	YEAR ENDED DECEMBER 31,
(In Millions)	2015		2014
Cumulative Credit-Related Losses on Securities Held – Beginning of Year	$	5.2	$	8.8
Plus: Losses on Newly Identified Impairments	—		1.8
Additional Losses on Previously Identified Impairments	—		2.4
Less: Current and Prior Period Losses on Securities Sold During the Year	—		(7.8		)

Cumulative Credit-Related Losses on Securities Held – End of Year	$	5.2	$	5.2