x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 36-2723087 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
50 South La Salle Street | |
Chicago, Illinois | 60603 |
(Address of principal executive offices) | (Zip Code) |
Title of Each Class | Name of Each Exchange On Which Registered |
Common Stock, $1.66 2/3 Par Value | The NASDAQ Stock Market LLC |
Depositary Shares, each representing 1/1000th interest in a share of Series C | |
Non-Cumulative Perpetual Preferred Stock | The NASDAQ Stock Market LLC |
Large accelerated filer | x | Accelerated filer | ¨ |
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Emerging growth company | ¨ |
Page | ||
Item 1 | ||
Item 1A | ||
Item 1B | ||
Item 2 | ||
Item 3 | ||
Item 4 | ||
Supplemental Item | ||
Item 5 | ||
Item 6 | ||
Item 7 | ||
Item 7A | ||
Item 8 | ||
Supplemental Item | ||
Item 9 | ||
Item 9A | ||
Item 9B | ||
Item 10 | ||
Item 11 | ||
Item 12 | ||
Item 13 | ||
Item 14 | ||
Item 15 | ||
Item 16 | ||
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COMMON EQUITY TIER 1 CAPITAL | TIER 1 CAPITAL | TOTAL CAPITAL | TIER 1 LEVERAGE | SUPPLEMENTARY LEVERAGE | ||||||||||||||
ADVANCED APPROACH | STANDARDIZED APPROACH | ADVANCED APPROACH | STANDARDIZED APPROACH | ADVANCED APPROACH | STANDARDIZED APPROACH | ADVANCED APPROACH | STANDARDIZED APPROACH | ADVANCED APPROACH | ||||||||||
Northern Trust Corporation | 13.5 | % | 12.6 | % | 14.8 | % | 13.8 | % | 16.7 | % | 15.8 | % | 7.8 | % | 7.8 | % | 6.8 | % |
The Northern Trust Company | 13.7 | % | 12.6 | % | 13.7 | % | 12.6 | % | 15.4 | % | 14.3 | % | 7.0 | % | 7.0 | % | 6.1 | % |
Minimum required ratio | 4.5 | % | 4.5 | % | 6.0 | % | 6.0 | % | 8.0 | % | 8.0 | % | 4.0 | % | 4.0 | % | N/A | |
“Well-capitalized” minimum ratio | 6.5 | % | 6.5 | % | 8.0 | % | 8.0 | % | 10.0 | % | 10.0 | % | 5.0 | % | 5.0 | % | N/A |
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• | Average Consolidated Balance Sheets with Analysis of Net Interest Income for the years ended December 31, 2017, 2016 and 2015. |
• | Changes in Net Interest Income for the years ended December 31, 2017 and 2016. |
• | Remaining Maturity and Average Yield of Securities Held to Maturity and Available for Sale as of December 31, 2017. |
• | Remaining Maturity of Selected Loans and Leases as of December 31, 2017. |
• | Distribution of Non-U.S. Loans by Type as of December 31, 2017, 2016, 2015, 2014 and 2013. |
• | Allowance for Credit Losses Relating to Non-U.S. Operations for the years ended December 31, 2017, 2016, 2015, 2014 and 2013. |
• | Analysis of Allowance for Credit Losses for the years ended December 31, 2017, 2016, 2015, 2014 and 2013. |
• | Average Deposits by Type as of December 31, 2017, 2016 and 2015. |
• | Distribution of Non-U.S. Deposits by Type as of December 31, 2017, 2016 and 2015. |
• | Remaining Maturity of Time Deposits $100,000 or More as of December 31, 2017. |
• | Average Rates Paid on Interest-Related Deposits by Type for the years ended December 31, 2017, 2016 and 2015. |
• | Selected Average Assets and Liabilities Attributable to Non-U.S. Operations for the years ended December 31, 2017, 2016, 2015, 2014, and 2013. |
• | Percent of Non-U.S.-Related Average Assets and Liabilities to Total Consolidated Average Assets for the years ended December 31, 2017, 2016, 2015, 2014, and 2013. |
• | Non-U.S. Outstandings as of December 31, 2017, 2016 and 2015. |
• | Purchased Funds as of December 31, 2017, 2016 and 2015. |
• | Item 6, “Selected Financial Data,” includes the Corporation’s consolidated return on average common equity, return on average assets, dividend payout ratio and ratio of average equity to average assets. |
• | The “Securities Portfolio” table (Item 7) provides the book values of investments in obligations of the U.S. government, states and political subdivisions, and other held to maturity and available for sale securities as of December 31, 2017, 2016 and 2015. |
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• | The “Composition of Loan Portfolio” table (Item 7) provides loans and leases by type as of December 31, 2017, 2016, 2015, 2014, and 2013. |
• | The “Nonperforming Assets” table (Item 7) provides information about the Corporation’s nonaccrual, past due and restructured loans receivable as of December 31, 2017, 2016, 2015, 2014, and 2013. |
• | The “Commercial Real Estate Loans” table (Item 7) provides details of loan concentrations as of December 31, 2017 and 2016. |
• | The “Allocation of the Allowance for Credit Losses” table (Item 7) provides a breakdown of the allowance for credit losses by loan class and illustrates the proportion of each loan class to total loans. |
• | The “Allowance and Provision for Credit Losses” section (Item 7) provides a discussion of the factors which influenced management’s judgment in determining the provision for credit losses. |
• | Note 6, “Loans and Leases,” (Item 8) provides the Corporation’s forgone interest income on nonaccrual loans, as well as a description of the nature of non-U.S. loans as of December 31, 2017 and 2016. |
• | Note 1, “Summary of Significant Accounting Policies,” (Item 8) provides a discussion of Northern Trust’s policy for placing loans on non-accrual status. |
• | Further discussion of Northern Trust’s management of credit risk with respect to the provision and allowance for credit losses is provided in the following information that is incorporated herein by reference to the notes to the consolidated financial statements provided in Item 8, “Financial Statements and Supplementary Data.” |
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• | failures of technological systems or breaches of security measures, including, but not limited to, those resulting from cyber-attacks; |
• | human errors or omissions, including failures to comply with applicable laws or corporate policies and procedures; |
• | theft, fraud or misappropriation of assets, whether arising from the intentional actions of internal personnel or external third parties; |
• | defects or interruptions in computer or communications systems; |
• | breakdowns in processes, over-reliance on manual processes, which are inherently more prone to error than automated processes, breakdowns in internal controls or failures of the systems and facilities that support our operations; |
• | unsuccessful or difficult implementation of computer systems upgrades; |
• | defects in product design or delivery; |
• | difficulty in accurately pricing assets, which can be aggravated by increased asset coverage, market volatility and illiquidity, and lack of reliable pricing from third-party vendors; |
• | negative developments in relationships with key counterparties, third-party vendors, employees or associates in our day-to-day operations; and |
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• | external events that are wholly or partially beyond our control, such as natural disasters, epidemics, computer viruses, geopolitical events, political unrest or acts of terrorism. |
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PERIOD | TOTAL NUMBER OF SHARES PURCHASED | AVERAGE PRICE PAID PER SHARE | TOTAL NUMBER OF SHARES PURCHASED AS PART OF A PUBLICLY ANNOUNCED PLAN (1) | MAXIMUM NUMBER OF SHARES THAT MAY YET BE PURCHASED UNDER THE PLAN | |||||
October 1-31, 2017 | 146,598 | $ | 95.50 | 146,598 | 7,985,577 | ||||
November 1-30, 2017 | 1,567,473 | 93.78 | 1,567,473 | 6,418,104 | |||||
December 1-31, 2017 | 71,248 | 98.25 | 71,248 | 6,346,856 | |||||
Total (Fourth Quarter) | 1,785,319 | $ | 94.10 | 1,785,319 | 6,346,856 |
32 2017 Annual Report | Northern Trust Corporation |
DECEMBER 31, | ||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | 2017 | |||||||
Northern Trust | 100 | 126 | 140 | 153 | 193 | 220 | ||||||
S&P 500 | 100 | 132 | 151 | 153 | 171 | 208 | ||||||
KBW Bank Index | 100 | 138 | 151 | 151 | 195 | 231 |
2017 Annual Report | Northern Trust Corporation 33 |
2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||
FOR THE YEAR ENDED DECEMBER 31, | |||||||||||||||
CONDENSED STATEMENTS OF INCOME (In Millions) | |||||||||||||||
Noninterest Income | $ | 3,946.1 | $ | 3,726.9 | $ | 3,632.5 | $ | 3,325.7 | $ | 3,156.2 | |||||
Net Interest Income | 1,429.2 | 1,234.9 | 1,070.1 | 1,005.5 | 933.1 | ||||||||||
Total Revenue | $ | 5,375.3 | $ | 4,961.8 | $ | 4,702.6 | $ | 4,331.2 | $ | 4,089.3 | |||||
Provision for Credit Losses | (28.0 | ) | (26.0 | ) | (43.0 | ) | 6.0 | 20.0 | |||||||
Noninterest Expense | 3,769.4 | 3,470.7 | 3,280.6 | 3,135.0 | 2,993.8 | ||||||||||
Income before Income Taxes | $ | 1,633.9 | $ | 1,517.1 | $ | 1,465.0 | $ | 1,190.2 | $ | 1,075.5 | |||||
Provision for Income Taxes | 434.9 | 484.6 | 491.2 | 378.4 | 344.2 | ||||||||||
Net Income | $ | 1,199.0 | $ | 1,032.5 | $ | 973.8 | $ | 811.8 | $ | 731.3 | |||||
Preferred Stock Dividends | 49.8 | 23.4 | 23.4 | 9.5 | — | ||||||||||
Net Income Applicable to Common Stock | $ | 1,149.2 | $ | 1,009.1 | $ | 950.4 | $ | 802.3 | $ | 731.3 | |||||
PER COMMON SHARE | |||||||||||||||
Net Income – Basic | $ | 4.95 | $ | 4.35 | $ | 4.03 | $ | 3.34 | $ | 3.01 | |||||
– Diluted | 4.92 | 4.32 | 3.99 | 3.32 | 2.99 | ||||||||||
Cash Dividends Declared Per Common Share | 1.60 | 1.48 | 1.41 | 1.30 | 1.23 | ||||||||||
Book Value – End of Period (EOP) | 41.28 | 38.88 | 36.27 | 34.54 | 33.34 | ||||||||||
Market Price – EOP | 99.89 | 89.05 | 72.09 | 67.40 | 61.89 | ||||||||||
SELECTED BALANCE SHEET DATA (In Millions) | |||||||||||||||
At Year End: | |||||||||||||||
Earning Assets | $ | 129,656.6 | $ | 115,446.4 | $ | 106,848.9 | $ | 100,889.8 | $ | 93,367.2 | |||||
Total Assets | 138,590.5 | 123,926.9 | 116,749.6 | 109,946.5 | 102,947.3 | ||||||||||
Deposits | 112,390.8 | 101,651.7 | 96,868.9 | 90,757.0 | 84,098.1 | ||||||||||
Senior Notes | 1,497.3 | 1,496.6 | 1,497.4 | 1,497.0 | 1,996.6 | ||||||||||
Long-Term Debt | 1,449.5 | 1,330.9 | 1,371.3 | 1,615.1 | 1,709.2 | ||||||||||
Stockholders’ Equity | 10,216.2 | 9,770.4 | 8,705.9 | 8,448.9 | 7,912.0 | ||||||||||
Average Balances: | |||||||||||||||
Earning Assets | $ | 111,178.3 | $ | 107,037.6 | $ | 102,249.8 | $ | 95,947.5 | $ | 85,628.3 | |||||
Total Assets | 119,607.4 | 115,570.3 | 110,715.1 | 104,083.5 | 94,857.7 | ||||||||||
Deposits | 96,504.8 | 93,613.9 | 90,768.0 | 84,656.6 | 75,596.3 | ||||||||||
Senior Notes | 1,496.9 | 1,496.6 | 1,497.2 | 1,661.2 | 2,247.0 | ||||||||||
Long-Term Debt | 1,519.4 | 1,392.4 | 1,426.4 | 1,654.9 | 1,211.7 | ||||||||||
Stockholders’ Equity | 9,980.6 | 9,085.3 | 8,624.5 | 8,166.5 | 7,667.7 | ||||||||||
CLIENT ASSETS (In Billions) | |||||||||||||||
Assets Under Custody/Administration | $ | 10,722.6 | $ | 8,541.3 | $ | 7,797.0 | N/A | N/A | |||||||
Assets Under Custody | 8,084.6 | 6,720.5 | 6,072.1 | 5,968.8 | 5,575.7 | ||||||||||
Assets Under Management | 1,161.0 | 942.4 | 875.3 | 934.1 | 884.5 | ||||||||||
SELECTED RATIOS AND METRICS | |||||||||||||||
Financial Ratios and Metrics: | |||||||||||||||
Return on Average Common Equity | 12.6 | % | 11.9 | % | 11.5 | % | 10.0 | % | 9.5 | % | |||||
Return on Average Assets | 1.00 | % | 0.89 | % | 0.88 | % | 0.78 | % | 0.77 | % | |||||
Dividend Payout Ratio | 32.5 | 34.3 | 35.3 | 39.2 | 41.1 | ||||||||||
Net Interest Margin (*) | 1.33 | 1.18 | 1.07 | 1.08 | 1.13 | ||||||||||
Average Stockholders’ Equity to Average Assets | 8.3 | 7.9 | 7.8 | 7.8 | 8.1 |
Capital Ratios: | DECEMBER 31, 2017 | DECEMBER 31, 2016 | DECEMBER 31, 2015 | December 31, 2014 | December 31, 2013(d) | |||||||||||||
ADVANCED APPROACH(a) | STANDARDIZED APPROACH(b) | ADVANCED APPROACH(a) | STANDARDIZED APPROACH(b) | ADVANCED APPROACH(a) | STANDARDIZED APPROACH(b) | ADVANCED APPROACH(a) | STANDARDIZED APPROACH(b) | |||||||||||
Common Equity Tier 1 | 13.5 | % | 12.6 | % | 12.4 | % | 11.8 | % | 11.9 | % | 10.8 | % | 12.4 | % | 12.5 | % | 12.9 | % |
Tier 1 | 14.8 | 13.8 | 13.7 | 12.9 | 12.5 | 11.4 | 13.2 | 13.3 | 13.4 | |||||||||
Total | 16.7 | 15.8 | 15.1 | 14.5 | 14.2 | 13.2 | 15.0 | 15.5 | 15.8 | |||||||||
Tier 1 Leverage | 7.8 | 7.8 | 8.0 | 8.0 | 7.5 | 7.5 | N/A | 7.8 | 7.9 | |||||||||
Supplementary Leverage(c) | 6.8 | N/A | 6.8 | N/A | 6.2 | N/A | N/A | N/A | N/A |
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2017 Annual Report | Northern Trust Corporation 35 |
n | 64% - Trust, Investment and Other Servicing Fees | |
n | 27% - Net Interest Income | |
n | 4% - Foreign Exchange Trading Income | |
n | 5% - Other Noninterest Income | |
36 2017 Annual Report | Northern Trust Corporation |
FOR THE YEAR ENDED DECEMBER 31, | CHANGE | ||||||||||||
($ In Millions) | 2017 | 2016 | 2015 | 2017 / 2016 | 2016 / 2015 | ||||||||
Trust, Investment and Other Servicing Fees | $ | 3,434.3 | $ | 3,108.1 | $ | 2,980.5 | 10 | % | 4 | % | |||
Foreign Exchange Trading Income | 209.9 | 236.6 | 261.8 | (11 | ) | (10 | ) | ||||||
Treasury Management Fees | 56.4 | 62.8 | 64.7 | (10 | ) | (3 | ) | ||||||
Security Commissions and Trading Income | 89.6 | 81.4 | 78.7 | 10 | 3 | ||||||||
Other Operating Income | 157.5 | 241.2 | 247.1 | (35 | ) | (2 | ) | ||||||
Investment Security Losses, net | (1.6 | ) | (3.2 | ) | (0.3 | ) | (50 | ) | N/M | ||||
Total Noninterest Income | $ | 3,946.1 | $ | 3,726.9 | $ | 3,632.5 | 6 | % | 3 | % |
DAILY AVERAGES | YEAR-END | |||||||||||
2017 | 2016 | CHANGE | 2017 | 2016 | CHANGE | |||||||
S&P 500 | 2,448 | 2,094 | 17 | % | 2,674 | 2,239 | 19 | % | ||||
MSCI EAFE (U.S. dollars) | 1,886 | 1,646 | 15 | 2,051 | 1,684 | 22 | ||||||
MSCI EAFE (local currency) | 1,105 | 956 | 16 | 1,164 | 1,037 | 12 | ||||||
AS OF DECEMBER 31, | ||||||
2017 | 2016 | CHANGE | ||||
Barclays Capital U.S. Aggregate Bond Index | 2,046 | 1,976 | 4 | % | ||
Barclays Capital Global Aggregate Bond Index | 485 | 451 | 7 | |||
2017 Annual Report | Northern Trust Corporation 37 |
DECEMBER 31, | CHANGE | ||||||||||||
($ In Billions) | 2017 | 2016 | 2015 | 2017 /2016 | 2016 /2015 | ||||||||
Corporate & Institutional | $ | 10,066.8 | $ | 7,987.0 | $ | 7,279.7 | 26 | % | 10 | % | |||
Wealth Management | 655.8 | 554.3 | 517.3 | 18 | 7 | ||||||||
Total Assets Under Custody/Administration | $ | 10,722.6 | $ | 8,541.3 | $ | 7,797.0 | 26 | % | 10 | % |
DECEMBER 31, | CHANGE | FIVE-YEAR COMPOUND GROWTH RATE | |||||||||||||||||||
($ In Billions) | 2017 | 2016 | 2015 | 2014 | 2013 | 2017 /2016 | 2016 / 2015 | ||||||||||||||
Corporate & Institutional | $ | 7,439.1 | $ | 6,176.9 | $ | 5,565.8 | $ | 5,453.1 | $ | 5,079.7 | 20 | % | 11 | % | 11 | % | |||||
Wealth Management | 645.5 | 543.6 | 506.3 | 515.7 | 496.0 | 19 | 7 | 8 | |||||||||||||
Total Assets Under Custody | $ | 8,084.6 | $ | 6,720.5 | $ | 6,072.1 | $ | 5,968.8 | $ | 5,575.7 | 20 | % | 11 | % | 11 | % |
DECEMBER 31, | ||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||
Equities | 47 | % | 46 | % | 44 | % | 45 | % | 47 | % |
Fixed Income Securities | 35 | 36 | 37 | 36 | 34 | |||||
Cash and Other Assets | 16 | 17 | 17 | 17 | 17 | |||||
Securities Lending Collateral | 2 | 1 | 2 | 2 | 2 |
DECEMBER 31, | CHANGE | FIVE-YEAR COMPOUND GROWTH RATE | |||||||||||||||||||
($ In Billions) | 2017 | 2016 | 2015 | 2014 | 2013 | 2017 / 2016 | 2016 / 2015 | ||||||||||||||
Corporate & Institutional | $ | 871.2 | $ | 694.0 | $ | 648.0 | $ | 709.6 | $ | 662.7 | 26 | % | 7 | % | 9 | % | |||||
Wealth Management | 289.8 | 248.4 | 227.3 | 224.5 | 221.8 | 17 | 9 | 8 | |||||||||||||
Total Assets Under Management | $ | 1,161.0 | $ | 942.4 | $ | 875.3 | $ | 934.1 | $ | 884.5 | 23 | % | 8 | % | 9 | % |
38 2017 Annual Report | Northern Trust Corporation |
DECEMBER 31, | ||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||
Equities | 51 | % | 51 | % | 51 | % | 52 | % | 54 | % |
Fixed Income Securities | 16 | 17 | 17 | 17 | 17 | |||||
Cash and Other Assets | 19 | 20 | 20 | 18 | 17 | |||||
Securities Lending Collateral | 14 | 12 | 12 | 13 | 12 |
DECEMBER 31, | ||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||
Index | 46 | % | 47 | % | 47 | % | 49 | % | 51 | % |
Active | 41 | 40 | 40 | 39 | 43 | |||||
Multi-Manager | 5 | 5 | 4 | 6 | 4 | |||||
Other | 8 | 8 | 9 | 6 | 2 |
FOR THE YEAR ENDED DECEMBER 31, | CHANGE | ||||||||||||
($ In Millions) | 2017 | 2016 | 2015 | 2017 / 2016 | 2016 / 2015 | ||||||||
Loan Service Fees | $ | 50.7 | $ | 56.6 | $ | 59.1 | (10 | )% | (4 | )% | |||
Banking Service Fees | 48.6 | 50.6 | 48.2 | (4 | ) | 5 | |||||||
Other Income | 58.2 | 134.0 | 139.8 | (57 | ) | (4 | ) | ||||||
Total Other Operating Income | $ | 157.5 | $ | 241.2 | $ | 247.1 | (35 | )% | (2 | )% |
2017 Annual Report | Northern Trust Corporation 39 |
FOR THE YEAR ENDED DECEMBER 31, | CHANGE | ||||||||||||
($ In Millions) | 2017 | 2016 | 2015 | 2017 / 2016 | 2016 / 2015 | ||||||||
Interest Income – GAAP | $ | 1,769.4 | $ | 1,416.9 | $ | 1,224.0 | 25 | % | 16 | % | |||
FTE Adjustment | 45.8 | 25.1 | 25.3 | 82 | (1 | ) | |||||||
Interest Income – FTE | 1,815.2 | 1,442.0 | 1,249.3 | 26 | 15 | ||||||||
Interest Expense | 340.2 | 182.0 | 153.9 | 87 | 18 | ||||||||
Net Interest Income – FTE Adjusted | 1,475.0 | 1,260.0 | 1,095.4 | 17 | 15 | ||||||||
Net Interest Income – GAAP | 1,429.2 | 1,234.9 | 1,070.1 | 16 | 15 | ||||||||
AVERAGE BALANCE | |||||||||||||
Earning Assets | $ | 111,178.3 | $ | 107,037.6 | $ | 102,249.8 | 4 | % | 5 | % | |||
Interest-Related Funds | 83,422.0 | 76,886.0 | 74,252.7 | 9 | 4 | ||||||||
Net Noninterest-Related Funds | 27,756.3 | 30,151.6 | 27,997.1 | (8 | ) | 8 | |||||||
CHANGE IN PERCENTAGE | |||||||||||||
AVERAGE RATE | |||||||||||||
Earning Assets | 1.63 | % | 1.35 | % | 1.22 | % | 0.28 | 0.13 | |||||
Interest-Related Funds | 0.41 | 0.24 | 0.21 | 0.17 | 0.03 | ||||||||
Interest Rate Spread | 1.22 | 1.11 | 1.01 | 0.11 | 0.10 | ||||||||
Total Source of Funds | 0.31 | 0.17 | 0.15 | 0.14 | 0.02 | ||||||||
Net Interest Margin – GAAP | 1.29 | % | 1.15 | % | 1.05 | % | 0.14 | 0.10 | |||||
Net Interest Margin – FTE | 1.33 | % | 1.18 | % | 1.07 | % | 0.15 | 0.11 |
40 2017 Annual Report | Northern Trust Corporation |
2017 Annual Report | Northern Trust Corporation 41 |
FOR THE YEAR ENDED DECEMBER 31, | CHANGE | ||||||||||||
($ In Millions) | 2017 | 2016 | 2015 | 2017 / 2016 | 2016 / 2015 | ||||||||
Compensation | $ | 1,733.7 | $ | 1,541.1 | $ | 1,443.3 | 13 | % | 7 | % | |||
Employee Benefits | 319.9 | 293.3 | 285.3 | 9 | 3 | ||||||||
Outside Services | 668.4 | 627.1 | 595.7 | 7 | 5 | ||||||||
Equipment and Software | 524.0 | 467.4 | 454.8 | 12 | 3 | ||||||||
Occupancy | 191.8 | 177.4 | 173.5 | 8 | 2 | ||||||||
Other Operating Expense | 331.6 | 364.4 | 328.0 | (9 | ) | 11 | |||||||
Total Noninterest Expense | $ | 3,769.4 | $ | 3,470.7 | $ | 3,280.6 | 9 | % | 6 | % |
42 2017 Annual Report | Northern Trust Corporation |
FOR THE YEAR ENDED DECEMBER 31, | CHANGE | ||||||||||||
($ In Millions) | 2017 | 2016 | 2015 | 2017 / 2016 | 2016 / 2015 | ||||||||
Business Promotion | $ | 95.4 | $ | 83.6 | $ | 85.1 | 14 | % | (2 | )% | |||
FDIC Insurance Premiums | 34.7 | 31.7 | 25.2 | 9 | 26 | ||||||||
Staff Related | 42.8 | 43.0 | 40.5 | (1 | ) | 6 | |||||||
Other Intangibles Amortization | 11.4 | 8.8 | 10.9 | 30 | (19 | ) | |||||||
Other Expenses | 147.3 | 197.3 | 166.3 | (25 | ) | 19 | |||||||
Total Other Operating Expense | $ | 331.6 | $ | 364.4 | $ | 328.0 | (9 | )% | 11 | % |
2017 Annual Report | Northern Trust Corporation 43 |
(In Millions) | 2017 | ||
Federal Taxes on Mandatory Deemed Repatriation | $ | 150.0 | |
Impact Related to Federal Deferred Taxes | (210.0 | ) | |
Other Adjustments | 6.9 | ||
Provision (Benefit) for Income Taxes | $ | (53.1 | ) |
44 2017 Annual Report | Northern Trust Corporation |
FOR THE YEAR ENDED DECEMBER 31, | CHANGE | ||||||||||||
($ In Millions) | 2017 | 2016 | 2015 | 2017 / 2016 | 2016 / 2015 | ||||||||
Noninterest Income | |||||||||||||
Trust, Investment and Other Servicing Fees | $ | 3,434.3 | $ | 3,108.1 | $ | 2,980.5 | 10 | % | 4 | % | |||
Foreign Exchange Trading Income | 209.9 | 236.6 | 261.8 | (11 | ) | (10 | ) | ||||||
Other Noninterest Income | 301.9 | 382.2 | 390.2 | (21 | ) | (2 | ) | ||||||
Net Interest Income (Note) | 1,475.0 | 1,260.0 | 1,095.4 | 17 | 15 | ||||||||
Revenue (Note) | 5,421.1 | 4,986.9 | 4,727.9 | 9 | 5 | ||||||||
Provision for Credit Losses | (28.0 | ) | (26.0 | ) | (43.0 | ) | 8 | (40 | ) | ||||
Noninterest Expense | 3,769.4 | 3,470.7 | 3,280.6 | 9 | 6 | ||||||||
Income before Income Taxes (Note) | 1,679.7 | 1,542.2 | 1,490.3 | 9 | 3 | ||||||||
Provision for Income Taxes (Note) | 480.7 | 509.7 | 516.5 | (6 | ) | (1 | ) | ||||||
Net Income | $ | 1,199.0 | $ | 1,032.5 | $ | 973.8 | 16 | % | 6 | % | |||
Average Assets | $ | 119,607.4 | $ | 115,570.3 | $ | 110,715.1 | 3 | % | 4 | % |
FOR THE YEAR ENDED DECEMBER 31, | CHANGE | ||||||||||||
($ In Millions) | 2017 | 2016 | 2015 | 2017 / 2016 | 2016 / 2015 | ||||||||
Noninterest Income | |||||||||||||
Trust, Investment and Other Servicing Fees | $ | 1,984.6 | $ | 1,787.8 | $ | 1,696.9 | 11 | % | 5 | % | |||
Foreign Exchange Trading Income | 197.9 | 224.4 | 249.4 | (12 | ) | (10 | ) | ||||||
Other Noninterest Income | 176.1 | 147.0 | 170.5 | 20 | (14 | ) | |||||||
Net Interest Income (Note) | 733.8 | 565.0 | 414.4 | 30 | 36 | ||||||||
Revenue (Note) | 3,092.4 | 2,724.2 | 2,531.2 | 14 | 8 | ||||||||
Provision for Credit Losses | 3.4 | 1.9 | (22.6 | ) | 79 | N/M | |||||||
Noninterest Expense | 2,194.5 | 2,012.2 | 1,856.4 | 9 | 8 | ||||||||
Income before Income Taxes (Note) | 894.5 | 710.1 | 697.4 | 26 | 2 | ||||||||
Provision for Income Taxes (Note) | 279.5 | 212.9 | 212.8 | 31 | — | ||||||||
Net Income | $ | 615.0 | $ | 497.2 | $ | 484.6 | 24 | % | 3 | % | |||
Percentage of Consolidated Net Income | 51 | % | 48 | % | 50 | % | |||||||
Average Assets | $ | 80,105.6 | $ | 76,194.7 | $ | 73,598.4 | 5 | % | 4 | % |
2017 Annual Report | Northern Trust Corporation 45 |
FOR THE YEAR ENDED DECEMBER 31, | CHANGE | ||||||||||||
($ In Millions) | 2017 | 2016 | 2015 | 2017 / 2016 | 2016 / 2015 | ||||||||
Custody and Fund Administration | $ | 1,342.1 | $ | 1,182.2 | $ | 1,150.8 | 14 | % | 3 | % | |||
Investment Management | 403.5 | 371.8 | 325.2 | 9 | 14 | ||||||||
Securities Lending | 96.4 | 97.7 | 90.5 | (1 | ) | 8 | |||||||
Other | 142.6 | 136.1 | 130.4 | 5 | 4 | ||||||||
Total Trust, Investment and Other Servicing Fees | $ | 1,984.6 | $ | 1,787.8 | $ | 1,696.9 | 11 | % | 5 | % |
n | 68% Custody and Fund Administration | |
n | 20% Investment Management | |
n | 7% Other Services | |
n | 5% Securities Lending | |
46 2017 Annual Report | Northern Trust Corporation |
DECEMBER 31, | CHANGE | ||||||||||||
($ In Billions) | 2017 | 2016 | 2015 | 2017 / 2016 | 2016 / 2015 | ||||||||
North America | $ | 3,972.1 | $ | 3,334.5 | $ | 2,999.0 | 19 | % | 11 | % | |||
Europe, Middle East, and Africa | 2,602.4 | 2,152.2 | 1,971.1 | 21 | 9 | ||||||||
Asia Pacific | 697.1 | 578.4 | 492.0 | 21 | 18 | ||||||||
Securities Lending | 167.5 | 111.8 | 103.7 | 50 | 8 | ||||||||
Total Assets Under Custody | $ | 7,439.1 | $ | 6,176.9 | $ | 5,565.8 | 20 | % | 11 | % |
n | 54% North America | |
n | 35% Europe, Middle East, and Africa | |
n | 9% Asia Pacific | |
n | 2% Securities Lending | |
DECEMBER 31, | CHANGE | ||||||||||||
($ In Billions) | 2017 | 2016 | 2015 | 2017 / 2016 | 2016 / 2015 | ||||||||
North America | $ | 533.5 | $ | 450.2 | $ | 410.4 | 19 | % | 10 | % | |||
Europe, Middle East, and Africa | 127.3 | 98.8 | 102.0 | 29 | (3 | ) | |||||||
Asia Pacific | 42.9 | 33.2 | 31.9 | 29 | 4 | ||||||||
Securities Lending | 167.5 | 111.8 | 103.7 | 50 | 8 | ||||||||
Total Assets Under Management | $ | 871.2 | $ | 694.0 | $ | 648.0 | 26 | % | 7 | % |
n | 61% North America | |
n | 15% Europe, Middle East, and Africa | |
n | 5% Asia Pacific | |
n | 19% Securities Lending | |
2017 Annual Report | Northern Trust Corporation 47 |
n | 51% Equities | |
n | 13% Fixed Income Securities | |
n | 17% Cash and Other Assets | |
n | 19% Securities Lending | |
48 2017 Annual Report | Northern Trust Corporation |
FOR THE YEAR ENDED DECEMBER 31, | CHANGE | ||||||||||||
($ In Millions) | 2017 | 2016 | 2015 | 2017 / 2016 | 2016 / 2015 | ||||||||
Noninterest Income | |||||||||||||
Trust, Investment and Other Servicing Fees | $ | 1,449.7 | $ | 1,320.3 | $ | 1,283.6 | 10 | % | 3 | % | |||
Foreign Exchange Trading Income | 3.1 | 8.6 | 12.4 | (64 | ) | (32 | ) | ||||||
Other Noninterest Income | 103.9 | 105.7 | 111.8 | (2 | ) | (6 | ) | ||||||
Net Interest Income (Note) | 736.2 | 651.4 | 568.1 | 13 | 15 | ||||||||
Revenue (Note) | 2,292.9 | 2,086.0 | 1,975.9 | 10 | 6 | ||||||||
Provision for Credit Losses | (31.4 | ) | (27.9 | ) | (20.4 | ) | 13 | 38 | |||||
Noninterest Expense | 1,405.3 | 1,315.3 | 1,291.9 | 7 | 2 | ||||||||
Income before Income Taxes (Note) | 919.0 | 798.6 | 704.4 | 15 | 13 | ||||||||
Provision for Income Taxes (Note) | 347.2 | 301.1 | 264.7 | 15 | 14 | ||||||||
Net Income | $ | 571.8 | $ | 497.5 | $ | 439.7 | 15 | % | 13 | % | |||
Percentage of Consolidated Net Income | 48 | % | 48 | % | 45 | % | |||||||
Average Assets | $ | 26,599.9 | $ | 26,525.0 | $ | 25,048.7 | — | % | 6 | % |
2017 Annual Report | Northern Trust Corporation 49 |
FOR THE YEAR ENDED DECEMBER 31, | CHANGE | ||||||||||||
($ In Millions) | 2017 | 2016 | 2015 | 2017 / 2016 | 2016 / 2015 | ||||||||
Central | $ | 575.5 | $ | 523.8 | $ | 514.3 | 10 | % | 2 | % | |||
East | 356.2 | 334.4 | 332.7 | 7 | 1 | ||||||||
West | 291.7 | 268.9 | 267.7 | 8 | — | ||||||||
Global Family Office | 226.3 | 193.2 | 168.9 | 17 | 14 | ||||||||
Total Trust, Investment and Other Servicing Fees | $ | 1,449.7 | $ | 1,320.3 | $ | 1,283.6 | 10 | % | 3 | % |
n | 40% Central | |
n | 24% East | |
n | 20% West | |
n | 16% Global Family Office | |
DECEMBER 31, | CHANGE | ||||||||||||
($ In Billions) | 2017 | 2016 | 2015 | 2017 / 2016 | 2016 / 2015 | ||||||||
Global Family Office | $ | 422.9 | $ | 347.7 | $ | 321.4 | 22 | % | 8 | % | |||
Central | 94.8 | 83.8 | 79.5 | 13 | 5 | ||||||||
East | 70.5 | 61.7 | 58.5 | 14 | 6 | ||||||||
West | 57.3 | 50.4 | 46.9 | 14 | 7 | ||||||||
Total Assets Under Custody | $ | 645.5 | $ | 543.6 | $ | 506.3 | 19 | % | 7 | % |
n | 65% Global Family Office | |
n | 15% Central | |
n | 11% East | |
n | 9% West | |
50 2017 Annual Report | Northern Trust Corporation |
DECEMBER 31, | CHANGE | ||||||||||||
($ In Billions) | 2017 | 2016 | 2015 | 2017 / 2016 | 2016 / 2015 | ||||||||
Central | $ | 102.1 | $ | 89.7 | $ | 81.8 | 14 | % | 10 | % | |||
Global Family Office | 87.1 | 69.3 | 61.9 | 26 | 12 | ||||||||
East | 57.0 | 50.9 | 47.4 | 12 | 7 | ||||||||
West | 43.6 | 38.5 | 36.2 | 13 | 6 | ||||||||
Total Assets Under Management | $ | 289.8 | $ | 248.4 | $ | 227.3 | 17 | % | 9 | % |
n | 35% Central | |
n | 30% Global Family Office | |
n | 20% East | |
n | 15% West | |
n | 51% Equities | |
n | 25% Fixed Income Securities | |
n | 24% Cash and Other Assets | |
2017 Annual Report | Northern Trust Corporation 51 |
52 2017 Annual Report | Northern Trust Corporation |
FOR THE YEAR ENDED DECEMBER 31, | CHANGE | ||||||||||||
($ In Millions) | 2017 | 2016 | 2015 | 2017 / 2016 | 2016 / 2015 | ||||||||
Noninterest Income | $ | 30.8 | $ | 133.1 | $ | 107.9 | (77 | )% | 23 | % | |||
Net Interest Income (Note) | 5.0 | 43.6 | 112.9 | (89 | ) | (61 | ) | ||||||
Revenue (Note) | 35.8 | 176.7 | 220.8 | (80 | ) | (20 | ) | ||||||
Noninterest Expense | 169.6 | 143.2 | 132.3 | 18 | 8 | ||||||||
Income (Loss) before Income Taxes (Note) | (133.8 | ) | 33.5 | 88.5 | N/M | (62 | ) | ||||||
Provision (Benefit) for Income Taxes (Note) | (146.0 | ) | (4.3 | ) | 39.0 | N/M | N/M | ||||||
Net Income | $ | 12.2 | $ | 37.8 | $ | 49.5 | (68 | )% | (24 | )% | |||
Percentage of Consolidated Net Income | 1 | % | 4 | % | 5 | % | |||||||
Average Assets | $ | 12,901.9 | $ | 12,850.6 | $ | 12,068.0 | — | % | 6 | % |
2017 Annual Report | Northern Trust Corporation 53 |
DECEMBER 31, | CHANGE | ||||||||||||
($ In Billions) | 2017 | 2016 | 2015 | 2017 / 2016 | 2016 / 2015 | ||||||||
Equities | $ | 592.3 | $ | 480.6 | $ | 446.6 | 23 | % | 8 | % | |||
Fixed Income Securities | 183.5 | 160.5 | 147.1 | 14 | 9 | ||||||||
Cash and Other Assets | 217.5 | 189.3 | 177.7 | 15 | 7 | ||||||||
Securities Lending Collateral | 167.7 | 112.0 | 103.9 | 50 | 8 | ||||||||
Total Assets Under Management | $ | 1,161.0 | $ | 942.4 | $ | 875.3 | 23 | % | 8 | % |
($ In Billions) | 2017 | 2016 | 2015 | |||||||
Balance as of January 1, | $ | 942.4 | $ | 875.3 | $ | 934.1 | ||||
Inflows by Investment Type | ||||||||||
Equity | 192.1 | 136.0 | 116.2 | |||||||
Fixed Income | 68.1 | 59.3 | 41.7 | |||||||
Cash & Other Assets | 407.9 | 383.4 | 281.0 | |||||||
Securities Lending Collateral | 132.4 | 93.8 | 28.8 | |||||||
Total Inflows | 800.5 | 672.5 | 467.7 | |||||||
Outflows by Investment Type | ||||||||||
Equity | (185.7 | ) | (136.1 | ) | (143.0 | ) | ||||
Fixed Income | (57.2 | ) | (48.0 | ) | (54.6 | ) | ||||
Cash & Other Assets | (384.0 | ) | (363.6 | ) | (273.3 | ) | ||||
Securities Lending Collateral | (76.7 | ) | (85.7 | ) | (41.2 | ) | ||||
Total Outflows | (703.6 | ) | (633.4 | ) | (512.1 | ) | ||||
Net Inflows | 96.9 | 39.1 | (44.4 | ) | ||||||
Market Performance, Currency & Other | ||||||||||
Market Performance & Other | 111.6 | 32.0 | — | |||||||
Currency | 10.1 | (4.0 | ) | — | ||||||
Total Market Performance, Currency & Other | 121.7 | 28.0 | (14.4 | ) | ||||||
Balance as of December 31, | $ | 1,161.0 | $ | 942.4 | $ | 875.3 |
54 2017 Annual Report | Northern Trust Corporation |
DECEMBER 31, | |||||||||
($ In Millions) | 2017 | 2016 | 2015 | ||||||
Securities Held to Maturity | |||||||||
U.S. Government | $ | 35.0 | $ | 15.0 | $ | 26.0 | |||
Obligations of States and Political Subdivisions | 34.6 | 63.6 | 89.2 | ||||||
Government Sponsored Agency | 5.8 | 7.4 | 9.9 | ||||||
Other | 12,973.6 | 8,835.1 | 5,123.2 | ||||||
Total Securities Held to Maturity | $ | 13,049.0 | $ | 8,921.1 | $ | 5,248.3 | |||
Securities Available for Sale | |||||||||
U.S. Government | $ | 5,700.3 | $ | 7,522.6 | $ | 6,178.3 | |||
Obligations of States and Political Subdivisions | 746.4 | 885.2 | 36.4 | ||||||
Government Sponsored Agency | 18,676.6 | 17,892.8 | 16,366.8 | ||||||
Asset-Backed | 2,726.4 | 2,556.7 | 2,500.1 | ||||||
Auction Rate | 4.3 | 4.7 | 17.1 | ||||||
Other | 5,888.1 | 6,717.8 | 7,219.2 | ||||||
Total Securities Available for Sale | $ | 33,742.1 | $ | 35,579.8 | $ | 32,317.9 | |||
Trading Account | $ | 0.5 | $ | 0.3 | $ | 1.2 | |||
Total Securities at Year-End | $ | 46,791.6 | $ | 44,501.2 | $ | 37,567.4 | |||
Average Total Securities | $ | 44,715.7 | $ | 42,041.3 | $ | 37,407.9 |
2017 Annual Report | Northern Trust Corporation 55 |
DECEMBER 31, | |||||||||||||||
($ In Millions) | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||
Commercial | |||||||||||||||
Commercial and Institutional | $ | 9,042.2 | $ | 9,287.4 | $ | 9,307.5 | $ | 8,343.7 | $ | 7,341.6 | |||||
Commercial Real Estate | 3,482.7 | 4,002.5 | 3,848.8 | 3,333.3 | 2,955.8 | ||||||||||
Non-U.S. | 1,538.5 | 1,877.8 | 1,137.7 | 1,530.6 | 954.7 | ||||||||||
Lease Financing, net | 229.2 | 293.9 | 544.4 | 916.3 | 975.1 | ||||||||||
Other | 265.4 | 205.1 | 194.1 | 191.5 | 358.6 | ||||||||||
Total Commercial | $ | 14,558.0 | $ | 15,666.7 | $ | 15,032.5 | $ | 14,315.4 | $ | 12,585.8 | |||||
Personal | |||||||||||||||
Private Client | $ | 10,753.1 | $ | 10,052.0 | $ | 9,136.4 | $ | 7,466.9 | $ | 6,445.6 | |||||
Residential Real Estate | 7,247.6 | 8,077.5 | 8,974.7 | 9,820.8 | 10,305.5 | ||||||||||
Other | 33.5 | 25.9 | 37.3 | 37.1 | 48.6 | ||||||||||
Total Personal | $ | 18,034.2 | $ | 18,155.4 | $ | 18,148.4 | $ | 17,324.8 | $ | 16,799.7 | |||||
Total Loans and Leases | $ | 32,592.2 | $ | 33,822.1 | $ | 33,180.9 | $ | 31,640.2 | $ | 29,385.5 |
56 2017 Annual Report | Northern Trust Corporation |
DECEMBER 31, | ||||||
($ In Millions) | 2017 | 2016 | ||||
Commercial Mortgages: | ||||||
Office | $ | 825.2 | $ | 866.1 | ||
Apartment/Multi-family | 623.3 | 784.8 | ||||
Retail | 631.1 | 698.1 | ||||
Industrial / Warehouse | 311.1 | 359.7 | ||||
Other | 445.6 | 457.6 | ||||
Total Commercial Mortgages | 2,836.3 | 3,166.3 | ||||
Construction, Acquisition and Development Loans | 350.8 | 445.0 | ||||
Single Family Investment | 164.8 | 179.6 | ||||
Other Commercial Real Estate Related | 130.8 | 211.6 | ||||
Total Commercial Real Estate Loans | $ | 3,482.7 | $ | 4,002.5 |
2017 Annual Report | Northern Trust Corporation 57 |
DECEMBER 31, | |||||||||||||||
($ In Millions) | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||
Nonperforming Loans and Leases | |||||||||||||||
Commercial | |||||||||||||||
Commercial and Institutional | $ | 26.0 | $ | 9.2 | $ | 18.1 | $ | 15.0 | $ | 23.1 | |||||
Commercial Real Estate | 8.3 | 11.6 | 16.7 | 37.1 | 49.2 | ||||||||||
Total Commercial | 34.3 | 20.8 | 34.8 | 52.1 | 72.3 | ||||||||||
Personal | |||||||||||||||
Residential Real Estate | $ | 116.4 | $ | 139.1 | $ | 144.9 | $ | 162.4 | $ | 189.1 | |||||
Private Client | — | 0.3 | 0.4 | 1.2 | 1.4 | ||||||||||
Total Personal | 116.4 | 139.4 | 145.3 | 163.6 | 190.5 | ||||||||||
Total Nonperforming Loans and Leases | 150.7 | 160.2 | 180.1 | 215.7 | 262.8 | ||||||||||
Other Real Estate Owned | 4.6 | 5.2 | 8.2 | 16.6 | 11.9 | ||||||||||
Total Nonperforming Assets | $ | 155.3 | $ | 165.4 | $ | 188.3 | $ | 232.3 | $ | 274.7 | |||||
90 Day Past Due Loans Still Accruing | $ | 8.0 | $ | 31.0 | $ | 7.1 | $ | 22.7 | $ | 16.4 | |||||
Nonperforming Loans and Leases to Total Loans and Leases | 0.46 | % | 0.47 | % | 0.54 | % | 0.68 | % | 0.89 | % | |||||
Allowance for Credit Losses Assigned to Loans and Leases to Nonperforming Loans and Leases | 0.9 | x | 1.0 | x | 1.1 | x | 1.2 | x | 1.1 | x |
($ In Millions) | 2017 | 2016 | 2015 | ||||||
Balance at January 1 | $ | 192.0 | $ | 233.3 | $ | 295.9 | |||
Charge-Offs | (21.5 | ) | (27.3 | ) | (30.7 | ) | |||
Recoveries | 11.3 | 12.1 | 11.2 | ||||||
Net Charge-Offs | (10.2 | ) | (15.2 | ) | (19.5 | ) | |||
Provision for Credit Losses | (28.0 | ) | (26.0 | ) | (43.0 | ) | |||
Effects of Foreign Exchange Rates | — | (0.1 | ) | (0.1 | ) | ||||
Balance at December 31 | $ | 153.8 | $ | 192.0 | $ | 233.3 |
58 2017 Annual Report | Northern Trust Corporation |
DECEMBER 31, | |||||||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||||
($ In Millions) | ALLOWANCE AMOUNT | PERCENT OF LOANS TO TOTAL LOANS | ALLOWANCE AMOUNT | PERCENT OF LOANS TO TOTAL LOANS | ALLOWANCE AMOUNT | PERCENT OF LOANS TO TOTAL LOANS | ALLOWANCE AMOUNT | PERCENT OF LOANS TO TOTAL LOANS | ALLOWANCE AMOUNT | PERCENT OF LOANS TO TOTAL LOANS | |||||||||||||||
Specific Allowance | $ | 5.4 | — | % | $ | 2.1 | — | % | $ | 3.1 | — | % | $ | 21.1 | — | % | $ | 24.9 | — | % | |||||
Allocated Inherent Allowance | |||||||||||||||||||||||||
Commercial | |||||||||||||||||||||||||
Commercial and Institutional | 34.7 | 27 | 34.7 | 27 | 40.4 | 28 | 73.0 | 26 | 67.5 | 25 | |||||||||||||||
Commercial Real Estate | 43.3 | 11 | 69.2 | 12 | 69.5 | 12 | 69.4 | 10 | 71.5 | 10 | |||||||||||||||
Lease Financing, net | 0.2 | 1 | 0.4 | 1 | 1.9 | 2 | 3.6 | 3 | 4.2 | 3 | |||||||||||||||
Non-U.S. | — | 5 | — | 5 | — | 3 | 3.3 | 5 | 2.1 | 3 | |||||||||||||||
Other | 1.5 | 1 | 0.6 | 1 | — | 1 | — | 1 | — | 2 | |||||||||||||||
Total Commercial | 79.7 | 45 | 104.9 | 46 | 111.8 | 46 | 149.3 | 45 | 145.3 | 43 | |||||||||||||||
Personal | |||||||||||||||||||||||||
Residential Real Estate | 57.3 | 22 | 69.0 | 24 | 96.2 | 27 | 107.7 | 31 | 118.7 | 35 | |||||||||||||||
Private Client | 9.5 | 33 | 13.8 | 30 | 19.7 | 27 | 17.8 | 24 | 19.0 | 22 | |||||||||||||||
Other | 1.9 | — | 2.2 | — | 2.5 | — | — | — | — | — | |||||||||||||||
Total Personal | 68.7 | 55 | 85.0 | 54 | 118.4 | 54 | 125.5 | 55 | 137.7 | 57 | |||||||||||||||
Total Allocated Inherent Allowance | $ | 148.4 | 100 | % | $ | 189.9 | 100 | % | $ | 230.2 | 100 | % | $ | 274.8 | 100 | % | $ | 283.0 | 100 | % | |||||
Total Allowance for Credit Losses | $ | 153.8 | 100 | % | $ | 192.0 | 100 | % | $ | 233.3 | 100 | % | $ | 295.9 | 100 | % | $ | 307.9 | 100 | % | |||||
Allowance Assigned to: | |||||||||||||||||||||||||
Loans and Leases | $ | 131.2 | $ | 161.0 | $ | 193.8 | $ | 267.0 | $ | 278.1 | |||||||||||||||
Undrawn Commitments and Standby Letters of Credit | 22.6 | 31.0 | 39.5 | 28.9 | 29.8 | ||||||||||||||||||||
Total Allowance for Credit Losses | $ | 153.8 | $ | 192.0 | $ | 233.3 | $ | 295.9 | $ | 307.9 | |||||||||||||||
Allowance Assigned to Loans and Leases to Total Loans and Leases | 0.40 | % | 0.48 | % | 0.58 | % | 0.84 | % | 0.95 | % |
2017 Annual Report | Northern Trust Corporation 59 |
60 2017 Annual Report | Northern Trust Corporation |
2017 Annual Report | Northern Trust Corporation 61 |
• | Discount Rate: Northern Trust estimates the discount rate for its U.S. pension plans by applying the projected cash flows for future benefit payments to the Aon Hewitt AA Above Median yield curve as of the measurement date. This yield curve is composed of individual zero-coupon interest rates for 198 different time periods over a 99-year time horizon. Zero-coupon rates utilized by the yield curve are mathematically derived from observable market yields for AA-rated corporate bonds. This yield curve model referenced by Northern Trust in establishing the discount rate resulted in a rate of 3.79% at December 31, 2017 for the Qualified and Nonqualified plans, a decrease from 4.46% at December 31, 2016. |
• | Compensation Level: Based on a review of actual and anticipated salary experience, the compensation scale assumption is based on a graded schedule from 9.00% to 2.50% that averages 4.39%. |
• | Rate of Return on Plan Assets: The expected return on plan assets is based on an estimate of the long-term (30 years) rate of return on plan assets, which is determined using a building block approach that considers the current asset mix and estimates of return by asset class based on historical experience, giving proper consideration to diversification and rebalancing. Current market factors such as inflation and interest rates are also evaluated before long-term capital market assumptions are determined. Peer data and historical returns are reviewed to check for reasonability and appropriateness. As a result of these analyses, Northern Trust’s rate of return assumption for the Qualified Plan decreased from 6.75% for 2017 to 6.00% for 2018. |
• | Mortality Table: Northern Trust uses the aggregate RP-2014 mortality table with adjustment from 2014 to 2006. Northern Trust’s pension obligations reflect proposed future improvement under scale MP-2017, released by the Society of Actuaries in October 2017. This assumption was updated at December 31, 2017 from improvement scale MP-2016. The updated improvement scale applies to annuity payments only and results in generally lower projected mortality improvements than estimated by the MP-2016 improvement scale. Mortality assumptions on lump sum payments remain static and continue to be in line with the IRS prescribed table for minimum lump sums in 2018. The IRS prescribed table for 2018 now reflects the aggregate RP-2014 mortality table with adjustment from 2014 to 2006, and future improvements under scale MP-2016. |
62 2017 Annual Report | Northern Trust Corporation |
($ In Millions) | 25 BASIS POINT INCREASE | 25 BASIS POINT DECREASE | ||||
Increase (Decrease) in 2018 Pension Expense | ||||||
Discount Rate Change | $ | (4.2 | ) | $ | 4.4 | |
Compensation Level Change | 1.8 | (1.7 | ) | |||
Rate of Return on Plan Assets Change | (3.7 | ) | 3.7 | |||
Increase (Decrease) in 2017 Projected Benefit Obligation | ||||||
Discount Rate Change | (49.7 | ) | 52.6 | |||
Compensation Level Change | 6.7 | (6.4 | ) |
2017 Annual Report | Northern Trust Corporation 63 |
64 2017 Annual Report | Northern Trust Corporation |
2017 Annual Report | Northern Trust Corporation 65 |
DECEMBER 31, | ||||||
($ In Millions) | 2017 | 2016 | ||||
Undrawn Commitments to Extend Credit | ||||||
One Year and Less | $ | 8,617.3 | $ | 10,953.5 | ||
Over One Year | 18,205.3 | 21,814.6 | ||||
Total | $ | 26,822.6 | $ | 32,768.1 | ||
Standby Letters of Credit | $ | 2,970.0 | $ | 3,846.1 | ||
Commercial Letters of Credit | 37.7 | 24.0 | ||||
Custody Securities Lent with Indemnification | 143,568.2 | 102,325.2 |
66 2017 Annual Report | Northern Trust Corporation |
AS OF DECEMBER 31, 2017 | COMMITMENT EXPIRATION | |||||||||||
($ In Millions) | TOTAL COMMITMENTS | ONE YEAR AND LESS | OVER ONE YEAR | OUTSTANDING LOANS | ||||||||
Commercial | ||||||||||||
Commercial and Institutional | ||||||||||||
Finance and Insurance | $ | 3,384.4 | $ | 1,609.0 | $ | 1,775.4 | $ | 1,056.2 | ||||
Holding Companies | 9.2 | 9.2 | — | 28.9 | ||||||||
Manufacturing | 7,221.9 | 752.3 | 6,469.6 | 1,747.3 | ||||||||
Mining | 707.5 | 187.1 | 520.4 | 54.4 | ||||||||
Public Administration | 209.5 | 101.8 | 107.7 | 72.1 | ||||||||
Retail Trade | 900.6 | 162.1 | 738.5 | 160.1 | ||||||||
Services | 5,765.2 | 1,987.3 | 3,777.9 | 4,873.2 | ||||||||
Transportation and Warehousing | 285.1 | 1.6 | 283.5 | 309.3 | ||||||||
Utilities | 1,162.9 | 20.7 | 1,142.2 | 13.1 | ||||||||
Wholesale Trade | 679.0 | 27.6 | 651.4 | 458.5 | ||||||||
Other Commercial | 294.0 | 262.4 | 31.6 | 269.1 | ||||||||
Commercial and Institutional (Note) | 20,619.3 | 5,121.1 | 15,498.2 | 9,042.2 | ||||||||
Commercial Real Estate | 312.5 | 49.3 | 263.2 | 3,482.7 | ||||||||
Lease Financing, net | — | — | — | 229.2 | ||||||||
Non-U.S. | 1,617.4 | 1,028.9 | 588.5 | 1,538.5 | ||||||||
Other | 155.2 | 155.2 | — | 265.4 | ||||||||
Total Commercial | 22,704.4 | 6,354.5 | 16,349.9 | 14,558.0 | ||||||||
Personal | ||||||||||||
Residential Real Estate | 1,008.3 | 237.7 | 770.6 | 7,247.6 | ||||||||
Private Client | 3,090.3 | 2,005.5 | 1,084.8 | 10,753.1 | ||||||||
Other | 19.6 | 19.6 | — | 33.5 | ||||||||
Total Personal | 4,118.2 | 2,262.8 | 1,855.4 | 18,034.2 | ||||||||
Total | $ | 26,822.6 | $ | 8,617.3 | $ | 18,205.3 | $ | 32,592.2 |
2017 Annual Report | Northern Trust Corporation 67 |
68 2017 Annual Report | Northern Trust Corporation |
CREDIT RATING | |||
STANDARD & POOR’S | MOODY’S | FITCHRATINGS | |
Northern Trust Corporation: | |||
Senior Debt | A+ | A2 | AA- |
Subordinated Debt | A | A2 | A+ |
Preferred Stock | BBB+ | Baa1 | BBB |
Trust Preferred Capital Securities | BBB+ | A3 | BBB+ |
Outlook | Stable | Stable | Stable |
The Northern Trust Company: | |||
Short-Term Deposit | A-1+ | P-1 | F1+ |
Long-Term Deposit | AA- | Aa2 | AA |
Subordinated Debt | A+ | A2 | A+ |
Outlook | Stable | Stable | Stable |
2017 Annual Report | Northern Trust Corporation 69 |
PAYMENT DUE BY PERIOD | |||||||||||||||
($ In Millions) | TOTAL | ONE YEAR AND LESS | 1-3 YEARS | 3-5 YEARS | OVER 5 YEARS | ||||||||||
Senior Notes(1) | $ | 1,497.3 | $ | — | $ | 499.6 | $ | 997.7 | $ | — | |||||
Subordinated Debt(1) | 1,435.1 | 305.5 | — | — | 1,129.6 | ||||||||||
Floating Rate Capital Debt(1) | 277.5 | — | — | — | 277.5 | ||||||||||
Capital Lease Obligations(2) | 15.4 | 8.4 | 7.0 | — | — | ||||||||||
Operating Leases(2) | 787.8 | 95.9 | 188.2 | 143.2 | 360.5 | ||||||||||
Purchase Obligations(3) | 641.7 | 222.3 | 287.2 | 108.4 | 23.8 | ||||||||||
Federal Taxes on Mandatory Deemed Repatriation(4) | 150.0 | 12.0 | 24.0 | 24.0 | 90.0 | ||||||||||
Total Contractual Obligations | $ | 4,804.8 | $ | 644.1 | $ | 1,006.0 | $ | 1,273.3 | $ | 1,881.4 |
70 2017 Annual Report | Northern Trust Corporation |
2017 Annual Report | Northern Trust Corporation 71 |
($ In Millions) | December 31, 2017 | December 31, 2016 | ||||||||||
Advanced Approach | Standardized Approach | Advanced Approach | Standardized Approach | |||||||||
Common Equity Tier 1 Capital | ||||||||||||
Common Stockholders’ Equity | $ | 9,334.2 | $ | 9,334.2 | $ | 8,888.4 | $ | 8,888.4 | ||||
Net Unrealized (Gains) Losses on Securities Available for Sale | 15.0 | 15.0 | 12.9 | 12.9 | ||||||||
Net Unrealized (Gains) Losses on Cash Flow Hedges | (0.9 | ) | (0.9 | ) | (2.4 | ) | (2.4 | ) | ||||
Goodwill and Other Intangible Assets, net of Deferred Tax Liability | (697.4 | ) | (697.4 | ) | (488.1 | ) | (488.1 | ) | ||||
Pension and Other Postretirement Benefit Adjustments | 68.4 | 68.4 | 130.1 | 130.1 | ||||||||
Other | (93.0 | ) | (93.0 | ) | (60.5 | ) | (60.5 | ) | ||||
Total Common Equity Tier 1 | 8,626.3 | 8,626.3 | 8,480.4 | 8,480.4 | ||||||||
Additional Tier 1 Capital | ||||||||||||
Preferred Stock | 882.0 | 882.0 | 882.0 | 882.0 | ||||||||
Other | (34.9 | ) | (34.9 | ) | (42.5 | ) | (42.5 | ) | ||||
Total Additional Tier 1 Capital | 847.1 | 847.1 | 839.5 | 839.5 | ||||||||
Total Tier 1 Capital | 9,473.4 | 9,473.4 | 9,319.9 | 9,319.9 | ||||||||
Tier 2 Capital | ||||||||||||
Qualifying Allowance for Credit Losses | — | 153.8 | — | 191.9 | ||||||||
Qualifying Subordinated Debt | 1,099.4 | 1,099.4 | 809.3 | 809.3 | ||||||||
Floating Rate Capital | 134.6 | 134.6 | 161.5 | 161.5 | ||||||||
Other | — | — | (9.1 | ) | (7.6 | ) | ||||||
Total Tier 2 Capital | 1,234.0 | 1,387.8 | 961.7 | 1,155.1 | ||||||||
Total Risk-Based Capital | $ | 10,707.4 | $ | 10,861.2 | $ | 10,281.6 | $ | 10,475.0 | ||||
Risk-Weighted Assets(1) | $ | 64,018.7 | $ | 68,616.4 | $ | 68,257.6 | $ | 72,020.9 | ||||
Total Assets – End of Period (EOP) | 138,590.5 | 138,590.5 | 123,926.9 | 123,926.9 | ||||||||
Adjusted Average Fourth Quarter Assets(2) | 121,517.1 | 121,517.1 | 116,958.0 | 116,958.0 | ||||||||
Total Loans and Leases – EOP | 32,592.2 | 32,592.2 | 33,822.1 | 33,822.1 | ||||||||
Common Stockholders’ Equity to: | ||||||||||||
Total Loans and Leases – EOP | 28.64 | % | 28.64 | % | 26.28 | % | 26.28 | % | ||||
Total Assets – EOP | 6.74 | 6.74 | 7.17 | 7.17 | ||||||||
Risk-Based Capital Ratios | ||||||||||||
Common Equity Tier 1 | 13.5 | % | 12.6 | % | 12.4 | % | 11.8 | % | ||||
Tier 1 | 14.8 | 13.8 | 13.7 | 12.9 | ||||||||
Total (Tier 1 and Tier 2) | 16.7 | 15.8 | 15.1 | 14.5 | ||||||||
Leverage | 7.8 | 7.8 | 8.0 | 8.0 | ||||||||
Supplementary Leverage(3) | 6.8 | N/A | 6.8 | N/A |
72 2017 Annual Report | Northern Trust Corporation |
Northern Trust Corporation Board of Directors | |||
Audit Committee | Business Risk Committee | Capital Governance Committee | Compensation and Benefit Committee |
Global Enterprise Risk Committee (GERC) | |||||
Credit Risk Committee | Operational Risk Committee | Fiduciary Risk Committee | Compliance & Ethics Oversight Committee | Market & Liquidity Risk Committee | Model Risk Oversight Committee |
2017 Annual Report | Northern Trust Corporation 73 |
74 2017 Annual Report | Northern Trust Corporation |
• | not an originator of loan products to be sold into a secondary market or to be bundled into asset securitizations; |
• | not an agent bank or syndicator of loans, where risk management is achieved post-close through the sale of participations; and |
• | not a participant in leveraged financial transactions, such as project finance, private-equity-originated acquisition financing or hedge fund leveraging. |
2017 Annual Report | Northern Trust Corporation 75 |
76 2017 Annual Report | Northern Trust Corporation |
• | Loss Event Data Program - a program that collects internal and external loss data for use in monitoring operational risk exposure, various business analyses and a Basel Advanced Management Approach (AMA) capital quantification. |
• | Risk and Control Self-Assessment - a structured risk management process used by Northern Trust’s businesses to analyze the risks that are present in their respective business environments, processes and activities and to assess the adequacy of associated internal controls. |
• | Operational Risk Scenario Analysis - a systematic process of obtaining expert opinions from business managers and risk management experts to derive reasoned assessments of the likelihood of occurrence and the potential loss impact of plausible high-severity operational losses. |
• | Product and Process Risk Management Program - a program used for evaluating and managing risks associated with the introduction of new and modified noncredit products and services, significant changes to operating processes, and related significant loss events. |
• | Outsourcing Risk Management Program - a program that provides processes for appropriate risk assessment, measurement, monitoring and management of outsourced technology and business process outsourcing. |
• | Information Security and Technology Risk Management - a program that communicates and implements compliance and risk management processes and controls to address information security, including cyber threats and technology risks to the organization. |
• | Significant New Business Opportunity - a program that assesses the resource requirements, impact on systems and controls, and other risk factors prior to taking on significant new business. |
• | Business Continuity Management Program - a program designed to minimize business impact and support the resumption of mission critical functions for clients following an incident. |
• | Physical Security - a program that provides for the safety of Northern Trust partners, clients, and visitors worldwide. |
• | Insurance Management Program - a program designed to reduce the monetary impact of certain operational loss events. |
2017 Annual Report | Northern Trust Corporation 77 |
78 2017 Annual Report | Northern Trust Corporation |
• | Regulatory Risk - risk arising from failure to comply with prudential and conduct of business or other regulatory requirements. |
• | Financial Crime Risk - risk arising from financial crime (e.g., money laundering, sanctions violations, fraud, insider dealing, theft, etc.) in relation to the products, services, or accounts of the institution, its clients, or others associated with the same. |
2017 Annual Report | Northern Trust Corporation 79 |
80 2017 Annual Report | Northern Trust Corporation |
• | repricing, which arises from differences in the maturity and repricing terms of assets and liabilities; |
• | yield curve, which arises from changes in the shape of the yield curve; |
• | basis, which arises from imperfect correlation in the adjustment of the rates earned and paid on different financial instruments with otherwise similar repricing characteristics; and |
• | behavioral characteristics embedded optionality, which arises from client or counterparty behavior in response to interest rate changes. |
• | purchase of securities; |
• | sale of securities that are classified as available for sale; |
• | issuance of senior notes and subordinated notes; |
• | collateralized borrowings from the Federal Home Loan Bank; |
• | placing and taking Eurodollar time deposits; and |
• | hedges with various types of derivative financial instruments. |
• | the balance sheet size and mix remains constant over the simulation horizon with maturing assets and liabilities replaced with instruments with similar terms as those that are maturing, with the exception of certain nonmaturity deposits that are considered short-term in nature and therefore receive a more conservative interest-bearing treatment; |
• | prepayments on mortgage loans and securities collateralized by mortgages are projected under each rate scenario using a third-party mortgage analytics system that incorporates market prepayment assumptions; |
• | cash flows for structured securities are estimated using a third-party vendor in conjunction with the prepayments provided by the third-party mortgage analytics vendor; |
• | nonmaturity deposit pricing and lives are projected based on Northern Trust’s actual historical patterns and management judgment, depending upon the availability of historical data and current pricing strategies/or judgment; and |
• | new business rates are based on current spreads to market indices. |
2017 Annual Report | Northern Trust Corporation 81 |
($ In Millions) | INCREASE/(DECREASE) ESTIMATED IMPACT ON NEXT TWELVE MONTHS OF NET INTEREST INCOME | ||
INCREASE IN INTEREST RATES ABOVE MARKET IMPLIED FORWARD RATES | |||
100 Basis Points | $ | 102 | |
200 Basis Points | 161 |
• | the present value of nonmaturity deposits are estimated using remaining lives, which are based on a combination of Northern Trust’s actual historical runoff patterns and management judgment - some balances are assumed to be core and have longer lives while other balances are assumed to be temporary and have comparatively shorter lives; and |
• | the present values of most noninterest-related balances (such as receivables, equipment, and payables) are the same as their book values. |
($ In Millions) | INCREASE/(DECREASE) ESTIMATED IMPACT ON MARKET VALUE OF EQUITY | ||
INCREASE IN INTEREST RATES ABOVE MARKET IMPLIED FORWARD RATES | |||
100 Basis Points | $ | 383 | |
200 Basis Points | 258 |
82 2017 Annual Report | Northern Trust Corporation |
($ In Millions) | TOTAL VaR (SPOT AND FORWARD) | FOREIGN EXCHANGE SPOT VaR | FOREIGN EXCHANGE FORWARD VaR | |||||||||||||||
As of December 31 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||
High | $ | 1.0 | $ | 0.9 | $ | 0.4 | $ | 0.3 | $ | 1.0 | $ | 0.9 | ||||||
Low | 0.1 | 0.2 | — | — | 0.1 | 0.2 | ||||||||||||
Average | 0.5 | 0.5 | 0.1 | 0.1 | 0.5 | 0.4 | ||||||||||||
Year-End | 0.3 | 0.3 | — | 0.2 | 0.3 | 0.3 |
2017 Annual Report | Northern Trust Corporation 83 |
• | Macroeconomic and geopolitical risk, which centers on events or themes that would have a significant, detrimental impact on financial markets, and by extension, financial services firms. Episodes of this kind would tend to have general, as opposed to idiosyncratic, consequences. |
• | Business risk, which arises from change in the following areas: |
• | Internal: situations within Northern Trust that threaten business continuity, profitability, or the achievement of strategic objectives |
• | Secular: behavioral or technological change that affects clients and renders a Northern Trust process or service obsolete |
• | Competitive: new products or shifts in the industry landscape that challenge Northern Trust’s performance |
• | Regulatory: changes to prudential or fiscal policy that have an adverse impact on Northern Trust or its clients |
• | Reputation risk, which is a residual risk which arises from negative perception on the part of clients, counterparties, stockholders, investors, debt holders, market analysts, regulators, staff, or other relevant parties that adversely affects Northern Trust’s ability to conduct its businesses or to access sources of funding. |
84 2017 Annual Report | Northern Trust Corporation |
• | financial market disruptions or economic recession, whether in the United States, Europe, the Middle East, Asia or other regions; |
• | volatility or changes in financial markets, including debt and equity markets, that impact the value, liquidity, or credit ratings of financial assets in general, or financial assets held in particular investment funds or client portfolios, including those funds, portfolios, and other financial assets with respect to which Northern Trust has taken, or may in the future take, actions to provide asset value stability or additional liquidity; |
• | the impact of equity markets on fee revenue; |
• | the downgrade of U.S. government-issued and other securities; |
• | changes in foreign exchange trading client volumes and volatility in foreign currency exchange rates, changes in the valuation of the U.S. dollar relative to other currencies in which Northern Trust records revenue or accrues expenses, and Northern Trust’s success in assessing and mitigating the risks arising from all such changes and volatility; |
• | a decline in the value of securities held in Northern Trust’s investment portfolio, particularly asset-backed securities, the liquidity and pricing of which may be negatively impacted by periods of economic turmoil and financial market disruptions; |
• | Northern Trust’s ability to address operating risks, including cyber-security or data security breach risks, human errors or omissions, pricing or valuation of securities, fraud, systems performance or defects, systems interruptions, and breakdowns in processes or internal controls; |
• | Northern Trust's success in responding to and investing in changes and advancements in technology; |
• | a significant downgrade of any of Northern Trust’s debt ratings; |
• | the health and soundness of the financial institutions and other counterparties with which Northern Trust conducts business; |
• | uncertainties inherent in the complex and subjective judgments required to assess credit risk and establish appropriate allowances therefor; |
• | the pace and extent of continued globalization of investment activity and growth in worldwide financial assets; |
• | changes in interest rates or in the monetary or other policies of various regulatory authorities or central banks; |
• | changes in the legal, regulatory and enforcement framework and oversight applicable to financial institutions, including changes that may affect leverage limits and risk-based capital and liquidity requirements, require financial institutions to pay higher assessments, expose financial institutions to certain liabilities of their subsidiary depository institutions, or restrict or increase the regulation of certain activities carried on by financial institutions, including Northern Trust; |
• | increased costs of compliance and other risks associated with changes in regulation, the current regulatory environment, and areas of increased regulatory emphasis and oversight in the United States and other countries, such as anti-money laundering, anti-bribery, and client privacy; |
• | failure to address in the Corporation's resolution plan submitted in December 2017 the "shortcomings" jointly identified by the Federal Reserve Board and FDIC in the resolution plan submitted by the Corporation in December 2015; |
• | failure to satisfy regulatory standards or to obtain regulatory approvals when required, including for the use and distribution of capital; |
• | changes in tax laws, accounting requirements or interpretations and other legislation in the United States or other countries that could affect Northern Trust or its clients including the Tax Cuts and Jobs Act; |
• | geopolitical risks and the risks of extraordinary events such as natural disasters, terrorist events and war, and the responses of the United States and other countries to those events; |
• | the pending departure of the United Kingdom from the European Union, commonly referred to as “Brexit,” and any negative effects thereof on global economic conditions, global financial markets, and our business and results of operations; |
• | changes in the nature and activities of Northern Trust’s competition; |
• | Northern Trust’s success in maintaining existing business and continuing to generate new business in existing and targeted markets and its ability to deploy deposits in a profitable manner consistent with its liquidity requirements; |
• | Northern Trust’s ability to address the complex needs of a global client base and manage compliance with legal, tax, regulatory and other requirements; |
• | Northern Trust’s ability to maintain a product mix that achieves acceptable margins; |
• | Northern Trust’s ability to continue to generate investment results that satisfy clients and to develop an array of investment products; |
2017 Annual Report | Northern Trust Corporation 85 |
• | Northern Trust’s success in recruiting and retaining the necessary personnel to support business growth and expansion and maintain sufficient expertise to support increasingly complex products and services; |
• | Northern Trust’s success in implementing its expense management initiatives, including its “Value for Spend” initiative; |
• | uncertainties inherent in Northern Trust’s assumptions concerning its pension plan, including discount rates and expected contributions, returns and payouts; |
• | Northern Trust’s success in continuing to enhance its risk management practices and controls and managing risks inherent in its businesses, including credit risk, operational risk, market and liquidity risk, fiduciary risk, compliance risk and strategic risk; |
• | risks and uncertainties inherent in the litigation and regulatory process, including the possibility that losses may be in excess of Northern Trust’s recorded liability and estimated range of possible loss for litigation exposures; |
• | risks associated with being a holding company, including Northern Trust’s dependence on dividends from its principal subsidiary; |
• | the risk of damage to Northern Trust’s reputation which may undermine the confidence of clients, counterparties, rating agencies, and stockholders; and |
• | other factors identified elsewhere in this Annual Report on Form 10-K, including those factors described in Item 1A, “Risk Factors,” and other filings with the SEC, all of which are available on Northern Trust’s website. |
FOR THE YEAR ENDED DECEMBER 31, | |||||||||||||||||||||||||||
2017 | 2016 | 2015 | |||||||||||||||||||||||||
($ In Millions) | REPORTED | FTE ADJ. | FTE | REPORTED | FTE ADJ. | FTE | REPORTED | FTE ADJ. | FTE | ||||||||||||||||||
Interest Income | $ | 1,769.4 | $ | 45.8 | $ | 1,815.2 | $ | 1,416.9 | $ | 25.1 | $ | 1,442.0 | $ | 1,224.0 | $ | 25.3 | $ | 1,249.3 | |||||||||
Interest Expense | 340.2 | — | 340.2 | 182.0 | — | 182.0 | 153.9 | — | 153.9 | ||||||||||||||||||
Net Interest Income | $ | 1,429.2 | $ | 45.8 | $ | 1,475.0 | $ | 1,234.9 | $ | 25.1 | $ | 1,260.0 | $ | 1,070.1 | $ | 25.3 | $ | 1,095.4 | |||||||||
Net Interest Margin | 1.29 | % | 1.33 | % | 1.15 | % | 1.18 | % | 1.05 | % | 1.07 | % | |||||||||||||||
Total Revenue | $ | 5,375.3 | $ | 45.8 | $ | 5,421.1 | $ | 4,961.8 | $ | 25.1 | $ | 4,986.9 | $ | 4,702.6 | $ | 25.3 | $ | 4,727.9 |
FOR THE YEAR ENDED DECEMBER 31, | |||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||
($ In Millions) | REPORTED | FTE ADJ. | FTE | REPORTED | FTE ADJ. | FTE | |||||||||||||||
Interest Income | $ | 1,186.9 | $ | 29.4 | $ | 1,216.3 | $ | 1,155.5 | $ | 32.5 | $ | 1,188.0 | |||||||||
Interest Expense | 181.4 | — | 181.4 | 222.4 | — | 222.4 | |||||||||||||||
Net Interest Income | $ | 1,005.5 | $ | 29.4 | $ | 1,034.9 | $ | 933.1 | $ | 32.5 | $ | 965.6 | |||||||||
Net Interest Margin | 1.05 | % | 1.08 | % | 1.09 | % | 1.13 | % | |||||||||||||
Total Revenue | $ | 4,331.2 | $ | 29.4 | $ | 4,360.6 | $ | 4,089.3 | $ | 32.5 | $ | 4,121.8 |
86 2017 Annual Report | Northern Trust Corporation |
2017 Annual Report | Northern Trust Corporation 87 |
88 2017 Annual Report | Northern Trust Corporation |
DECEMBER 31, | ||||||
(In Millions Except Share Information) | 2017 | 2016 | ||||
ASSETS | ||||||
Cash and Due from Banks | $ | 4,518.1 | $ | 5,332.0 | ||
Federal Reserve and Other Central Bank Deposits | 40,479.1 | 26,674.2 | ||||
Interest-Bearing Deposits with Banks | 5,611.9 | 4,800.6 | ||||
Federal Funds Sold and Securities Purchased under Agreements to Resell | 1,324.3 | 1,974.3 | ||||
Securities | ||||||
Available for Sale | 33,742.1 | 35,579.8 | ||||
Held to Maturity (Fair value of $13,010.9 and $8,905.1) | 13,049.0 | 8,921.1 | ||||
Trading Account | 0.5 | 0.3 | ||||
Total Securities | 46,791.6 | 44,501.2 | ||||
Loans and Leases | ||||||
Commercial | 14,558.0 | 15,666.7 | ||||
Personal | 18,034.2 | 18,155.4 | ||||
Total Loans and Leases (Net of unearned income of $35.5 and $41.2) | 32,592.2 | 33,822.1 | ||||
Allowance for Credit Losses Assigned to Loans and Leases | (131.2 | ) | (161.0 | ) | ||
Buildings and Equipment | 464.6 | 466.6 | ||||
Client Security Settlement Receivables | 1,647.0 | 1,043.7 | ||||
Goodwill | 605.6 | 519.4 | ||||
Other Assets | 4,687.3 | 4,953.8 | ||||
Total Assets | $ | 138,590.5 | $ | 123,926.9 | ||
LIABILITIES | ||||||
Deposits | ||||||
Demand and Other Noninterest-Bearing | $ | 18,712.2 | $ | 22,190.4 | ||
Savings and Money Market | 16,975.3 | 16,509.0 | ||||
Savings Certificates and Other Time | 1,152.3 | 1,331.7 | ||||
Non U.S. Offices – Noninterest-Bearing | 9,878.8 | 7,972.5 | ||||
– Interest-Bearing | 65,672.2 | 53,648.1 | ||||
Total Deposits | 112,390.8 | 101,651.7 | ||||
Federal Funds Purchased | 2,286.1 | 204.8 | ||||
Securities Sold Under Agreements to Repurchase | 834.0 | 473.7 | ||||
Other Borrowings | 6,051.1 | 5,109.5 | ||||
Senior Notes | 1,497.3 | 1,496.6 | ||||
Long-Term Debt | 1,449.5 | 1,330.9 | ||||
Floating Rate Capital Debt | 277.5 | 277.4 | ||||
Other Liabilities | 3,588.0 | 3,611.9 | ||||
Total Liabilities | 128,374.3 | 114,156.5 | ||||
STOCKHOLDERS’ EQUITY | ||||||
Preferred Stock, No Par Value; Authorized 10,000,000 shares: | ||||||
Series C, outstanding shares of 16,000 | 388.5 | 388.5 | ||||
Series D, outstanding shares of 5,000 | 493.5 | 493.5 | ||||
Common Stock, $1.66 2/3 Par Value; Authorized 560,000,000 shares; Outstanding shares of 226,126,674 and 228,605,485 | 408.6 | 408.6 | ||||
Additional Paid-In Capital | 1,047.2 | 1,035.8 | ||||
Retained Earnings | 9,685.1 | 8,908.4 | ||||
Accumulated Other Comprehensive Loss | (414.3 | ) | (370.0 | ) | ||
Treasury Stock (19,044,850 and 16,566,039 shares, at cost) | (1,392.4 | ) | (1,094.4 | ) | ||
Total Stockholders' Equity | 10,216.2 | 9,770.4 | ||||
Total Liabilities and Stockholders' Equity | $ | 138,590.5 | $ | 123,926.9 |
2017 Annual Report | Northern Trust Corporation 89 |
FOR THE YEAR ENDED DECEMBER 31, | |||||||||
(In Millions Except Share Information) | 2017 | 2016 | 2015 | ||||||
Noninterest Income | |||||||||
Trust, Investment and Other Servicing Fees | $ | 3,434.3 | $ | 3,108.1 | $ | 2,980.5 | |||
Foreign Exchange Trading Income | 209.9 | 236.6 | 261.8 | ||||||
Treasury Management Fees | 56.4 | 62.8 | 64.7 | ||||||
Security Commissions and Trading Income | 89.6 | 81.4 | 78.7 | ||||||
Other Operating Income | 157.5 | 241.2 | 247.1 | ||||||
Investment Security Losses, net (Note) | (1.6 | ) | (3.2 | ) | (0.3 | ) | |||
Total Noninterest Income | 3,946.1 | 3,726.9 | 3,632.5 | ||||||
Net Interest Income | |||||||||
Interest Income | 1,769.4 | 1,416.9 | 1,224.0 | ||||||
Interest Expense | 340.2 | 182.0 | 153.9 | ||||||
Net Interest Income | 1,429.2 | 1,234.9 | 1,070.1 | ||||||
Provision for Credit Losses | (28.0 | ) | (26.0 | ) | (43.0 | ) | |||
Net Interest Income after Provision for Credit Losses | 1,457.2 | 1,260.9 | 1,113.1 | ||||||
Noninterest Expense | |||||||||
Compensation | 1,733.7 | 1,541.1 | 1,443.3 | ||||||
Employee Benefits | 319.9 | 293.3 | 285.3 | ||||||
Outside Services | 668.4 | 627.1 | 595.7 | ||||||
Equipment and Software | 524.0 | 467.4 | 454.8 | ||||||
Occupancy | 191.8 | 177.4 | 173.5 | ||||||
Other Operating Expense | 331.6 | 364.4 | 328.0 | ||||||
Total Noninterest Expense | 3,769.4 | 3,470.7 | 3,280.6 | ||||||
Income before Income Taxes | 1,633.9 | 1,517.1 | 1,465.0 | ||||||
Provision for Income Taxes | 434.9 | 484.6 | 491.2 | ||||||
NET INCOME | $ | 1,199.0 | $ | 1,032.5 | $ | 973.8 | |||
Preferred Stock Dividends | 49.8 | 23.4 | 23.4 | ||||||
Net Income Applicable to Common Stock | $ | 1,149.2 | $ | 1,009.1 | $ | 950.4 | |||
PER COMMON SHARE | |||||||||
Net Income – Basic | $ | 4.95 | $ | 4.35 | $ | 4.03 | |||
– Diluted | 4.92 | 4.32 | 3.99 | ||||||
Average Number of Common Shares Outstanding – Basic | 228,257,664 | 227,580,584 | 232,279,849 | ||||||
– Diluted | 229,654,401 | 229,151,406 | 234,221,729 | ||||||
Note: Changes in Other-Than-Temporary-Impairment (OTTI) Losses | $ | (0.2 | ) | $ | (3.7 | ) | $ | — | |
Other Security Gains/(Losses), net | (1.4 | ) | 0.5 | (0.3 | ) | ||||
Investment Security Losses, net | $ | (1.6 | ) | $ | (3.2 | ) | $ | (0.3 | ) |
FOR THE YEAR ENDED DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||
Net Income | $ | 1,199.0 | $ | 1,032.5 | $ | 973.8 | |||
Other Comprehensive Income (Loss) (Net of Tax and Reclassifications) | |||||||||
Net Unrealized (Losses) Gains on Securities Available for Sale | (42.4 | ) | (1.4 | ) | (58.6 | ) | |||
Net Unrealized Gains (Losses) on Cash Flow Hedges | (1.6 | ) | 9.1 | 1.7 | |||||
Foreign Currency Translation Adjustments | 16.7 | (0.9 | ) | (15.9 | ) | ||||
Pension and Other Postretirement Benefit Adjustments | (17.0 | ) | (4.1 | ) | 19.8 | ||||
Other Comprehensive Income (Loss) | (44.3 | ) | 2.7 | (53.0 | ) | ||||
Comprehensive Income | $ | 1,154.7 | $ | 1,035.2 | $ | 920.8 |
90 2017 Annual Report | Northern Trust Corporation |
FOR THE YEAR ENDED DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||
PREFERRED STOCK | |||||||||
Balance at January 1 | $ | 882.0 | $ | 388.5 | $ | 388.5 | |||
Issuance of Preferred Stock, Series D | — | 493.5 | — | ||||||
Balance at December 31 | 882.0 | 882.0 | 388.5 | ||||||
COMMON STOCK | |||||||||
Balance at January 1 and December 31 | 408.6 | 408.6 | 408.6 | ||||||
ADDITIONAL PAID-IN CAPITAL | |||||||||
Balance at January 1 | 1,035.8 | 1,072.3 | 1,050.9 | ||||||
Treasury Stock Transactions – Stock Options and Awards | (117.1 | ) | (116.6 | ) | (74.0 | ) | |||
Stock Options and Awards – Amortization | 128.5 | 87.7 | 77.7 | ||||||
Stock Options and Awards – Tax Benefits | — | (7.6 | ) | 17.7 | |||||
Balance at December 31 | 1,047.2 | 1,035.8 | 1,072.3 | ||||||
RETAINED EARNINGS | |||||||||
Balance at January 1 | 8,908.4 | 8,242.8 | 7,625.4 | ||||||
Net Income | 1,199.0 | 1,032.5 | 973.8 | ||||||
Dividends Declared – Common Stock | (372.5 | ) | (343.5 | ) | (333.0 | ) | |||
Dividends Declared – Preferred Stock | (49.8 | ) | (23.4 | ) | (23.4 | ) | |||
Balance at December 31 | 9,685.1 | 8,908.4 | 8,242.8 | ||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | |||||||||
Balance at January 1 | (370.0 | ) | (372.7 | ) | (319.7 | ) | |||
Net Unrealized (Losses) Gains on Securities Available for Sale | (42.4 | ) | (1.4 | ) | (58.6 | ) | |||
Net Unrealized Gains (Losses) on Cash Flow Hedges | (1.6 | ) | 9.1 | 1.7 | |||||
Foreign Currency Translation Adjustments | 16.7 | (0.9 | ) | (15.9 | ) | ||||
Pension and Other Postretirement Benefit Adjustments | (17.0 | ) | (4.1 | ) | 19.8 | ||||
Balance at December 31 | (414.3 | ) | (370.0 | ) | (372.7 | ) | |||
TREASURY STOCK | |||||||||
Balance at January 1 | (1,094.4 | ) | (1,033.6 | ) | (704.8 | ) | |||
Stock Options and Awards | 225.1 | 350.3 | 168.1 | ||||||
Stock Purchased | (523.1 | ) | (411.1 | ) | (496.9 | ) | |||
Balance at December 31 | (1,392.4 | ) | (1,094.4 | ) | (1,033.6 | ) | |||
Total Stockholders’ Equity at December 31 | $ | 10,216.2 | $ | 9,770.4 | $ | 8,705.9 |
2017 Annual Report | Northern Trust Corporation 91 |
FOR THE YEAR ENDED DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||
Net Income | $ | 1,199.0 | $ | 1,032.5 | $ | 973.8 | |||
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities | |||||||||
Investment Security Losses, net | 1.6 | 3.2 | 0.3 | ||||||
Amortization and Accretion of Securities and Unearned Income, net | 105.0 | 100.9 | 53.3 | ||||||
Provision for Credit Losses | (28.0 | ) | (26.0 | ) | (43.0 | ) | |||
Depreciation on Buildings and Equipment | 101.2 | 89.2 | 90.4 | ||||||
Amortization of Computer Software | 309.1 | 275.3 | 250.3 | ||||||
Amortization of Intangibles | 11.4 | 8.8 | 10.9 | ||||||
Change in Accrued Income Taxes | 36.2 | (129.0 | ) | 206.8 | |||||
Pension Plan Contributions | (14.5 | ) | (12.8 | ) | (21.1 | ) | |||
Deferred Income Tax Provision | (76.1 | ) | (175.8 | ) | (146.2 | ) | |||
Change in Receivables | (119.3 | ) | (129.2 | ) | (16.2 | ) | |||
Change in Interest Payable | 10.7 | (0.1 | ) | (8.2 | ) | ||||
Change in Collateral With Derivative Counterparties, net | 486.2 | (180.4 | ) | 801.4 | |||||
Other Operating Activities, net | (302.1 | ) | 653.4 | (318.1 | ) | ||||
Net Cash Provided by Operating Activities | 1,720.4 | 1,510.0 | 1,834.4 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||
Net Change in Federal Funds Sold and Securities Purchased under Agreements to Resell | 678.9 | (372.9 | ) | (549.8 | ) | ||||
Change in Interest-Bearing Deposits with Banks | (467.7 | ) | 1,906.1 | 284.9 | |||||
Net Change in Federal Reserve and Other Central Bank Deposits | (12,748.7 | ) | (4,124.2 | ) | 558.6 | ||||
Purchases of Securities – Held to Maturity | (11,955.2 | ) | (8,573.2 | ) | (8,075.5 | ) | |||
Proceeds from Maturity and Redemption of Securities – Held to Maturity | 9,924.8 | 4,026.5 | 6,628.3 | ||||||
Purchases of Securities – Available for Sale | (9,780.0 | ) | (14,741.9 | ) | (11,490.3 | ) | |||
Proceeds from Sale, Maturity and Redemption of Securities – Available for Sale | 10,103.4 | 11,317.3 | 8,576.1 | ||||||
Change in Loans and Leases | 1,451.0 | (471.0 | ) | (1,581.0 | ) | ||||
Purchases of Buildings and Equipment | (91.6 | ) | (111.3 | ) | (98.5 | ) | |||
Purchases and Development of Computer Software | (381.2 | ) | (362.1 | ) | (335.0 | ) | |||
Change in Client Security Settlement Receivables | (592.6 | ) | 1,105.0 | (605.0 | ) | ||||
Acquisition of a Subsidiary, Net of Cash Received | (188.5 | ) | (16.9 | ) | — | ||||
Other Investing Activities, net | 25.8 | 226.5 | (212.9 | ) | |||||
Net Cash Used in Investing Activities | (14,021.6 | ) | (10,192.1 | ) | (6,900.1 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||
Change in Deposits | 8,523.6 | 6,737.4 | 8,105.7 | ||||||
Change in Federal Funds Purchased | 2,081.2 | (146.7 | ) | (581.4 | ) | ||||
Change in Securities Sold under Agreements to Repurchase | 360.5 | (72.9 | ) | (338.5 | ) | ||||
Change in Short-Term Other Borrowings | 967.7 | 1,073.5 | 2,312.8 | ||||||
Proceeds from Senior Notes and Long-Term Debt | 350.0 | — | — | ||||||
Repayments of Senior Notes and Long-Term Debt | (208.7 | ) | (6.7 | ) | (231.0 | ) | |||
Proceeds from Issuance of Preferred Stock - Series D | — | 493.5 | — | ||||||
Treasury Stock Purchased | (523.1 | ) | (411.1 | ) | (496.9 | ) | |||
Net Proceeds from Stock Options | 108.0 | 233.8 | 94.0 | ||||||
Cash Dividends Paid on Common Stock | (356.8 | ) | (333.0 | ) | (321.4 | ) | |||
Cash Dividends Paid on Preferred Stock | (49.8 | ) | (23.4 | ) | (27.0 | ) | |||
Other Financing Activities, net | 0.1 | (7.5 | ) | 17.8 | |||||
Net Cash Provided by Financing Activities | 11,252.7 | 7,536.9 | 8,534.1 | ||||||
Effect of Foreign Currency Exchange Rates on Cash | 234.6 | 58.7 | (70.9 | ) | |||||
(Decrease) Increase in Cash and Due from Banks | (813.9 | ) | (1,086.5 | ) | 3,397.5 | ||||
Cash and Due from Banks at Beginning of Year | 5,332.0 | 6,418.5 | 3,021.0 | ||||||
Cash and Due from Banks at End of Year | $ | 4,518.1 | $ | 5,332.0 | $ | 6,418.5 | |||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | |||||||||
Interest Paid | $ | 328.8 | $ | 181.6 | $ | 161.6 | |||
Income Taxes Paid | 441.2 | 754.2 | 390.0 | ||||||
Transfers from Loans to OREO | 8.2 | 14.2 | 13.0 |
92 2017 Annual Report | Northern Trust Corporation |
2017 Annual Report | Northern Trust Corporation 93 |
94 2017 Annual Report | Northern Trust Corporation |
2017 Annual Report | Northern Trust Corporation 95 |
96 2017 Annual Report | Northern Trust Corporation |
2017 Annual Report | Northern Trust Corporation 97 |
98 2017 Annual Report | Northern Trust Corporation |
2017 Annual Report | Northern Trust Corporation 99 |
100 2017 Annual Report | Northern Trust Corporation |
DECEMBER 31, 2017 | |||||||||
FINANCIAL INSTRUMENT | FAIR VALUE | VALUATION TECHNIQUE | UNOBSERVABLE INPUT | RANGE OF INPUTS | |||||
Auction Rate Securities | $ | 4.3 | million | Comparables | Price | $92 | – | $100 | |
Swaps Related to Sale of Certain Visa Class B Common Shares | $ | 29.7 | million | Discounted Cash Flow | Visa Class A Appreciation | 7.0 | % | – | 11.0% |
Conversion Rate | 1.63 | x | – | 1.65x | |||||
Expected Duration | 1.5 | – | 4.0 years |
DECEMBER 31, 2016 | |||||||||
FINANCIAL INSTRUMENT | FAIR VALUE | VALUATION TECHNIQUE | UNOBSERVABLE INPUT | RANGE OF INPUTS | |||||
Auction Rate Securities | $ | 4.7 | million | Comparables | Price | $84 | – | $99 | |
Swap Related to Sale of Certain Visa Class B Common Shares | $ | 25.2 | million | Discounted Cash Flow | Visa Class A Appreciation | 7.0 | % | – | 11.0% |
Conversion Rate | 1.63 | x | – | 1.65x | |||||
Expected Duration | 1.5 | – | 4.5 years |
2017 Annual Report | Northern Trust Corporation 101 |
DECEMBER 31, 2017 | ||||||||||||||||
(In Millions) | LEVEL 1 | LEVEL 2 | LEVEL 3 | NETTING | ASSETS/ LIABILITIES AT FAIR VALUE | |||||||||||
Securities | ||||||||||||||||
Available for Sale | ||||||||||||||||
U.S. Government | $ | 5,700.3 | $ | — | $ | — | $ | — | $ | 5,700.3 | ||||||
Obligations of States and Political Subdivisions | — | 746.4 | — | — | 746.4 | |||||||||||
Government Sponsored Agency | — | 18,676.6 | — | — | 18,676.6 | |||||||||||
Non-U.S. Government | — | 177.2 | — | — | 177.2 | |||||||||||
Corporate Debt | — | 2,993.0 | — | — | 2,993.0 | |||||||||||
Covered Bonds | — | 875.6 | — | — | 875.6 | |||||||||||
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds | — | 1,820.0 | — | — | 1,820.0 | |||||||||||
Other Asset-Backed | — | 2,291.3 | — | — | 2,291.3 | |||||||||||
Auction Rate | — | — | 4.3 | — | 4.3 | |||||||||||
Commercial Mortgage-Backed | — | 435.1 | — | — | 435.1 | |||||||||||
Other | — | 22.3 | — | — | 22.3 | |||||||||||
Total Available for Sale | 5,700.3 | 28,037.5 | 4.3 | — | 33,742.1 | |||||||||||
Trading Account | — | 0.5 | — | — | 0.5 | |||||||||||
Total Available for Sale and Trading Securities | 5,700.3 | 28,038.0 | 4.3 | — | 33,742.6 | |||||||||||
Other Assets | ||||||||||||||||
Derivative Assets | ||||||||||||||||
Foreign Exchange Contracts | — | 2,557.1 | — | — | 2,557.1 | |||||||||||
Interest Rate Contracts | — | 97.0 | — | — | 97.0 | |||||||||||
Total Derivative Assets | — | 2,654.1 | — | (1,860.0 | ) | 794.1 | ||||||||||
Other Liabilities | ||||||||||||||||
Derivative Liabilities | ||||||||||||||||
Foreign Exchange Contracts | — | 2,715.1 | — | — | 2,715.1 | |||||||||||
Interest Rate Contracts | — | 83.5 | — | — | 83.5 | |||||||||||
Other Financial Derivatives (1) | — | 0.7 | 29.7 | — | 30.4 | |||||||||||
Total Derivative Liabilities | $ | — | $ | 2,799.3 | $ | 29.7 | $ | (1,621.4 | ) | $ | 1,207.6 |
102 2017 Annual Report | Northern Trust Corporation |
DECEMBER 31, 2016 | ||||||||||||||||
(In Millions) | LEVEL 1 | LEVEL 2 | LEVEL 3 | NETTING | ASSETS/ LIABILITIES AT FAIR VALUE | |||||||||||
Securities | ||||||||||||||||
Available for Sale | ||||||||||||||||
U.S. Government | $ | 7,522.6 | $ | — | $ | — | $ | — | $ | 7,522.6 | ||||||
Obligations of States and Political Subdivisions | — | 885.2 | — | — | 885.2 | |||||||||||
Government Sponsored Agency | — | 17,892.8 | — | — | 17,892.8 | |||||||||||
Non-U.S. Government | — | 417.9 | — | — | 417.9 | |||||||||||
Corporate Debt | — | 3,765.2 | — | — | 3,765.2 | |||||||||||
Covered Bonds | — | 1,143.9 | — | — | 1,143.9 | |||||||||||
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds | — | 1,340.7 | — | — | 1,340.7 | |||||||||||
Residential Mortgage-Backed | — | — | — | — | — | |||||||||||
Other Asset-Backed | — | 2,085.1 | — | — | 2,085.1 | |||||||||||
Auction Rate | — | — | 4.7 | — | 4.7 | |||||||||||
Commercial Mortgage Backed | — | 471.6 | — | — | 471.6 | |||||||||||
Other | — | 50.1 | — | — | 50.1 | |||||||||||
Total Available for Sale | 7,522.6 | 28,052.5 | 4.7 | — | 35,579.8 | |||||||||||
Trading Account | — | 0.3 | — | — | 0.3 | |||||||||||
Total Available for Sale and Trading Securities | 7,522.6 | 28,052.8 | 4.7 | — | 35,580.1 | |||||||||||
Other Assets | ||||||||||||||||
Derivative Assets | ||||||||||||||||
Foreign Exchange Contracts | — | 3,609.6 | — | — | 3,609.6 | |||||||||||
Interest Rate Contracts | — | 247.2 | — | — | 247.2 | |||||||||||
Other Financial Derivative | — | — | — | — | — | |||||||||||
Total Derivatives Assets | — | 3,856.8 | — | (2,170.4 | ) | 1,686.4 | ||||||||||
Other Liabilities | ||||||||||||||||
Derivative Liabilities | ||||||||||||||||
Foreign Exchange Contracts | — | 3,242.9 | — | — | 3,242.9 | |||||||||||
Interest Rate Contracts | — | 108.0 | — | — | 108.0 | |||||||||||
Other Financial Derivative (1) | — | — | 25.2 | — | 25.2 | |||||||||||
Total Derivative Liabilities | $ | — | $ | 3,350.9 | $ | 25.2 | $ | (2,431.2 | ) | $ | 944.9 |
2017 Annual Report | Northern Trust Corporation 103 |
LEVEL 3 ASSETS | AUCTION RATE SECURITIES | |||||
(In Millions) | 2017 | 2016 | ||||
Fair Value at January 1 | $ | 4.7 | $ | 17.1 | ||
Total Gains (Losses): | ||||||
Included in Other Comprehensive Income (1) | 0.2 | (0.7 | ) | |||
Purchases, Issues, Sales, and Settlements | ||||||
Sales | — | (10.1 | ) | |||
Settlements | (0.6 | ) | (1.6 | ) | ||
Fair Value at December 31 | $ | 4.3 | $ | 4.7 |
LEVEL 3 LIABILITIES | SWAPS RELATED TO SALE OF CERTAIN VISA CLASS B COMMON SHARES | |||||
(In Millions) | 2017 | 2016 | ||||
Fair Value at January 1 | $ | 25.2 | $ | 10.8 | ||
Total (Gains) Losses: | ||||||
Included in Earnings (1) | 12.7 | 4.4 | ||||
Purchases, Issues, Sales, and Settlements | ||||||
Issuance | — | 14.9 | ||||
Settlements | (8.2 | ) | (4.9 | ) | ||
Fair Value at December 31 | $ | 29.7 | $ | 25.2 | ||
Unrealized (Gains) Losses Included in Earnings Related to Financial Instruments Held at December 31 (1) | $ | 11.4 | $ | 4.4 |
FINANCIAL INSTRUMENT | FAIR VALUE | VALUATION TECHNIQUE | UNOBSERVABLE INPUT | RANGE OF DISCOUNTS APPLIED | ||
Loans | $12.2 million | Market Approach | Discount to reflect realizable value | 15.0% | – | 25.0% |
OREO | $0.3 million | Market Approach | Discount to reflect realizable value | 15.0% | – | 20.0% |
104 2017 Annual Report | Northern Trust Corporation |
2017 Annual Report | Northern Trust Corporation 105 |
DECEMBER 31, 2017 | |||||||||||||||
FAIR VALUE | |||||||||||||||
(In Millions) | BOOK VALUE | TOTAL FAIR VALUE | LEVEL 1 | LEVEL 2 | LEVEL 3 | ||||||||||
ASSETS | |||||||||||||||
Cash and Due from Banks | $ | 4,518.1 | $ | 4,518.1 | $ | 4,518.1 | $ | — | $ | — | |||||
Federal Reserve and Other Central Bank Deposits | 40,479.1 | 40,479.1 | — | 40,479.1 | — | ||||||||||
Interest-Bearing Deposits with Banks | 5,611.9 | 5,611.9 | — | 5,611.9 | — | ||||||||||
Federal Funds Sold and Resell Agreements | 1,324.3 | 1,324.3 | — | 1,324.3 | — | ||||||||||
Securities | |||||||||||||||
Available for Sale (Note) | 33,742.1 | 33,742.1 | 5,700.3 | 28,037.5 | 4.3 | ||||||||||
Held to Maturity | 13,049.0 | 13,010.9 | 35.0 | 12,975.9 | — | ||||||||||
Trading Account | 0.5 | 0.5 | — | 0.5 | — | ||||||||||
Loans (excluding Leases) | |||||||||||||||
Held for Investment | 32,211.1 | 32,375.8 | — | — | 32,375.8 | ||||||||||
Held for Sale | 20.9 | 20.9 | — | — | 20.9 | ||||||||||
Client Security Settlement Receivables | 1,647.0 | 1,647.0 | — | 1,647.0 | — | ||||||||||
Other Assets | |||||||||||||||
Federal Reserve and Federal Home Loan Bank Stock | 223.1 | 223.1 | — | 223.1 | — | ||||||||||
Community Development Investments | 415.3 | 415.3 | — | 415.3 | — | ||||||||||
Employee Benefit and Deferred Compensation | 183.4 | 181.5 | 115.5 | 66.0 | — | ||||||||||
LIABILITIES | |||||||||||||||
Deposits | |||||||||||||||
Demand, Noninterest-Bearing, Savings and Money Market | $ | 45,566.3 | $ | 45,566.3 | $ | 45,566.3 | $ | — | $ | — | |||||
Savings Certificates and Other Time | 1,152.3 | 1,153.6 | — | 1,153.6 | — | ||||||||||
Non U.S. Offices Interest-Bearing | 65,672.2 | 65,672.2 | — | 65,672.2 | — | ||||||||||
Federal Funds Purchased | 2,286.1 | 2,286.1 | — | 2,286.1 | — | ||||||||||
Securities Sold under Agreements to Repurchase | 834.0 | 834.0 | — | 834.0 | — | ||||||||||
Other Borrowings | 6,051.1 | 6,052.9 | — | 6,052.9 | — | ||||||||||
Senior Notes | 1,497.3 | 1,528.4 | — | 1,528.4 | — | ||||||||||
Long Term Debt (excluding Leases) | |||||||||||||||
Subordinated Debt | 1,435.1 | 1,449.8 | — | 1,449.8 | — | ||||||||||
Federal Home Loan Bank Borrowings | — | — | — | — | — | ||||||||||
Floating Rate Capital Debt | 227.5 | 260.0 | — | 260.0 | — | ||||||||||
Other Liabilities | |||||||||||||||
Standby Letters of Credit | 30.3 | 30.3 | — | — | 30.3 | ||||||||||
Loan Commitments | 33.1 | 33.1 | — | — | 33.1 | ||||||||||
DERIVATIVE INSTRUMENTS | |||||||||||||||
Asset/Liability Management | |||||||||||||||
Foreign Exchange Contracts | |||||||||||||||
Assets | $ | 30.1 | $ | 30.1 | $ | — | $ | 30.1 | $ | — | |||||
Liabilities | 192.6 | 192.6 | — | 192.6 | — | ||||||||||
Interest Rate Contracts | |||||||||||||||
Assets | 31.9 | 31.9 | — | 31.9 | — | ||||||||||
Liabilities | 19.4 | 19.4 | — | 19.4 | — | ||||||||||
Other Financial Derivatives | |||||||||||||||
Assets | — | — | — | — | — | ||||||||||
Liabilities (1) | 30.4 | 30.4 | — | 0.7 | 29.7 | ||||||||||
Client-Related and Trading | |||||||||||||||
Foreign Exchange Contracts | |||||||||||||||
Assets | 2,527.0 | 2,527.0 | — | 2,527.0 | — | ||||||||||
Liabilities | 2,522.5 | 2,522.5 | — | 2,522.5 | — | ||||||||||
Interest Rate Contracts | |||||||||||||||
Assets | 65.1 | 65.1 | — | 65.1 | — | ||||||||||
Liabilities | 64.1 | 64.1 | — | 64.1 | — |
106 2017 Annual Report | Northern Trust Corporation |
DECEMBER 31, 2016 | |||||||||||||||
FAIR VALUE | |||||||||||||||
(In Millions) | BOOK VALUE | TOTAL FAIR VALUE | LEVEL 1 | LEVEL 2 | LEVEL 3 | ||||||||||
ASSETS | |||||||||||||||
Cash and Due from Banks | $ | 5,332.0 | $ | 5,332.0 | $ | 5,332.0 | $ | — | $ | — | |||||
Federal Reserve and Other Central Bank Deposits | 26,674.2 | 26,674.2 | — | 26,674.2 | — | ||||||||||
Interest-Bearing Deposits with Banks | 4,800.6 | 4,800.6 | — | 4,800.6 | — | ||||||||||
Federal Funds Sold and Resell Agreements | 1,974.3 | 1,974.3 | — | 1,974.3 | — | ||||||||||
Securities | |||||||||||||||
Available for Sale (Note) | 35,579.8 | 35,579.8 | 7,522.6 | 28,052.5 | 4.7 | ||||||||||
Held to Maturity | 8,921.1 | 8,905.1 | 15.0 | 8,890.1 | — | ||||||||||
Trading Account | 0.3 | 0.3 | — | 0.3 | — | ||||||||||
Loans (excluding Leases) | |||||||||||||||
Held for Investment | 33,354.1 | 33,471.3 | — | — | 33,471.3 | ||||||||||
Held for Sale | 13.4 | 13.4 | — | — | 13.4 | ||||||||||
Client Security Settlement Receivables | 1,043.7 | 1,043.7 | — | 1,043.7 | — | ||||||||||
Other Assets | |||||||||||||||
Federal Reserve and Federal Home Loan Bank Stock | 203.1 | 203.1 | — | 203.1 | — | ||||||||||
Community Development Investments | 218.9 | 215.5 | — | 215.5 | — | ||||||||||
Employee Benefit and Deferred Compensation | 166.2 | 162.5 | 107.2 | 55.3 | — | ||||||||||
LIABILITES | |||||||||||||||
Deposits | |||||||||||||||
Demand, Noninterest-Bearing, Savings and Money Market | $ | 46,671.9 | $ | 46,671.9 | $ | 46,671.9 | $ | — | $ | — | |||||
Savings Certificates and Other Time | 1,331.7 | 1,337.5 | — | 1,337.5 | — | ||||||||||
Non U.S. Offices Interest-Bearing | 53,648.1 | 53,648.1 | — | 53,648.1 | — | ||||||||||
Federal Funds Purchased | 204.8 | 204.8 | — | 204.8 | — | ||||||||||
Securities Sold under Agreements to Repurchase | 473.7 | 473.7 | — | 473.7 | — | ||||||||||
Other Borrowings | 5,109.5 | 5,113.4 | — | 5,113.4 | — | ||||||||||
Senior Notes | 1,496.6 | 1,535.5 | — | 1,535.5 | — | ||||||||||
Long Term Debt (excluding Leases) | |||||||||||||||
Subordinated Debt | 1,307.9 | 1,316.0 | — | 1,316.0 | — | ||||||||||
Floating Rate Capital Debt | 277.4 | 251.0 | — | 251.0 | — | ||||||||||
Other Liabilities | |||||||||||||||
Standby Letters of Credit | 37.2 | 37.2 | — | — | 37.2 | ||||||||||
Loan Commitments | 41.2 | 41.2 | — | — | 41.2 | ||||||||||
DERIVATIVE INSTRUMENTS | |||||||||||||||
Asset/Liability Management | |||||||||||||||
Foreign Exchange Contracts | |||||||||||||||
Assets | $ | 335.4 | $ | 335.4 | $ | — | $ | 335.4 | $ | — | |||||
Liabilities | 21.2 | 21.2 | — | 21.2 | — | ||||||||||
Interest Rate Contracts | |||||||||||||||
Assets | 160.2 | 160.2 | — | 160.2 | — | ||||||||||
Liabilities | 22.8 | 22.8 | — | 22.8 | — | ||||||||||
Other Financial Derivatives | |||||||||||||||
Assets | — | — | — | — | — | ||||||||||
Liabilities (1) | 25.2 | 25.2 | — | — | 25.2 | ||||||||||
Client-Related and Trading | |||||||||||||||
Foreign Exchange Contracts | |||||||||||||||
Assets | 3,274.2 | 3,274.2 | — | 3,274.2 | — | ||||||||||
Liabilities | 3,221.7 | 3,221.7 | — | 3,221.7 | — | ||||||||||
Interest Rate Contracts | |||||||||||||||
Assets | 87.0 | 87.0 | — | 87.0 | — | ||||||||||
Liabilities | 85.2 | 85.2 | — | 85.2 | — |
2017 Annual Report | Northern Trust Corporation 107 |
DECEMBER 31, 2017 | ||||||||||||
(In Millions) | AMORTIZED COST | GROSS UNREALIZED GAINS | GROSS UNREALIZED LOSSES | FAIR VALUE | ||||||||
U.S. Government | $ | 5,714.4 | $ | 18.0 | $ | 32.1 | $ | 5,700.3 | ||||
Obligations of States and Political Subdivisions | 749.9 | — | 3.5 | 746.4 | ||||||||
Government Sponsored Agency | 18,745.3 | 39.9 | 108.6 | 18,676.6 | ||||||||
Non-U.S. Government | 179.1 | — | 1.9 | 177.2 | ||||||||
Corporate Debt | 3,013.7 | 2.2 | 22.9 | 2,993.0 | ||||||||
Covered Bonds | 879.0 | 1.0 | 4.4 | 875.6 | ||||||||
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds | 1,819.8 | 4.0 | 3.8 | 1,820.0 | ||||||||
Other Asset-Backed | 2,297.7 | 1.5 | 7.9 | 2,291.3 | ||||||||
Auction Rate | 4.4 | — | 0.1 | 4.3 | ||||||||
Commercial Mortgage-Backed | 439.2 | — | 4.1 | 435.1 | ||||||||
Other | 22.3 | — | — | 22.3 | ||||||||
Total | $ | 33,864.8 | $ | 66.6 | $ | 189.3 | $ | 33,742.1 |
DECEMBER 31, 2016 | ||||||||||||
(In Millions) | AMORTIZED COST | GROSS UNREALIZED GAINS | GROSS UNREALIZED LOSSES | FAIR VALUE | ||||||||
U.S. Government | $ | 7,514.5 | $ | 22.4 | $ | 14.3 | $ | 7,522.6 | ||||
Obligations of States and Political Subdivisions | 890.8 | — | 5.6 | 885.2 | ||||||||
Government Sponsored Agency | 17,914.1 | 49.3 | 70.6 | 17,892.8 | ||||||||
Non-U.S. Government | 420.0 | — | 2.1 | 417.9 | ||||||||
Corporate Debt | 3,787.4 | 2.6 | 24.8 | 3,765.2 | ||||||||
Covered Bonds | 1,148.6 | 0.8 | 5.5 | 1,143.9 | ||||||||
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds | 1,343.6 | 0.9 | 3.8 | 1,340.7 | ||||||||
Other Asset-Backed | 2,083.7 | 2.7 | 1.3 | 2,085.1 | ||||||||
Auction Rate | 5.0 | — | 0.3 | 4.7 | ||||||||
Commercial Mortgage-Backed | 474.1 | — | 2.5 | 471.6 | ||||||||
Other | 50.1 | — | — | 50.1 | ||||||||
Total | $ | 35,631.9 | $ | 78.7 | $ | 130.8 | $ | 35,579.8 |
DECEMBER 31, 2017 | DECEMBER 31, 2016 | |||||||||||||
(In Millions) | AMORTIZED COST | FAIR VALUE | AMORTIZED COST | FAIR VALUE | ||||||||||
Due in One Year or Less | $ | 6,249.5 | $ | 6,227.0 | $ | 7,880.8 | $ | 7,876.6 | ||||||
Due After One Year Through Five Years | 20,017.2 | 19,937.8 | 21,094.8 | 21,058.7 | ||||||||||
Due After Five Years Through Ten Years | 6,545.3 | 6,535.1 | 5,759.1 | 5,753.6 | ||||||||||
Due After Ten Years | 1,052.8 | 1,042.2 | 897.2 | 890.9 | ||||||||||
Total | $ | 33,864.8 | $ | 33,742.1 | $ | 35,631.9 | $ | 35,579.8 |
108 2017 Annual Report | Northern Trust Corporation |
DECEMBER 31, 2017 | ||||||||||||
(In Millions) | AMORTIZED COST | GROSS UNREALIZED GAINS | GROSS UNREALIZED LOSSES | FAIR VALUE | ||||||||
U.S. Government | $ | 35.0 | $ | — | $ | — | $ | 35.0 | ||||
Obligations of States and Political Subdivisions | 34.6 | 1.4 | 0.1 | 35.9 | ||||||||
Government Sponsored Agency | 5.8 | 0.4 | — | 6.2 | ||||||||
Corporate Debt | 431.5 | 1.0 | 0.4 | 432.1 | ||||||||
Covered Bonds | 2,821.5 | 11.9 | 3.7 | 2,829.7 | ||||||||
Non-U.S. Government | 5,536.2 | 1.3 | 6.0 | 5,531.5 | ||||||||
Certificates of Deposit | 43.8 | — | 0.1 | 43.7 | ||||||||
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds | 2,788.9 | 5.4 | 4.1 | 2,790.2 | ||||||||
Other Asset-Backed | 1,175.8 | 0.6 | 0.5 | 1,175.9 | ||||||||
Other | 175.9 | — | 45.2 | 130.7 | ||||||||
Total | $ | 13,049.0 | $ | 22.0 | $ | 60.1 | $ | 13,010.9 |
DECEMBER 31, 2016 | ||||||||||||
(In Millions) | AMORTIZED COST | GROSS UNREALIZED GAINS | GROSS UNREALIZED LOSSES | FAIR VALUE | ||||||||
U.S. Government | $ | 15.0 | $ | — | $ | — | $ | 15.0 | ||||
Obligations of States and Political Subdivisions | 63.6 | 2.7 | — | 66.3 | ||||||||
Government Sponsored Agency | 7.4 | 0.5 | — | 7.9 | ||||||||
Corporate Debt | 231.2 | 0.2 | 0.4 | 231.0 | ||||||||
Covered Bonds | 2,051.6 | 10.1 | 3.7 | 2,058.0 | ||||||||
Non-U.S. Government | 3,517.5 | 4.9 | 2.3 | 3,520.1 | ||||||||
Certificates of Deposit | 606.0 | 0.2 | 0.1 | 606.1 | ||||||||
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds | 2,154.7 | 10.5 | 2.8 | 2,162.4 | ||||||||
Other Asset-Backed | 143.4 | 0.1 | — | 143.5 | ||||||||
Other | 130.7 | — | 35.9 | 94.8 | ||||||||
Total | $ | 8,921.1 | $ | 29.2 | $ | 45.2 | $ | 8,905.1 |
DECEMBER 31, 2017 | DECEMBER 31, 2016 | |||||||||||||
(In Millions) | AMORTIZED COST | FAIR VALUE | AMORTIZED COST | FAIR VALUE | ||||||||||
Due in One Year or Less | $ | 5,691.9 | $ | 5,695.8 | $ | 3,631.6 | $ | 3,635.9 | ||||||
Due After One Year Through Five Years | 6,667.8 | 6,663.9 | 5,072.7 | 5,081.6 | ||||||||||
Due After Five Years Through Ten Years | 612.2 | 606.3 | 158.7 | 156.1 | ||||||||||
Due After Ten Years | 77.1 | 44.9 | 58.1 | 31.5 | ||||||||||
Total | $ | 13,049.0 | $ | 13,010.9 | $ | 8,921.1 | $ | 8,905.1 |
2017 Annual Report | Northern Trust Corporation 109 |
AS OF DECEMBER 31, 2017 | 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 | $ | 3,595.0 | $ | 32.1 | $ | — | $ | — | $ | 3,595.0 | $ | 32.1 | ||||||
Obligations of States and Political Subdivisions | 687.8 | 3.3 | 52.0 | 0.3 | 739.8 | 3.6 | ||||||||||||
Government Sponsored Agency | 6,495.6 | 81.3 | 2,998.9 | 27.3 | 9,494.5 | 108.6 | ||||||||||||
Non-U.S. Government | 5,181.8 | 7.9 | — | — | 5,181.8 | 7.9 | ||||||||||||
Corporate Debt | 1,547.3 | 9.3 | 922.3 | 14.0 | 2,469.6 | 23.3 | ||||||||||||
Covered Bonds | 967.5 | 7.2 | 89.1 | 0.9 | 1,056.6 | 8.1 | ||||||||||||
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds | 1,692.4 | 7.5 | 235.8 | 0.4 | 1,928.2 | 7.9 | ||||||||||||
Other Asset-Backed | 2,453.7 | 8.3 | 29.9 | 0.1 | 2,483.6 | 8.4 | ||||||||||||
Certificates of Deposit | 43.7 | 0.1 | — | — | 43.7 | 0.1 | ||||||||||||
Auction Rate | — | — | 3.1 | 0.1 | 3.1 | 0.1 | ||||||||||||
Commercial Mortgage-Backed | 233.5 | 2.6 | 201.6 | 1.5 | 435.1 | 4.1 | ||||||||||||
Other | 82.9 | 27.3 | 48.1 | 17.9 | 131.0 | 45.2 | ||||||||||||
Total | $ | 22,981.2 | $ | 186.9 | $ | 4,580.8 | $ | 62.5 | $ | 27,562.0 | $ | 249.4 |
AS OF DECEMBER 31, 2016 | 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 | $ | 1,603.0 | $ | 14.3 | $ | — | $ | — | $ | 1,603.0 | $ | 14.3 | ||||||
Obligations of States and Political Subdivisions | 865.3 | 5.6 | — | — | 865.3 | 5.6 | ||||||||||||
Government Sponsored Agency | 8,252.5 | 58.5 | 2,121.0 | 12.1 | 10,373.5 | 70.6 | ||||||||||||
Non-U.S. Government | 2,957.1 | 4.4 | — | — | 2,957.1 | 4.4 | ||||||||||||
Corporate Debt | 1,601.7 | 11.2 | 1,054.4 | 14.0 | 2,656.1 | 25.2 | ||||||||||||
Covered Bonds | 809.0 | 8.6 | 138.9 | 0.6 | 947.9 | 9.2 | ||||||||||||
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds | 1,136.1 | 5.7 | 249.1 | 0.9 | 1,385.2 | 6.6 | ||||||||||||
Other Asset-Backed | 584.3 | 1.3 | — | — | 584.3 | 1.3 | ||||||||||||
Certificates of Deposit | 81.4 | 0.1 | — | — | 81.4 | 0.1 | ||||||||||||
Auction Rate | 0.4 | 0.1 | 4.3 | 0.2 | 4.7 | 0.3 | ||||||||||||
Commercial Mortgage-Backed | 471.5 | 2.5 | — | — | 471.5 | 2.5 | ||||||||||||
Other | 50.5 | 17.9 | 59.7 | 18.0 | 110.2 | 35.9 | ||||||||||||
Total | $ | 18,412.8 | $ | 130.2 | $ | 3,627.4 | $ | 45.8 | $ | 22,040.2 | $ | 176.0 |
110 2017 Annual Report | Northern Trust Corporation |
DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||
Changes in Other-Than-Temporary Impairment Losses(1) | $ | (0.2 | ) | $ | (3.7 | ) | $ | — | |
Noncredit-related Losses Recorded in / (Reclassified from) OCI(2) | — | — | — | ||||||
Net Impairment Losses Recognized in Earnings | $ | (0.2 | ) | $ | (3.7 | ) | $ | — |
2017 Annual Report | Northern Trust Corporation 111 |
YEAR ENDED DECEMBER 31, | ||||||
(In Millions) | 2017 | 2016 | ||||
Cumulative Credit-Related Losses on Securities Held – Beginning of Year | $ | 3.4 | $ | 5.2 | ||
Plus: Losses on Newly Identified Impairments | 0.1 | 0.5 | ||||
Additional Losses on Previously Identified Impairments | 0.1 | 3.2 | ||||
Less: Current and Prior Period Losses on Securities Sold or Matured During the Year | — | (5.5 | ) | |||
Cumulative Credit-Related Losses on Securities Held – End of Year | $ | 3.6 | $ | 3.4 |
($ In Millions) | 2017 | 2016 | ||||
Balance at December 31 | $ | 1,303.3 | $ | 1,967.5 | ||
Average Balance During the Year | 1,832.0 | 1,764.1 | ||||
Average Interest Rate Earned During the Year | 1.48 | % | 1.04 | % | ||
Maximum Month-End Balance During the Year | 2,064.1 | 2,050.9 |
($ In Millions) | 2017 | 2016 | ||||
Balance at December 31 | $ | 834.0 | $ | 473.7 | ||
Average Balance During the Year | 738.9 | 847.1 | ||||
Average Interest Rate Paid During the Year | 0.81 | % | 0.27 | % | ||
Maximum Month-End Balance During the Year | 834.0 | 565.5 |
112 2017 Annual Report | Northern Trust Corporation |
DECEMBER 31, | ||||||
(In Millions) | 2017 | 2016 | ||||
Commercial | ||||||
Commercial and Institutional | $ | 9,042.2 | $ | 9,287.4 | ||
Commercial Real Estate | 3,482.7 | 4,002.5 | ||||
Non-U.S. | 1,538.5 | 1,877.8 | ||||
Lease Financing, net | 229.2 | 293.9 | ||||
Other | 265.4 | 205.1 | ||||
Total Commercial | 14,558.0 | 15,666.7 | ||||
Personal | ||||||
Private Client | 10,753.1 | 10,052.0 | ||||
Residential Real Estate | 7,247.6 | 8,077.5 | ||||
Other | 33.5 | 25.9 | ||||
Total Personal | 18,034.2 | 18,155.4 | ||||
Total Loans and Leases | $ | 32,592.2 | $ | 33,822.1 | ||
Allowance for Credit Losses Assigned to Loans and Leases | (131.2 | ) | (161.0 | ) | ||
Net Loans and Leases | $ | 32,461.0 | $ | 33,661.1 |
2017 Annual Report | Northern Trust Corporation 113 |
DECEMBER 31, | ||||||
(In Millions) | 2017 | 2016 | ||||
Direct Finance Leases | ||||||
Lease Receivable | $ | 26.6 | $ | 37.6 | ||
Residual Value | 72.4 | 75.3 | ||||
Initial Direct Costs | 0.7 | 1.0 | ||||
Unearned Income | (1.5 | ) | (3.5 | ) | ||
Investment in Direct Finance Leases | 98.2 | 110.4 | ||||
Leveraged Leases | ||||||
Net Rental Receivable | 76.1 | 110.1 | ||||
Residual Value | 85.6 | 106.2 | ||||
Unearned Income | (30.7 | ) | (32.8 | ) | ||
Investment in Leveraged Leases | 131.0 | 183.5 | ||||
Lease Financing, net | $ | 229.2 | $ | 293.9 |
(In Millions) | FUTURE MINIMUM LEASE PAYMENTS | ||
2018 | $ | 11.2 | |
2019 | 9.0 | ||
2020 | 3.9 | ||
2021 | 2.1 | ||
2022 | — |
• | 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. |
114 2017 Annual Report | Northern Trust Corporation |
DECEMBER 31, 2017 | DECEMBER 31, 2016 | |||||||||||||||||||||||
(In Millions) | 1 TO 3 CATEGORY | 4 TO 5 CATEGORY | 6 TO 9 CATEGORY (WATCH LIST) | TOTAL | 1 TO 3 CATEGORY | 4 TO 5 CATEGORY | 6 TO 9 CATEGORY (WATCH LIST) | TOTAL | ||||||||||||||||
Commercial | ||||||||||||||||||||||||
Commercial and Institutional | $ | 5,832.9 | $ | 3,133.4 | $ | 75.9 | $ | 9,042.2 | $ | 6,187.2 | $ | 3,013.9 | $ | 86.3 | $ | 9,287.4 | ||||||||
Commercial Real Estate | 1,280.7 | 2,187.5 | 14.5 | 3,482.7 | 1,825.7 | 2,134.8 | 42.0 | 4,002.5 | ||||||||||||||||
Non-U.S. | 606.6 | 930.5 | 1.4 | 1,538.5 | 602.8 | 1,273.5 | 1.5 | 1,877.8 | ||||||||||||||||
Lease Financing, net | 191.4 | 37.8 | — | 229.2 | 214.3 | 79.6 | — | 293.9 | ||||||||||||||||
Other | 155.5 | 109.9 | — | 265.4 | 135.5 | 67.9 | 1.7 | 205.1 | ||||||||||||||||
Total Commercial | 8,067.1 | 6,399.1 | 91.8 | 14,558.0 | 8,965.5 | 6,569.7 | 131.5 | 15,666.7 | ||||||||||||||||
Personal | ||||||||||||||||||||||||
Private Client | 6,716.0 | 4,027.8 | 9.3 | 10,753.1 | 6,373.2 | 3,668.4 | 10.4 | 10,052.0 | ||||||||||||||||
Residential Real Estate | 2,960.5 | 3,978.8 | 308.3 | 7,247.6 | 2,723.8 | 5,008.5 | 345.2 | 8,077.5 | ||||||||||||||||
Other | 19.6 | 13.9 | — | 33.5 | 17.1 | 8.5 | 0.3 | 25.9 | ||||||||||||||||
Total Personal | 9,696.1 | 8,020.5 | 317.6 | 18,034.2 | 9,114.1 | 8,685.4 | 355.9 | 18,155.4 | ||||||||||||||||
Total Loans and Leases | $ | 17,763.2 | $ | 14,419.6 | $ | 409.4 | $ | 32,592.2 | $ | 18,079.6 | $ | 15,255.1 | $ | 487.4 | $ | 33,822.1 |
2017 Annual Report | Northern Trust Corporation 115 |
(In Millions) | CURRENT | 30 – 59 DAYS PAST DUE | 60 – 89 DAYS PAST DUE | 90 DAYS OR MORE PAST DUE | TOTAL PERFORMING | NONPERFORMING | TOTAL LOANS AND LEASES | ||||||||||||||
December 31, 2017 | |||||||||||||||||||||
Commercial | |||||||||||||||||||||
Commercial and Institutional | $ | 8,999.4 | $ | 13.3 | $ | 3.1 | $ | 0.4 | $ | 9,016.2 | $ | 26.0 | $ | 9,042.2 | |||||||
Commercial Real Estate | 3,455.3 | 14.1 | 4.1 | 0.9 | 3,474.4 | 8.3 | 3,482.7 | ||||||||||||||
Non-U.S. | 1,538.3 | 0.2 | — | — | 1,538.5 | — | 1,538.5 | ||||||||||||||
Lease Financing, net | 229.2 | — | — | — | 229.2 | — | 229.2 | ||||||||||||||
Other | 265.4 | — | — | — | 265.4 | — | 265.4 | ||||||||||||||
Total Commercial | 14,487.6 | 27.6 | 7.2 | 1.3 | 14,523.7 | 34.3 | 14,558.0 | ||||||||||||||
Personal | |||||||||||||||||||||
Private Client | 10,687.5 | 55.3 | 9.7 | 0.6 | 10,753.1 | — | 10,753.1 | ||||||||||||||
Residential Real Estate | 7,059.4 | 53.8 | 11.9 | 6.1 | 7,131.2 | 116.4 | 7,247.6 | ||||||||||||||
Other | 33.5 | — | — | — | 33.5 | — | 33.5 | ||||||||||||||
Total Personal | 17,780.4 | 109.1 | 21.6 | 6.7 | 17,917.8 | 116.4 | 18,034.2 | ||||||||||||||
Total Loans and Leases | $ | 32,268.0 | $ | 136.7 | $ | 28.8 | $ | 8.0 | $ | 32,441.5 | $ | 150.7 | $ | 32,592.2 | |||||||
Other Real Estate Owned | $ | 4.6 | |||||||||||||||||||
Total Nonperforming Assets | $ | 155.3 |
(In Millions) | CURRENT | 30 – 59 DAYS PAST DUE | 60 – 89 DAYS PAST DUE | 90 DAYS OR MORE PAST DUE | TOTAL PERFORMING | NONPERFORMING | TOTAL LOANS AND LEASES | ||||||||||||||
December 31, 2016 | |||||||||||||||||||||
Commercial | |||||||||||||||||||||
Commercial and Institutional | $ | 9,269.8 | $ | 5.3 | $ | 1.9 | $ | 1.2 | $ | 9,278.2 | $ | 9.2 | $ | 9,287.4 | |||||||
Commercial Real Estate | 3,974.4 | 10.9 | 1.0 | 4.6 | 3,990.9 | 11.6 | 4,002.5 | ||||||||||||||
Non-U.S. | 1,877.7 | 0.1 | — | — | 1,877.8 | — | 1,877.8 | ||||||||||||||
Lease Financing, net | 293.9 | — | — | — | 293.9 | — | 293.9 | ||||||||||||||
Other | 205.1 | — | — | — | 205.1 | — | 205.1 | ||||||||||||||
Total Commercial | 15,620.9 | 16.3 | 2.9 | 5.8 | 15,645.9 | 20.8 | 15,666.7 | ||||||||||||||
Personal | |||||||||||||||||||||
Private Client | 9,988.7 | 40.8 | 8.5 | 13.7 | 10,051.7 | 0.3 | 10,052.0 | ||||||||||||||
Residential Real Estate | 7,875.9 | 44.5 | 6.5 | 11.5 | 7,938.4 | 139.1 | 8,077.5 | ||||||||||||||
Other | 25.9 | — | — | — | 25.9 | — | 25.9 | ||||||||||||||
Total Personal | 17,890.5 | 85.3 | 15.0 | 25.2 | 18,016.0 | 139.4 | 18,155.4 | ||||||||||||||
Total Loans and Leases | $ | 33,511.4 | $ | 101.6 | $ | 17.9 | $ | 31.0 | $ | 33,661.9 | $ | 160.2 | $ | 33,822.1 | |||||||
Other Real Estate Owned | $ | 5.2 | |||||||||||||||||||
Total Nonperforming Assets | $ | 165.4 |
116 2017 Annual Report | Northern Trust Corporation |
AS OF DECEMBER 31, 2017 | AS OF DECEMBER 31, 2016 | |||||||||||||||||
(In Millions) | RECORDED INVESTMENT | UNPAID PRINCIPAL BALANCE | SPECIFIC ALLOWANCE | RECORDED INVESTMENT | UNPAID PRINCIPAL BALANCE | SPECIFIC ALLOWANCE | ||||||||||||
With no related specific allowance | ||||||||||||||||||
Commercial and Institutional | $ | 24.9 | $ | 30.3 | $ | — | $ | 7.9 | $ | 8.7 | $ | — | ||||||
Commercial Real Estate | 5.7 | 7.6 | — | 14.7 | 18.6 | — | ||||||||||||
Residential Real Estate | 90.9 | 124.9 | — | 125.5 | 164.3 | — | ||||||||||||
Private Client | 0.7 | 0.7 | — | 0.3 | 0.3 | — | ||||||||||||
With a related specific allowance | ||||||||||||||||||
Commercial and Institutional | 0.5 | 5.4 | 0.5 | — | — | — | ||||||||||||
Commercial Real Estate | 2.8 | 2.8 | 0.6 | — | — | — | ||||||||||||
Residential Real Estate | 14.3 | 14.9 | 4.3 | 7.7 | 7.9 | 2.1 | ||||||||||||
Total | ||||||||||||||||||
Commercial | 33.9 | 46.1 | 1.1 | 22.6 | 27.3 | — | ||||||||||||
Personal | 105.9 | 140.5 | 4.3 | 133.5 | 172.5 | 2.1 | ||||||||||||
Total | $ | 139.8 | $ | 186.6 | $ | 5.4 | $ | 156.1 | $ | 199.8 | $ | 2.1 |
YEAR ENDED DECEMBER 31, 2017 | YEAR ENDED DECEMBER 31, 2016 | |||||||||||
(In Millions) | AVERAGE RECORDED INVESTMENT | INTEREST INCOME RECOGNIZED | AVERAGE RECORDED INVESTMENT | INTEREST INCOME RECOGNIZED | ||||||||
With no related specific allowance | ||||||||||||
Commercial and Institutional | $ | 8.7 | $ | — | $ | 8.6 | $ | — | ||||
Commercial Real Estate | 9.2 | 0.1 | 17.0 | 0.3 | ||||||||
Lease Financing, net | — | — | 0.6 | 0.1 | ||||||||
Residential Real Estate | 105.0 | 1.5 | 121.4 | 1.9 | ||||||||
Private Client | 0.2 | — | 1.2 | — | ||||||||
With a related specific allowance | ||||||||||||
Commercial and Institutional | 6.5 | — | 7.6 | — | ||||||||
Commercial Real Estate | 2.6 | — | — | — | ||||||||
Lease Financing, net | — | — | 1.2 | — | ||||||||
Residential Real Estate | 17.0 | — | 2.1 | — | ||||||||
Total | ||||||||||||
Commercial | 27.0 | 0.1 | 35.0 | 0.4 | ||||||||
Personal | 122.2 | 1.5 | 124.7 | 1.9 | ||||||||
Total | $ | 149.2 | $ | 1.6 | $ | 159.7 | $ | 2.3 |
2017 Annual Report | Northern Trust Corporation 117 |
($ In Millions) | NUMBER OF LOANS AND LEASES | RECORDED INVESTMENT | UNPAID PRINCIPAL BALANCE | |||||
December 31, 2017 | ||||||||
Commercial | ||||||||
Commercial and Institutional | 3 | $ | 0.4 | $ | 1.4 | |||
Commercial Real Estate | 2 | 1.8 | 1.8 | |||||
Total Commercial | 5 | 2.2 | 3.2 | |||||
Personal | ||||||||
Residential Real Estate | 66 | 22.1 | 22.8 | |||||
Private Client | 3 | 0.2 | 0.5 | |||||
Total Personal | 69 | 22.3 | 23.3 | |||||
Total Loans and Leases | 74 | $ | 24.5 | $ | 26.5 |
($ In Millions) | NUMBER OF LOANS AND LEASES | RECORDED INVESTMENT | UNPAID PRINCIPAL BALANCE | |||||
December 31, 2016 | ||||||||
Commercial | ||||||||
Commercial and Institutional | 7 | $ | 4.3 | $ | 6.5 | |||
Commercial Real Estate | 7 | 8.7 | 11.0 | |||||
Total Commercial | 14 | 13.0 | 17.5 | |||||
Personal | ||||||||
Residential Real Estate | 73 | 22.2 | 23.5 | |||||
Private Client | 2 | 2.1 | 2.1 | |||||
Total Personal | 75 | 24.3 | 25.6 | |||||
Total Loans and Leases | 89 | $ | 37.3 | $ | 43.1 |
118 2017 Annual Report | Northern Trust Corporation |
2017 | 2016 | 2015 | |||||||||||||||||||||||||
(In Millions) | COMMERCIAL | PERSONAL | TOTAL | COMMERCIAL | PERSONAL | TOTAL | COMMERCIAL | PERSONAL | TOTAL | ||||||||||||||||||
Balance at Beginning of Year | $ | 104.9 | $ | 87.1 | $ | 192.0 | $ | 114.8 | $ | 118.5 | $ | 233.3 | $ | 169.7 | $ | 126.2 | $ | 295.9 | |||||||||
Charge-Offs | (11.4 | ) | (10.1 | ) | (21.5 | ) | (16.6 | ) | (10.7 | ) | (27.3 | ) | (13.1 | ) | (17.6 | ) | (30.7 | ) | |||||||||
Recoveries | 5.5 | 5.8 | 11.3 | 4.8 | 7.3 | 12.1 | 5.5 | 5.7 | 11.2 | ||||||||||||||||||
Net (Charge-Offs) Recoveries | (5.9 | ) | (4.3 | ) | (10.2 | ) | (11.8 | ) | (3.4 | ) | (15.2 | ) | (7.6 | ) | (11.9 | ) | (19.5 | ) | |||||||||
Provision for Credit Losses | (18.2 | ) | (9.8 | ) | (28.0 | ) | 2.0 | (28.0 | ) | (26.0 | ) | (47.2 | ) | 4.2 | (43.0 | ) | |||||||||||
Effects of Foreign Exchange Rates | — | — | — | (0.1 | ) | — | (0.1 | ) | (0.1 | ) | — | (0.1 | ) | ||||||||||||||
Balance at End of Year | $ | 80.8 | $ | 73.0 | $ | 153.8 | $ | 104.9 | $ | 87.1 | $ | 192.0 | $ | 114.8 | $ | 118.5 | $ | 233.3 | |||||||||
Allowance for Credit Losses Assigned to: | |||||||||||||||||||||||||||
Loans and Leases | $ | 63.5 | $ | 67.7 | $ | 131.2 | $ | 83.7 | $ | 77.3 | $ | 161.0 | $ | 86.3 | $ | 107.5 | $ | 193.8 | |||||||||
Undrawn Commitments and Standby Letters of Credit | 17.3 | 5.3 | 22.6 | 21.2 | 9.8 | 31.0 | 28.5 | 11.0 | 39.5 | ||||||||||||||||||
Total Allowance for Credit Losses | $ | 80.8 | $ | 73.0 | $ | 153.8 | $ | 104.9 | $ | 87.1 | $ | 192.0 | $ | 114.8 | $ | 118.5 | $ | 233.3 |
2017 Annual Report | Northern Trust Corporation 119 |
(In Millions) | COMMERCIAL | PERSONAL | TOTAL | ||||||
December 31, 2017 | |||||||||
Loans and Leases | |||||||||
Specifically Evaluated for Impairment | $ | 33.9 | $ | 105.9 | $ | 139.8 | |||
Evaluated for Inherent Impairment | 14,524.1 | 17,928.3 | 32,452.4 | ||||||
Total Loans and Leases | 14,558.0 | 18,034.2 | 32,592.2 | ||||||
Allowance for Credit Losses on Credit Exposures | |||||||||
Specifically Evaluated for Impairment | 1.1 | 4.3 | 5.4 | ||||||
Evaluated for Inherent Impairment | 62.4 | 63.4 | 125.8 | ||||||
Allowance Assigned to Loans and Leases | 63.5 | 67.7 | 131.2 | ||||||
Allowance for Undrawn Exposures | |||||||||
Commitments and Standby Letters of Credit | 17.3 | 5.3 | 22.6 | ||||||
Total Allowance for Credit Losses | $ | 80.8 | $ | 73.0 | $ | 153.8 |
(In Millions) | COMMERCIAL | PERSONAL | TOTAL | ||||||
December 31, 2016 | |||||||||
Loans and Leases | |||||||||
Specifically Evaluated for Impairment | $ | 46.9 | $ | 109.2 | $ | 156.1 | |||
Evaluated for Inherent Impairment | 15,619.8 | 18,046.2 | 33,666.0 | ||||||
Total Loans and Leases | 15,666.7 | 18,155.4 | 33,822.1 | ||||||
Allowance for Credit Losses on Credit Exposures | |||||||||
Specifically Evaluated for Impairment | — | 2.1 | 2.1 | ||||||
Evaluated for Inherent Impairment | 83.7 | 75.2 | 158.9 | ||||||
Allowance Assigned to Loans and Leases | 83.7 | 77.3 | 161.0 | ||||||
Allowance for Undrawn Exposures | |||||||||
Commitments and Standby Letters of Credit | 21.2 | 9.8 | 31.0 | ||||||
Total Allowance for Credit Losses | $ | 104.9 | $ | 87.1 | $ | 192.0 |
120 2017 Annual Report | Northern Trust Corporation |
DECEMBER 31, | ||||||
(In Millions) | 2017 | 2016 | ||||
Commercial Mortgages | ||||||
Office | $ | 825.2 | $ | 866.1 | ||
Apartment/ Multi-family | 623.3 | 784.8 | ||||
Retail | 631.1 | 698.1 | ||||
Industrial/ Warehouse | 311.1 | 359.7 | ||||
Other | 445.6 | 457.6 | ||||
Total Commercial Mortgages | 2,836.3 | 3,166.3 | ||||
Construction, Acquisition and Development Loans | 350.8 | 445.0 | ||||
Single Family Investment | 164.8 | 179.6 | ||||
Other Commercial Real Estate Related | 130.8 | 211.6 | ||||
Total Commercial Real Estate Loans | $ | 3,482.7 | $ | 4,002.5 |
DECEMBER 31, 2017 | |||||||||
(In Millions) | ORIGINAL COST | ACCUMULATED DEPRECIATION | NET BOOK VALUE | ||||||
Land and Improvements | $ | 15.3 | $ | 1.0 | $ | 14.3 | |||
Buildings | 260.4 | 144.1 | 116.3 | ||||||
Equipment | 590.5 | 405.1 | 185.4 | ||||||
Leasehold Improvements | 389.4 | 263.2 | 126.2 | ||||||
Buildings Leased under Capital Leases | 80.0 | 57.6 | 22.4 | ||||||
Total Buildings and Equipment | $ | 1,335.6 | $ | 871.0 | $ | 464.6 |
2017 Annual Report | Northern Trust Corporation 121 |
(In Millions) | FUTURE MINIMUM LEASE PAYMENTS | ||
2018 | $ | 95.9 | |
2019 | 96.0 | ||
2020 | 92.2 | ||
2021 | 76.5 | ||
2022 | 66.7 | ||
Later Years | 360.5 | ||
Total Minimum Lease Payments | 787.8 | ||
Less: Sublease Rentals | (21.2 | ) | |
Net Minimum Lease Payments | $ | 766.6 |
(In Millions) | FUTURE MINIMUM LEASE PAYMENTS, NET | ||
2018 | $ | 8.4 | |
2019 | 8.7 | ||
2020 | (1.7 | ) | |
2021 | — | ||
2022 | — | ||
Later Years | — | ||
Total Minimum Lease Payments, net | 15.4 | ||
Less: Amount Representing Interest | (1.0 | ) | |
Net Present Value under Capital Lease Obligations | $ | 14.4 |
122 2017 Annual Report | Northern Trust Corporation |
(In Millions) | CORPORATE & INSTITUTIONAL SERVICES | WEALTH MANAGEMENT | TOTAL | ||||||
Balance at December 31, 2015 | $ | 455.1 | $ | 71.3 | $ | 526.4 | |||
Goodwill Acquired | 11.8 | — | 11.8 | ||||||
Foreign Exchange Rates | (18.5 | ) | (0.3 | ) | (18.8 | ) | |||
Balance at December 31, 2016 | $ | 448.4 | $ | 71.0 | $ | 519.4 | |||
Goodwill Acquired | 78.3 | — | 78.3 | ||||||
Measurement Period Adjustments | (1.3 | ) | — | (1.3 | ) | ||||
Foreign Exchange Rates | 9.1 | 0.1 | 9.2 | ||||||
Balance at December 31, 2017 | $ | 534.5 | $ | 71.1 | $ | 605.6 |
DECEMBER 31, | ||||||
(In Millions) | 2017 | 2016 | ||||
Gross Carrying Amount | $ | 222.7 | $ | 89.0 | ||
Less: Accumulated Amortization | 61.3 | 47.2 | ||||
Net Book Value | $ | 161.4 | $ | 41.8 |
2017 Annual Report | Northern Trust Corporation 123 |
DECEMBER 31, | ||||||||
($ In Millions) | RATE | 2017 | 2016 | |||||
Corporation-Senior Notes(1)(5) | ||||||||
Fixed Rate Due Nov. 2020(6) | 3.45 | % | $ | 499.6 | $ | 499.4 | ||
Fixed Rate Due Aug. 2021(7) | 3.38 | 498.8 | 498.5 | |||||
Fixed Rate Due Aug. 2022(8) | 2.38 | 498.9 | 498.7 | |||||
Total Senior Notes | $ | 1,497.3 | $ | 1,496.6 |
DECEMBER 31, | ||||||
($ In Millions) | 2017 | 2016 | ||||
Bank-Subordinated Debt(1)(3)(5)(11) | ||||||
5.85% Notes due Nov. 2017 | $ | — | $ | 207.6 | ||
6.50% Notes due Aug. 2018(9) | 305.5 | 315.3 | ||||
Total Bank-Subordinated Debt | 305.5 | 522.9 | ||||
Corporation-Subordinated Debt(5) | ||||||
3.95% Notes due Oct. 2025(1)(10)(11) | 780.4 | 785.0 | ||||
3.375% Fixed-to-Floating Rate Notes due May 2032(2) | 349.2 | — | ||||
Total Corporation Subordinated Debt | 1,129.6 | 785.0 | ||||
Capital Lease Obligations(4) | 14.4 | 23.0 | ||||
Total Long-Term Debt | $ | 1,449.5 | $ | 1,330.9 | ||
Long-Term Debt Qualifying as Risk-Based Capital | $ | 1,099.4 | $ | 809.3 |
124 2017 Annual Report | Northern Trust Corporation |
DECEMBER 31, | ||||||
(In Millions) | 2017 | 2016 | ||||
NTC Capital I Subordinated Debentures due January 15, 2027 | $ | 154.2 | $ | 154.1 | ||
NTC Capital II Subordinated Debentures due April 15, 2027 | 123.3 | 123.3 | ||||
Total Subordinated Debentures | $ | 277.5 | $ | 277.4 |
2017 Annual Report | Northern Trust Corporation 125 |
2017 | 2016 | 2015 | ||||
Balance at January 1 | 228,605,485 | 229,293,783 | 233,390,705 | |||
Incentive Plan and Awards | 1,320,129 | 1,209,124 | 1,033,664 | |||
Stock Options Exercised | 1,997,362 | 4,156,728 | 1,721,282 | |||
Treasury Stock Purchased | (5,796,302 | ) | (6,054,150 | ) | (6,851,868 | ) |
Balance at December 31 | 226,126,674 | 228,605,485 | 229,293,783 |
(In Millions) | BALANCE AT DECEMBER 31, 2017 | NET CHANGE | BALANCE AT DECEMBER 31, 2016 | NET CHANGE | BALANCE AT DECEMBER 31, 2015 | NET CHANGE | BALANCE AT DECEMBER 31, 2014 | ||||||||||||||
Net Unrealized (Losses) Gains on Securities Available for Sale* | $ | (74.8 | ) | $ | (42.4 | ) | $ | (32.4 | ) | $ | (1.4 | ) | $ | (31.0 | ) | $ | (58.6 | ) | $ | 27.6 | |
Net Unrealized Gains (Losses) on Cash Flow Hedges | 4.5 | (1.6 | ) | 6.1 | 9.1 | (3.0 | ) | 1.7 | (4.7 | ) | |||||||||||
Net Foreign Currency Adjustments | (1.8 | ) | 16.7 | (18.5 | ) | (0.9 | ) | (17.6 | ) | (15.9 | ) | (1.7 | ) | ||||||||
Net Pension and Other Postretirement Benefit Adjustments | (342.2 | ) | (17.0 | ) | (325.2 | ) | (4.1 | ) | (321.1 | ) | 19.8 | (340.9 | ) | ||||||||
Total | $ | (414.3 | ) | $ | (44.3 | ) | $ | (370.0 | ) | $ | 2.7 | $ | (372.7 | ) | $ | (53.0 | ) | $ | (319.7 | ) |
126 2017 Annual Report | Northern Trust Corporation |
FOR THE YEAR ENDED DECEMBER 31, | |||||||||||||||||||||||||||
2017 | 2016 | 2015 | |||||||||||||||||||||||||
(In Millions) | BEFORE TAX | TAX EFFECT | AFTER TAX | BEFORE TAX | TAX EFFECT | AFTER TAX | BEFORE TAX | TAX EFFECT | AFTER TAX | ||||||||||||||||||
Unrealized Gains (Losses) on Securities Available for Sale | |||||||||||||||||||||||||||
Unrealized (Losses) Gains on Securities Available for Sale | $ | (70.2 | ) | $ | 26.9 | $ | (43.3 | ) | $ | (1.8 | ) | $ | 0.7 | $ | (1.1 | ) | $ | (94.3 | ) | $ | 35.5 | $ | (58.8 | ) | |||
Reclassification Adjustment for (Gains) Losses Included in Net Income | 1.4 | (0.5 | ) | 0.9 | (0.5 | ) | 0.2 | (0.3 | ) | 0.3 | (0.1 | ) | 0.2 | ||||||||||||||
Net Change | $ | (68.8 | ) | $ | 26.4 | $ | (42.4 | ) | $ | (2.3 | ) | $ | 0.9 | $ | (1.4 | ) | $ | (94.0 | ) | $ | 35.4 | $ | (58.6 | ) | |||
Unrealized (Losses) Gains on Cash Flow Hedges | |||||||||||||||||||||||||||
Unrealized (Losses) Gains on Cash Flow Hedges | $ | 33.8 | $ | (20.3 | ) | $ | 13.5 | $ | 4.4 | $ | 5.9 | $ | 10.3 | $ | (1.2 | ) | $ | 0.2 | $ | (1.0 | ) | ||||||
Reclassification Adjustment for (Gains) Losses Included in Net Income | (24.5 | ) | 9.4 | (15.1 | ) | (1.9 | ) | 0.7 | (1.2 | ) | 4.7 | (2.0 | ) | 2.7 | |||||||||||||
Net Change | $ | 9.3 | $ | (10.9 | ) | $ | (1.6 | ) | $ | 2.5 | $ | 6.6 | $ | 9.1 | $ | 3.5 | $ | (1.8 | ) | $ | 1.7 | ||||||
Foreign Currency Adjustments | |||||||||||||||||||||||||||
Foreign Currency Translation Adjustments | $ | 156.5 | $ | (3.1 | ) | $ | 153.4 | $ | (126.5 | ) | $ | (3.1 | ) | $ | (129.6 | ) | $ | (101.5 | ) | $ | 4.9 | $ | (96.6 | ) | |||
Long-Term Intra-Entity Foreign Currency Transaction Losses | 2.0 | (0.7 | ) | 1.3 | (5.3 | ) | 2.0 | (3.3 | ) | (18.7 | ) | 7.1 | (11.6 | ) | |||||||||||||
Net Investment Hedge Gains (Losses) | (223.2 | ) | 85.2 | (138.0 | ) | 212.4 | (80.4 | ) | 132.0 | 148.6 | (56.3 | ) | 92.3 | ||||||||||||||
Net Change | $ | (64.7 | ) | $ | 81.4 | $ | 16.7 | $ | 80.6 | $ | (81.5 | ) | $ | (0.9 | ) | $ | 28.4 | $ | (44.3 | ) | $ | (15.9 | ) | ||||
Pension and Other Postretirement Benefit Adjustments | |||||||||||||||||||||||||||
Net Actuarial Gains (Losses) | $ | (58.4 | ) | $ | 25.4 | $ | (33.0 | ) | $ | (31.1 | ) | $ | 11.2 | $ | (19.9 | ) | $ | (12.2 | ) | $ | 8.2 | $ | (4.0 | ) | |||
Reclassification Adjustment for Losses Included in Net Income | 25.9 | (9.9 | ) | 16.0 | 25.4 | (9.6 | ) | 15.8 | 38.3 | (14.5 | ) | 23.8 | |||||||||||||||
Net Change | $ | (32.5 | ) | $ | 15.5 | $ | (17.0 | ) | $ | (5.7 | ) | $ | 1.6 | $ | (4.1 | ) | $ | 26.1 | $ | (6.3 | ) | $ | 19.8 |
(In Millions) | LOCATION OF RECLASSIFICATION ADJUSTMENTS RECOGNIZED IN INCOME | AMOUNT OF RECLASSIFICATION ADJUSTMENTS RECOGNIZED IN INCOME YEAR ENDED DECEMBER 31, | ||||||||
2017 | 2016 | 2015 | ||||||||
Securities Available for Sale | ||||||||||
Realized Losses on Securities Available for Sale | Investment Security Gains (Losses), net | $ | 1.4 | $ | (0.5 | ) | $ | 0.3 | ||
Realized (Gains) Losses on Cash Flow Hedges | ||||||||||
Foreign Exchange Contracts | Other Operating Income/Expense | (24.5 | ) | (1.9 | ) | 4.7 | ||||
Pension and Other Postretirement Benefit Adjustments | ||||||||||
Amortization of Net Actuarial Losses | Employee Benefits | 26.0 | 25.6 | 38.5 | ||||||
Amortization of Prior Service Cost | Employee Benefits | (0.1 | ) | (0.2 | ) | (0.2 | ) | |||
Gross Reclassification Adjustment | $ | 25.9 | $ | 25.4 | $ | 38.3 |
2017 Annual Report | Northern Trust Corporation 127 |
FOR THE YEAR ENDED DECEMBER 31, | |||||||||
($ In Millions Except Per Common Share Information) | 2017 | 2016 | 2015 | ||||||
BASIC NET INCOME PER COMMON SHARE | |||||||||
Average Number of Common Shares Outstanding | 228,257,664 | 227,580,584 | 232,279,849 | ||||||
Net Income | $ | 1,199.0 | $ | 1,032.5 | $ | 973.8 | |||
Less: Dividends on Preferred Stock | 49.8 | 23.4 | 23.4 | ||||||
Net Income Applicable to Common Stock | $ | 1,149.2 | $ | 1,009.1 | $ | 950.4 | |||
Less: Earnings Allocated to Participating Securities | 18.8 | 18.7 | 15.4 | ||||||
Earnings Allocated to Common Shares Outstanding | 1,130.4 | 990.4 | 935.0 | ||||||
Basic Net Income Per Common Share | 4.95 | 4.35 | 4.03 | ||||||
DILUTED NET INCOME PER COMMON SHARE | |||||||||
Average Number of Common Shares Outstanding | 228,257,664 | 227,580,584 | 232,279,849 | ||||||
Plus Dilutive Effect of Share-based Compensation | 1,396,737 | 1,570,822 | 1,941,880 | ||||||
Average Common and Potential Common Shares | 229,654,401 | 229,151,406 | 234,221,729 | ||||||
Earnings Allocated to Common and Potential Common Shares | $ | 1,130.5 | $ | 990.4 | $ | 935.0 | |||
Diluted Net Income Per Common Share | 4.92 | 4.32 | 3.99 |
128 2017 Annual Report | Northern Trust Corporation |
FOR THE YEAR ENDED DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||
Interest Income | |||||||||
Loans and Leases | $ | 919.1 | $ | 806.5 | $ | 731.9 | |||
Securities – Taxable | 594.1 | 428.8 | 332.2 | ||||||
– Non-Taxable | 9.8 | 7.5 | 4.8 | ||||||
Interest-Bearing Due from and Deposits with Banks (1) | 63.8 | 64.3 | 84.9 | ||||||
Federal Reserve and Other Central Bank Deposits and Other | 182.6 | 109.8 | 70.2 | ||||||
Total Interest Income | $ | 1,769.4 | $ | 1,416.9 | $ | 1,224.0 | |||
Interest Expense | |||||||||
Deposits | $ | 182.1 | $ | 83.5 | $ | 74.3 | |||
Federal Funds Purchased | 10.4 | 1.5 | 0.7 | ||||||
Securities Sold under Agreements to Repurchase | 6.0 | 2.3 | 0.3 | ||||||
Other Borrowings | 50.7 | 18.0 | 5.0 | ||||||
Senior Notes | 46.9 | 46.8 | 46.8 | ||||||
Long-Term Debt | 39.2 | 26.4 | 24.4 | ||||||
Floating Rate Capital Debt | 4.9 | 3.5 | 2.4 | ||||||
Total Interest Expense | $ | 340.2 | $ | 182.0 | $ | 153.9 | |||
Net Interest Income | $ | 1,429.2 | $ | 1,234.9 | $ | 1,070.1 |
FOR THE YEAR ENDED DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||
Loan Service Fees | $ | 50.7 | $ | 56.6 | $ | 59.1 | |||
Banking Service Fees | 48.6 | 50.6 | 48.2 | ||||||
Other Income | 58.2 | 134.0 | 139.8 | ||||||
Total Other Operating Income | $ | 157.5 | $ | 241.2 | $ | 247.1 |
2017 Annual Report | Northern Trust Corporation 129 |
FOR THE YEAR ENDED DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||
Business Promotion | $ | 95.4 | $ | 83.6 | $ | 85.1 | |||
FDIC Insurance Premiums | 34.7 | 31.7 | 25.2 | ||||||
Staff Related | 42.8 | 43.0 | 40.5 | ||||||
Other Intangibles Amortization | 11.4 | 8.8 | 10.9 | ||||||
Other Expenses | 147.3 | 197.3 | 166.3 | ||||||
Total Other Operating Expense | $ | 331.6 | $ | 364.4 | $ | 328.0 |
FOR THE YEAR ENDED DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||
Tax at Statutory Rate | $ | 571.9 | $ | 531.0 | $ | 512.7 | |||
Tax Exempt Income | (9.6 | ) | (7.2 | ) | (4.8 | ) | |||
Foreign Tax Rate Differential | (50.0 | ) | (50.9 | ) | (44.2 | ) | |||
Excess Tax Benefit Related to Share-Based Compensation | (31.6 | ) | (12.3 | ) | — | ||||
State Taxes, net | 41.0 | 31.1 | 33.1 | ||||||
Impact of Tax Cuts and Jobs Act | (53.1 | ) | — | — | |||||
Other | (33.7 | ) | (7.1 | ) | (5.6 | ) | |||
Provision for Income Taxes | $ | 434.9 | $ | 484.6 | $ | 491.2 |
130 2017 Annual Report | Northern Trust Corporation |
(In Millions) | 2017 | ||
Federal Taxes on Mandatory Deemed Repatriation | $ | 150.0 | |
Impact Related to Federal Deferred Taxes | (210.0 | ) | |
Other Adjustments | 6.9 | ||
Provision (Benefit) for Income Taxes | $ | (53.1 | ) |
(In Millions) | 2017 | 2016 | ||||
Balance at January 1 | $ | 17.2 | $ | 12.3 | ||
Additions for Tax Positions Taken in the Current Year | 9.9 | — | ||||
Additions for Tax Positions Taken in Prior Years | 6.2 | 6.6 | ||||
Reductions for Tax Positions Taken in Prior Years | (5.4 | ) | (1.2 | ) | ||
Reductions Resulting from Expiration of Statutes | (0.2 | ) | (0.5 | ) | ||
Balance at December 31 | $ | 27.7 | $ | 17.2 |
2017 Annual Report | Northern Trust Corporation 131 |
FOR THE YEAR ENDED DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||
Current Tax Provision: | |||||||||
Federal | $ | 347.3 | $ | 495.8 | $ | 489.8 | |||
State | 38.3 | 65.3 | 64.5 | ||||||
Non-U.S. | 125.4 | 99.3 | 83.1 | ||||||
Total | 511.0 | 660.4 | 637.4 | ||||||
Deferred Tax Provision: | |||||||||
Federal | $ | (96.4 | ) | $ | (159.0 | ) | $ | (131.1 | ) |
State | 24.6 | (18.9 | ) | (13.6 | ) | ||||
Non-U.S. | (4.3 | ) | 2.1 | (1.5 | ) | ||||
Total | (76.1 | ) | (175.8 | ) | (146.2 | ) | |||
Provision for Income Taxes | $ | 434.9 | $ | 484.6 | $ | 491.2 |
FOR THE YEAR ENDED DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||
Current Tax Benefit (Charge) for Employee Stock Options and Other Stock-Based Plans | $ | — | $ | (7.6 | ) | $ | 17.7 | ||
Tax Effect of Other Comprehensive Income | (112.4 | ) | 72.4 | 17.0 |
132 2017 Annual Report | Northern Trust Corporation |
DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||
Deferred Tax Liabilities: | |||||||||
Lease Financing | $ | 85.8 | $ | 148.7 | $ | 272.6 | |||
Software Development | 187.8 | 352.0 | 339.9 | ||||||
Accumulated Depreciation | 41.0 | 26.0 | 20.6 | ||||||
Compensation and Benefits | — | 50.2 | 70.7 | ||||||
State Taxes, net | 59.4 | 33.3 | 48.8 | ||||||
Other Liabilities | 145.7 | 243.1 | 169.1 | ||||||
Gross Deferred Tax Liabilities | 519.7 | 853.3 | 921.7 | ||||||
Deferred Tax Assets: | |||||||||
Allowance for Credit Losses | 32.3 | 67.2 | 81.7 | ||||||
Compensation and Benefits | 35.5 | — | — | ||||||
Other Assets | 88.3 | 233.8 | 185.0 | ||||||
Gross Deferred Tax Assets | 156.1 | 301.0 | 266.7 | ||||||
Valuation Reserve | (1.1 | ) | (0.9 | ) | (1.6 | ) | |||
Deferred Tax Assets, net of Valuation Reserve | 155.0 | 300.1 | 265.1 | ||||||
Net Deferred Tax Liabilities | $ | 364.7 | $ | 553.2 | $ | 656.6 |
2017 Annual Report | Northern Trust Corporation 133 |
U.S. PLAN | NON-U.S. PLANS | SUPPLEMENTAL PLAN | ||||||||||||||||
($ In Millions) | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Accumulated Benefit Obligation | $ | 1,088.4 | $ | 953.2 | $ | 192.2 | $ | 158.3 | $ | 129.0 | $ | 108.9 | ||||||
Projected Benefit Obligation | 1,209.9 | 1,062.7 | 198.3 | 155.9 | 144.5 | 121.1 | ||||||||||||
Plan Assets at Fair Value | 1,506.4 | 1,393.5 | 178.7 | 139.3 | — | — | ||||||||||||
Funded Status at December 31 | $ | 296.5 | $ | 330.8 | $ | (19.6 | ) | $ | (16.6 | ) | $ | (144.5 | ) | $ | (121.1 | ) | ||
Weighted-Average Assumptions: | ||||||||||||||||||
Discount Rates | 3.79 | % | 4.46 | % | 2.08 | % | 2.39 | % | 3.79 | % | 4.46 | % | ||||||
Rate of Increase in Compensation Level | 4.39 | 4.39 | N/A | N/A | 4.39 | 4.39 | ||||||||||||
Expected Long-Term Rate of Return on Assets | 6.00 | 6.75 | 2.61 | 3.22 | N/A | N/A |
U.S. PLAN | NON-U.S. PLANS | SUPPLEMENTAL PLAN | ||||||||||||||||
(In Millions) | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Net Actuarial Loss | $ | 399.0 | $ | 378.1 | $ | 44.2 | $ | 55.8 | $ | 83.2 | $ | 67.4 | ||||||
Prior Service Cost | (1.8 | ) | (2.3 | ) | 2.5 | — | 0.6 | 0.8 | ||||||||||
Gross Amount in Accumulated Other Comprehensive Income | 397.2 | 375.8 | 46.7 | 55.8 | 83.8 | 68.2 | ||||||||||||
Income Tax Effect | 151.6 | 142.3 | 5.3 | 6.7 | 31.9 | 25.8 | ||||||||||||
Net Amount in Accumulated Other Comprehensive Income | $ | 245.6 | $ | 233.5 | $ | 41.4 | $ | 49.1 | $ | 51.9 | $ | 42.4 |
U.S. PLAN | NON-U.S. PLANS | SUPPLEMENTAL PLAN | |||||||||||||||||||||||||
($ In Millions) | 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | ||||||||||||||||||
Service Cost | $ | 38.3 | $ | 37.4 | $ | 37.8 | $ | 0.4 | $ | — | $ | — | $ | 3.7 | $ | 3.5 | $ | 3.6 | |||||||||
Interest Cost | 45.9 | 45.8 | 44.7 | 4.0 | 4.7 | 5.7 | 5.2 | 5.1 | 5.0 | ||||||||||||||||||
Expected Return on Plan Assets | (93.8 | ) | (94.4 | ) | (96.5 | ) | (4.5 | ) | (4.6 | ) | (5.9 | ) | — | N/A | N/A | ||||||||||||
Settlement Expense | — | — | — | 1.1 | 3.7 | — | — | — | — | ||||||||||||||||||
Amortization: | |||||||||||||||||||||||||||
Net Loss | 19.0 | 18.8 | 29.7 | 1.3 | 1.0 | 1.5 | 5.7 | 5.8 | 7.3 | ||||||||||||||||||
Prior Service Cost | (0.4 | ) | (0.4 | ) | (0.4 | ) | 0.1 | — | — | 0.2 | 0.2 | 0.2 | |||||||||||||||
Net Periodic Pension Expense | $ | 9.0 | $ | 7.2 | $ | 15.3 | $ | 2.4 | $ | 4.8 | $ | 1.3 | $ | 14.8 | $ | 14.6 | $ | 16.1 | |||||||||
Weighted-Average Assumptions: | |||||||||||||||||||||||||||
Discount Rates | 4.46 | % | 4.71 | % | 4.25 | % | 2.33 | % | 3.39 | % | 3.20 | % | 4.46 | % | 4.71 | % | 4.25 | % | |||||||||
Rate of Increase in Compensation Level | 4.39 | 4.25 | 4.25 | 1.75 | N/A | N/A | 4.39 | 4.25 | 4.25 | ||||||||||||||||||
Expected Long-Term Rate of Return on Assets | 6.75 | 7.00 | 7.25 | 3.13 | 3.73 | 4.00 | N/A | N/A | N/A |
134 2017 Annual Report | Northern Trust Corporation |
U.S. PLAN | NON-U.S. PLANS | SUPPLEMENTAL PLAN | ||||||||||||||||
(In Millions) | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Beginning Balance | $ | 1,062.7 | $ | 1,006.5 | $ | 155.9 | $ | 156.5 | $ | 121.1 | $ | 113.9 | ||||||
Service Cost | 38.3 | 37.4 | 0.4 | — | 3.7 | 3.5 | ||||||||||||
Interest Cost | 45.9 | 45.8 | 4.0 | 4.7 | 5.2 | 5.1 | ||||||||||||
Employee Contributions | — | — | 0.1 | — | — | — | ||||||||||||
Plan Amendment | — | — | 2.5 | — | — | — | ||||||||||||
Actuarial (Gain) Loss | 142.6 | 31.5 | 0.4 | 26.0 | 21.5 | 7.4 | ||||||||||||
Settlement | — | — | (6.8 | ) | (7.3 | ) | — | — | ||||||||||
Acquisitions/Divestitures | — | — | 27.0 | — | — | — | ||||||||||||
Benefits Paid | (79.6 | ) | (58.5 | ) | (3.0 | ) | (2.4 | ) | (7.0 | ) | (8.8 | ) | ||||||
Foreign Exchange Rate Changes | — | — | 17.8 | (21.6 | ) | — | — | |||||||||||
Ending Balance | $ | 1,209.9 | $ | 1,062.7 | $ | 198.3 | $ | 155.9 | $ | 144.5 | $ | 121.1 |
(In Millions) | U.S. PLAN | NON-U.S. PLANS | SUPPLEMENTAL PLAN | ||||||
2018 | $ | 77.2 | $ | 3.7 | $ | 8.0 | |||
2019 | 75.7 | 3.5 | 12.5 | ||||||
2020 | 78.0 | 3.9 | 12.7 | ||||||
2021 | 75.9 | 4.2 | 15.5 | ||||||
2022 | 74.8 | 4.0 | 14.9 | ||||||
2023-2027 | 375.1 | 24.9 | 66.8 |
U.S. PLAN | NON-U.S. PLANS | |||||||||||
(In Millions) | 2017 | 2016 | 2017 | 2016 | ||||||||
Fair Value of Assets at Beginning of Period | $ | 1,393.5 | $ | 1,342.0 | $ | 139.3 | $ | 144.3 | ||||
Actual Return on Assets | 192.5 | 110.0 | 12.4 | 21.9 | ||||||||
Employer Contributions | — | — | 3.0 | 4.3 | ||||||||
Employee Contributions | 0.1 | |||||||||||
Settlement | — | — | (6.8 | ) | (7.3 | ) | ||||||
Acquisitions/Divestitures | — | — | 18.5 | — | ||||||||
Benefits Paid | (79.6 | ) | (58.5 | ) | (3.0 | ) | (2.4 | ) | ||||
Foreign Exchange Rate Changes | — | — | 15.2 | (21.5 | ) | |||||||
Fair Value of Assets at End of Period | $ | 1,506.4 | $ | 1,393.5 | $ | 178.7 | $ | 139.3 |
2017 Annual Report | Northern Trust Corporation 135 |
136 2017 Annual Report | Northern Trust Corporation |
December 31, 2017 | ||||||||||||
(In Millions) | LEVEL 1 | LEVEL 2 | LEVEL 3 | TOTAL | ||||||||
Domestic Common Stock | $ | 38.6 | $ | — | $ | — | $ | 38.6 | ||||
Foreign Common Stock | — | — | — | — | ||||||||
U.S. Government Obligations | — | 1,072.0 | — | 1,072.0 | ||||||||
Northern Trust Mutual Fund | 44.5 | — | — | 44.5 | ||||||||
Northern Trust Collective Trust Funds | — | 268.6 | — | 268.6 | ||||||||
Northern Trust Private Equity Funds | — | — | 29.3 | 29.3 | ||||||||
Northern Trust Hedge Funds | — | — | 44.6 | 44.6 | ||||||||
Cash and Other | 8.7 | — | — | 8.7 | ||||||||
Total Assets at Fair Value | $ | 91.9 | $ | 1,340.6 | $ | 73.9 | $ | 1,506.4 |
December 31, 2016 | ||||||||||||
(In Millions) | LEVEL 1 | LEVEL 2 | LEVEL 3 | TOTAL | ||||||||
Domestic Common Stock | $ | 52.1 | $ | — | $ | — | $ | 52.1 | ||||
Foreign Common Stock | 0.1 | — | — | 0.1 | ||||||||
U.S. Government Obligations | — | 134.6 | — | 134.6 | ||||||||
Northern Trust Mutual Fund | 70.7 | — | — | 70.7 | ||||||||
Northern Trust Collective Trust Funds | — | 1,029.9 | — | 1,029.9 | ||||||||
Northern Trust Private Equity Funds | — | — | 35.7 | 35.7 | ||||||||
Northern Trust Hedge Funds | — | — | 64.8 | 64.8 | ||||||||
Cash and Other | 5.6 | — | — | 5.6 | ||||||||
Total Assets at Fair Value | $ | 128.5 | $ | 1,164.5 | $ | 100.5 | $ | 1,393.5 |
PRIVATE EQUITY FUNDS | HEDGE FUNDS | |||||||||||
(In Millions) | 2017 | 2016 | 2017 | 2016 | ||||||||
Fair Value at January 1 | $ | 35.7 | $ | 47.5 | $ | 64.8 | $ | 63.4 | ||||
Actual Return on Plan Assets | (5.4 | ) | (5.6 | ) | (3.1 | ) | 1.5 | |||||
Realized Gain | — | — | 5.0 | — | ||||||||
Purchases | 0.8 | 2.0 | — | — | ||||||||
Sales | (1.8 | ) | (8.2 | ) | (22.1 | ) | (0.1 | ) | ||||
Fair Value at December 31 | $ | 29.3 | $ | 35.7 | $ | 44.6 | $ | 64.8 |
2017 Annual Report | Northern Trust Corporation 137 |
DECEMBER 31, | ||||||
(In Millions) | 2017 | 2016 | ||||
Accumulated Postretirement Benefit Obligation at Measurement Date: | ||||||
Retirees and Dependents | $ | 27.7 | $ | 26.4 | ||
Actives Eligible for Benefits | 6.7 | 7.7 | ||||
Net Postretirement Benefit Obligation | $ | 34.4 | $ | 34.1 |
DECEMBER 31, | ||||||
(In Millions) | 2017 | 2016 | ||||
Net Actuarial Loss / (Gain) | $ | 3.9 | $ | 0.3 | ||
Prior Service Cost | — | — | ||||
Gross Amount in Accumulated Other Comprehensive Income | 3.9 | 0.3 | ||||
Income Tax Effect | 1.5 | 0.1 | ||||
Net Amount in Accumulated Other Comprehensive Income | $ | 2.4 | $ | 0.2 |
FOR THE YEAR ENDED DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||
Service Cost | $ | 0.1 | $ | 0.1 | $ | 0.1 | |||
Interest Cost | 1.4 | 1.5 | 1.4 | ||||||
Expected Return on Plan Assets | — | — | — | ||||||
Amortization | |||||||||
Net Gain | — | — | — | ||||||
Prior Service Benefit | — | — | — | ||||||
Net Periodic Postretirement Expense | $ | 1.5 | $ | 1.6 | $ | 1.5 |
FOR THE YEAR ENDED DECEMBER 31, | ||||||
(In Millions) | 2017 | 2016 | ||||
Beginning Balance | $ | 34.1 | $ | 32.2 | ||
Service Cost | 0.1 | 0.1 | ||||
Interest Cost | 1.4 | 1.5 | ||||
Actuarial Loss / (Gain) | (0.2 | ) | 2.7 | |||
Net Claims Paid | (1.0 | ) | (2.4 | ) | ||
Medicare Subsidy | — | — | ||||
Ending Balance | $ | 34.4 | $ | 34.1 |
138 2017 Annual Report | Northern Trust Corporation |
(In Millions) | TOTAL POSTRETIREMENT MEDICAL BENEFITS | ||
2018 | $ | 2.7 | |
2019 | 2.7 | ||
2020 | 2.7 | ||
2021 | 2.6 | ||
2022 | 2.5 | ||
2023-2027 | 11.4 |
(In Millions) | 1–PERCENTAGE POINT INCREASE | 1–PERCENTAGE POINT DECREASE | ||||
Effect on Postretirement Benefit Obligation | $ | 0.8 | $ | (0.7 | ) | |
Effect on Total Service and Interest Cost Components | — | — |
FOR THE YEAR ENDED DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||
Restricted Stock Unit Awards | $ | 87.3 | $ | 60.2 | $ | 51.5 | |||
Stock Options | 9.0 | 9.0 | 10.0 | ||||||
Performance Stock Units | 31.7 | 17.6 | 14.9 | ||||||
Total Share-Based Compensation Expense | $ | 128.0 | $ | 86.8 | $ | 76.4 | |||
Tax Benefits Recognized | $ | 48.7 | $ | 32.8 | $ | 28.8 |
2017 Annual Report | Northern Trust Corporation 139 |
2017 | 2016 | 2015 | ||||
Expected Term (in Years) | 6.9 | 7.0 | 7.1 | |||
Dividend Yield | 1.81 | % | 2.57 | % | 2.07 | % |
Expected Volatility | 23.2 | 32.3 | 30.4 | |||
Risk-Free Interest Rate | 2.11 | 1.45 | 1.83 |
FOR THE YEAR ENDED DECEMBER 31, | |||||||||
(In Millions, Except Per Share Information) | 2017 | 2016 | 2015 | ||||||
Weighted Average Grant-Date Per Share Fair Value of Stock Options Granted | $ | 19.18 | $ | 14.84 | $ | 18.72 | |||
Grant-Date Fair Value of Stock Options Vested | 7.3 | 9.6 | 16.0 | ||||||
Stock Options Exercised | |||||||||
Intrinsic Value as of Exercise Date | 74.7 | 83.9 | 32.1 | ||||||
Cash Received | 108.0 | 233.8 | 94.0 | ||||||
Tax Deduction Benefits Realized | 73.1 | 80.0 | 30.1 |
140 2017 Annual Report | Northern Trust Corporation |
NONVESTED OPTIONS | SHARES | WEIGHTED- AVERAGE GRANT- DATE FAIR VALUE PER SHARE | |||
Nonvested at December 31, 2016 | 1,259,160 | $ | 15.89 | ||
Granted | 468,381 | 19.18 | |||
Vested | (471,089 | ) | 15.55 | ||
Forfeited or Cancelled | (9,947 | ) | 16.17 | ||
Nonvested at December 31, 2017 | 1,246,505 | $ | 17.25 |
($ In Millions Except Per Share Information) | SHARES | WEIGHTED AVERAGE EXERCISE PRICE PER SHARE | WEIGHTED AVERAGE REMAINING CONTRACTUAL TERM (YEARS) | AGGREGATE INTRINSIC VALUE | |||||
Options Outstanding, December 31, 2016 | 4,703,769 | $ | 55.20 | ||||||
Granted | 468,381 | 88.06 | |||||||
Exercised | (1,997,362 | ) | 54.08 | ||||||
Forfeited, Expired or Cancelled | (101,690 | ) | 53.35 | ||||||
Options Outstanding, December 31, 2017 | 3,073,098 | $ | 60.99 | 5.8 | $ | 119.5 | |||
Options Exercisable, December 31, 2017 | 1,826,593 | $ | 53.66 | 4.2 | $ | 84.4 |
($ In Millions) | NUMBER | AGGREGATE INTRINSIC VALUE | |||
Restricted Stock Unit Awards Outstanding, December 31, 2016 | 3,695,657 | $ | 329.1 | ||
Granted | 863,308 | ||||
Distributed | (1,040,725 | ) | |||
Forfeited | (118,802 | ) | |||
Restricted Stock Unit Awards Outstanding, December 31, 2017 | 3,399,438 | $ | 339.6 | ||
Units Convertible, December 31, 2017 | 168,111 | $ | 16.8 |
2017 Annual Report | Northern Trust Corporation 141 |
NONVESTED RESTRICTED STOCK UNITS | NUMBER | WEIGHTED AVERAGE GRANT- DATE FAIR VALUE PER UNIT | WEIGHTED AVERAGE REMAINING VESTING TERM (YEARS) | |||
Nonvested at December 31, 2016 | 3,515,632 | $ | 61.80 | 2.0 | ||
Granted | 863,308 | 88.19 | ||||
Vested | (1,028,835 | ) | 58.64 | |||
Forfeited | (118,778 | ) | 66.79 | |||
Nonvested at December 31, 2017 | 3,231,327 | $ | 69.67 | 1.9 |
142 2017 Annual Report | Northern Trust Corporation |
2017 Annual Report | Northern Trust Corporation 143 |
DECEMBER 31, | ||||||
(in Millions) | 2017 | 2016 | ||||
Pledged to others: | ||||||
Not permitted by contract or custom to sell or repledge | $ | 39.9 | $ | 70.7 | ||
Permitted by contract or custom to sell or repledge | — | — | ||||
Accepted from others: | ||||||
Not permitted by contract or custom to sell or repledge | — | — | ||||
Permitted by contract or custom to sell or repledge | 4.6 | — |
144 2017 Annual Report | Northern Trust Corporation |
DECEMBER 31, 2017 | DECEMBER 31, 2016 | |||||||||||||||||
FAIR VALUE | FAIR VALUE | |||||||||||||||||
(In Millions) | NOTIONAL VALUE | ASSET | LIABILITY | NOTIONAL VALUE | ASSET | LIABILITY | ||||||||||||
Foreign Exchange Contracts | $ | 317,882.5 | $ | 2,527.0 | $ | 2,522.5 | $ | 273,213.1 | $ | 3,274.2 | $ | 3,221.7 | ||||||
Interest Rate Contracts | 7,418.0 | 65.1 | 64.1 | 6,968.3 | 87.0 | 85.2 | ||||||||||||
Total | $ | 325,300.5 | $ | 2,592.1 | $ | 2,586.6 | $ | 280,181.4 | $ | 3,361.2 | $ | 3,306.9 |
2017 Annual Report | Northern Trust Corporation 145 |
(In Millions) | LOCATION OF DERIVATIVE GAIN RECOGNIZED IN INCOME | AMOUNT OF DERIVATIVE GAIN RECOGNIZED IN INCOME DECEMBER 31, | ||||||||
2017 | 2016 | 2015 | ||||||||
Foreign Exchange Contracts | Foreign Exchange Trading Income | $ | 209.9 | $ | 236.6 | $ | 261.8 | |||
Interest Rate Contracts | Security Commissions and Trading Income | 10.7 | 11.4 | 17.5 | ||||||
Total | $ | 220.6 | $ | 248.0 | $ | 279.3 |
December 31, 2017 | December 31, 2016 | |||||||||||||||||||
FAIR VALUE | FAIR VALUE | |||||||||||||||||||
(In Millions) | DERIVATIVE INSTRUMENT | RISK CLASSIFICATION | NOTIONAL VALUE | ASSET | LIABILITY | NOTIONAL VALUE | ASSET | LIABILITY | ||||||||||||
FAIR VALUE HEDGES | ||||||||||||||||||||
Available for Sale Investment Securities | Interest Rate Swap Contracts | Interest Rate | $ | 3,423.1 | $ | 15.7 | $ | 14.5 | $ | 3,873.4 | $ | 88.3 | $ | 16.8 | ||||||
Senior Notes and Long-Term Subordinated Debt | Interest Rate Swap Contracts | Interest Rate | 1,050.0 | 16.0 | 3.7 | 1,250.0 | 71.8 | 3.3 | ||||||||||||
CASH FLOW HEDGES | ||||||||||||||||||||
Forecasted Foreign Currency Denominated Transactions | Foreign Exchange Contracts | Foreign Currency | 436.2 | 13.5 | 6.4 | 329.3 | 8.5 | 7.8 | ||||||||||||
Foreign Currency Denominated Investment Securities | Foreign Exchange Contracts | Foreign Currency | 2,852.8 | 14.9 | 6.6 | 1,431.6 | 151.5 | 0.8 | ||||||||||||
Available for Sale Investment Securities | Interest Rate Contracts | Interest Rate | $ | 925.0 | $ | 0.2 | $ | 1.2 | $ | 975.0 | $ | 0.1 | $ | 2.7 | ||||||
NET INVESTMENT HEDGES | ||||||||||||||||||||
Net Investments in Non-U.S. Affiliates | Foreign Exchange Contracts | Foreign Currency | 3,011.3 | 0.6 | 179.6 | 2,083.6 | 174.6 | 10.8 | ||||||||||||
Total | $ | 11,698.4 | $ | 60.9 | $ | 212.0 | $ | 9,942.9 | $ | 494.8 | $ | 42.2 |
DERIVATIVE INSTRUMENT | LOCATION OF DERIVATIVE GAIN/(LOSS) RECOGNIZED IN INCOME | AMOUNT OF DERIVATIVE GAIN/ (LOSS) RECOGNIZED IN INCOME DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||||
Available for Sale Investment Securities | Interest Rate Swap Contracts | Interest Income | $ | (0.8 | ) | $ | 63.4 | $ | (21.1 | ) | |
Senior Notes and Long-Term Subordinated Debt | Interest Rate Swap Contracts | Interest Expense | 3.4 | 5.0 | 34.7 | ||||||
Total | $ | 2.6 | $ | 68.4 | $ | 13.6 |
146 2017 Annual Report | Northern Trust Corporation |
FOREIGN EXCHANGE CONTRACTS (BEFORE TAX) | INTEREST RATE CONTRACTS (BEFORE TAX) | |||||||||||||||||
(In Millions) | 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | ||||||||||||
Net Gain/(Loss) Recognized in AOCI | $ | 32.5 | $ | 7.9 | $ | (1.2 | ) | $ | 1.3 | $ | (3.4 | ) | $ | — | ||||
Net Gain/(Loss) Reclassified from AOCI to Earnings | ||||||||||||||||||
Other Operating Income | 5.0 | (6.4 | ) | (8.0 | ) | — | — | — | ||||||||||
Interest Income | 19.3 | 6.4 | — | 0.3 | 2.8 | 5.2 | ||||||||||||
Other Operating Expense | (0.1 | ) | (0.9 | ) | (1.9 | ) | — | — | — | |||||||||
Total | $ | 24.2 | $ | (0.9 | ) | $ | (9.9 | ) | $ | 0.3 | $ | 2.8 | $ | 5.2 |
DECEMBER 31, 2017 | DECEMBER 31, 2016 | |||||||||||||||||
FAIR VALUE | FAIR VALUE | |||||||||||||||||
(In Millions) | NOTIONAL VALUE | ASSET | LIABILITY | NOTIONAL VALUE | ASSET | LIABILITY | ||||||||||||
Foreign Exchange Contracts | $ | 214.1 | $ | 1.1 | $ | 0.1 | $ | 289.6 | $ | 0.8 | $ | 1.8 | ||||||
Other Financial Derivatives (1) | 404.7 | — | 30.4 | 270.0 | — | 25.2 | ||||||||||||
Total | $ | 618.8 | $ | 1.1 | $ | 30.5 | $ | 559.6 | $ | 0.8 | $ | 27.0 |
2017 Annual Report | Northern Trust Corporation 147 |
LOCATION OF DERIVATIVE GAIN/ (LOSS) RECOGNIZED IN INCOME | AMOUNT RECOGNIZED IN INCOME | |||||||||
(In Millions) | 2017 | 2016 | 2015 | |||||||
Foreign Exchange Contracts | Other Operating Income | $ | 8.2 | $ | (6.7 | ) | $ | (10.9 | ) | |
Other Financial Derivatives (1) | Other Operating Income | (13.3 | ) | (6.1 | ) | (1.0 | ) | |||
Total | $ | (5.1 | ) | $ | (12.8 | ) | $ | (11.9 | ) |
148 2017 Annual Report | Northern Trust Corporation |
December 31, 2017 | |||||||||||||||
(In Millions) | GROSS RECOGNIZED ASSETS | GROSS AMOUNTS OFFSET | NET AMOUNTS PRESENTED | GROSS AMOUNTS NOT OFFSET | NET AMOUNT(3) | ||||||||||
Derivative Assets(1) | |||||||||||||||
Foreign Exchange Contracts Over the Counter (OTC) | $ | 2,106.3 | $ | 1,397.7 | $ | 708.6 | $ | — | $ | 708.6 | |||||
Interest Rate Swaps OTC | 86.9 | 14.2 | 72.7 | — | 72.7 | ||||||||||
Interest Rate Swaps Exchange Cleared | 10.1 | 10.1 | — | — | — | ||||||||||
Cross Product Netting Adjustment | — | 10.4 | — | — | — | ||||||||||
Cross Product Collateral Adjustment | — | 427.6 | — | — | — | ||||||||||
Total Derivatives Subject to a Master Netting Arrangement | 2,203.3 | 1,860.0 | 343.3 | — | 343.3 | ||||||||||
Total Derivatives Not Subject to a Master Netting Arrangement | 450.8 | — | 450.8 | — | 450.8 | ||||||||||
Total Derivatives | 2,654.1 | 1,860.0 | 794.1 | — | 794.1 | ||||||||||
Securities Purchased under Agreements to Resell(2) | $ | 1,303.3 | $ | — | $ | 1,303.3 | $ | 1,303.3 | $ | — |
December 31, 2016 | |||||||||||||||
(In Millions) | GROSS RECOGNIZED ASSETS | GROSS AMOUNTS OFFSET | NET AMOUNTS PRESENTED | GROSS AMOUNTS NOT OFFSET | NET AMOUNT(3) | ||||||||||
Derivative Assets(1) | |||||||||||||||
Foreign Exchange Contracts Over the Counter (OTC) | $ | 2,800.4 | $ | 1,651.9 | $ | 1,148.5 | $ | — | $ | 1,148.5 | |||||
Interest Rate Swaps OTC | 129.8 | 18.2 | 111.6 | — | 111.6 | ||||||||||
Interest Rate Swaps Exchange Cleared | 117.4 | 21.8 | 95.6 | — | 95.6 | ||||||||||
Cross Product Netting Adjustment | — | 17.2 | — | — | — | ||||||||||
Cross Product Collateral Adjustment | — | 461.3 | — | — | — | ||||||||||
Total Derivatives Subject to a Master Netting Arrangement | 3,047.6 | 2,170.4 | 877.2 | — | 877.2 | ||||||||||
Total Derivatives Not Subject to a Master Netting Arrangement | 809.2 | — | 809.2 | — | 809.2 | ||||||||||
Total Derivatives | 3,856.8 | 2,170.4 | 1,686.4 | — | 1,686.4 | ||||||||||
Securities Purchased under Agreements to Resell(2) | $ | 1,967.5 | $ | — | $ | 1,967.5 | $ | 1,967.5 | $ | — |
2017 Annual Report | Northern Trust Corporation 149 |
December 31, 2017 | |||||||||||||||
(In Millions) | GROSS RECOGNIZED LIABILITIES | GROSS AMOUNTS OFFSET | NET AMOUNTS PRESENTED | GROSS AMOUNTS NOT OFFSET | NET AMOUNT(2) | ||||||||||
Derivative Liabilities(1) | |||||||||||||||
Foreign Exchange Contracts OTC | $ | 1,889.2 | $ | 1,397.7 | $ | 491.5 | $ | — | $ | 491.5 | |||||
Interest Rate Swaps OTC | 69.2 | 14.2 | 55.0 | — | 55.0 | ||||||||||
Interest Rate Swaps Exchange Cleared | 14.3 | 10.1 | 4.2 | — | 4.2 | ||||||||||
Other Financial Derivatives | 30.4 | — | 30.4 | — | 30.4 | ||||||||||
Cross Product Netting Adjustment | — | 10.4 | — | — | — | ||||||||||
Cross Product Collateral Adjustment | — | 189.0 | — | — | — | ||||||||||
Total Derivatives Subject to a Master Netting Arrangement | 2,003.1 | 1,621.4 | 381.7 | — | 381.7 | ||||||||||
Total Derivatives Not Subject to a Master Netting Arrangement | 825.9 | — | 825.9 | — | 825.9 | ||||||||||
Total Derivatives | 2,829.0 | 1,621.4 | 1,207.6 | — | 1,207.6 | ||||||||||
Securities Sold under Agreements to Repurchase | $ | 834.0 | $ | — | $ | 834.0 | $ | 834.0 | $ | — |
December 31, 2016 | |||||||||||||||
(In Millions) | GROSS RECOGNIZED LIABILITIES | GROSS AMOUNTS OFFSET | NET AMOUNTS PRESENTED | GROSS AMOUNTS NOT OFFSET | NET AMOUNT(2) | ||||||||||
Derivative Liabilities(1) | |||||||||||||||
Foreign Exchange Contracts OTC | $ | 2,634.4 | $ | 1,651.9 | $ | 982.5 | $ | — | $ | 982.5 | |||||
Interest Rate Swaps OTC | 86.2 | 18.2 | 68.0 | — | 68.0 | ||||||||||
Interest Rate Swaps Exchange Cleared | 21.8 | 21.8 | — | — | — | ||||||||||
Other Financial Derivatives | 25.2 | — | 25.2 | — | 25.2 | ||||||||||
Cross Product Netting Adjustment | — | 17.2 | — | — | — | ||||||||||
Cross Product Collateral Adjustment | — | 722.1 | — | — | — | ||||||||||
Total Derivatives Subject to a Master Netting Arrangement | 2,767.6 | 2,431.2 | 336.4 | — | 336.4 | ||||||||||
Total Derivatives Not Subject to a Master Netting Arrangement | 608.5 | — | 608.5 | — | 608.5 | ||||||||||
Total Derivatives | 3,376.1 | 2,431.2 | 944.9 | — | 944.9 | ||||||||||
Securities Sold under Agreements to Repurchase | $ | 473.7 | $ | — | $ | 473.7 | $ | 473.7 | $ | — |
150 2017 Annual Report | Northern Trust Corporation |
DECEMBER 31, | ||||||
(In Millions) | 2017 | 2016 | ||||
Legally Binding Commitments to Extend Credit(1) | $ | 26,822.6 | $ | 32,768.1 | ||
Standby Letters of Credit(2) | 2,970.0 | 3,846.1 | ||||
Commercial Letters of Credit | 37.7 | 24.0 |
2017 Annual Report | Northern Trust Corporation 151 |
152 2017 Annual Report | Northern Trust Corporation |
2017 Annual Report | Northern Trust Corporation 153 |
154 2017 Annual Report | Northern Trust Corporation |
FOR THE YEAR ENDED DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||
Noninterest Income | |||||||||
Trust, Investment and Other Servicing Fees | $ | 1,984.6 | $ | 1,787.8 | $ | 1,696.9 | |||
Foreign Exchange Trading Income | 197.9 | 224.4 | 249.4 | ||||||
Other Noninterest Income | 176.1 | 147.0 | 170.5 | ||||||
Net Interest Income (Note) | 733.8 | 565.0 | 414.4 | ||||||
Revenue (Note) | 3,092.4 | 2,724.2 | 2,531.2 | ||||||
Provision for Credit Losses | 3.4 | 1.9 | (22.6 | ) | |||||
Noninterest Expense | 2,194.5 | 2,012.2 | 1,856.4 | ||||||
Income before Income Taxes (Note) | 894.5 | 710.1 | 697.4 | ||||||
Provision for Income Taxes (Note) | 279.5 | 212.9 | 212.8 | ||||||
Net Income | $ | 615.0 | $ | 497.2 | $ | 484.6 | |||
Percentage of Consolidated Net Income | 51 | % | 48 | % | 50 | % | |||
Average Assets | $ | 80,105.6 | $ | 76,194.7 | $ | 73,598.4 |
FOR THE YEAR ENDED DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||
Noninterest Income | |||||||||
Trust, Investment and Other Servicing Fees | $ | 1,449.7 | $ | 1,320.3 | $ | 1,283.6 | |||
Foreign Exchange Trading Income | 3.1 | 8.6 | 12.4 | ||||||
Other Noninterest Income | 103.9 | 105.7 | 111.8 | ||||||
Net Interest Income (Note) | 736.2 | 651.4 | 568.1 | ||||||
Revenue (Note) | 2,292.9 | 2,086.0 | 1,975.9 | ||||||
Provision for Credit Losses | (31.4 | ) | (27.9 | ) | (20.4 | ) | |||
Noninterest Expense | 1,405.3 | 1,315.3 | 1,291.9 | ||||||
Income before Income Taxes (Note) | 919.0 | 798.6 | 704.4 | ||||||
Provision for Income Taxes (Note) | 347.2 | 301.1 | 264.7 | ||||||
Net Income | $ | 571.8 | $ | 497.5 | $ | 439.7 | |||
Percentage of Consolidated Net Income | 48 | % | 48 | % | 45 | % | |||
Average Assets | $ | 26,599.9 | $ | 26,525.0 | $ | 25,048.7 |
2017 Annual Report | Northern Trust Corporation 155 |
FOR THE YEAR ENDED DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||
Noninterest Income | $ | 30.8 | $ | 133.1 | $ | 107.9 | |||
Net Interest Income (Note) | 5.0 | 43.6 | 112.9 | ||||||
Revenue (Note) | 35.8 | 176.7 | 220.8 | ||||||
Noninterest Expense | 169.6 | 143.2 | 132.3 | ||||||
Income before Income Taxes (Note) | (133.8 | ) | 33.5 | 88.5 | |||||
Provision for Income Taxes (Note) | (146.0 | ) | (4.3 | ) | 39.0 | ||||
Net Income | $ | 12.2 | $ | 37.8 | $ | 49.5 | |||
Percentage of Consolidated Net Income | 1 | % | 4 | % | 5 | % | |||
Average Assets | $ | 12,901.9 | $ | 12,850.6 | $ | 12,068.0 |
FOR THE YEAR ENDED DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||
Noninterest Income | |||||||||
Trust, Investment and Other Servicing Fees | $ | 3,434.3 | $ | 3,108.1 | $ | 2,980.5 | |||
Foreign Exchange Trading Income | 209.9 | 236.6 | 261.8 | ||||||
Other Noninterest Income | 301.9 | 382.2 | 390.2 | ||||||
Net Interest Income (Note) | 1,475.0 | 1,260.0 | 1,095.4 | ||||||
Revenue (Note) | 5,421.1 | 4,986.9 | 4,727.9 | ||||||
Provision for Credit Losses | (28.0 | ) | (26.0 | ) | (43.0 | ) | |||
Noninterest Expense | 3,769.4 | 3,470.7 | 3,280.6 | ||||||
Income before Income Taxes (Note) | 1,679.7 | 1,542.2 | 1,490.3 | ||||||
Provision for Income Taxes (Note) | 480.7 | 509.7 | 516.5 | ||||||
Net Income | $ | 1,199.0 | $ | 1,032.5 | $ | 973.8 | |||
Average Assets | $ | 119,607.4 | $ | 115,570.3 | $ | 110,715.1 |
156 2017 Annual Report | Northern Trust Corporation |
(In Millions) | TOTAL ASSETS | TOTAL REVENUE | INCOME BEFORE INCOME TAXES | NET INCOME | ||||||||
2017 | ||||||||||||
Non-U.S. | $ | 30,325.3 | $ | 1,709.7 | $ | 613.5 | $ | 430.0 | ||||
U.S. | 108,265.2 | 3,665.6 | 1,020.4 | 769.0 | ||||||||
Total | $ | 138,590.5 | $ | 5,375.3 | $ | 1,633.9 | $ | 1,199.0 | ||||
2016 | ||||||||||||
Non-U.S. | $ | 24,944.0 | $ | 1,221.2 | $ | 284.3 | $ | 225.1 | ||||
U.S. | 98,982.9 | 3,740.6 | 1,232.8 | 807.4 | ||||||||
Total | $ | 123,926.9 | $ | 4,961.8 | $ | 1,517.1 | $ | 1,032.5 | ||||
2015 | ||||||||||||
Non-U.S. | $ | 30,636.5 | $ | 1,358.4 | $ | 483.2 | $ | 344.4 | ||||
U.S. | 86,113.1 | 3,344.2 | 981.8 | 629.4 | ||||||||
Total | $ | 116,749.6 | $ | 4,702.6 | $ | 1,465.0 | $ | 973.8 |
2017 Annual Report | Northern Trust Corporation 157 |
December 31, 2017 | December 31, 2016 | |||||||||||||||||||
($ In Millions) | ADVANCED APPROACH | STANDARDIZED APPROACH | ADVANCED APPROACH | STANDARDIZED APPROACH | ||||||||||||||||
BALANCE | RATIO | BALANCE | RATIO | BALANCE | RATIO | BALANCE | RATIO | |||||||||||||
Common Equity Tier 1 | ||||||||||||||||||||
Northern Trust Corporation | $ | 8,626.3 | 13.5 | % | $ | 8,626.3 | 12.6 | % | $ | 8,480.4 | 12.4 | % | $ | 8,480.4 | 11.8 | % | ||||
The Northern Trust Company | 8,517.8 | 13.7 | 8,517.8 | 12.6 | 8,201.4 | 12.4 | 8,201.4 | 11.5 | ||||||||||||
Minimum to qualify as well-capitalized | ||||||||||||||||||||
Northern Trust Corporation | 4,161.2 | 6.5 | 4,460.1 | 6.5 | 4,436.7 | 6.5 | 4,681.4 | 6.5 | ||||||||||||
The Northern Trust Company | 4,032.7 | 6.5 | 4,406.8 | 6.5 | 4,296.2 | 6.5 | 4,624.8 | 6.5 | ||||||||||||
Tier 1 | ||||||||||||||||||||
Northern Trust Corporation | 9,473.4 | 14.8 | 9,473.4 | 13.8 | 9,319.9 | 13.7 | 9,319.9 | 12.9 | ||||||||||||
The Northern Trust Company | 8,517.8 | 13.7 | 8,517.8 | 12.6 | 8,201.4 | 12.4 | 8,201.4 | 11.5 | ||||||||||||
Minimum to qualify as well-capitalized: | ||||||||||||||||||||
Northern Trust Corporation | 5,121.5 | 8.0 | 5,489.3 | 8.0 | 5,460.6 | 8.0 | 5,761.7 | 8.0 | ||||||||||||
The Northern Trust Company | 4,963.3 | 8.0 | 5,423.8 | 8.0 | 5,287.6 | 8.0 | 5,692.1 | 8.0 | ||||||||||||
Total | ||||||||||||||||||||
Northern Trust Corporation | 10,707.4 | 16.7 | 10,861.2 | 15.8 | 10,281.6 | 15.1 | 10,475.0 | 14.5 | ||||||||||||
The Northern Trust Company | 9,527.8 | 15.4 | 9,681.6 | 14.3 | 9,271.4 | 14.0 | 9,463.4 | 13.3 | ||||||||||||
Minimum to qualify as well-capitalized: | ||||||||||||||||||||
Northern Trust Corporation | 6,401.9 | 10.0 | 6,861.6 | 10.0 | 6,825.8 | 10.0 | 7,202.1 | 10.0 | ||||||||||||
The Northern Trust Company | 6,204.2 | 10.0 | 6,779.7 | 10.0 | 6,609.5 | 10.0 | 7,115.1 | 10.0 | ||||||||||||
Tier 1 Leverage | ||||||||||||||||||||
Northern Trust Corporation | 9,473.4 | 7.8 | 9,473.4 | 7.8 | 9,319.9 | 8.0 | 9,319.9 | 8.0 | ||||||||||||
The Northern Trust Company | 8,517.8 | 7.0 | 8,517.8 | 7.0 | 8,201.4 | 7.0 | 8,201.4 | 7.0 | ||||||||||||
Minimum to qualify as well-capitalized: | ||||||||||||||||||||
Northern Trust Corporation | 6,075.9 | 5.0 | 6,075.9 | 5.0 | 5,847.9 | 5.0 | 5,847.9 | 5.0 | ||||||||||||
The Northern Trust Company | 6,057.9 | 5.0 | 6,057.9 | 5.0 | 5,831.0 | 5.0 | 5,831.0 | 5.0 | ||||||||||||
Supplementary Leverage(1) | ||||||||||||||||||||
Northern Trust Corporation | 9,473.4 | 6.8 | N/A | N/A | 9,319.9 | 6.8 | N/A | N/A | ||||||||||||
The Northern Trust Company | 8,517.8 | 6.1 | N/A | N/A | 8,201.4 | 6.0 | N/A | N/A | ||||||||||||
Minimum to qualify as well-capitalized: | ||||||||||||||||||||
Northern Trust Corporation | 4,175.7 | N/A | N/A | N/A | 4,129.9 | N/A | N/A | N/A | ||||||||||||
The Northern Trust Company | 4,164.7 | N/A | N/A | N/A | 4,120.0 | N/A | N/A | N/A |
158 2017 Annual Report | Northern Trust Corporation |
DECEMBER 31, | ||||||
(In Millions) | 2017 | 2016 | ||||
ASSETS | ||||||
Cash on Deposit with Subsidiary Bank | $ | 1,002.5 | $ | 757.0 | ||
Securities | 0.9 | 0.9 | ||||
Advances to Wholly-Owned Subsidiaries – Banks | 2,460.0 | 2,560.0 | ||||
– Nonbank | 13.5 | 13.5 | ||||
Investments in Wholly-Owned Subsidiaries – Banks | 9,223.9 | 8,635.0 | ||||
– Nonbank | 212.9 | 184.8 | ||||
Other Assets | 706.4 | 599.1 | ||||
Total Assets | $ | 13,620.1 | $ | 12,750.3 | ||
LIABILITIES | ||||||
Senior Notes | $ | 1,497.3 | $ | 1,496.6 | ||
Long Term Debt | 1,129.6 | 785.0 | ||||
Floating Rate Capital Debt | 277.5 | 277.4 | ||||
Other Liabilities | 499.5 | 420.9 | ||||
Total Liabilities | 3,403.9 | 2,979.9 | ||||
STOCKHOLDERS’ EQUITY | ||||||
Preferred Stock | 882.0 | 882.0 | ||||
Common Stock | 408.6 | 408.6 | ||||
Additional Paid-in Capital | 1,047.2 | 1,035.8 | ||||
Retained Earnings | 9,685.1 | 8,908.4 | ||||
Accumulated Other Comprehensive Income (Loss) | (414.3 | ) | (370.0 | ) | ||
Treasury Stock | (1,392.4 | ) | (1,094.4 | ) | ||
Total Stockholders’ Equity | 10,216.2 | 9,770.4 | ||||
Total Liabilities and Stockholders’ Equity | $ | 13,620.1 | $ | 12,750.3 |
2017 Annual Report | Northern Trust Corporation 159 |
FOR THE YEAR ENDED DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||
OPERATING INCOME | |||||||||
Dividends – Bank Subsidiaries | $ | 525.0 | $ | 300.0 | $ | 600.0 | |||
– Nonbank Subsidiaries | — | 3.4 | 8.7 | ||||||
Intercompany Interest and Other Charges | 58.2 | 39.8 | 38.5 | ||||||
Interest and Other Income | 18.1 | 7.5 | 5.4 | ||||||
Total Operating Income | 601.3 | 350.7 | 652.6 | ||||||
OPERATING EXPENSES | |||||||||
Interest Expense | 76.5 | 63.5 | 59.3 | ||||||
Other Operating Expenses | 25.9 | 19.9 | 56.8 | ||||||
Total Operating Expenses | 102.4 | 83.4 | 116.1 | ||||||
Income before Income Taxes and Equity in Undistributed Net Income of Subsidiaries | 498.9 | 267.3 | 536.5 | ||||||
Benefit for Income Taxes | 43.7 | 28.3 | 29.0 | ||||||
Income before Equity in Undistributed Net Income of Subsidiaries | 542.6 | 295.6 | 565.5 | ||||||
Equity in Undistributed Net Income of Subsidiaries – Banks | 632.6 | 708.3 | 392.8 | ||||||
– Nonbank | 23.8 | 28.6 | 15.5 | ||||||
Net Income | $ | 1,199.0 | $ | 1,032.5 | $ | 973.8 | |||
Preferred Stock Dividends | 49.8 | 23.4 | 23.4 | ||||||
Net Income Applicable to Common Stock | $ | 1,149.2 | $ | 1,009.1 | $ | 950.4 |
160 2017 Annual Report | Northern Trust Corporation |
FOR THE YEAR ENDED DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||
OPERATING ACTIVITIES: | |||||||||
Net Income | $ | 1,199.0 | $ | 1,032.5 | $ | 973.8 | |||
Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities: | |||||||||
Equity in Undistributed Net Income of Subsidiaries | (656.4 | ) | (736.9 | ) | (408.3 | ) | |||
Change in Prepaid Expenses | (0.3 | ) | 3.0 | 1.2 | |||||
Change in Accrued Income Taxes | 17.2 | (17.9 | ) | 22.8 | |||||
Other, net | 55.7 | 55.7 | 58.4 | ||||||
Net Cash Provided by Operating Activities | 615.2 | 336.4 | 647.9 | ||||||
INVESTING ACTIVITIES: | |||||||||
Proceeds from Sale, Maturity and Redemption of Securities – Available for Sale | — | 0.2 | 1.3 | ||||||
Change in Capital Investments in Subsidiaries | — | (3.0 | ) | (10.0 | ) | ||||
Advances to Wholly-Owned Subsidiaries | 100.0 | (295.0 | ) | — | |||||
Other, net | 1.9 | 1.2 | 0.2 | ||||||
Net Cash Used in Investing Activities | 101.9 | (296.6 | ) | (8.5 | ) | ||||
FINANCING ACTIVITIES: | |||||||||
Proceeds from Senior Notes and Long-Term Debt | 350.0 | — | — | ||||||
Proceeds from Issuance of Preferred Stock – Series C and Series D | — | 493.5 | — | ||||||
Treasury Stock Purchased | (523.1 | ) | (411.1 | ) | (496.9 | ) | |||
Net Proceeds from Stock Options | 108.0 | 233.8 | 94.0 | ||||||
Cash Dividends Paid on Common Stock | (356.8 | ) | (333.0 | ) | (321.4 | ) | |||
Cash Dividends Paid on Preferred Stock | (49.8 | ) | (23.4 | ) | (27.0 | ) | |||
Other, net | 0.1 | (0.1 | ) | — | |||||
Net Cash Used in Financing Activities | (471.6 | ) | (40.3 | ) | (751.3 | ) | |||
Net Change in Cash on Deposit with Subsidiary Bank | 245.5 | (0.5 | ) | (111.9 | ) | ||||
Cash on Deposit with Subsidiary Bank at Beginning of Year | 757.0 | 757.5 | 869.4 | ||||||
Cash on Deposit with Subsidiary Bank at End of Year | $ | 1,002.5 | $ | 757.0 | $ | 757.5 |
2017 Annual Report | Northern Trust Corporation 161 |
STATEMENTS OF INCOME | 2017 | 2016 | ||||||||||||||||||||||
($ In Millions Except Per Share Information) | FOURTH QUARTER | THIRD QUARTER | SECOND QUARTER | FIRST QUARTER | FOURTH QUARTER | THIRD QUARTER | SECOND QUARTER | FIRST QUARTER | ||||||||||||||||
Trust, Investment and Other Servicing Fees | $ | 910.0 | $ | 867.9 | $ | 848.2 | $ | 808.2 | $ | 794.4 | $ | 788.3 | $ | 777.2 | $ | 748.2 | ||||||||
Other Noninterest Income | 134.5 | 123.1 | 131.5 | 122.7 | 122.7 | 122.3 | 239.8 | 134.0 | ||||||||||||||||
Net Interest Income | ||||||||||||||||||||||||
Interest Income | 488.1 | 453.8 | 417.2 | 410.3 | 371.0 | 349.2 | 344.7 | 352.0 | ||||||||||||||||
Interest Expense | 108.1 | 99.6 | 75.7 | 56.8 | 46.7 | 46.1 | 45.0 | 44.2 | ||||||||||||||||
Net Interest Income | 380.0 | 354.2 | 341.5 | 353.5 | 324.3 | 303.1 | 299.7 | 307.8 | ||||||||||||||||
Provision for Credit Losses | (13.0 | ) | (7.0 | ) | (7.0 | ) | (1.0 | ) | (22.0 | ) | (3.0 | ) | (3.0 | ) | 2.0 | |||||||||
Noninterest Expense | 1,001.9 | 935.6 | 937.4 | 894.5 | 873.9 | 843.0 | 925.0 | 828.8 | ||||||||||||||||
Provision for Income Taxes | 79.0 | 118.2 | 122.9 | 114.8 | 123.0 | 116.1 | 131.7 | 113.8 | ||||||||||||||||
Net Income | $ | 356.6 | $ | 298.4 | $ | 267.9 | $ | 276.1 | $ | 266.5 | $ | 257.6 | $ | 263.0 | $ | 245.4 | ||||||||
Preferred Stock Dividends | 5.9 | 17.3 | 5.9 | 20.7 | 5.8 | 5.9 | 5.8 | 5.9 | ||||||||||||||||
Net Income Applicable to Common Stock | $ | 350.7 | $ | 281.1 | $ | 262.0 | $ | 255.4 | $ | 260.7 | $ | 251.7 | $ | 257.2 | $ | 239.5 | ||||||||
PER COMMON SHARE | ||||||||||||||||||||||||
Net Income – Basic | $ | 1.52 | $ | 1.21 | $ | 1.12 | $ | 1.10 | $ | 1.12 | $ | 1.09 | $ | 1.11 | $ | 1.03 | ||||||||
– Diluted | 1.51 | 1.20 | 1.12 | 1.09 | 1.11 | 1.08 | 1.10 | 1.03 | ||||||||||||||||
AVERAGE BALANCE SHEET ASSETS | ||||||||||||||||||||||||
Cash and Due from Banks | $ | 2,838.8 | $ | 2,666.8 | $ | 2,701.1 | $ | 2,116.6 | $ | 1,923.6 | $ | 1,933.8 | $ | 2,093.9 | $ | 2,192.4 | ||||||||
Federal Reserve and Other Central Bank Deposits | 25,995.8 | 25,182.9 | 22,570.0 | 21,806.9 | 20,079.6 | 20,829.6 | 19,657.8 | 21,170.2 | ||||||||||||||||
Interest-Bearing Due from and Deposits with Banks(1) | 7,084.7 | 7,145.8 | 7,653.9 | 6,684.3 | 7,869.1 | 8,232.2 | 9,827.9 | 9,056.8 | ||||||||||||||||
Federal Funds Sold and Securities Purchased under Agreements to Resell | 1,389.8 | 1,945.8 | 2,059.4 | 2,011.7 | 1,980.1 | 1,613.2 | 1,915.2 | 1,593.7 | ||||||||||||||||
Securities(2) | 45,601.9 | 44,742.3 | 43,731.8 | 44,777.7 | 45,297.6 | 43,258.7 | 40,756.5 | 38,803.3 | ||||||||||||||||
Loans and Leases | 33,235.6 | 33,468.2 | 33,891.4 | 33,671.2 | 33,818.5 | 33,910.1 | 34,456.1 | 33,993.4 | ||||||||||||||||
Allowance for Credit Losses Assigned to Loans and Leases | (149.1 | ) | (155.1 | ) | (162.3 | ) | (160.8 | ) | (189.7 | ) | (192.9 | ) | (195.4 | ) | (193.5 | ) | ||||||||
Other Assets | 6,314.5 | 6,162.7 | 5,955.4 | 5,568.8 | 6,758.5 | 6,797.8 | 6,401.8 | 6,800.8 | ||||||||||||||||
Total Assets | $ | 122,312.0 | $ | 121,159.4 | $ | 118,400.7 | $ | 116,476.4 | $ | 117,537.3 | $ | 116,382.5 | $ | 114,913.8 | $ | 113,417.1 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||
Deposits | ||||||||||||||||||||||||
Demand and Other Noninterest-Bearing | $ | 21,385.5 | $ | 21,736.4 | $ | 23,518.1 | $ | 25,712.5 | $ | 26,168.4 | $ | 25,829.3 | $ | 26,718.0 | $ | 26,214.5 | ||||||||
Savings, Money Market, and Other | 15,996.1 | 15,617.1 | 15,236.1 | 15,446.7 | 15,136.8 | 15,025.7 | 15,041.3 | 15,367.3 | ||||||||||||||||
Savings Certificates and Other Time | 1,189.2 | 1,255.1 | 1,312.7 | 1,338.5 | 1,413.2 | 1,450.3 | 1,405.0 | 1,459.6 | ||||||||||||||||
Non-U.S. Offices – Interest-Bearing | 58,632.0 | 58,503.4 | 56,672.3 | 52,435.9 | 51,866.5 | 51,468.6 | 50,443.8 | 49,434.9 | ||||||||||||||||
Total Deposits | 97,202.8 | 97,112.0 | 96,739.2 | 94,933.6 | 94,584.9 | 93,773.9 | 93,608.1 | 92,476.3 | ||||||||||||||||
Short-Term Borrowings | 8,411.9 | 7,264.5 | 5,412.0 | 5,659.1 | 6,598.0 | 6,961.0 | 6,195.0 | 5,584.1 | ||||||||||||||||
Senior Notes | 1,497.2 | 1,497.0 | 1,496.9 | 1,496.7 | 1,496.5 | 1,496.3 | 1,496.1 | 1,497.4 | ||||||||||||||||
Long-Term Debt | 1,540.1 | 1,672.5 | 1,536.1 | 1,324.9 | 1,360.5 | 1,406.9 | 1,403.2 | 1,399.3 | ||||||||||||||||
Floating Rate Capital Debt | 277.5 | 277.5 | 277.4 | 277.4 | 277.4 | 277.4 | 277.4 | 277.3 | ||||||||||||||||
Other Liabilities | 3,271.7 | 3,295.7 | 2,963.1 | 2,993.3 | 3,600.7 | 3,236.4 | 3,141.3 | 3,491.5 | ||||||||||||||||
Stockholders’ Equity | 10,110.8 | 10,040.2 | 9,976.0 | 9,791.4 | 9,619.3 | 9,230.6 | 8,792.7 | 8,691.2 | ||||||||||||||||
Total Liabilities and Stockholders’ Equity | $ | 122,312.0 | $ | 121,159.4 | $ | 118,400.7 | $ | 116,476.4 | $ | 117,537.3 | $ | 116,382.5 | $ | 114,913.8 | $ | 113,417.1 | ||||||||
ANALYSIS OF NET INTEREST INCOME | ||||||||||||||||||||||||
Earning Assets | $ | 113,307.8 | $ | 112,485.0 | $ | 109,906.5 | $ | 108,951.8 | $ | 109,044.9 | $ | 107,843.8 | $ | 106,613.5 | $ | 104,617.4 | ||||||||
Interest-Related Funds | 87,544.0 | 86,087.1 | 81,943.5 | 77,979.2 | 78,148.9 | 78,086.2 | 76,261.8 | 75,019.9 | ||||||||||||||||
Noninterest-Related Funds | $ | 25,763.8 | $ | 26,397.9 | $ | 27,963.0 | $ | 30,972.6 | $ | 30,896.0 | $ | 29,757.6 | $ | 30,351.7 | $ | 29,597.5 | ||||||||
Net Interest Income (Fully Taxable Equivalent) | 396.0 | 366.2 | 350.4 | 362.4 | 329.3 | 310.1 | 306.6 | 314.0 | ||||||||||||||||
Net Interest Margin (Fully Taxable Equivalent) | 1.39 | % | 1.29 | % | 1.28 | % | 1.35 | % | 1.20 | % | 1.14 | % | 1.16 | % | 1.21 | % | ||||||||
COMMON STOCK DIVIDEND AND MARKET PRICE | ||||||||||||||||||||||||
Dividends-Common Stock | $ | 0.42 | $ | 0.42 | $ | 0.38 | $ | 0.38 | $ | 0.38 | $ | 0.38 | $ | 0.36 | $ | 0.36 | ||||||||
Market Price Range – High | 101.46 | 99.30 | 98.72 | 91.14 | 90.96 | 71.66 | 74.86 | 71.13 | ||||||||||||||||
– Low | 91.06 | 85.69 | 84.93 | 81.92 | 66.83 | 61.86 | 61.32 | 54.38 |
162 2017 Annual Report | Northern Trust Corporation |
2017 | 2016 | 2015 | ||||||||||||||||||||||
($ In Millions) | INTEREST | AVERAGE BALANCE | RATE(4) | INTEREST | AVERAGE BALANCE | RATE(4) | INTEREST | AVERAGE BALANCE | RATE(4) | |||||||||||||||
AVERAGE EARNING ASSETS | ||||||||||||||||||||||||
Federal Reserve and Other Central Bank Deposits | $ | 155.1 | $ | 23,903.9 | 0.65 | % | $ | 91.4 | $ | 20,434.4 | 0.45 | % | $ | 63.9 | $ | 19,949.8 | 0.32 | % | ||||||
Interest-Bearing Due from and Deposits with Banks(1) | 63.8 | 7,143.3 | 0.89 | 64.3 | 8,742.7 | 0.73 | 84.9 | 10,713.4 | 0.79 | |||||||||||||||
Federal Funds Sold and Securities Purchased under Agreements to Resell | 27.5 | 1,850.2 | 1.48 | 18.4 | 1,775.7 | 1.04 | 6.3 | 1,162.6 | 0.54 | |||||||||||||||
Securities | ||||||||||||||||||||||||
U.S. Government | 89.4 | 6,342.5 | 1.41 | 78.1 | 7,073.1 | 1.10 | 55.2 | 4,985.5 | 1.11 | |||||||||||||||
Obligations of States and Political Subdivisions | 13.1 | 887.3 | 1.48 | 11.3 | 585.8 | 1.94 | 7.4 | 113.2 | 6.58 | |||||||||||||||
Government Sponsored Agency | 283.2 | 17,987.0 | 1.57 | 177.2 | 17,421.0 | 1.02 | 144.0 | 16,458.8 | 0.87 | |||||||||||||||
Other(2) | 253.3 | 19,498.9 | 1.30 | 189.9 | 16,961.4 | 1.12 | 149.5 | 15,850.4 | 0.94 | |||||||||||||||
Total Securities | 639.0 | 44,715.7 | 1.43 | 456.5 | 42,041.3 | 1.09 | 356.1 | 37,407.9 | 0.95 | |||||||||||||||
Loans and Leases(3) | 929.8 | 33,565.2 | 2.77 | 811.4 | 34,043.5 | 2.38 | 738.1 | 33,016.1 | 2.24 | |||||||||||||||
Total Earning Assets | 1,815.2 | 111,178.3 | 1.63 | 1,442.0 | 107,037.6 | 1.35 | 1,249.3 | 102,249.8 | 1.22 | |||||||||||||||
Allowance for Credit Losses Assigned to Loans and Leases | — | (156.8 | ) | — | — | (192.9 | ) | — | — | (255.9 | ) | — | ||||||||||||
Cash and Due from Banks | — | 2,583.1 | — | — | 2,035.3 | — | — | 2,138.7 | — | |||||||||||||||
Buildings and Equipment | — | 466.0 | — | — | 445.5 | — | — | 442.5 | — | |||||||||||||||
Client Security Settlement Receivables | — | 891.6 | — | — | 1,136.6 | — | — | 1,002.2 | — | |||||||||||||||
Goodwill | — | 544.0 | — | — | 524.9 | — | 530.8 | — | ||||||||||||||||
Other Assets | — | 4,101.2 | — | — | 4,583.3 | — | — | 4,607.0 | — | |||||||||||||||
Total Assets | $ | — | $ | 119,607.4 | — | % | $ | — | $ | 115,570.3 | — | % | $ | — | $ | 110,715.1 | — | % | ||||||
AVERAGE SOURCE OF FUNDS | ||||||||||||||||||||||||
Deposits | ||||||||||||||||||||||||
Savings, Money Market, and Other | $ | 24.3 | $ | 15,575.6 | 0.16 | % | $ | 11.9 | $ | 15,142.4 | 0.08 | % | $ | 9.7 | $ | 15,306.9 | 0.06 | % | ||||||
Savings Certificates and Other Time | 9.4 | 1,273.4 | 0.74 | 8.3 | 1,432.0 | 0.58 | 7.5 | 1,609.9 | 0.47 | |||||||||||||||
Non-U.S. Offices – Interest-Bearing | 148.4 | 56,583.2 | 0.26 | 63.3 | 50,808.2 | 0.12 | 57.1 | 49,377.1 | 0.12 | |||||||||||||||
Total Interest-Bearing Deposits | 182.1 | 73,432.2 | 0.25 | 83.5 | 67,382.6 | 0.12 | 74.3 | 66,293.9 | 0.11 | |||||||||||||||
Short-Term Borrowings | 67.1 | 6,696.0 | 1.00 | 21.8 | 6,337.0 | 0.34 | 6.0 | 4,757.9 | 0.13 | |||||||||||||||
Senior Notes | 46.9 | 1,496.9 | 3.13 | 46.8 | 1,496.6 | 3.13 | 46.8 | 1,497.2 | 3.13 | |||||||||||||||
Long-Term Debt | 39.2 | 1,519.4 | 2.58 | 26.4 | 1,392.4 | 1.90 | 24.4 | 1,426.4 | 1.71 | |||||||||||||||
Floating Rate Capital Debt | 4.9 | 277.5 | 1.75 | 3.5 | 277.4 | 1.25 | 2.4 | 277.3 | 0.86 | |||||||||||||||
Total Interest-Related Funds | 340.2 | 83,422.0 | 0.41 | 182.0 | 76,886.0 | 0.24 | 153.9 | 74,252.7 | 0.21 | |||||||||||||||
Interest Rate Spread | — | — | 1.22 | — | — | 1.11 | — | — | 1.01 | |||||||||||||||
Demand and Other Noninterest-Bearing Deposits | — | 23,072.6 | — | — | 26,231.3 | — | — | 24,474.1 | — | |||||||||||||||
Other Liabilities | — | 3,132.2 | — | — | 3,367.7 | — | — | 3,363.8 | — | |||||||||||||||
Stockholders’ Equity | — | 9,980.6 | — | — | 9,085.3 | — | — | 8,624.5 | — | |||||||||||||||
Total Liabilities and Stockholders’ Equity | $ | — | $ | 119,607.4 | — | % | $ | — | $ | 115,570.3 | — | % | $ | — | $ | 110,715.1 | — | % | ||||||
Net Interest Income/Margin (FTE Adjusted) | $ | 1,475.0 | $ | — | 1.33 | % | $ | 1,260.0 | $ | — | 1.18 | % | $ | 1,095.4 | $ | — | 1.07 | % | ||||||
Net Interest Income/Margin (Unadjusted) | $ | 1,429.2 | $ | — | 1.29 | % | $ | 1,234.9 | $ | — | 1.15 | % | $ | 1,070.1 | $ | — | 1.05 | % | ||||||
Net Interest Income/Margin Components (FTE Adjusted) | ||||||||||||||||||||||||
U.S. | $ | 1,076.4 | $ | 90,090.3 | 1.19 | % | $ | 959.5 | $ | 88,514.4 | 1.08 | % | $ | 842.5 | $ | 78,136.5 | 1.08 | % | ||||||
Non-U.S. | 398.6 | 21,088.0 | 1.89 | 300.5 | 18,523.2 | 1.62 | % | 252.9 | 24,113.3 | 1.05 | % | |||||||||||||
Consolidated | $ | 1,475.0 | $ | 111,178.3 | 1.33 | % | $ | 1,260.0 | $ | 107,037.6 | 1.18 | % | $ | 1,095.4 | $ | 102,249.8 | 1.07 | % |
Notes: | Net Interest Income (FTE Adjusted) includes adjustments to a fully taxable equivalent basis for loans and securities. Such adjustments are based on a blended federal and state tax rate of 38.1%. Total taxable equivalent interest adjustments amounted to $45.8 million in 2017, $25.1 million in 2016 and $25.3 million in 2015. Interest revenue on cash collateral positions is reported above within interest-bearing due from and deposits with banks and within loans and leases. Interest expense on cash collateral positions is reported above within non-U.S. offices interest-bearing deposits. Related cash collateral received from and deposited with derivative counterparties is recorded net of the associated derivative contract within other assets and other liabilities, respectively. |
2017 Annual Report | Northern Trust Corporation 163 |
(INTEREST AND RATE ON A FULLY TAXABLE EQUIVALENT BASIS) | 2017/2016 CHANGE DUE TO | 2016/2015 CHANGE DUE TO | ||||||||||||||||
(In Millions) | AVERAGE BALANCE | RATE | TOTAL | AVERAGE BALANCE | RATE | TOTAL | ||||||||||||
Increase (Decrease) in Interest Income | ||||||||||||||||||
Money Market Assets | ||||||||||||||||||
Federal Reserve and Other Central Bank Deposits | $ | 17.6 | $ | 46.1 | $ | 63.7 | $ | 1.6 | $ | 25.9 | $ | 27.5 | ||||||
Interest-Bearing Due from and Deposits with Banks | 2.5 | (3.0 | ) | (0.5 | ) | (14.6 | ) | (6.0 | ) | (20.6 | ) | |||||||
Federal Funds Sold and Securities Purchased under Agreements to Resell | 0.8 | 8.3 | 9.1 | 4.4 | 7.7 | 12.1 | ||||||||||||
Securities | ||||||||||||||||||
U.S. Government | (6.5 | ) | 17.8 | 11.3 | 23.4 | (0.5 | ) | 22.9 | ||||||||||
Obligations of States and Political Subdivisions | 3.4 | (1.6 | ) | 1.8 | 4.7 | (0.8 | ) | 3.9 | ||||||||||
Government Sponsored Agency | 6.1 | 99.9 | 106.0 | 8.4 | 24.8 | 33.2 | ||||||||||||
Other | 30.6 | 32.8 | 63.4 | 10.8 | 29.6 | 40.4 | ||||||||||||
Loans and Leases | 20.5 | 97.9 | 118.4 | (5.1 | ) | 78.4 | 73.3 | |||||||||||
Total | $ | 75.0 | $ | 298.2 | $ | 373.2 | $ | 33.6 | $ | 159.1 | $ | 192.7 | ||||||
Increase (Decrease) in Interest Expense | ||||||||||||||||||
Deposits | ||||||||||||||||||
Savings and Money Market | $ | 0.3 | $ | 12.1 | $ | 12.4 | $ | (0.1 | ) | $ | 2.3 | $ | 2.2 | |||||
Savings Certificates and Other Time | (0.7 | ) | 1.8 | 1.1 | (0.6 | ) | 1.4 | 0.8 | ||||||||||
Non-U.S. Offices Time | 7.5 | 77.6 | 85.1 | 6.2 | — | 6.2 | ||||||||||||
Short-Term Borrowings | 1.3 | 44.0 | 45.3 | 2.7 | 13.1 | 15.8 | ||||||||||||
Senior Notes | — | 0.1 | 0.1 | — | — | — | ||||||||||||
Subordinated Notes | ||||||||||||||||||
Long-Term Debt | 10.3 | 2.5 | 12.8 | 0.6 | 1.4 | 2.0 | ||||||||||||
Floating Rate Capital Debt | — | 1.4 | 1.4 | — | 1.1 | 1.1 | ||||||||||||
Total | $ | 18.7 | $ | 139.5 | $ | 158.2 | $ | 8.8 | $ | 19.3 | $ | 28.1 | ||||||
Increase in Net Interest Income | $ | 56.3 | $ | 158.7 | $ | 215.0 | $ | 24.8 | $ | 139.8 | $ | 164.6 |
164 2017 Annual Report | Northern Trust Corporation |
December 31, 2017 | |||||||||||||||||||||
ONE YEAR OR LESS | ONE TO FIVE YEARS | FIVE TO TEN YEARS | OVER TEN YEARS | AVERAGE MATURITY | |||||||||||||||||
($ in Millions) | BOOK | YIELD | BOOK | YIELD | BOOK | YIELD | BOOK | YIELD | |||||||||||||
Securities Held to Maturity | |||||||||||||||||||||
U.S. Government | $ | 35.0 | 1.12 | % | $ | — | — | % | $ | — | — | % | $ | — | — | % | 1 mo. | ||||
Obligations of States and Political Subdivisions | 16.5 | 3.68 | 18.1 | 4.97 | — | — | — | — | 18 mos. | ||||||||||||
Government Sponsored Agency | 0.4 | 3.90 | 0.8 | 4.83 | 1.3 | 4.85 | 3.3 | 4.87 | 130 mos. | ||||||||||||
Other – Fixed | 5,032.7 | 1.16 | 5,187.4 | 0.69 | 31.9 | 1.75 | 73.8 | 2.30 | 22 mos. | ||||||||||||
– Floating | 607.3 | 1.98 | 1,461.5 | 2.13 | 579.0 | 2.19 | — | — | 37 mos. | ||||||||||||
Total Securities Held to Maturity | $ | 5,691.9 | 1.26 | % | $ | 6,667.8 | 1.02 | % | $ | 612.2 | 2.18 | % | $ | 77.1 | 2.41 | % | 25 mos. | ||||
Securities Available for Sale | |||||||||||||||||||||
U.S. Government | $ | 398.0 | 1.33 | % | $ | 3,865.2 | 1.50 | % | $ | 1,437.1 | 1.58 | % | $ | — | — | % | 37 mos. | ||||
Obligations of States and Political Subdivisions | 430.1 | 0.85 | 316.3 | 1.23 | — | — | — | — | 12 mos. | ||||||||||||
Government Sponsored Agency | 3,152.3 | 1.73 | 9,666.8 | 1.76 | 4,822.1 | 1.76 | 1,035.4 | 2.03 | 52 mos. | ||||||||||||
Asset-Backed – Fixed | 741.9 | 1.53 | 1,425.5 | 1.81 | — | — | — | — | 18 mos. | ||||||||||||
Asset-Backed – Floating | 106.9 | 1.76 | 452.1 | 1.87 | — | — | — | — | 30 mos. | ||||||||||||
Auction Rate Securities | — | — | 0.6 | 2.33 | — | — | 3.7 | 2.95 | 166 mos. | ||||||||||||
Other – Fixed | 1,313.3 | 1.39 | 2,920.3 | 1.97 | 205.3 | 1.81 | — | — | 28 mos. | ||||||||||||
– Floating | 84.5 | 1.83 | 1,291.0 | 1.78 | 70.6 | 1.75 | 3.1 | 1.85 | 36 mos. | ||||||||||||
Total Securities Available for Sale | $ | 6,227.0 | 1.55 | % | $ | 19,937.8 | 1.74 | % | $ | 6,535.1 | 1.73 | % | $ | 1,042.2 | 2.03 | % | 42 mos. |
2017 Annual Report | Northern Trust Corporation 165 |
December 31, 2017 | ||||||||||||
(In Millions) | TOTAL | ONE YEAR OR LESS | ONE TO FIVE YEARS | OVER FIVE YEARS | ||||||||
U.S. (Excluding Residential Real Estate and Private Client Loans): | ||||||||||||
Commercial and Institutional | $ | 9,042.2 | $ | 5,478.2 | $ | 2,059.4 | $ | 1,504.6 | ||||
Commercial Real Estate | 3,482.7 | 764.9 | 2,033.6 | 684.2 | ||||||||
Lease Financing, net | 229.2 | 10.2 | 110.5 | 108.5 | ||||||||
Other-Commercial | 265.4 | 160.8 | 60.4 | 44.2 | ||||||||
Other-Personal | 33.5 | 1.7 | 2.4 | 29.4 | ||||||||
Total U.S. | $ | 13,053.0 | $ | 6,415.8 | $ | 4,266.3 | $ | 2,370.9 | ||||
Non-U.S. | $ | 1,538.5 | $ | 1,467.8 | $ | 37.5 | $ | 33.2 | ||||
Total Selected Loans and Leases | $ | 14,591.5 | $ | 7,883.6 | $ | 4,303.8 | $ | 2,404.1 | ||||
Interest Rate Sensitivity of Loans and Leases: | ||||||||||||
Fixed Rate | $ | 8,525.1 | $ | 5,995.2 | $ | 1,299.2 | $ | 1,230.7 | ||||
Variable Rate | 6,066.4 | 1,925.5 | 2,995.4 | 1,145.5 | ||||||||
Total | $ | 14,591.5 | $ | 7,920.7 | $ | 4,294.6 | $ | 2,376.2 |
DECEMBER 31, | |||||||||||||||
(In Millions) | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||
Commercial | $ | 289.5 | $ | 318.0 | $ | 335.2 | $ | 154.0 | $ | 497.0 | |||||
Non-U.S. Governments and Official Institutions | — | — | — | — | 250.1 | ||||||||||
Banks | — | 26.2 | 8.5 | — | 10.4 | ||||||||||
Other | 1,249.0 | 1,533.6 | 794.0 | 1,376.6 | 197.2 | ||||||||||
Total | $ | 1,538.5 | $ | 1,877.8 | $ | 1,137.7 | $ | 1,530.6 | $ | 954.7 |
(In Millions) | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||
Balance at Beginning of Year | $ | — | $ | — | $ | 3.3 | $ | 2.1 | $ | 3.4 | |||||
Charge-Offs | — | — | — | — | — | ||||||||||
Recoveries | — | — | — | — | — | ||||||||||
Provision for Credit Losses | — | — | (3.3 | ) | 1.2 | (1.3 | ) | ||||||||
Balance at End of Year | $ | — | $ | — | $ | — | $ | 3.3 | $ | 2.1 |
166 2017 Annual Report | Northern Trust Corporation |
($ in Millions) | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||
Balance at Beginning of Year | $ | 192.0 | $ | 233.3 | $ | 295.9 | $ | 307.9 | $ | 327.6 | |||||
Charge-Offs | |||||||||||||||
Commercial | |||||||||||||||
Commercial and Institutional | 10.3 | 15.8 | 9.2 | 5.4 | 5.0 | ||||||||||
Commercial Real Estate | 1.1 | 0.8 | 3.9 | 7.5 | 11.7 | ||||||||||
Total Commercial | 11.4 | 16.6 | 13.1 | 12.9 | 16.7 | ||||||||||
Personal | |||||||||||||||
Residential Real Estate | 8.0 | 10.4 | 16.7 | 21.2 | 37.0 | ||||||||||
Private Client | 2.1 | 0.3 | 0.9 | 2.0 | 5.5 | ||||||||||
Other | — | — | — | — | 0.1 | ||||||||||
Total Personal | 10.1 | 10.7 | 17.6 | 23.2 | 42.6 | ||||||||||
Total Charge-Offs | 21.5 | 27.3 | 30.7 | 36.1 | 59.3 | ||||||||||
Recoveries | |||||||||||||||
Commercial | |||||||||||||||
Commercial and Institutional | 3.7 | 3.3 | 1.7 | 1.3 | 3.6 | ||||||||||
Commercial Real Estate | 1.8 | 1.5 | 3.8 | 9.8 | 5.0 | ||||||||||
Total Commercial | 5.5 | 4.8 | 5.5 | 11.1 | 8.6 | ||||||||||
Personal | |||||||||||||||
Residential Real Estate | 5.4 | 6.6 | 4.5 | 5.6 | 9.4 | ||||||||||
Private Client | 0.4 | 0.7 | 1.2 | 1.4 | 1.6 | ||||||||||
Total Personal | 5.8 | 7.3 | 5.7 | 7.0 | 11.0 | ||||||||||
Total Recoveries | 11.3 | 12.1 | 11.2 | 18.1 | 19.6 | ||||||||||
Net Charge-Offs | 10.2 | 15.2 | 19.5 | 18.0 | 39.7 | ||||||||||
Provision for Credit Losses | (28.0 | ) | (26.0 | ) | (43.0 | ) | 6.0 | 20.0 | |||||||
Effect of Foreign Exchange Rates | — | (0.1 | ) | (0.1 | ) | — | — | ||||||||
Net Change in Allowance | (38.2 | ) | (41.3 | ) | (62.6 | ) | (12.0 | ) | (19.7 | ) | |||||
Balance at End of Year | 153.8 | 192.0 | 233.3 | 295.9 | 307.9 | ||||||||||
Allowance Assigned To: | |||||||||||||||
Loans and Leases | $ | 131.2 | $ | 161.0 | $ | 193.8 | $ | 267.0 | $ | 278.1 | |||||
Undrawn Commitments and Standby Letters of Credit | 22.6 | 31.0 | 39.5 | 28.9 | 29.8 | ||||||||||
Total Allowance for Credit Losses | $ | 153.8 | $ | 192.0 | $ | 233.3 | $ | 295.9 | $ | 307.9 | |||||
Loans and Leases at Year-End | $ | 32,592.2 | $ | 33,822.1 | $ | 33,180.9 | $ | 31,640.2 | $ | 29,385.5 | |||||
Average Total Loans and Leases | $ | 33,565.2 | $ | 34,043.5 | $ | 33,016.1 | $ | 30,215.6 | $ | 28,696.5 | |||||
As a Percent of Year-End Loans and Leases | |||||||||||||||
Net Loan Charge-Offs | 0.03 | % | 0.04 | % | 0.06 | % | 0.06 | % | 0.14 | % | |||||
Provision for Credit Losses | (0.09 | ) | (0.08 | ) | (0.13 | ) | 0.02 | 0.07 | |||||||
Allowance at Year-End Assigned to Loans and Leases | 0.40 | 0.48 | 0.58 | 0.84 | 0.95 | ||||||||||
As a Percent of Average Loans and Leases | |||||||||||||||
Net Loan Charge-Offs | 0.03 | % | 0.04 | % | 0.06 | % | 0.06 | % | 0.14 | % | |||||
Allowance at Year-End Assigned to Loans and Leases | 0.39 | 0.47 | 0.59 | 0.88 | 0.97 |
2017 Annual Report | Northern Trust Corporation 167 |
DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||
U.S. Offices | |||||||||
Demand and Noninterest-Bearing | |||||||||
Individuals, Partnerships and Corporations | $ | 16,410.6 | $ | 20,764.8 | $ | 20,684.9 | |||
Correspondent Banks | 60.3 | 58.0 | 59.8 | ||||||
Other Noninterest-Bearing | 1.4 | 76.3 | 124.6 | ||||||
Total Demand and Noninterest-Bearing | 16,472.3 | 20,899.1 | 20,869.3 | ||||||
Interest-Bearing | |||||||||
Savings, Money Market, and Other | 15,575.6 | 15,142.4 | 15,306.9 | ||||||
Savings Certificates less than $100,000 | 130.1 | 150.9 | 175.9 | ||||||
Savings Certificates $100,000 and more | 717.3 | 672.0 | 669.9 | ||||||
Other | 426.0 | 609.1 | 764.1 | ||||||
Total Interest-Bearing | 16,849.0 | 16,574.4 | 16,916.8 | ||||||
Total U.S. Offices | 33,321.3 | 37,473.5 | 37,786.1 | ||||||
Non-U.S. Offices | |||||||||
Noninterest-Bearing | 6,600.3 | 5,332.2 | 3,604.8 | ||||||
Interest-Bearing | 56,583.2 | 50,808.2 | 49,377.1 | ||||||
Total Non-U.S. Offices | 63,183.5 | 56,140.4 | 52,981.9 | ||||||
Total Deposits | $ | 96,504.8 | $ | 93,613.9 | $ | 90,768.0 |
DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||
Commercial | $ | 70,987.1 | $ | 57,354.0 | $ | 50,965.8 | |||
Non-U.S. Governments and Official Institutions | 4,246.0 | 3,971.8 | 5,464.3 | ||||||
Banks | 305.5 | 276.6 | 489.5 | ||||||
Other Time | 6.3 | 9.4 | 18.2 | ||||||
Other Demand | 6.1 | 8.8 | 3.9 | ||||||
Total | $ | 75,551.0 | $ | 61,620.6 | $ | 56,941.7 |
DECEMBER 31, 2017 | |||||||||
U.S. OFFICES | NON-U.S. OFFICES | ||||||||
(In Millions) | CERTIFICATES OF DEPOSIT | OTHER TIME | |||||||
3 Months or Less | $ | 507.2 | $ | — | $ | 12,680.0 | |||
Over 3 through 6 Months | 219.0 | — | 13.7 | ||||||
Over 6 through 12 Months | 237.5 | — | 2.4 | ||||||
Over 12 Months | 60.9 | — | 0.2 | ||||||
Total | $ | 1,024.6 | $ | — | $ | 12,696.3 |
168 2017 Annual Report | Northern Trust Corporation |
DECEMBER 31, | ||||||
Interest-Related Deposits – U.S. Offices | 2017 | 2016 | 2015 | |||
Savings, Money Market, and Other | 0.16 | % | 0.08 | % | 0.06 | % |
Savings Certificates less than $100,000 | 0.15 | 0.15 | 0.19 | |||
Savings Certificates $100,000 and more | 0.46 | 0.35 | 0.38 | |||
Other Time | 1.38 | 0.94 | 0.63 | |||
Total U.S. Offices Interest-Related Deposits | 0.20 | 0.12 | 0.10 | |||
Total Non-U.S. Offices Interest-Related Deposits | 0.26 | 0.12 | 0.12 | |||
Total Interest-Related Deposits | 0.25 | % | 0.12 | % | 0.11 | % |
(In Millions) | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||
Total Assets | $ | 26,510.1 | $ | 24,031.0 | $ | 29,411.2 | $ | 28,072.8 | $ | 29,315.6 | |||||
Time Deposits with Banks | 5,013.4 | 6,331.3 | 13,712.9 | 16,106.9 | 17,785.5 | ||||||||||
Loans | 2,014.8 | 1,894.3 | 1,759.4 | 1,490.2 | 1,164.0 | ||||||||||
Customers’ Acceptance Liability | — | — | — | — | 0.5 | ||||||||||
Non-U.S. Investments | 14,047.8 | 10,255.7 | 8,590.8 | 6,446.5 | 5,334.1 | ||||||||||
Total Liabilities | 64,267.3 | 57,270.0 | 54,521.0 | 52,123.3 | 48,144.4 | ||||||||||
Deposits | 63,183.5 | 56,139.8 | 52,981.2 | 49,854.7 | 45,865.7 | ||||||||||
Liability on Acceptances | — | — | — | — | 0.5 |
2017 | 2016 | 2015 | 2014 | 2013 | ||||||
Assets | 22 | % | 21 | % | 27 | % | 27 | % | 31 | % |
Liabilities | 54 | % | 50 | % | 49 | % | 50 | % | 51 | % |
2017 Annual Report | Northern Trust Corporation 169 |
(In Millions) | BANKS | COMMERCIAL AND OTHER | TOTAL | ||||||
AT DECEMBER 31, 2017 | |||||||||
Japan | $ | 510 | $ | 3,375 | $ | 3,885 | |||
Canada | 1,437 | 196 | 1,633 | ||||||
AT DECEMBER 31, 2016 | |||||||||
Japan | $ | 900 | $ | 1,608 | $ | 2,508 | |||
Canada | 2,114 | 309 | 2,423 | ||||||
France | 1,311 | 233 | 1,544 | ||||||
Sweden | 1,112 | 217 | 1,329 | ||||||
AT DECEMBER 31, 2015 | |||||||||
Canada | $ | 2,293 | $ | 277 | $ | 2,570 | |||
Japan | 2,290 | — | 2,290 | ||||||
United Kingdom | 428 | 764 | 1,192 | ||||||
DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||
Balance on December 31 | $ | 2,286.1 | $ | 204.8 | $ | 351.5 | |||
Highest Month-End Balance | 2,286.1 | 378.5 | 982.2 | ||||||
Year – Average Balance | 1,102.6 | 617.7 | 823.6 | ||||||
– Average Rate | 0.95 | % | 0.25 | % | 0.08 | % | |||
Average Rate at Year-End | 1.17 | % | 0.07 | % | 0.05 | % |
DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||
Balance on December 31 | $ | 834.0 | $ | 473.7 | $ | 546.6 | |||
Highest Month-End Balance | 834.0 | 565.5 | 802.4 | ||||||
Year – Average Balance | 738.9 | 847.1 | 649.5 | ||||||
– Average Rate | 0.81 | % | 0.27 | % | 0.05 | % | |||
Average Rate at Year-End | 1.29 | % | 0.64 | % | 0.36 | % |
170 2017 Annual Report | Northern Trust Corporation |
DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||
Balance on December 31 | $ | 6,051.1 | $ | 5,109.5 | $ | 4,055.1 | |||
Highest Month-End Balance | 7,040.4 | 6,037.6 | 4,123.2 | ||||||
Year – Average Balance | 4,854.5 | 4,872.1 | 3,284.9 | ||||||
– Average Rate | 1.04 | % | 0.37 | % | 0.15 | % | |||
Average Rate at Year-End | 1.38 | % | 0.57 | % | 0.16 | % |
DECEMBER 31, | |||||||||
(In Millions) | 2017 | 2016 | 2015 | ||||||
Balance on December 31 | $ | 9,171.2 | $ | 5,788.0 | $ | 4,953.2 | |||
Year – Average Balance | 6,696.0 | 6,337.0 | 4,757.9 | ||||||
– Average Rate | 1.00 | % | 0.34 | % | 0.13 | % |
2017 Annual Report | Northern Trust Corporation 171 |
172 2017 Annual Report | Northern Trust Corporation |
2017 Annual Report | Northern Trust Corporation 173 |
174 2017 Annual Report | Northern Trust Corporation |
For Northern Trust Corporation and Subsidiaries: |
Consolidated Balance Sheets - December 31, 2017 and 2016 |
Consolidated Statements of Income - Years Ended December 31, 2017, 2016, and 2015 |
Consolidated Statements of Comprehensive Income - Years Ended December 31, 2017, 2016, and 2015 |
Consolidated Statements of Changes in Stockholders' Equity - Years Ended December 31, 2017, 2016, and 2015 |
Consolidated Statements of Cash Flows - Years Ended December 31, 2017, 2016, and 2015 |
Notes to Consolidated Financial Statements |
Report of Independent Registered Public Accounting Firm |
2017 Annual Report | Northern Trust Corporation 175 |
Northern Trust Corporation | |
(Registrant) | |
By: | /s/ Michael G. O’Grady |
Michael G. O’Grady | |
President and Chief Executive Officer |
Signature | Capacity | |
/s/ Michael G. O'Grady | President and Chief Executive Officer (Principal Executive Officer) | |
Michael G. O’Grady | ||
/s/ S. Biff Bowman | Executive Vice President and Chief Financial Officer (Principal Financial Officer) | |
S. Biff Bowman | ||
/s/ Aileen B. Blake | Executive Vice President and Controller (Principal Accounting Officer) | |
Aileen B. Blake | ||
/s/ Frederick H. Waddell | Chairman | |
Frederick H. Waddell | ||
/s/ Linda Walker Bynoe | Director | |
Linda Walker Bynoe | ||
/s/ Susan Crown | Director | |
Susan Crown | ||
/s/ Dean M. Harrison | Director | |
Dean M. Harrison | ||
/s/ Jay L. Henderson | Director | |
Jay L. Henderson | ||
/s/ Jose Luis Prado | Director | |
Jose Luis Prado |
176 2017 Annual Report | Northern Trust Corporation |
/s/ Thomas E. Richards | Director | |
Thomas E. Richards | ||
/s/ John W. Rowe | Director | |
John W. Rowe | ||
/s/ Martin P. Slark | Director | |
Martin P. Slark | ||
/s/ David H.B. Smith, Jr. | Director | |
David H.B. Smith, Jr. | ||
/s/ Donald Thompson | Director | |
Donald Thompson | ||
/s/ Charles A. Tribbett, III | Director | |
Charles A. Tribbett, III |
2017 Annual Report | Northern Trust Corporation 177 |
Exhibit Number | Description |
4.3 | Certain instruments defining the rights of the holders of long-term debt of the Corporation and certain of its subsidiaries, none of which authorize a total amount of indebtedness in excess of 10% of the total assets of the Corporation and its subsidiaries on a consolidated basis, have not been filed as exhibits. The Corporation hereby agrees to furnish a copy of any of these agreements to the SEC upon request. |
178 2017 Annual Report | Northern Trust Corporation |
Exhibit Number | Description |
2017 Annual Report | Northern Trust Corporation 179 |
Exhibit Number | Description |
180 2017 Annual Report | Northern Trust Corporation |
Exhibit Number | Description |
2017 Annual Report | Northern Trust Corporation 181 |
Exhibit Number | Description |
101 | Includes the following financial and related information from the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets as of December 31, 2017 and 2016, (ii) the Consolidated Statements of Income for the twelve months ended December 31, 2017, 2016 and 2015, (iii) the Consolidated Statements of Comprehensive Income for the twelve months ended December 31, 2017, 2016 and 2015, (iv) the Consolidated Statements of Changes in Stockholders’ Equity for the twelve months ended December 31, 2017, 2016 and 2015, (v) the Consolidated Statements of Cash Flows for the twelve months ended December 31, 2017, 2016 and 2015, and (vi) Notes to Consolidated Financial Statements. |
182 2017 Annual Report | Northern Trust Corporation |
1.1 | “Assigned Base Salary” means the regular annual base wage rate of the Participant, excluding overtime wages or wages related to shift differential. |
1.2 | “Beneficiary” means any person eligible to receive a death benefit under the respective Incentive Compensation Plan as designated by the Participant or otherwise provided under such Incentive Compensation Plan, in the event of the death of the Participant. |
1.3 | “Board” means the Board of Directors of the Corporation. |
1.4 | A “Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred: |
(a) | any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Corporation (not including in the securities beneficially owned by such Person any securities acquired directly from the Corporation or its Affiliates) representing 30% or more of the combined voting power of the Corporation's then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (i) of paragraph (c) below; |
(b) | the election to the Board, without the recommendation or approval of two- |
(c) | there is consummated a merger or consolidation of the Corporation or any direct or indirect Subsidiary of the Corporation with any other company, other than (i) a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), at least 60% of the combined voting power of the securities of the Corporation or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Corporation (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Corporation (not including in the securities beneficially owned by such Person any securities acquired directly from the Corporation or its Affiliates) representing 20% or more of the combined voting power of the Corporation's then outstanding securities; or |
(d) | there is consummated the sale or disposition by the Corporation of all or substantially all of the Corporation's assets, other than a sale or disposition by the Corporation of all or substantially all of the Corporation's assets to an entity, at least 60% of the combined voting power of the voting securities of which are owned by stockholders of the Corporation in substantially the same proportions as their ownership of the Corporation immediately prior to such sale or the stockholders of the Corporation approve a plan of complete liquidation or dissolution of the Corporation. |
1.5 | “Code” means the Internal Revenue Code of 1986, as amended from time to time. |
1.6 | “Committee” means the Employee Benefit Administrative Committee, which has the responsibility for administering various benefit plans of the Company, as constituted from time to time. |
1.7 | “Company” means The Northern Trust Company, an Illinois banking corporation; the Corporation; and such U.S. Related Companies as shall, with the consent of the Board, adopt the Plan. |
1.8 | “Corporation” means Northern Trust Corporation, a Delaware corporation, and, to the extent provided in Section 8.8 below, any successor corporation or other entity resulting from a merger or consolidation into or with the Corporation or a transfer or sale of substantially all of the assets of the Corporation. |
1.9 | “Deferred Compensation Account” means an individual bookkeeping account for each Participant established hereunder. |
1.10 | “Early Retirement Age” means the Participant’s age upon the date the Participant has both attained at least age 55 and earned 15 or more years of “Credited Service” as defined under the Pension Plan, provided, however, that in the case of amounts credited to a Participant’s Deferred Compensation Account that are attributable to services performed prior to 2018, “Early Retirement Age” shall have the meaning assigned to it under the Plan as in effect prior to November 1, 2017. |
1.11 | “Effective Date” means November 1, 2017, for the amended and restated Plan. The original effective date of the Plan was May 1, 1998. |
1.12 | “409A Amount” means the portion of the Deferred Compensation Account of a Participant that consists of amounts deferred in taxable years beginning after December 31, 2004, and earnings on such amounts, as determined in accordance with Code Section 409A and |
1.13 | “Incentive Compensation” means cash compensation earned pursuant to the Incentive Compensation Plans. |
1.14 | “Incentive Compensation Plans” means the Partners Incentive Plan, the Management Performance Plan and/or any other bonus program defined by the Company to be included. |
1.15 | “Initial Plan Year” means the eight-consecutive-month period commencing on the original effective date and ending on December 31, 1998. |
1.16 | “Investment Committee” means the Employee Benefit Investment Committee of the Company, as constituted from time to time, which has the investment responsibilities specifically assigned to it under Article IV. |
1.17 | “Key Employee” means a Participant who is a “specified employee” within the meaning of Code Section 409A(a)(2)(B)(i). The Company’s Key Employees shall be identified annually pursuant to Section 5.7. |
1.18 | “Normal Retirement Age” means age 65, provided that in the case of an individual who commences participation in the Pension Plan after his sixtieth (60th) birthday, the individual’s “Normal Retirement Age” shall mean his age on the earlier of (i) the fifth (5th) anniversary of the date the individual commenced participation in the Pension Plan, or (ii) the date the individual completes five (5) years of “Vesting Service,” as defined under the Pension Plan. |
1.19 | “Participant” means an employee of the Company (a) who resides in the United States or is a United States expatriate on temporary foreign assignment, (b) who is eligible to participate in the Plan in accordance with Article II and (c) who has a Deferred Compensation Account under the Plan; provided, that the following shall not be considered Participants: (i) an employee employed by any office or branch of the Company located in a foreign country who, as to the United States, is a nonresident alien, and (ii) an employee who (A) as to the United States, is a foreign national, (B) is working for the Company at a location located in the United States, and (C) is covered by a retirement plan sponsored by a non-U.S. affiliate of the Corporation in the country in which that affiliate is located. |
1.20 | “Pension Plan” means The Northern Trust Company Pension Plan, as amended from time to time. |
1.21 | “Plan” means the Northern Trust Corporation Deferred Compensation Plan, as amended from time to time. |
1.22 | “Plan Year” means the calendar year. |
1.23 | “Postponed Retirement Age” means the Participant’s age after Normal Retirement Age when such Participant incurs a Break in Service. |
1.24 | “Related Company” means any person with whom the Company is considered to be a single employer under Section 414(b) of the Code and all persons with whom the Company would be considered a single employer under Code Section 414(c), substituting 50% for the 80% standard that would otherwise apply. |
1.25 | “Retirement Deferral” means the category of deferral described in Section 5.1(a). |
1.26 | “Retirement Date” means the date, if any, of the Participant’s Separation from Service after reaching the Participant’s Normal, Early or Postponed Retirement Age. |
1.27 | “Retirement Distribution Date” means the last business day of the 12th month following the month in which the Participant’s Retirement Date occurs. |
1.28 | “Separation from Service” means a Participant’s termination of employment with the Company for any reason other than death. A termination of employment will be deemed to occur when the Company and the Participant reasonably anticipate that the level of bona fide services the Participant will perform for the Company (whether as an employee or an independent contractor, but not as a director) after a certain date will permanently decrease to less than 50 percent of the average level of bona fide services performed by the Participant for the Company (as an employee or independent contractor, but not as a director) in the immediately preceding 36 months (or the full period of the Participant’s services to the Company if the Participant has been providing services to the Company for less than 36 months), determined in accordance with Treas. Reg. Sec. 1.409A-1(h). The employment relationship will be treated as continuing intact while the Participant is on a bona fide leave of absence (determined in accordance with Treas. Reg. Sec. 1.409A-1(h)), but (a) only if there is a reasonable expectation that the Participant will return to active employment status, and (b) only to the extent that such leave of absence does not exceed 6 months, or, if longer, for so long as the Participant has a statutory or contractual right to reemployment. For purposes of this Section 1.28, references to the Company shall include the Company and all Related Companies. |
1.29 | Short-Term Deferral means the category of deferral described in Section 5.1(b). |
1.30 | “Short-Term Distribution Date” means the last business day of January of any Plan Year as provided under Section 5.1 of the Plan and as irrevocably set forth in each of the Participant’s Short-Term Deferral election forms. |
2.1 | Conditions for Deferrals for 1998 and 1999 Incentive Compensation Payments. For Incentive Compensation which otherwise would be paid during the 1998 or 1999 Plan Years, an employee of the Company who participates in an Incentive Compensation Plan and (i) whose Assigned Base Salary, determined as of April 1, 1998, is at least $100,000, or (ii) whose Assigned Base Salary determined as of April 1, 1998 plus Incentive Compensation paid under the Incentive Compensation Plans during the period commencing on April 1, 1997 and ending on March 31, 1998 is at least $150,000, shall be eligible to defer Incentive Compensation under the Plan. |
2.2 | Conditions for Deferrals in Subsequent Plan Years. For Plan Years beginning after 1999 and prior to 2018, the Plan required that the Participant’s Assigned Base Salary or Assigned Based Salary plus Incentive Compensation meet certain dollar thresholds described in the Plan. For Incentive Compensation attributable to services performed in the 2018 Plan Year and each subsequent Plan Year, an employee of the Company who participates in an Incentive Compensation Plan for such year and whose Assigned Base Salary, determined as of November 15 immediately preceding the Participant’s deferral election made under Section 3.2 below with respect to such year, is at least $165,000 (or such other amount as the Committee from time to time determines) shall be eligible to defer Incentive Compensation under the Plan for such year. |
3.1 | Amount Which May Be Deferred. Each Participant may elect to defer all or a portion of his or her annual Incentive Compensation as determined by the Committee; provided, however, the amount of each deferral for each payment of Incentive Compensation shall be at least $2,500. Participants shall always be one hundred percent (100%) vested in the amount they defer. |
3.2 | Deferral Election. Participants shall make the election to defer Incentive Compensation under the Plan on a Deferral Election Form within such dates as the Committee from time to time establishes; provided, that any such election must be made on or before December 31 of the Participant’s taxable year preceding the taxable year in which the Participant performs the services that give rise to the Incentive Compensation to be deferred. Participants shall make the following determinations on each Deferral Election Form, which determinations shall become irrevocable on December 31 of the Plan Year in which the election is made (or such earlier date in that Plan Year as the Committee may determine): |
(a) | the amount to be deferred with respect to the Participant’s Incentive Compensation to which the election applies pursuant to the terms of Sections 3.1 and 3.2 herein; |
(b) | with respect to the automatic Retirement Deferral election described in Section 5.1(a), the date as of which payments are to commence in accordance with Section |
(c) | if the Participant is making an optional Short-Term Deferral election described in Section 5.1(b), the Short-Term Distribution Date on which such Short-Term Deferral is to be paid in accordance with and subject to the terms and conditions of Article V. |
3.3 | Partial Year Employment and Initial Election. An employee who commences employment with the Company after the beginning of a Plan Year shall not be permitted to make an election to defer Incentive Compensation attributable to services performed in such Plan Year. Further, an employee who commences employment with the Company after November 15 of any Plan Year (or such other date as the Company may determine in its sole discretion) shall not be eligible under Section 2.2 to defer Incentive Compensation attributable to services performed in the subsequent Plan Year. |
3.4 | Disability or Other Absence. Subject to Section 5.1(d), if the Participant experiences a disability, all previous Deferral Elections will remain in force unless the Committee, in its sole discretion, determines that the Participant has incurred an unforeseeable emergency pursuant to Section 5.3 of the Plan, in which case it will waive, upon the Participant’s request, such election(s). Subject to the foregoing, if the Participant takes a paid or unpaid leave of absence, all previous Deferral Elections will remain in full force. |
4.1 | Investment Options/Earnings Credited to Participant Accounts. The Deferred Compensation Account of each Participant shall be a notional account. All amounts credited to such accounts shall be bookkeeping entries only. The Investment Committee may permit Participants to select among certain investment alternatives designated by the Investment Committee, and amounts credited to Participant Deferred Compensation Accounts shall be treated as if they were invested in such investment alternatives and shall be credited with earnings based on the performance of such investment alternatives. |
4.2 | A Participant may transfer amounts credited to the Particpant’s Deferred Compensation Account among the investment alternatives specified by the Investment Committee in accordance with such rules and requirements as established by the Investment Committee on a uniform and nondiscriminatory basis. Transfers among investment alternatives shall generally be made effective on the business day following the business day a transfer election is filed, subject to the Investment Committee’s discretion to suspend transfers in the event of market disruption or such other factor that the Investment Committee deems relevant. |
4.3 | Participant Statements. Statements that identify the Participant’s Deferred Compensation Account balance shall be provided, or made available, to Participants no less frequently than annually. |
4.4 | Notwithstanding anything in the Plan to the contrary, for a period of two years after the date of an occurrence of a Change in Control, neither the Investment Committee, nor the Company or Corporation or any successor of any of the foregoing, shall eliminate any of the investment alternatives and elections that were in effect immediately prior to the Change in Control and shall not decrease the frequency with which Participants may change investment elections. Notwithstanding the foregoing, in the event that an investment alternative is discontinued by its sponsor and therefore becomes unavailable to Participants, the Investment Committee or its successor shall provide a substitute alternative with substantially similar investment objectives and policies. |
4.5 | Valuation of Deferred Compensation Accounts. Participants’ Deferred Compensation Accounts shall be valued as of each business day. |
5.1 | Deferral Period. Pursuant to Section 3.2, each Participant shall irrevocably elect the Deferral Period for the Incentive Compensation payments deferred in any Plan Year, as described below: |
(a) | Automatic Retirement Deferral Election. Subject to Section 5.1(b), each Participant shall be deemed to irrevocably elect, with respect to the Incentive Compensation payments deferred in any Plan Year under Section 3.2, a Retirement Deferral, pursuant to which payments under the Plan shall commence, provided that the Participant incurs a Retirement Date and subject to Section 5.6, (i) either (A) within sixty (60) days of the Participant’s Retirement Date, or (B) on the Retirement Distribution Date, and (ii) in the form elected by the Participant in accordance with Section 5.2 of the Plan, each as elected by the Participant in accordance with Section 3.2 (provided, however, that payments must commence in accordance with clause (i)(B) of this Section 5.1(a) if the Participant elects to receive payment in the form provided under Section 5.2(b)). Any election by the Participant to defer Incentive Compensation under Section 3.2 and this Section 5.1 shall not be effective unless the Participant completes the elections described in clauses (i) and (ii) of this Section 5.1(a). |
(b) | Optional Short-Term Deferral Election. In addition to the automatic Retirement Deferral election described in Section 5.1(a), each Participant may also irrevocably elect, with respect to the Incentive Compensation payments deferred in any Plan Year, a Short-Term Deferral, pursuant to which payments under the Plan shall commence only in the form provided under Section 5.2(a) of this Plan on any Short-Term Distribution Date elected by the Participant, provided that such Short-Term Distribution Date shall be no earlier than the Short-Term Distribution Date that is subsequent to three (3) Plan Years following the end of the Plan Year in which the Incentive |
(c) | Notwithstanding anything in the Plan to the contrary, Incentive Compensation paid after a Participant’s Retirement Date, other Separation from Service or death, is not eligible for deferral and will not be deferred, regardless of the Participant’s prior Deferral Election. |
(d) | Notwithstanding any Deferral Period(s) elected by a Participant pursuant to Section 3.2(b) or 3.2(c), as applicable, and this Section 5.1, and subject to Section 5.6, if a Participant has a Separation from Service prior to Early Retirement Age and prior to the Short-Term Distribution Date, if any, elected by the Participant in accordance with Section 5.1(b), |
(i) | such Participant shall be paid out of the Plan in one (1) lump sum in cash within sixty (60) days after such Separation from Service; or |
(ii) | (A) with respect to a Participant’s 409A Amount, if the Participant has been on disability leave for a period of six (6) months and the Participant does not retain a right to reemployment under an applicable statute or by contract, such Participant’s 409A Amount shall be paid out of the Plan in one (1) lump sum in cash within sixty (60) days after such six (6) month disability period has elapsed; and |
(B) | with respect to a Participant’s Grandfathered Amount, if any, if the Participant has been on disability leave for a period of twelve (12) months, such Participant’s Grandfathered Amount shall be paid out of the Plan in one (1) lump sum in cash within sixty (60) days after such twelve (12) month disability period has elapsed. |
5.2 | Payment of Deferred Amounts. Subject to Section 5.6(d), payment of a Participant’s Deferred Compensation Account under the Plan shall be made in cash in one of the following forms irrevocably elected by the Participant pursuant to Sections 3.2(b) and 5.1: |
(a) | Lump Sum Payment. Payments shall be made in one (1) lump sum in an amount equal to the value of the Participant’s Deferred Compensation Account (i) in the case of payment pursuant to an election made under Sections 3.2(b) and 5.1(a)(i)(A), on the last business day of the month preceding the date of payment; (ii) in the case of payment pursuant to an election to commence payment under Sections 3.2(b) and 5.1(a)(i)(B) in the form of a lump sum, on the Retirement Distribution Date; and (iii) in the case of payment pursuant to an election made under Section 5.1(b) on the Short-Term Distribution Date. |
(b) | Installment Payments. Payments shall be made in either five (5) or ten (10) annual installments, as irrevocably elected by the Participant. Subject to Section 5.6, the initial payment shall be made on the Retirement Distribution Date. The remaining installment payments shall be made in the form of cash each year thereafter on the anniversary date of the Retirement Distribution Date (notwithstanding any delay of an initial payment due to the application of Section 5.6), until the Participant’s entire Deferred Compensation Account has been paid. The amount of each installment payment shall be equal to value of the Participant’s Deferred Compensation Account on the Retirement Distribution Date or anniversary date thereof. as applicable (or if that day is not a business day, then on the immediately preceding business day), multiplied by a fraction, the numerator of which is one (1), and the denominator of which is the number of installment payments remaining. |
5.3 | Unforeseeable Emergency. The Committee shall have the sole authority to alter the timing or manner of payment of amounts from a Participant’s Deferred Compensation Account in the event that the Participant establishes, to the satisfaction of the Committee that the Participant has experienced an unforeseeable emergency, as defined in Treas. Reg. Sec. 1.409A-3(i)(3)(i). In such event, the Committee may, upon the request of the Participant: |
(a) | Provide that all or a portion of the amount previously deferred by the Participant immediately shall be paid to the Participant in a lump sum payment; or |
(b) | Provide that all or a portion of the installments payable over a period of time immediately shall be paid to the Participant in a lump sum payment. |
(i) | Through reimbursement or compensation by insurance or otherwise; |
(ii) | By liquidation of the Participant’s assets, to the extent the liquidation of such assets would not itself cause severe financial hardship; or |
(iii) | By cessation of deferrals under the Plan. |
5.4 | Maximum Deductible Amount. An amount that would otherwise be paid from the Deferred Compensation Account of a Participant in a given Plan Year may be delayed to the extent that the Company reasonably anticipates that if the payment were made as scheduled the Company’s deduction with respect to such payment would not be permitted due to the application of Code Section 162(m). Subject to the first sentence of Section 5.5, amounts not paid as a result of the above limitation shall be paid in the earlier of (a) the Company’s first taxable year in which the Company reasonably anticipates that if the payment is made during such year the deduction of such payment will not be barred by application of Section 162(m), or (b) the period beginning with the date of the Participant’s Separation from Service or death, and ending on the later of (i) the last day of the taxable year of the Company in which the Participant incurs a Separation from Service or dies, or (ii) the 15th day of the third month following the Participant’s Separation from Service or death. |
5.5 | Death of Participant. A Participant, who at the time of his death is employed by the Company or any Related Company and who dies before a complete distribution of his Deferred Compensation Account has been made to him, or who has a Separation from Service and subsequently dies before a complete distribution of his Deferred Compensation Account has been paid to him, shall have his remaining Deferred Compensation Account distributed in cash in one (1) lump sum to his Beneficiary. Such distribution shall be made any time during the period beginning on the date of death and ending on December 31 of the first calendar year following the calendar year in which the Participant’s death occurs. |
5.6 | Limits on Distributions to Key Employees. Anything in the Plan to the contrary notwithstanding, including without limitation Section 5.3, if a Participant is a Key Employee, any distribution of a 409A Amount to such Participant due to the Participant’s Separation from Service that would otherwise be made during the six months following such Separation from Service shall in no event be made earlier than the earlier of (i) the date that is six months and one day following such Separation from Service, or (ii) the Participant’s death. |
5.7 | Annual Identification of Key Employees. The Specified Employee Identification Date, as defined in Treas. Reg. Sec. 1.409A-1(i)(3), to be used in determining Key Employees of the Company shall be September 30 of any Plan Year. The January 1 of the Plan Year next following that Plan Year shall be the Specified Employee Effective Date, as defined in Treas. Reg. Sec. 1.409A-1(i)(4), for Participants identified as Key Employees on the immediately preceding Specified Employee Identification Date. Participants identified as Key Employees on a Specified Employee Identification Date (September 30) shall be treated as Key Employees under the Plan for the 12-month period beginning on the Specified Employee Effective Date (January 1) next following such Specified Employee Identification Date. |
5.8 | Grandfathered Amount. Notwithstanding anything herein to the contrary, a Participant’s Grandfathered Amount, if any, shall be paid at the time and in the form determined under the Plan as in effect October 3, 2004. |
5.9 | 409A Amounts Attributable to Service Prior to 2018. Notwithstanding anything herein to the contrary, a Participant’s 409A amounts attributable to services performed prior to 2018 shall be paid at the time and in the form determined under the Plan as in effect prior to November 1, 2017, which are described in Supplement 2; provided, however that amounts payable on account of the death of Participant shall be paid in accordance with Section 5.5 |
6.1 | Terms Include Authorized Delegates. Where appropriate, the terms “Company,” “Corporation,” “Committee” or “Investment Committee” as used in this Plan shall also include any applicable subcommittee or any duly authorized delegate of the Company, the Corporation, the Committee or the Investment Committee, as the case may be. Such duly authorized delegate may be an individual or an organization within the Company, the Corporation, the Committee or the Investment Committee, or may be an unrelated third party individual or organization. |
6.2 | Authority of the Committees. The Committee shall administer the Plan and shall have full power to select employees for participation in the Plan and to determine the terms and conditions of each employee’s participation; to construe and interpret the Plan and any agreement or instrument entered into hereunder; and to establish, amend, or waive rules and regulations for the Plan’s administration. Further, the Committee shall have full power to make any other determination which may be necessary or advisable for the Plan’s administration. The Investment Committee shall have those powers set forth in Section 4.1 of the Plan. |
6.3 | Decisions Binding. Subject to the provisions of Article VII, all determinations and decisions made by the Committee or the Investment Committee pursuant to the provisions of the Plan, and all related orders, resolutions or actions of the Board, the Compensation and Benefits Committee of the Board, the Chief Executive Officer of the Corporation or the Executive Vice President and Human Resources Department Head of the Corporation (or the duly authorized designee of either of the latter two individuals) shall be final, conclusive, and binding on all persons, including the Company, its stockholders, employees, Participants, and their estates and beneficiaries. |
7.1 | Amendment or Termination. The Corporation has set no termination date for the Plan but reserves the right to amend or terminate the Plan when, in the sole discretion of the Corporation, such amendment or termination is advisable. |
(a) | Any such termination shall be made by action of the Compensation and Benefits Committee of the Board (or by action of the Board if the Compensation and Benefits Committee is unavailable or unable to act for any reason) and shall be effective as of the date set forth in such resolution. |
(b) | Any such amendment shall be made in accordance with the following: |
(i) | material amendments to the Plan shall be made by action of the Compensation and Benefits Committee of the Board (or by action of the Board, if the Compensation and Benefits Committee is unavailable or unable to act for any reason); and |
(ii) | (A) non-material or administrative amendments to the Plan or (B) any amendment to the Plan deemed required, authorized or desirable under applicable statutes, regulations or rulings, shall be made by action of either the Chief Executive Officer of the Corporation or the Executive Vice President and Human Resources Department Head of the Corporation (or either of their duly authorized designees). |
7.2 | Effect of Amendment or Termination. No amendment or termination of the Plan shall directly or indirectly reduce the balance of any deferred compensation held hereunder as of the effective date of such amendment or termination. Upon termination of the Plan, distribution of amounts in a Participant’s Deferred Compensation Account shall be made to him or his Beneficiary in the manner and at the time described in Article V of the Plan. No additional credits shall be made to the Deferred Compensation Account of a Participant for any Plan Year beginning after the termination of the Plan, but the Company shall continue to credit gains and losses attributable to investments made pursuant to Section 4.1 to such Deferred Compensation Account until the balance of such Account has been fully distributed to the Participant or his Beneficiary. |
7.3 | Amendments Necessary to Satisfy Code Section 409A. Anything in the preceding Sections 7.1 or 7.2 or elsewhere in the Plan to the contrary notwithstanding: |
(a) | the Plan may be amended in any manner necessary to ensure that the Plan complies in all applicable respects with Code Section 409A; and |
(b) | the Plan may not be amended in any manner that would cause the Plan to fail to comply in any applicable respect with Code Section 409A. |
8.1 | Plan Unfunded/Participant’s Rights Unsecured. The Plan at all times shall be entirely unfunded and no provision shall at any time be made with respect to segregating any assets of the Company for payment of any benefits hereunder. The Company shall contribute assets to a rabbi trust described in Revenue Procedure 92-64 (the “Trust”) for the purpose of paying benefits under this Plan, and if and to the extent that the Company does so, benefits under the Plan shall be payable pursuant to and in accordance with the Trust Agreement, which shall in all events provide that all assets held thereunder remain subject to the claims of the general creditors of the Company. No Participant, Beneficiary or any other person shall have any interest in any particular assets of the Company or the Trust by reason of the right to receive a benefit under the Plan and any such Participant, Beneficiary or other person shall have only the rights of a general unsecured creditor of the Company with respect to any rights under the Plan and Trust Agreement. |
8.2 | Tax Withholding. In connection with any deferral under the Plan, the Company shall have the right to withhold from nondeferred Incentive Compensation amounts or other compensation available at the time of the award an amount sufficient to satisfy the FICA tax withholding requirements applicable to such deferrals, or to require the Participant to remit to the Company an amount sufficient to satisfy the tax obligation. In connection with any distribution to the Participant of deferred Incentive Compensation, the Company shall have the right to withhold from such distribution an amount sufficient to satisfy Federal, State, and local tax withholding requirements applicable to such distributions. |
8.3 | No Guaranty of Benefits. Nothing contained in the Plan shall constitute a guaranty by the Company or any other person or entity that the assets of the Company will be sufficient to pay any benefit hereunder. |
8.4 | No Enlargement of Employee Rights. No Participant shall have any right to receive a distribution of contributions made under the Plan except in accordance with the terms of the Plan. Establishment of the Plan shall not be construed to give any Participant the right to be retained in the service of the Company. |
8.5 | Spendthrift Provision. No interest of any person or entity in, or right to receive a distribution under, the Plan shall be subject in any manner to sale, transfer, assignment, pledge, attachment, garnishment, or other alienation or encumbrance of any kind; nor may such interest or right to receive a distribution be taken, either voluntarily or involuntarily, for the satisfaction of the debts of, or other obligations or claims against, such person or entity, including claims for alimony, support, separate maintenance and claims in bankruptcy proceedings. |
8.6 | Applicable Law. To the extent not preempted by Federal law, the Plan shall be construed and administered under the laws of the State of Illinois. |
8.7 | Incapacity of Recipient. If any benefit under the Plan shall be payable to a minor or a person not adjudicated incompetent but who, by reason of illness or mental or physical disability, is, in the opinion of the Committee, unable to properly manage his affairs, such benefit shall be paid in such of the following ways as the Committee deems best: (a) to the person directly; (b) in the case of a minor, to a custodian under any Uniform Gift to Minors Act for the person; or (c) to the person’s spouse, adult child or blood relative. Any benefit so paid shall be a complete discharge of any liability of the Company and the Plan therefor. |
8.8 | Successors. The Plan shall not be automatically terminated by a transfer or sale of assets of the Corporation or by the merger or consolidation of the Corporation into or with any other corporation or other entity, but the Plan shall be continued after such sale, merger or consolidation only if and to the extent that the transferee, purchaser or successor entity agrees to continue the Plan. In the event that the Plan is not continued by the transferee, purchaser or successor entity, then the Plan shall terminate subject to the provisions of Section 7.2. |
8.9 | Unclaimed Benefit. Each Participant shall keep the Committee informed of his current address and the current address of his designated Beneficiary. None of the Corporation, the Company or the Committee shall be obligated to search for the whereabouts of any person. If the Committee is unable to locate the Participant or any Beneficiary of the Participant, then none of the Corporation, the Company or the Plan shall have any further obligation to pay any benefit hereunder to such Participant or Beneficiary and such benefit shall be forfeited; provided, however, that if the Participant or Beneficiary makes a valid claim for any benefit that has been forfeited, the forfeited benefit shall be reinstated. |
8.10 | Electronic or Telephonic Notices. Any election, notice, direction or other such action |
8.11 | Limitations on Liability. Notwithstanding any of the preceding provisions of the Plan, neither the Company, any member of the Committee or the Investment Committee nor any individual acting as an employee or agent of the Company, the Committee or the Investment Committee shall be liable to any Participant, former Participant, Beneficiary or any other person for any claim, loss, liability or expense incurred in connection with the Plan. |
8.12 | Gender; Headings. Words in the masculine gender shall include the feminine and the singular shall include the plural, and vice versa, unless qualified by the context. Any headings used herein are included for ease of reference only, and are not to be construed so as to alter the terms hereof. |
8.13 | Compliance with Code Section 409A. The Plan is intended to comply in all applicable respects with the requirements of Code Section 409A and shall be construed and administered so as to comply with that Code section. |
2. | Application. This Supplement #1 shall apply to: |
(a) | Any Participant who, prior to February 28, 2005, requested the cancellation of the Participant’s previous election to defer all or a portion of the cash award payment of Incentive Compensation scheduled to be made to the Participant on February 28, 2005; |
(b) | Any Participant who previously elected to defer all or a portion of the cash award payment of Incentive Compensation scheduled to be made to the Participant in the Plan Year beginning January 1, 2005 (the “2005 Plan Year”) and whose 2005 Plan Year payment schedule for such Incentive Compensation was changed from annual to quarterly after such deferral election had been made; |
(c) | Any Participant who would be considered a “specified employee” as defined in proposed regulation section 1.409A-1(i) issued by the U.S. Treasury Department and the Internal Revenue Service; who terminates employment for any reason on or after the Effective Date of this Supplement #1 and on or before October 31, 2005 (individually, a “2005 Specified Employee Participant” and, collectively, the “2005 Specified Employee Participants”). |
3. | Special Provision. The following special provision shall apply to the Special Election Cancellation Participants: |
4. | Special Election Deadline. To be effective, the election cancellation referred to in Paragraph 3 above must be executed and delivered to the Company by the Special Election Cancellation Participant on or before the date specified by the Company that is after the Effective Date of this Supplement #1, but no later than December 1, 2005. |
5. | Special Provision. The following special provision will apply to the 2005 Specified Employee Participants: |
6. | Limitations on Supplement. Nothing in this Supplement #1 shall be construed to provide any Special Election Cancellation Participant or 2005 Specified Employee Participant with any rights or benefits under the Plan other than those described in Paragraphs 3 through 5, as applicable, above. |
1. | “Distribution Date” was defined under the pre-November 1, 2017 Plan as the last business day of February of any Plan Year as provided under Section 5.1 of the Plan and as irrevocably set forth in each of the Participant’s Deferral Election forms. |
2. | Deferral Election. Section 3.2 of the Plan provided that Participants “shall make the election to defer Incentive Compensation under the Plan on a Deferral Election Form by such dates as the Committee from time to time establishes; provided, that any such election must be made on or before December 31 of the Participant’s taxable year preceding the taxable year in which the Participant performs the services that give rise to the Incentive Compensation to be deferred. Participants shall make the following determinations on each Deferral Election Form, which determinations shall become irrevocable on December 31 of the Plan Year in which the election is made (or such earlier date in that Plan Year as the Committee may determine): |
(a) | The amount to be deferred with respect to the Participant’s Incentive Compensation paid during the Plan Year for which the election applies, pursuant to the terms of Section 3.1 herein; |
(b) | The deferral period after which payments of deferred amounts commence (the “Deferral Period”), pursuant to the terms of Section 5.1 herein; and |
(c) | The form of the payment of the deferred amount, pursuant to the terms of Section 5.2 herein. |
3. | Article V described the payment provisions applicable to Retirement Deferrals and Short- Term Deferrals. Under the pre-November 1, 2017 Plan, Retirement Deferrals were not automatic. Sections 5.1 and 5.2 provided: |
(a) | If the Participant elects a Short-Term Deferral, payments under the Plan shall commence only in the form provided under Section 5.2(a) of this Plan on any Distribution Date elected by the Participant; provided that such Distribution Date shall be no earlier than the Distribution Date that is subsequent to three (3) Plan Years following the end of the Plan Year in which the Incentive Compensation would have otherwise been paid to the Participant. |
(b) | Subject to Section 5.6, if the Participant elects a Retirement Deferral, payments under the Plan shall commence following the Participant’s Separation from Service after reaching the Participant’s Normal, Early or Postponed Retirement date, as such dates are defined in the Pension Plan (such Separation from Service in those circumstances referred to as a “Retirement Date”), provided that payments under the Plan shall commence, as elected by the Participant in accordance with Section 3.2, either (i) within sixty (60) days of the Participant’s Retirement Date or (ii) on the Distribution Date immediately following the Plan Year in which the Participant’s Retirement Date occurs (provided that payments must commence under (ii) if the Participant elects to receive the payments in the form provided under Section 5.2(b) of the Plan). |
(c) | Notwithstanding anything in the Plan to the contrary, Incentive Compensation paid after a Participant’s Retirement Date or other Separation from Service is not eligible for deferral and will not be deferred, regardless of the Participant’s prior Deferral Election. |
(d) | Notwithstanding any Deferral Period(s) elected by a Participant pursuant to Section 3.2(b) and this Section 5.1, and subject to Section 5.6, if at any time before the end of the elected Deferral Period, |
(i) | a Participant incurs a Separation from Service, such Participant shall be paid out of the Plan in one (1) lump sum in cash within sixty (60) days after such Separation from Service; or |
(ii) | (A) with respect to a Participant’s 409A Amount, the Participant has been on disability leave for a period of six (6) months, such Participant’s 409A Amount shall be paid out of the Plan in one (1) lump sum in cash within sixty (60) days after such six (6) month disability period; and |
(B) | with respect to the Participant’s Grandfathered Amount, if any, the Participant has been on disability leave for a period of twelve (12) months, such Participant’s Grandfathered Amount shall be paid out |
(b) | Installment Payments. Payments will be made in either five (5) or ten (10) annual installments, as irrevocably elected by the Participant. Subject to Section 5.6, the initial payment shall be made on the Distribution Date following the Participant’s Retirement Date. The remaining installment payments shall be made in the form of cash each year thereafter (on each anniversary date of the initial payment), until the Participant’s entire Deferred Compensation Account has been paid. The amount of each installment payment shall be equal to the value of the the Participant’s Deferred Compensation Account on the last business day of January immediately prior to each such payment, multiplied by a fraction, the numerator of which is one (1), and the denominator of which is the number of installment payments remaining. |
Vesting Date | Percentage of Cash Award Vesting |
First Anniversary of Grant Date | 0% |
Second Anniversary of Grant Date | 0% |
Third Anniversary of Grant Date | 50% |
Fourth Anniversary of Grant Date | 50% |
Vesting Date | Percentage of Cash Award Vesting |
Vesting Date | Percentage of Stock Options Vesting |
First Anniversary of Grant Date | 25% |
Second Anniversary of Grant Date | 25% |
Third Anniversary of Grant Date | 25% |
Fourth Anniversary of Grant Date | 25% |
Vesting Date | Percentage of Stock Options Vesting |
Vesting Date | Percentage of Stock Units Vesting |
First Anniversary of Grant Date | 0% |
Second Anniversary of Grant Date | 0% |
Third Anniversary of Grant Date | 50% |
Fourth Anniversary of Grant Date | 50% |
Vesting Date | Percentage of Stock Units Vesting |
Average Annual Rate of Return on Equity | Less than 7.5% | 7.5% | 9.0% | 12.0% | ≥ 15% |
PSU Multiplier | 0% | 25% | 50% | 100% | 150% |
(i) | The average annual rate of return on equity for the Performance Period attained by the Corporation is the return on average common equity, based on the Corporation’s net income, and shall be determined by the Committee in its sole and absolute discretion in accordance with generally accepted accounting principles (subject to the adjustments set forth below). For purposes of the foregoing, the average annual rate of return on equity shall be calculated as the simple average annual rate of return on equity for the three-year Performance Period measured across the Corporation as a whole. |
(ii) | Notwithstanding anything herein to the contrary, for purposes of determining the average annual rate of return on equity for any individual fiscal year of the Corporation within the Performance Period, if any of the following items, individually or aggregated with other items as reflected herein, would produce a change to net income in excess of $100 million, net income shall be determined for such fiscal year by excluding such item(s) as aggregated: |
(A) | the gains or losses resulting from, and the expenses incurred in connection with, the acquisition or disposition of a business, a merger, or a similar transaction, and integration in connection therewith; |
(B) | the impact of securities issuances in connection with events described in item (A), above, and expenses incurred in connection therewith; |
(C) | any gain, loss, income or expense resulting from changes in accounting principles, tax laws, or other laws or provisions affecting reported results, that become effective during the Performance Period; |
(D) | any gain or loss resulting from, and expenses incurred in connection with, any litigation or regulatory investigations; |
(E) | any charges and expenses incurred in connection with restructuring activity, including but not limited to, reductions in force; |
(F) | the impact of discontinued operations; |
(G) | asset write-downs; |
(H) | the impact on goodwill impairment; or |
(I) | any other gain, loss, income or expense with respect to the Performance Period that is extraordinary, unusual and/or infrequent. |
Percent Owned | Jurisdiction of Incorporation | |
The Northern Trust Company | 100% | Illinois |
MFC Company, Inc. | 100% | Delaware |
Norlease, Inc. | 100% | Delaware |
Clenston Ltd.* | 100% | Bermuda |
NL-Camillus NMTC Fund, LLC | 100% | Delaware |
Northern CDE Corporation | 100% | Illinois |
Northern Trust Company of California | 100% | California |
Northern Trust Guernsey Holdings Limited | 100% | Guernsey |
Northern Trust (Guernsey) Limited | 100% | Guernsey |
Northern Trust Hedge Fund Services LLC | 100% | Delaware |
Northern Trust Holdings Limited | 100% | England |
Northern Trust Global Services Limited | 100% | England |
1889 Holdings, S.A. | 100% | Luxembourg |
Northern Trust Switzerland AG | 100% | Switzerland |
NT Property Nominees 1A Limited | 100% | England |
NT Property Nominees 1B Limited | 100% | England |
Northern Trust Investments, Inc. | 100% | Illinois |
Nortrust Nominees Limited | 100% | England |
NTC-Dormae NMTC Fund, LLC | 100% | Delaware |
The Northern Trust Company of Delaware | 100% | Delaware |
The Northern Trust Company of Nevada | 100% | Nevada |
The Northern Trust Company UK Pension Plan Limited | 100% | England |
The Northern Trust Company, Canada | 100% | Ontario, Canada |
The Northern Trust International Banking Corporation | 100% | Edge Act |
Northern Operating Services Private Limited | 100% | India |
Northern Trust Cayman International, Ltd. | 100% | Cayman Islands, BWI |
Northern Trust Convertibles LLP | 100% | England |
Northern Trust Equities Limited | 100% | England |
Aviate Equities Pty Ltd. | 100% | Australia |
Northern Trust Fund Managers (Ireland) Limited | 100% | Ireland |
Northern Trust Global Fund Services Cayman Limited | 100% | Cayman Islands, BWI |
Northern Trust Management Services Asia Pte. Ltd. | 100% | Singapore |
Northern Operating Services Asia Inc. | 99.99% | Philippines |
The Northern Trust Company of Hong Kong Limited | 100% | Hong Kong |
NT Securities Asia Ltd. | 100% | Hong Kong |
Northern Trust Management Services Limited | 100% | England |
Northern Trust Global Investments Limited | 100% | England |
Northern Trust Partners Scotland Limited | 100% | Scotland |
Northern Trust Securities LLP | 100% | England |
NT Global Advisors, Inc. | 100% | Ontario, Canada |
The Northern Trust Scottish Limited Partnership | 100% | Scotland |
Northern Trust (Ireland) Limited | 100% | Ireland |
Northern Trust Fiduciary Services (Ireland) Limited | 100% | Ireland |
Northern Trust Fund Services (Ireland) Limited | 100% | Ireland |
Northern Trust International Fund Administration Services (Ireland) Limited | 100% | Ireland |
Percent Owned | Jurisdiction of Incorporation | |
Northern Trust Management Services (Ireland) Limited | 100% | Ireland |
Northern Trust Nominees (Ireland) Limited | 100% | Ireland |
Northern Trust Pension Trustees (Ireland) Limited | 100% | Ireland |
NTRS Nominees Limited | 100% | Ireland |
Northern Trust GFS Holdings Limited | 100% | Guernsey |
Northern Trust Fiduciary Services (Guernsey) Limited | 100% | Guernsey |
Arnold Limited | 100% | Guernsey |
Doyle Administration Limited | 100% | Guernsey |
Barfield Nominees Limited | 100% | Guernsey |
Truchot Limited | 100% | Guernsey |
Vivian Limited | 100% | Guernsey |
Northern Trust International Fund Administration Services (Guernsey) Limited | 100% | Guernsey |
Admiral Nominees Limited | 100% | Guernsey |
Nelson Representatives Limited | 100% | Guernsey |
Northern Trust Luxembourg Capital S.A.R.L. | 100% | Luxembourg |
Northern Trust Management Services (Deutschland) GmbH | 100% | Germany |
NT EBT Limited | 100% | England |
The Northern Trust Company of Saudi Arabia (a closed joint stock company) | 100% | Kingdom of Saudi Arabia |
TNT-CASFV NMTC Fund, LLC | 100% | Illinois |
Northern CDE 7, LLC | 100% | Illinois |
TNT-DHA NMTC Fund, LLC | 100% | Illinois |
Northern CDE 2, LLC | 100% | Illinois |
TNT-Eastside NMTC Fund, LLC | 100% | Illinois |
Northern CDE 1, LLC | 100% | Illinois |
TNT-HHO NMTC Fund, LLC | 100% | Illinois |
Northern CDE 5, LLC | 100% | Illinois |
TNT-PBSA NMTC Fund, LLC | 100% | Illinois |
Northern CDE 3, LLC | 100% | Illinois |
TNT-Student U NMTC Fund, LLC | 100% | Illinois |
Northern CDE 4, LLC | 100% | Illinois |
50 South Capital Advisors, LLC | 100% | Delaware |
Equilend Holdings LLC | 10% | Delaware |
Northern Trust European Holdings Limited | 100% | England |
Northern Trust Luxembourg Management Company S.A. | 100% | Luxembourg |
Northern Trust Global Investments Japan, K.K. | 100% | Japan |
Northern Trust Holdings L.L.C. | 100% | Delaware |
Northern Trust Securities, Inc. | 100% | Delaware |
Northern Trust Services, Inc. | 100% | Illinois |
Nortrust Realty Management, Inc. | 100% | Illinois |
NTC Capital I | 100% | Delaware |
NTC Capital II | 100% | Delaware |
1. | I have reviewed this report on Form 10-K for the year ended December 31, 2017 of Northern Trust Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | February 27, 2018 | /s/ Michael G. O’Grady |
Michael G. O’Grady | ||
Chief Executive Officer | ||
(Principal Executive Officer) |
1. | I have reviewed this report on Form 10-K for the year ended December 31, 2017 of Northern Trust Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | February 27, 2018 | /s/ S. Biff Bowman |
S. Biff Bowman | ||
Chief Financial Officer | ||
(Principal Financial Officer) |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation. |
/s/ Michael G. O’Grady |
Michael G. O’Grady |
Chief Executive Officer |
(Principal Executive Officer) |
February 27, 2018 |
/s/ S. Biff Bowman |
S. Biff Bowman |
Chief Financial Officer |
(Principal Financial Officer) |
February 27, 2018 |
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Document and Entity Information - USD ($) $ in Billions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Jan. 31, 2018 |
Jun. 30, 2017 |
|
Document And Entity Information [Abstract] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Dec. 31, 2017 | ||
Document Fiscal Year Focus | 2017 | ||
Document Fiscal Period Focus | FY | ||
Trading Symbol | NTRS | ||
Entity Registrant Name | NORTHERN TRUST CORP | ||
Entity Central Index Key | 0000073124 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Common Stock, Shares Outstanding | 226,325,851 | ||
Entity Public Float | $ 22.1 |
Consolidated Balance Sheet (Parenthetical) - USD ($) $ in Millions |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Held to Maturity, Fair value | $ 13,010.9 | $ 8,905.1 |
Total Loans and Leases, unearned income | $ 35.5 | $ 41.2 |
Preferred stock, par value (in dollars per share) | ||
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Common stock, par value (in dollars per share) | $ 1.6667 | $ 1.6667 |
Common stock, shares authorized | 560,000,000 | 560,000,000 |
Common stock, shares outstanding | 226,126,674 | 228,605,485 |
Treasury stock, shares | 19,044,850 | 16,566,039 |
Series C Preferred Stock | ||
Preferred stock, shares outstanding | 16,000 | 16,000 |
Series D Preferred Stock | ||
Preferred stock, shares outstanding | 5,000 | 5,000 |
Consolidated Statements of Income - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Noninterest Income | |||
Trust, Investment and Other Servicing Fees | $ 3,434,300,000 | $ 3,108,100,000 | $ 2,980,500,000 |
Foreign Exchange Trading Income | 209,900,000 | 236,600,000 | 261,800,000 |
Treasury Management Fees | 56,400,000 | 62,800,000 | 64,700,000 |
Security Commissions and Trading Income | 89,600,000 | 81,400,000 | 78,700,000 |
Other Operating Income | 157,500,000 | 241,200,000 | 247,100,000 |
Investment Security Losses, net | (1,600,000) | (3,200,000) | (300,000) |
Total Noninterest Income | 3,946,100,000 | 3,726,900,000 | 3,632,500,000 |
Net Interest Income | |||
Interest Income | 1,769,400,000 | 1,416,900,000 | 1,224,000,000 |
Interest Expense | 340,200,000 | 182,000,000 | 153,900,000 |
Net Interest Income | 1,429,200,000 | 1,234,900,000 | 1,070,100,000 |
Provision for Credit Losses | (28,000,000) | (26,000,000) | (43,000,000) |
Net Interest Income after Provision for Credit Losses | 1,457,200,000 | 1,260,900,000 | 1,113,100,000 |
Noninterest Expense | |||
Compensation | 1,733,700,000 | 1,541,100,000 | 1,443,300,000 |
Employee Benefits | 319,900,000 | 293,300,000 | 285,300,000 |
Outside Services | 668,400,000 | 627,100,000 | 595,700,000 |
Equipment and Software | 524,000,000 | 467,400,000 | 454,800,000 |
Occupancy | 191,800,000 | 177,400,000 | 173,500,000 |
Other Operating Expense | 331,600,000 | 364,400,000 | 328,000,000 |
Total Noninterest Expense | 3,769,400,000 | 3,470,700,000 | 3,280,600,000 |
Income before Income Taxes | 1,633,900,000 | 1,517,100,000 | 1,465,000,000 |
Provision for Income Taxes | 434,900,000 | 484,600,000 | 491,200,000 |
NET INCOME | 1,199,000,000 | 1,032,500,000 | 973,800,000 |
Preferred Stock Dividends | 49,800,000 | 23,400,000 | 23,400,000 |
Net Income Applicable to Common Stock | $ 1,149,200,000 | $ 1,009,100,000 | $ 950,400,000 |
PER COMMON SHARE | |||
Net Income - Basic (in dollars per share) | $ 4.95 | $ 4.35 | $ 4.03 |
Net Income - Diluted (in dollars per share) | $ 4.92 | $ 4.32 | $ 3.99 |
Average Number of Common Shares Outstanding - Basic | 228,257,664 | 227,580,584 | 232,279,849 |
Average Number of Common Shares Outstanding - Diluted | 229,654,401 | 229,151,406 | 234,221,729 |
Note: Changes in Other-Than-Temporary-Impairment (OTTI) Losses | $ (200,000) | $ (3,700,000) | $ 0 |
Other Security Gains/(Losses), net | (1,400,000) | 500,000 | (300,000) |
Investment Security Losses, net | $ (1,600,000) | $ (3,200,000) | $ (300,000) |
Consolidated Statements of Comprehensive Income - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Statement of Comprehensive Income [Abstract] | |||
Net Income | $ 1,199.0 | $ 1,032.5 | $ 973.8 |
Other Comprehensive Income (Loss) (Net of Tax and Reclassifications) | |||
Net Unrealized (Losses) Gains on Securities Available for Sale | (42.4) | (1.4) | (58.6) |
Net Unrealized Gains (Losses) on Cash Flow Hedges | (1.6) | 9.1 | 1.7 |
Foreign Currency Translation Adjustments | 16.7 | (0.9) | (15.9) |
Pension and Other Postretirement Benefit Adjustments | (17.0) | (4.1) | 19.8 |
Other Comprehensive Income (Loss) | (44.3) | 2.7 | (53.0) |
Comprehensive Income | $ 1,154.7 | $ 1,035.2 | $ 920.8 |
Summary of Significant Accounting Policies |
12 Months Ended |
---|---|
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (GAAP) and reporting practices prescribed for the banking industry. A description of the more significant accounting policies follows. A. Basis of Presentation. The consolidated financial statements include the accounts of Northern Trust Corporation (Corporation) and its wholly-owned subsidiary, The Northern Trust Company (Bank), and various other wholly-owned subsidiaries of the Corporation and Bank. Throughout the notes, the term “Northern Trust” refers to the Corporation and its subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. The consolidated statements of income include results of acquired subsidiaries from the dates of acquisition. Certain prior-year balances have been reclassified consistent with the current-year’s presentation. B. Nature of Operations. The Corporation is a bank holding company that has elected to be a financial holding company under the Bank Holding Company Act of 1956, as amended. The Bank is an Illinois banking corporation headquartered in Chicago and the Corporation’s principal subsidiary. The Corporation conducts business in the United States (U.S.) and internationally through various U.S. and non-U.S. subsidiaries, including the Bank. Northern Trust generates the majority of its revenue from its two client-focused reporting segments: Corporate & Institutional Services (C&IS) and Wealth Management. Asset management and related services are provided to C&IS and Wealth Management clients primarily by the Asset Management business. C&IS is a leading global provider of asset servicing and related services to corporate and public retirement funds, foundations, endowments, fund managers, insurance companies, sovereign wealth funds, and other institutional investors around the globe. Asset servicing and related services encompass a full range of capabilities including but not limited to: global custody; fund administration; investment operations outsourcing; investment management; investment risk and analytical services; employee benefit services; securities lending; foreign exchange; treasury management; brokerage services; transition management services; banking and cash management. Client relationships are managed through the Bank and the Bank’s and the Corporation’s other subsidiaries, including support from locations in North America, Europe, the Middle East, and the Asia-Pacific region. Wealth Management focuses on high-net-worth individuals and families, business owners, executives, professionals, retirees, and established privately-held businesses in its target markets. The business also includes the Global Family Office, which provides customized services to meet the complex financial needs of individuals and family offices in the U.S. and throughout the world with assets typically exceeding $200 million. In supporting these targeted segments, Wealth Management provides trust, investment management, custody, and philanthropic services; financial consulting; guardianship and estate administration; family business consulting; family financial education; brokerage services; and private and business banking. Wealth Management services are delivered by multidisciplinary teams through a network of offices in 18 U.S. states and Washington, D.C., as well as offices in London, Guernsey, and Abu Dhabi. C. Use of Estimates in the Preparation of Financial Statements. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. D. Foreign Currency Remeasurement and Translation. Asset and liability accounts denominated in nonfunctional currencies are remeasured into functional currencies at period-end rates of exchange, except for certain balance sheet items including buildings and equipment, goodwill and other intangible assets, which are remeasured at historical exchange rates. Results from remeasurement of asset and liability accounts are reported in other operating income as currency translation gains (losses), net. Income and expense accounts are remeasured at period-average rates of exchange. Asset and liability accounts of entities with functional currencies that are not the U.S. dollar are translated at period-end rates of exchange. Income and expense accounts are translated at period-average rates of exchange. Translation adjustments, net of applicable taxes, are reported directly to accumulated other comprehensive income (AOCI), a component of stockholders’ equity. E. Securities. Securities Available for Sale are reported at fair value, with unrealized gains and losses credited or charged, net of the tax effect, to AOCI. Realized gains and losses on securities available for sale are determined on a specific identification basis and are reported within other security gains (losses), net, in the consolidated statements of income. Interest income is recorded on the accrual basis, adjusted for the amortization of premium and accretion of discount. Securities Held to Maturity consist of debt securities that management intends to, and Northern Trust has the ability to, hold until maturity. Such securities are reported at cost, adjusted for amortization of premium and accretion of discount. Interest income is recorded on the accrual basis adjusted for the amortization of premium and accretion of discount. Securities Held for Trading are stated at fair value. Realized and unrealized gains and losses on securities held for trading are reported in the consolidated statements of income within security commissions and trading income. Nonmarketable Securities primarily consist of Federal Reserve Bank of Chicago and Federal Home Loan Bank stock and community development investments, each of which are recorded in other assets on the consolidated balance sheets. Federal Reserve and Federal Home Loan Bank stock are reported at cost, which represents redemption value. Community development investments are typically reported at amortized cost. Those community development investments that are designed to generate a return primarily through realization of tax credits and other tax benefits, which are discussed in further detail in Note 28, “Variable Interest Entities,” are reported at amortized cost using the effective yield method or proportional amortization method and amortized over the lives of the related tax credits and other tax benefits. Other-Than-Temporary Impairment (OTTI). A security is considered to be other-than-temporarily impaired if the present value of cash flows expected to be collected are less than the security’s amortized cost basis (the difference being defined as the credit loss) or if the fair value of the security is less than the security’s amortized cost basis and the investor intends, or more-likely-than-not will be required, to sell the security before recovery of the security’s amortized cost basis. If OTTI exists, the charge to earnings is limited to the amount of credit loss if the investor does not intend to sell the security, and it is more-likely-than-not that it will not be required to sell the security, before recovery of the security’s amortized cost basis. Any remaining difference between fair value and amortized cost is recognized in AOCI, net of applicable taxes. Otherwise, the entire difference between fair value and amortized cost is charged to earnings. F. Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase. Securities purchased under agreements to resell and securities sold under agreements to repurchase are accounted for as collateralized financings and recorded at the amounts at which the securities were acquired or sold plus accrued interest. To minimize any potential credit risk associated with these transactions, the fair value of the securities purchased or sold is monitored, limits are set on exposure with counterparties, and the financial condition of counterparties is regularly assessed. It is Northern Trust’s policy to take possession, either directly or via third-party custodians, of securities purchased under agreements to resell. Securities sold under agreements to repurchase are held by the counterparty until the repurchase. G. Derivative Financial Instruments. Northern Trust is a party to various derivative instruments that are used in the normal course of business to meet the needs of its clients; as part of its trading activity for its own account; and as part of its risk management activities. These instruments include foreign exchange contracts, interest rate contracts, total return swap contracts and credit default swap contracts. Derivative financial instruments are recorded on the consolidated balance sheets at fair value within other assets and other liabilities. Derivative asset and liability positions with the same counterparty are reflected on a net basis on the consolidated balance sheets in cases where legally enforceable master netting arrangements or similar agreements exist. Derivative assets and liabilities are further reduced by cash collateral received from, and deposited with, derivative counterparties. The accounting for changes in the fair value of a derivative in the consolidated statements of income depends on whether or not the contract has been designated as a hedge and qualifies for hedge accounting under GAAP. Derivative financial instruments are recorded on the consolidated statements of cash flows within the line item, “other operating activities, net,” except for net investment hedges which are recorded within “other investing activities, net”. Changes in the fair value of client-related and trading derivative instruments, which are not designated hedges under GAAP, are recognized currently in either foreign exchange trading income or security commissions and trading income. Changes in the fair value of derivative instruments entered into for risk management purposes but not designated as hedges are recognized currently in other operating income. Certain derivative instruments used by Northern Trust to manage risk are formally designated and qualify for hedge accounting as fair value, cash flow, or net investment hedges. Derivatives designated as fair value hedges are used to limit Northern Trust’s exposure to changes in the fair value of assets and liabilities due to movements in interest rates. Changes in the fair value of the derivative instrument and changes in the fair value of the hedged asset or liability attributable to the hedged risk are recognized currently in income. For substantially all fair value hedges, Northern Trust applies the “shortcut” method of accounting, available under GAAP, which assumes there is no ineffectiveness in a hedge. As a result, changes recorded in the fair value of the hedged item are equal to the offsetting gain or loss on the derivative and are reflected in the same line item. For fair value hedges that do not qualify for the “shortcut” method of accounting, Northern Trust utilizes regression analysis, a “long-haul” method of accounting, in assessing whether these hedging relationships are highly effective at inception and quarterly thereafter. Ineffectiveness resulting from fair value hedges is recorded in either interest income or interest expense. Derivatives designated as cash flow hedges are used to minimize the variability in cash flows of earning assets or forecasted transactions caused by movements in interest or foreign exchange rates. The effective portion of changes in the fair value of such derivatives is recognized in AOCI, a component of stockholders’ equity, and there is no change to the accounting for the hedged item. Balances in AOCI are reclassified to earnings when the hedged forecasted transaction impacts earnings. Northern Trust applies the “shortcut” method of accounting for cash flow hedges of certain available for sale investment securities. For cash flow hedges of certain other available for sale investment securities, foreign currency denominated investment securities, and forecasted foreign currency denominated revenue and expenditure transactions, Northern Trust closely matches all terms of the hedged item and hedging derivative at inception and on an ongoing basis which limits hedge ineffectiveness. For cash flow hedges of available for sale investment securities, to the extent all terms are not perfectly matched, effectiveness is assessed using regression analysis and any ineffectiveness is measured using the hypothetical derivative method. For cash flow hedges of forecasted foreign currency denominated revenue and expenditure transactions and investment securities, to the extent all terms are not perfectly matched, effectiveness is assessed using the dollar-offset method and any ineffectiveness is measured using the hypothetical derivative method. Any ineffectiveness is recognized currently in earnings. Foreign exchange contracts and qualifying non-derivative instruments designated as net investment hedges are used to minimize Northern Trust’s exposure to variability in the foreign currency translation of net investments in non-U.S. branches and subsidiaries. The effective portion of changes in the fair value of the hedging instrument is recognized in AOCI consistent with the related translation gains and losses of the hedged net investment. For net investment hedges, all critical terms of the hedged item and the hedging instrument are matched at inception and on an ongoing basis to minimize the risk of hedge ineffectiveness. To the extent all terms are not perfectly matched, any ineffectiveness is measured using the hypothetical derivative method. Ineffectiveness resulting from net investment hedges is recorded in other operating income. Amounts recorded in AOCI are reclassified to earnings only upon the sale or liquidation of an investment in a non-U.S. branch or subsidiary. Fair value, cash flow, and net investment hedges are designated and formally documented as such contemporaneous with the transaction. The formal documentation describes the hedge relationship and identifies the hedging instruments and hedged items. Included in the documentation is a discussion of the risk management objectives and strategies for undertaking such hedges, the nature of the risk being hedged, a description of the method for assessing hedge effectiveness at inception and on an ongoing basis, as well as the method that will be used to measure hedge ineffectiveness. For hedges that do not qualify for the “shortcut” or the critical terms match methods of accounting, a formal assessment is performed on a calendar quarter basis to verify that derivatives used in hedging transactions continue to be highly effective in offsetting the changes in fair value or cash flows of the hedged item. Hedge accounting is discontinued if a derivative ceases to be highly effective, matures, is terminated or sold, if a hedged forecasted transaction is no longer expected to occur, or if Northern Trust removes the derivative’s hedge designation. Subsequent gains and losses on these derivatives are included in foreign exchange trading income or security commissions and trading income. For discontinued cash flow hedges, the accumulated gain or loss on the derivative remains in AOCI and is reclassified to earnings in the period in which the previously hedged forecasted transaction impacts earnings or is no longer probable of occurring. For discontinued fair value hedges, the previously hedged asset or liability ceases to be adjusted for changes in its fair value. Previous adjustments to the hedged item are amortized over the remaining life of the hedged item. H. Loans and Leases. Loans and leases are recognized assets that represent a contractual right to receive money either on demand or on fixed or determinable dates. Loans and leases are disaggregated for disclosure purposes by portfolio segment (segment) and by class. Northern Trust has defined its segments as commercial and personal. A class of loans and leases is a subset of a segment, the components of which has similar risk characteristics, measurement attributes, or risk monitoring methods. The classes within the commercial segment have been defined as commercial and institutional, commercial real estate, lease financing, net, non-U.S. and other. The classes within the personal segment have been defined as residential real estate, private client and other. Loan Classification. Loans that are held for investment are reported at the principal amount outstanding, net of unearned income. Loans classified as held for sale are reported at the lower of aggregate cost or fair value. Undrawn commitments relating to loans that are not held for sale are recorded in other liabilities and are carried at the amount of unamortized fees with an allowance for credit loss liability recognized for any estimated probable losses. Recognition of Income. Interest income on loans is recorded on an accrual basis unless, in the opinion of management, there is a question as to the ability of the debtor to meet the terms of the loan agreement, or interest or principal is more than 90 days contractually past due and the loan is not well-secured and in the process of collection. Loans meeting such criteria are classified as nonperforming and interest income is recorded on a cash basis. Past due status is based on how long since the contractual due date a principal or interest payment has been past due. For disclosure purposes, loans that are 29 days past due or less are reported as current. At the time a loan is determined to be nonperforming, interest accrued but not collected is reversed against interest income in the current period. Interest collected on nonperforming loans is applied to principal unless, in the opinion of management, collectability of principal is not in doubt. Management’s assessment of indicators of loan and lease collectability, and its policies relative to the recognition of interest income, including the suspension and subsequent resumption of income recognition, do not meaningfully vary between loan and lease classes. Nonperforming loans are returned to performing status when factors indicating doubtful collectability no longer exist. Factors considered in returning a loan to performing status are consistent across all classes of loans and leases and, in accordance with regulatory guidance, relate primarily to expected payment performance. A loan is eligible to be returned to performing status when: (i) no principal or interest that is due is unpaid and repayment of the remaining contractual principal and interest is expected or (ii) the loan has otherwise become well-secured (possessing realizable value sufficient to discharge the debt, including accrued interest, in full) and is in the process of collection (through action reasonably expected to result in debt repayment or restoration to a current status in the near future). A loan that has not been brought fully current may be restored to performing status provided there has been a sustained period of repayment performance (generally a minimum of six payment periods) by the borrower in accordance with the contractual terms, and Northern Trust is reasonably assured of repayment within a reasonable period of time. Additionally, a loan that has been formally restructured so as to be reasonably assured of repayment and performance according to its modified terms may be returned to accrual status, provided there was a well-documented credit evaluation of the borrower’s financial condition and prospects of repayment under the revised terms, and there has been a sustained period of repayment performance (generally a minimum of six payment periods) under the revised terms. Impaired Loans. A loan is considered to be impaired when, based on current information and events, management determines that it is probable that Northern Trust will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans are identified through ongoing credit management and risk rating processes, including the formal review of past due and watch list credits. Payment performance and delinquency status are critical factors in identifying impairment for all loans and leases, particularly those within the residential real estate, private client and personal-other classes. Other key factors considered in identifying impairment of loans and leases within the commercial and institutional, lease financing, net, non-U.S., and commercial-other classes relate to the borrower’s ability to perform under the terms of the obligation as measured through the assessment of future cash flows, including consideration of collateral value, market value, and other factors. A loan is also considered to be impaired if its terms have been modified as a concession by Northern Trust or a bankruptcy court resulting from the debtor’s financial difficulties, referred to as a troubled debt restructuring (TDR). All TDRs are reported as impaired loans in the calendar year of their restructuring. In subsequent years, a TDR may cease being reported as impaired if the loan was modified at a market rate and has performed according to the modified terms for at least six payment periods. A loan that has been modified at a below market rate will return to performing status if it satisfies the six payment periods performance requirement; however, it will remain reported as impaired. Impairment is measured based upon the present value of expected future cash flows, discounted at the loan's original effective interest rate, the fair value of the collateral if the loan is collateral dependent, or the loan's observable market value. If the loan valuation is less than the recorded value of the loan, based on the certainty of loss, either a specific allowance is established, or a charge-off is recorded, for the difference. Smaller balance (individually less than $1,000,000) homogeneous loans are collectively evaluated for impairment and excluded from impaired loan disclosures as allowed under applicable accounting standards. Northern Trust’s accounting policies for material impaired loans is consistent across all classes of loans and leases. Premium, Discounts, Origination Costs and Fees. Premiums and discounts on loans are recognized as an adjustment of yield using the interest method based on the contractual terms of the loan. Certain direct origination costs and fees are netted, deferred and amortized over the life of the related loan as an adjustment to the loan’s yield. Direct Financing and Leveraged Leases. Unearned lease income from direct financing and leveraged leases is recognized using the interest method. This method provides a constant rate of return on the unrecovered investment over the life of the lease. The rate of return and the allocation of income over the lease term are recalculated from the inception of the lease if during the lease term assumptions regarding the amount or timing of estimated cash flows change. Lease residual values are established at the inception of the lease based on in-house valuations and market analyses provided by outside parties. Lease residual values are reviewed at least annually for OTTI. A decline in the estimated residual value of a leased asset determined to be other-than-temporary would be recorded in the period in which the decline is identified as a reduction of interest income. I. Allowance for Credit Losses. The allowance for credit losses represents management’s estimate of probable losses which have occurred as of the date of the consolidated financial statements. The loan and lease portfolio and other lending-related credit exposures are regularly reviewed to evaluate the level of the allowance for credit losses. In determining an appropriate allowance level, Northern Trust evaluates the allowance necessary for impaired loans and lending-related commitments and also estimates losses inherent in other lending-related credit exposures. The allowance for credit losses consists of the following components: Specific Allowance. The specific allowance is determined through an individual evaluation of loans and lending-related commitments considered impaired that is based on expected future cash flows, the value of collateral, and other factors that may impact the borrower’s ability to pay. For impaired loans where the amount of specific allowance, if any, is determined based on the value of the underlying real estate collateral, third-party appraisals are typically obtained and utilized by management. These appraisals are generally less than twelve months old and are subject to adjustments to reflect management’s judgment as to the realizable value of the collateral. Inherent Allowance. The inherent allowance estimation methodology is based on internally developed loss data specific to the Northern Trust loan and lease portfolio. The estimation methodology and the related qualitative adjustment framework segregate the loan and lease portfolio into homogeneous segments. For each segment, the probability of default and the loss given default are applied to the total exposure at default to determine a quantitative inherent allowance. The quantitative inherent allowance is then reviewed within the qualitative adjustment framework, where management applies judgment by assessing internal risk factors, potential limitations in the quantitative methodology and environmental factors that are not fully contemplated in the quantitative methodology to compute an adjustment to the quantitative inherent allowance for each segment of the loan portfolio. The results of the inherent allowance estimation methodology are reviewed quarterly by Northern Trust’s Loan Loss Reserve Committee, which includes representatives from Credit Risk Management, reporting segment management, and Corporate Finance. Loans, leases, and other extensions of credit deemed uncollectible are charged to the allowance for credit losses. Subsequent recoveries, if any, are credited to the allowance. Northern Trust’s policies relative to the charging-off of uncollectible loans and leases are consistent across both loan and lease segments. Determinations as to whether loan balances for which the collectability is in question are charged-off or a specific reserve is established are based on management’s assessment as to the level of certainty regarding the amount of loss. The provision for credit losses, which is charged to income, is the amount necessary to adjust the allowance for credit losses to the level determined to be appropriate through the above processes. Actual losses may vary from current estimates and the amount of the provision for credit losses may be either greater or less than actual net charge-offs. Northern Trust analyzes its exposure to credit losses from both on-balance-sheet and off-balance-sheet activity using a consistent methodology. For purposes of estimating the allowance for credit losses for undrawn loan commitments and standby letters of credit, the exposure at default includes an estimated drawdown of unused credit based on a credit conversion factor. The proportionate amount of the quantitative methodology calculation after any required adjustment in the qualitative framework results in the required allowance for undrawn loan commitments and standby letters of credit as of the reporting date. The portion of the allowance assigned to loans and leases is reported as a contra asset, directly following loans and leases in the consolidated balance sheets. The portion of the allowance assigned to undrawn loan commitments and standby letters of credit is reported in other liabilities in the consolidated balance sheets. J. Standby Letters of Credit. Fees on standby letters of credit are recognized in other operating income using the straight-line method over the lives of the underlying agreements. Northern Trust’s recorded other liability for standby letters of credit, reflecting the obligation it has undertaken, is measured as the amount of unamortized fees on these instruments. K. Buildings and Equipment. Buildings and equipment owned are carried at original cost less accumulated depreciation. The charge for depreciation is computed using the straight-line method based on the following range of lives: buildings – up to 30 years; equipment – 3 to 10 years; and leasehold improvements–the shorter of the lease term or 15 years. Leased properties meeting certain criteria are capitalized and amortized using the straight-line method over the lease period. L. Other Real Estate Owned (OREO). OREO is comprised of commercial and residential real estate properties acquired in partial or total satisfaction of loans. OREO assets are carried at the lower of cost or fair value less estimated costs to sell and are recorded in other assets on the consolidated balance sheets. Fair value is typically based on third-party appraisals. Appraisals of OREO properties are updated on an annual basis and are subject to adjustments to reflect management’s judgment as to the realizable value of the properties. Losses identified during the 90-day period after the acquisition of such properties are charged against the allowance for credit losses assigned to loans and leases. Subsequent write-downs that may be required to the carrying value of these assets and gains or losses realized from asset sales are recorded within other operating expense. M. Goodwill and Other Intangible Assets. Goodwill is not subject to amortization. Separately identifiable acquired intangible assets with finite lives are amortized over their estimated useful lives, primarily on a straight-line basis. Purchased software, software licenses, and allowable internal costs, including compensation relating to software developed for internal use, are capitalized. Software is amortized using the straight-line method over the estimated useful lives of the assets, generally ranging from 3 to 10 years. Fees paid for the use of software licenses that are not hosted by Northern Trust are expensed as incurred. Goodwill and other intangible assets are reviewed for impairment on an annual basis or more frequently if events or changes in circumstances indicate the carrying amounts may not be recoverable. N. Trust, Investment and Other Servicing Fees. Trust, investment and other servicing fees are recorded on an accrual basis, over the period in which the service is provided. Fees are a function of the market value of assets custodied, managed and serviced, the volume of transactions, securities lending volume and spreads, and fees for other services rendered, as set forth in the underlying client agreement. This revenue recognition involves the use of estimates and assumptions, including components that are calculated based on estimated asset valuations and transaction volumes. O. Client Security Settlement Receivables. These receivables result from custody client withdrawals from short-term investment funds that settle on the following business day as well as custody client security sales executed under contractual settlement date accounting that have not yet settled. Northern Trust advances cash to the client on the date of either client withdrawal or trade execution and awaits collection from either the short-term investment funds or via the settled trade. P. Income Taxes. Northern Trust follows an asset and liability approach to account for income taxes. The objective is to recognize the amount of taxes payable or refundable for the current year, and to recognize deferred tax assets and liabilities resulting from temporary differences between the amounts reported in the financial statements and the tax bases of assets and liabilities. The measurement of tax assets and liabilities is based on enacted tax laws and applicable tax rates. Tax positions taken or expected to be taken on a tax return are evaluated based on their likelihood of being sustained upon examination by tax authorities. Only tax positions that are considered more-likely-than-not to be sustained are recorded in the consolidated financial statements. Northern Trust recognizes any interest and penalties related to unrecognized tax benefits in the provision for income taxes. Q. Cash Flow Statements. Cash and cash equivalents have been defined as “Cash and Due from Banks”. R. Pension and Other Postretirement Benefits. Northern Trust records the funded status of its defined benefit pension and other postretirement plans on the consolidated balance sheets. Funded pension and postretirement benefits are reported in other assets and unfunded pension and postretirement benefits are reported in other liabilities. Plan assets and benefit obligations are measured annually at December 31. Plan assets are determined based on fair value generally representing observable market prices. The projected benefit obligations are determined based on the present value of projected benefit distributions at an assumed discount rate. Pension costs are recognized ratably over the estimated working lifetime of eligible participants. S. Share-Based Compensation Plans. Northern Trust recognizes as compensation expense the grant-date fair value of stock and stock unit awards and other share-based compensation granted to employees within the consolidated statements of income. The fair values of stock and stock unit awards, including performance stock unit awards and director awards, are based on the closing price of the Corporation’s stock on the date of grant. The fair value of stock options is estimated on the date of grant using the Black-Scholes option pricing model. The model utilizes weighted-average assumptions regarding the period of time that options granted are expected to be outstanding (expected term) based primarily on the historical exercise behavior attributable to previous option grants, the estimated yield from dividends paid on the Corporation’s stock over the expected term of the options, the historical volatility of Northern Trust’s stock price and the implied volatility of traded options on Northern Trust stock, and a risk free interest rate based on the U.S. Treasury yield curve at the time of grant for a period equal to the expected term of the options granted. Compensation expense for share-based award grants with terms that provide for a graded vesting schedule, whereby portions of the award vest in increments over the requisite service period, are recognized on a straight-line basis over the requisite service period for the entire award. Compensation expense for performance stock unit awards are recognized on a straight-line basis over the requisite service period of the award based on expected achievement of the performance condition. Northern Trust does not include an estimate of future forfeitures in its recognition of share-based compensation expense. Share-based compensation expense is adjusted based on forfeitures as they occur. Dividend equivalents are paid on performance stock unit awards granted prior to February 16, 2016 and restricted stock units granted prior to February 21, 2017 that are not yet vested. Dividend equivalents are accrued on performance stock unit awards granted on or after February 16, 2016, restricted stock units granted on or after February 21, 2017 and director awards not yet vested, and are paid upon vesting. Cash flows resulting from the realization of excess tax benefits are classified as operating cash flows. T. Net Income Per Common Share. Basic net income per common share is computed by dividing net income/loss applicable to common stock by the weighted average number of common shares outstanding during each period. Diluted net income per common share is computed by dividing net income applicable to common stock and potential common shares by the aggregate of the weighted average number of common shares outstanding during the period and common share equivalents calculated for stock options outstanding using the treasury stock method. In a period of a net loss, diluted net income per common share is calculated in the same manner as basic net income per common share. Northern Trust has issued certain restricted stock unit awards, which are unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents. These units are considered participating securities. Accordingly, Northern Trust calculates net income applicable to common stock using the two-class method, whereby net income is allocated between common stock and participating securities. |
Recent Accounting Pronouncements |
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Accounting Changes and Error Corrections [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements On January 1, 2017, the Corporation adopted ASU 2016-05, “Derivatives and Hedging (Topic 815): Effects of Derivative Contract Novations on Existing Hedge Accounting Relationships (a consensus of the Emerging Issues Task Force)” (ASU 2016-05). ASU 2016-05 clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument under Topic 815, does not, in and of itself, require dedesignation of that hedging relationship provided all other hedge accounting criteria continue to be met. Upon adoption of ASU 2016-05, the Corporation did not dedesignate any hedging relationships due to change in counterparty and therefore there was no impact to its consolidated financial condition or results of operations. On January 1, 2017, the Corporation adopted ASU 2016-06, “Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments (a consensus of the Emerging Issues Task Force)” (ASU 2016-06). The amendments in ASU 2016-06 clarify what steps are required when assessing whether the economic characteristics and risks of call (put) options are clearly and closely related to the economic characteristics and risks of their debt hosts, which is one of the criteria for bifurcating an embedded derivative. The Corporation had already applied the approach for analyzing potential embedded derivative instruments in debt instruments detailed in ASU 2016-06 and therefore upon adoption there was no impact to its consolidated financial condition or results of operations. On January 1, 2017, the Corporation adopted ASU 2016-07, “Investments - Equity Method and Joint Ventures (Topic 323), Simplifying the Transition to the Equity Method of Accounting” (ASU 2016-07), which requires that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. Upon adoption of ASU 2016-07, the Corporation did not hold an interest in an investee that subsequently qualified for the use of the equity method and therefore there was no impact to its consolidated financial condition or results of operations. On January 1, 2017, the Corporation adopted ASU 2016-17, “Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control” (ASU 2016-17). Under ASU 2016-17, a single decision maker evaluating whether it is the primary beneficiary of a variable interest entity will consider its indirect interests held by related parties that are under common control on a proportionate basis. Upon adoption of ASU 2016-17, there was no impact to the Corporation’s consolidated financial condition or results of operations. |
Fair Value Measurements |
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Fair Value Measurements | Fair Value Measurements Fair value under GAAP is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date. Fair Value Hierarchy. The following describes the hierarchy of valuation inputs (Levels 1, 2, and 3) used to measure fair value and the primary valuation methodologies used by Northern Trust for financial instruments measured at fair value on a recurring basis. Observable inputs reflect market data obtained from sources independent of the reporting entity; unobservable inputs reflect the entity’s own assumptions about how market participants would value an asset or liability based on the best information available. GAAP requires an entity measuring fair value to maximize the use of observable inputs and minimize the use of unobservable inputs and establishes a fair value hierarchy of inputs. Financial instruments are categorized within the hierarchy based on the lowest level input that is significant to their valuation. Northern Trust’s policy is to recognize transfers into and transfers out of fair value levels as of the end of the reporting period in which the transfer occurred. No transfers between fair value levels occurred during the years ended December 31, 2017, or 2016. Level 1 – Quoted, active market prices for identical assets or liabilities. Northern Trust’s Level 1 assets are comprised of available for sale investments in U.S. treasury securities. Level 2 – Observable inputs other than Level 1 prices, such as quoted active market prices for similar assets or liabilities, quoted prices for identical or similar assets in inactive markets, and model-derived valuations in which all significant inputs are observable in active markets. Northern Trust’s Level 2 assets include available for sale and trading account securities, the fair values of which are determined predominantly by external pricing vendors. Prices received from vendors are compared to other vendor and third-party prices. If a security price obtained from a pricing vendor is determined to exceed pre-determined tolerance levels that are assigned based on an asset type’s characteristics, the exception is researched and, if the price is not able to be validated, an alternate pricing vendor is utilized, consistent with Northern Trust’s pricing source hierarchy. As of December 31, 2017, Northern Trust’s available for sale securities portfolio included 1,436 Level 2 securities with an aggregate market value of $28.0 billion. All 1,436 securities were valued by external pricing vendors. As of December 31, 2016, Northern Trust’s available for sale securities portfolio included 1,409 Level 2 securities with an aggregate market value of $28.1 billion. All 1,409 securities were valued by external pricing vendors. Trading account securities, which totaled $0.5 million and $0.3 million as of December 31, 2017, and December 31, 2016, respectively, were all valued using external pricing vendors. Northern Trust has established processes and procedures to assess the suitability of valuation methodologies used by external pricing vendors, including reviews of valuation techniques and assumptions used for selected securities. On a daily basis, periodic quality control reviews of prices received from vendors are conducted which include comparisons to prices on similar security types received from multiple pricing vendors and to the previous day’s reported prices for each security. Predetermined tolerance level exceptions are researched and may result in additional validation through available market information or the use of an alternate pricing vendor. Quarterly, Northern Trust reviews documentation from third-party pricing vendors regarding the valuation processes and assumptions used in their valuations and assesses whether the fair value levels assigned by Northern Trust to each security classification are appropriate. Annually, valuation inputs used within third-party pricing vendor valuations are reviewed for propriety on a sample basis through a comparison of inputs used to comparable market data, including security classifications that are less actively traded and security classifications comprising significant portions of the portfolio. Level 2 assets and liabilities also include derivative contracts which are valued internally using widely accepted income-based models that incorporate inputs readily observable in actively quoted markets and reflect the contractual terms of the contracts. Observable inputs include foreign exchange rates and interest rates for foreign exchange contracts; credit spreads, default probabilities, and recovery rates for credit default swap contracts; interest rates for interest rate swap contracts and forward contracts; and interest rates and volatility inputs for interest rate option contracts. Northern Trust evaluates the impact of counterparty credit risk and its own credit risk on the valuation of its derivative instruments. Factors considered include the likelihood of default by Northern Trust and its counterparties, the remaining maturities of the instruments, net exposures after giving effect to master netting arrangements or similar agreements, available collateral, and other credit enhancements in determining the appropriate fair value of derivative instruments. The resulting valuation adjustments have not been considered material. Level 3 – Valuation techniques in which one or more significant inputs are unobservable in the marketplace. Northern Trust’s Level 3 assets consist of auction rate securities purchased in 2008 from Northern Trust clients. To estimate the fair value of auction rate securities, Northern Trust uses external pricing vendors that incorporate transaction details and market-based inputs such as past auction results, trades and bids. The significant unobservable inputs used in the fair value measurement are the prices of the securities supported by little market activity and for which trading is limited. Northern Trust’s Level 3 liabilities consist of swaps that Northern Trust entered into with the purchaser of 1.1 million and 1.0 million shares of Visa Inc. Class B common stock (Visa Class B common shares) previously held by Northern Trust and sold in June 2016 and 2015, respectively. Pursuant to the swaps, Northern Trust retains the risks associated with the ultimate conversion of the Visa Class B common shares into shares of Visa Inc. Class A common stock (Visa Class A common shares), such that the counterparty will be compensated for any dilutive adjustments to the conversion ratio and Northern Trust will be compensated for any anti-dilutive adjustments to the ratio. The swap also requires periodic payments from Northern Trust to the counterparty calculated by reference to the market price of Visa Class A common shares and a fixed rate of interest. The fair value of the swap is determined using a discounted cash flow methodology. The significant unobservable inputs used in the fair value measurement are Northern Trust’s own assumptions about estimated changes in the conversion rate of the Visa Class B common shares into Visa Class A common shares, the date on which such conversion is expected to occur and the estimated growth rate of the Visa Class A common share price. See “Visa Class B Common Shares” under Note 24 — “Contingent Liabilities,” for further information. Northern Trust believes its valuation methods for its assets and liabilities carried at fair value are appropriate; however, the use of different methodologies or assumptions, particularly as applied to Level 3 assets and liabilities, could have a material effect on the computation of their estimated fair values. Management of various businesses and departments of Northern Trust (including Corporate Market Risk, Credit Risk Management, Corporate Finance, C&IS and Wealth Management) reviews valuation methods and models for Level 3 assets and liabilities. Fair value measurements are performed upon acquisitions of an asset or liability. Management of the appropriate business or department reviews assumed inputs, especially when unobservable in the marketplace, in order to substantiate their use in each fair value measurement. When appropriate, management reviews forecasts used in the valuation process in light of other relevant financial projections to understand any variances between current and previous fair value measurements. In certain circumstances, third party information is used to support the fair value measurements. If certain third party information seems inconsistent with consensus views, a review of the information is performed by management of the respective business or department to determine the appropriate fair value of the asset or liability. The following presents the fair values of, and the valuation techniques, significant unobservable inputs, and quantitative information used to develop significant unobservable inputs for, Northern Trust’s Level 3 assets and liabilities as of December 31, 2017 and 2016. TABLE 46: LEVEL 3 SIGNIFICANT UNOBSERVABLE INPUTS
The following presents assets and liabilities measured at fair value on a recurring basis as of December 31, 2017 and 2016, segregated by fair value hierarchy level. TABLE 47: RECURRING BASIS HIERARCHY LEVELING
Note: Northern Trust has elected to net derivative assets and liabilities when legally enforceable master netting arrangements or similar agreements exist between Northern Trust and the counterparty. As of December 31, 2017, derivative assets and liabilities shown above also include reductions of $427.6 million and $189.0 million, respectively, as a result of cash collateral received from and deposited with derivative counterparties. (1) This line consists of swaps related to the sale of certain Visa Class B common shares and total return swaps.
Note: Northern Trust has elected to net derivative assets and liabilities when legally enforceable master netting arrangements or similar agreements exist between Northern Trust and the counterparty. As of December 31, 2016, derivative assets and liabilities shown above also include reductions of $461.3 million and $722.1 million, respectively, as a result of cash collateral received from and deposited with derivative counterparties. (1) This line consists of a swap related to the sale of certain Visa Class B common shares. The following tables present the changes in Level 3 assets and liabilities for the years ended December 31, 2017 and 2016. TABLE 48: CHANGES IN LEVEL 3 ASSETS AND LIABILITIES
(1) Unrealized gains (losses) are included in net unrealized gains (losses) on securities available for sale, within the consolidated statements of comprehensive income.
(1) Gains (losses) are recorded in other operating income (expense) within the consolidated statements of income. For the years ended December 31, 2017 and 2016 there were no assets or liabilities transferred into or out of Level 3. Carrying values of assets and liabilities that are not measured at fair value on a recurring basis may be adjusted to fair value in periods subsequent to their initial recognition, for example, to record an impairment of an asset. GAAP requires entities to separately disclose these subsequent fair value measurements and to classify them under the fair value hierarchy. Assets measured at fair value on a nonrecurring basis at December 31, 2017 and 2016, all of which were categorized as Level 3 under the fair value hierarchy, were comprised of impaired loans whose values were based on real-estate and other available collateral, and of OREO properties. Fair values of real-estate loan collateral were estimated using a market approach typically supported by third-party valuations and property-specific fees and taxes, and were subject to adjustments to reflect management’s judgment as to realizable value. Other loan collateral, which typically consists of accounts receivable, inventory and equipment, is valued using a market approach adjusted for asset specific characteristics and in limited instances third-party valuations are used. Collateral-based impaired loans and OREO assets that have been adjusted to fair value totaled $12.2 million and $0.3 million, respectively, at December 31, 2017, and $6.7 million and $0.7 million, respectively, at December 31, 2016. Assets measured at fair value on a nonrecurring basis reflect management’s judgment as to realizable value. The following table provides the fair value of, and the valuation technique, significant unobservable inputs, and quantitative information used to develop the significant unobservable inputs for, Northern Trust’s Level 3 assets that were measured at fair value on a nonrecurring basis as of December 31, 2017. TABLE 49: LEVEL 3 NONRECURRING BASIS SIGNIFICANT UNOBSERVABLE INPUTS
Fair Value of Financial Instruments. GAAP requires disclosure of the estimated fair value of certain financial instruments and the methods and significant assumptions used to estimate fair value. It excludes from this requirement nonfinancial assets and liabilities, as well as a wide range of franchise, relationship, and intangible values that add value to Northern Trust. Accordingly, the required fair value disclosures provide only a partial estimate of the fair value of Northern Trust. Financial instruments recorded at fair value on Northern Trust’s consolidated balance sheets are discussed above. The following methods and assumptions were used in estimating the fair values of financial instruments that are not carried at fair value. Held to Maturity Securities. The fair values of held to maturity securities, excluding U.S. Treasury securities, were obtained from external pricing vendors, or in limited cases internally, using widely accepted methods which are based on an income approach that incorporates current market yield curves. The fair values of U.S. Treasury securities were determined using quoted, active market prices for identical securities. Loans (excluding lease receivables). The fair value of the loan portfolio was estimated using an income approach (discounted cash flow) that incorporates current market rates offered by Northern Trust as of the date of the consolidated financial statements. The fair values of all loans were adjusted to reflect current assessments of loan collectability. Loans held for sale are recorded at the lower of cost or fair value. Federal Reserve and Federal Home Loan Bank Stock. The fair values of Federal Reserve and Federal Home Loan Bank stock are equal to their carrying values which represent redemption value. Community Development Investments. The fair values of these instruments were estimated using an income approach (discounted cash flow) that incorporates current market rates. Employee Benefit and Deferred Compensation. These assets include U.S. treasury securities and investments in mutual and collective trust funds held to fund certain supplemental employee benefit obligations and deferred compensation plans. Fair values of U.S. treasury securities were determined using quoted, active market prices for identical securities. The fair values of investments in mutual and collective trust funds were valued at the funds’ net asset values based on a market approach. Savings Certificates and Other Time Deposits. The fair values of these instruments were estimated using an income approach (discounted cash flow) that incorporates market interest rates currently offered by Northern Trust for deposits with similar maturities. Senior Notes, Subordinated Debt, and Floating Rate Capital Debt. Fair values were determined using a market approach based on quoted market prices, when available. If quoted market prices were not available, fair values were based on quoted market prices for comparable instruments. Federal Home Loan Bank Borrowings. The fair values of these instruments were estimated using an income approach (discounted cash flow) that incorporates market interest rates available to Northern Trust. Loan Commitments. The fair values of loan commitments represent the estimated costs to terminate or otherwise settle the obligations with a third party adjusted for any related allowance for credit losses. Standby Letters of Credit. The fair values of standby letters of credit are measured as the amount of unamortized fees on these instruments, inclusive of the related allowance for credit losses. Fees are determined by applying basis points to the principal amounts of the letters of credit. Financial Instruments Valued at Carrying Value. Due to their short maturity, the carrying values of certain financial instruments approximated their fair values. These financial instruments include cash and due from banks; federal funds sold and securities purchased under agreements to resell, interest-bearing deposits with banks, Federal Reserve deposits and other interest-bearing assets; client security settlement receivables; non-U.S. offices interest-bearing deposits; federal funds purchased; securities sold under agreements to repurchase; and other borrowings (includes term federal funds purchased, and other short-term borrowings). The fair values of demand, noninterest-bearing, savings, and money market deposits represent the amounts payable on demand as of the reporting date. The following tables summarize the fair values of all financial instruments. TABLE 50: FAIR VALUE OF FINANCIAL INSTRUMENTS
Note: Refer to the table located on page 102 for the disaggregation of available for sale securities. (1) This line consists of a swap related to the sale of certain Visa Class B common shares and total return swaps.
Note: Refer to the table located on page 103 for the disaggregation of available for sale securities. (1) This line consists of a swap related to the sale of certain Visa Class B common shares. |
Securities |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Securities | Securities Securities Available for Sale. The following tables provide the amortized cost, fair values, and remaining maturities of securities available for sale. TABLE 51: RECONCILIATION OF AMORTIZED COST TO FAIR VALUE OF SECURITIES AVAILABLE FOR SALE
TABLE 52: REMAINING MATURITY OF SECURITIES AVAILABLE FOR SALE
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 53: RECONCILIATION OF AMORTIZED COST TO FAIR VALUES OF SECURITIES HELD TO MATURITY
TABLE 54: REMAINING MATURITY OF SECURITIES HELD TO MATURITY
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. During the twelve months ended December 31, 2017, approximately $1.4 billion of securities reflected in Other Asset-Backed, Covered Bonds, Sub-Sovereign, Supranational and Non-U.S. Agency Bonds, and Corporate Debt were transferred from available for sale to held to maturity. Investment Security Gains and Losses. Net investment security losses of $1.6 million were recognized in 2017, and include $0.2 million of charges related to the other-than-temporary impairment (OTTI) of certain Community Reinvestment Act (CRA) eligible held to maturity securities. Net investment security losses of $3.2 million, and $0.3 million were recognized in 2016, and 2015, respectively. There were $3.7 million OTTI losses in 2016 and no OTTI losses in 2015. Proceeds of $2.2 billion from the sale of securities in 2017 resulted in gross realized gains and losses of $0.2 million and $1.6 million, respectively. Proceeds of $828.9 million from the sale of securities in 2016 resulted in gross realized gains and losses of $0.7 million and $0.2 million, respectively. 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. 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, 2017 and 2016. TABLE 55: SECURITIES WITH UNREALIZED LOSSES
As of December 31, 2017, 1,285 securities with a combined fair value of $27.6 billion were in an unrealized loss position, with their unrealized losses totaling $249.4 million. Unrealized losses of $108.6 million and $32.1 million related to government sponsored agency and U.S. government securities, respectively, are primarily attributable to changes in market rates since their purchase. Unrealized losses of $23.3 million within corporate debt securities primarily reflect widened credit spreads and higher market rates since purchase; 36% of the corporate debt portfolio is backed by guarantees provided by U.S. and non-U.S. governmental entities. The majority of the $45.2 million of unrealized losses in securities classified as “other” at December 31, 2017, relate to securities primarily purchased at a premium or par by Northern Trust to fulfill its obligations under 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, 2017, are attributable to changes in overall market interest rates, increased credit spreads, or reduced market liquidity. As of December 31, 2017, 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 2017 and 2016, 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 the pool or similar pools, 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 $0.2 million and $3.7 million of OTTI losses recognized in 2017 and 2016 respectively. There were no OTTI losses recognized during the year ended December 31, 2015. 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, 2017, 2016, and 2015. TABLE 56: NET IMPAIRMENT LOSSES RECOGNIZED IN EARNINGS
(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 57: CUMULATIVE CREDIT-RELATED LOSSES ON SECURITIES HELD
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Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase |
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Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase | Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase Securities purchased under agreements to resell and securities sold under agreements to repurchase are accounted for as collateralized financings and recorded at the amounts at which the securities were acquired or sold plus accrued interest. To minimize any potential credit risk associated with these transactions, the fair value of the securities purchased or sold is monitored, limits are set on exposure with counterparties, and the financial condition of counterparties is regularly assessed. It is Northern Trust’s policy to take possession, either directly or via third-party custodians, of securities purchased under agreements to resell. Securities sold under agreements to repurchase are held by the counterparty until the repurchase. The following tables summarize information related to securities purchased under agreements to resell and securities sold under agreements to repurchase. TABLE 58: SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
TABLE 59: SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
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Loans and Leases |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans and Leases | Loans and Leases During 2017, the Corporation implemented a change in the classification of certain loans and leases to enhance the consistency of its reporting across various regulatory regimes. As a result, certain prior-period loan and lease balances below have been adjusted to conform with current-period presentation. The adjustments generally reflected reclassification of loans and leases from the commercial and institutional class to the residential real estate class. There was no impact on total loans and leases previously reported. The previously reported allowance for credit losses remains unadjusted, as the impact of the reclassification on the allowance was immaterial. Amounts outstanding for loans and leases, by segment and class, are shown below. TABLE 60: LOANS AND LEASES
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, 2017 and 2016, equity credit lines totaled $908.6 million and $1.2 billion, respectively, and equity credit lines for which first liens were held by Northern Trust represented 93% and 91%, respectively, of the total equity credit lines as 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, that totaled $906.4 million and $1.4 billion at December 31, 2017 and 2016, respectively. Demand deposit overdrafts reclassified as loan balances totaled $127.6 million and $88.1 million at December 31, 2017 and 2016, respectively. Loans classified as held for sale totaled $20.9 million and $13.4 million at December 31, 2017 and December 31, 2016, respectively. Leases classified as held for sale totaled $33.1 million and $43.0 million at December 31, 2017 and December 31, 2016, respectively, related to the decision to exit a non-strategic loan and lease portfolio. The components of the net investment in direct finance and leveraged leases are as follows: TABLE 61: DIRECT FINANCE AND LEVERAGED LEASES
The following schedule reflects the future minimum lease payments to be received over the next five years under direct finance leases. TABLE 62: FUTURE MINIMUM LEASE PAYMENTS
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.
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 at December 31, 2017 and 2016 are provided below, segregated by borrower ratings into “1 to 3”, “4 to 5”, and “6 to 9” (watch list), categories. TABLE 63: BORROWER RATINGS
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 reduced cushion in adverse down cycle scenarios. 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 nonperforming 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. The following table provides balances and delinquency status of performing and nonperforming loans and leases by segment and class, as well as the other real estate owned and total nonperforming asset balances, as of December 31, 2017 and 2016. TABLE 64: DELINQUENCY STATUS
The following table provides information related to impaired loans by segment and class. TABLE 65: IMPAIRED LOANS
Note: Average recorded investments in impaired loans are calculated as the average of the month-end impaired loan balances for the period. Interest income that would have been recorded on nonperforming loans in accordance with their original terms totaled approximately $9.1 million in 2017, $8.5 million in 2016, and $8.1 million in 2015. There were $9.4 million and $2.3 million of aggregate undrawn loan commitments and standby letters of credit at December 31, 2017 and 2016, respectively, issued to borrowers whose loans were classified as nonperforming or impaired. Troubled Debt Restructurings (TDRs). Included within impaired loans were $72.5 million and $85.2 million of nonperforming TDRs and $25.9 million and $42.4 million of performing TDRs as of December 31, 2017 and 2016, respectively. The following tables provide, by segment and class, the number of loans and leases modified in TDRs during the years ended December 31, 2017, and 2016, and the recorded investments and unpaid principal balances as of December 31, 2017 and 2016. TABLE 66: TROUBLED DEBT RESTRUCTURINGS
Note: Period-end balances reflect all paydowns and charge-offs during the year.
Note: Period-end balances reflect all paydowns and charge-offs during the year. TDR modifications primarily 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, 2017 TDR modifications of loans within residential real estate were primarily extensions of term, deferrals of principal, interest rate concessions, and other modifications. During the year ended December 31, 2017, the majority of TDR modifications of loans within commercial and institutional, commercial real estate, and private client classes were primarily extensions of term or deferrals of principal. During the year ended December 31, 2016, TDR modifications of loans within residential real estate loans were primarily extensions of term, deferrals of principal, interest rate concessions and other modifications; modification within commercial and institutional, commercial real estate, and private client classes were primarily extensions of term and other modifications. There were two loans or leases modified in TDRs during the previous twelve-month periods which subsequently became nonperforming during the year ended December 31, 2017. There were five loans or leases modified in TDRs during the previous twelve-month periods which subsequently became nonperforming during the year ended December 31, 2016. All loans and leases modified in troubled debt restructurings are evaluated for impairment. The nature and extent of impairment of TDRs, including those which have experienced a subsequent default, is considered in the determination of an appropriate level of allowance for credit losses. Northern Trust may obtain physical possession of residential real estate collateralizing a consumer mortgage loan via foreclosure. As of December 31, 2017 and 2016, Northern Trust held foreclosed residential real estate properties with a carrying value of $4.3 million and $4.6 million, respectively, as a result of obtaining physical possession. In addition, as of December 31, 2017 and 2016, Northern Trust had consumer loans with a carrying value of $14.1 million and $25.9 million, respectively, collateralized by residential real estate property for which formal foreclosure proceedings were in process. |
Allowance for Credit Losses |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for Credit Losses | Allowance for Credit Losses The allowance for credit losses, which represents management’s estimate of probable losses related to specific borrower relationships and inherent in the various loan and lease portfolios, undrawn commitments, and standby letters of credit, is determined by management through a disciplined credit review process. Northern Trust’s accounting policies related to the estimation of the allowance for credit losses and the charging off of loans, leases and other extensions of credit deemed uncollectible are consistent across both loan and lease segments. Loans, leases and other extensions of credit deemed uncollectible are charged to the allowance for credit losses. Subsequent recoveries, if any, are credited to the allowance. Determinations as to whether an uncollectible loan is charged off or a specific allowance is established are based on management’s assessment as to the level of certainty regarding the amount of loss. Changes in the allowance for credit losses by segment were as follows: TABLE 67: CHANGES IN THE ALLOWANCE FOR CREDIT LOSSES
The following table provides information regarding the recorded investments in loans and leases and the allowance for credit losses by segment as of December 31, 2017 and 2016. TABLE 68: RECORDED INVESTMENTS IN LOANS AND LEASES
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Concentrations of Credit Risk |
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Risks and Uncertainties [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Concentrations of Credit Risk | Concentrations of Credit Risk Concentrations of credit risk exist if a number of borrowers or other counterparties are engaged in similar activities and have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. The fact that a credit exposure falls into one of these groups does not necessarily indicate that the credit has a higher than normal degree of credit risk. These groups are: banks and bank holding companies, residential real estate, and commercial real estate. Banks and Bank Holding Companies. On-balance-sheet credit risk to banks and bank holding companies, both U.S. and non-U.S., consists primarily of interest-bearing deposits with banks and federal funds sold and securities purchased under agreements to resell, which totaled $6.9 billion and $6.8 billion at December 31, 2017 and 2016, respectively, and noninterest-bearing demand balances maintained at correspondent banks, which totaled $2.1 billion and $1.9 billion at December 31, 2017 and 2016, respectively. Credit risk associated with U.S. and non-U.S. banks and bank holding companies deemed to be counterparties by Credit Risk Management is managed by the Capital Markets Credit Committee. Credit limits are established through a review process that includes an internally-prepared financial analysis, use of an internal risk rating system and consideration of external ratings from rating agencies. Northern Trust places deposits with banks that have strong internal and external credit ratings and the average life to maturity of deposits with banks is maintained on a short-term basis in order to respond quickly to changing credit conditions. Residential Real Estate. At December 31, 2017, residential real estate loans totaled $7.2 billion, or 23% of total U.S. loans at December 31, 2017, compared with $8.1 billion, or 25% of total U.S. loans at December 31, 2016. Residential real estate loans consist of traditional first lien mortgages and equity credit lines, which generally require a loan-to-collateral value ratio of no more than 65% to 80% at inception. Revaluations of supporting collateral are obtained upon refinancing or default or when otherwise considered warranted. Collateral revaluations for mortgages are performed by independent third parties. Of the total $7.2 billion in residential real estate loans, $1.9 billion were in Florida, $1.4 billion were in the greater Chicago area, and $1.4 billion were in California, with the remainder distributed throughout the other geographic regions within the U.S. served by Northern Trust. Legally binding undrawn commitments to extend residential real estate credit, which are primarily equity credit lines totaled $1.0 billion and $1.2 billion at December 31, 2017 and 2016, respectively. Commercial Real Estate. The commercial real estate portfolio consists of commercial mortgages and construction, acquisition and development loans extended to experienced investors well known to Northern Trust. Underwriting standards generally reflect conservative loan-to-value ratios and debt service coverage requirements. Recourse to borrowers through guarantees is also commonly required. Commercial mortgage financing is provided for the acquisition or refinancing of income-producing properties. Cash flows from the properties generally are sufficient to amortize the loan. These loans are primarily located in the Illinois, California, Florida, Texas, and Arizona markets. Construction, acquisition and development loans provide financing for commercial real estate prior to rental income stabilization. The intent is generally that the borrower will sell the project or refinance the loan through a commercial mortgage with Northern Trust or another financial institution upon completion. The table below provides additional detail regarding commercial real estate loan types. TABLE 69: COMMERCIAL REAL ESTATE LOANS
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Buildings and Equipment |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Buildings and Equipment | Buildings and Equipment A summary of buildings and equipment is presented below. TABLE 70: BUILDINGS AND EQUIPMENT
The charge for depreciation, which includes depreciation of assets recorded under capital leases and is included within occupancy expense in the consolidated statements of income, amounted to $101.2 million in 2017, $89.2 million in 2016, and $90.4 million in 2015. |
Lease Commitments |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease Commitments | Lease Commitments At December 31, 2017, Northern Trust was obligated under a number of non-cancelable operating leases for buildings and equipment. Certain leases contain rent escalation clauses based on market indices or increases in real estate taxes and other operating expenses and renewal option clauses calling for increased rentals. There are no restrictions imposed by any lease agreement regarding the payment of dividends, debt financing or Northern Trust entering into further lease agreements. Minimum annual lease commitments as of December 31, 2017, for all non-cancelable operating leases with a term of one year or more are as follows: TABLE 71: MINIMUM LEASE PAYMENTS
Operating lease rental expense, net of rental income, is recorded in occupancy expense and amounted to $76.7 million in 2017, $76.1 million in 2016, and $71.6 million in 2015. One of the buildings and related land utilized for Chicago operations has been leased under an agreement that qualifies as a capital lease. The original long-term financing for the property was provided by Northern Trust. In the event of sale or refinancing, Northern Trust would anticipate receiving full repayment of any outstanding loans plus 42% of any proceeds in excess of the original project costs. The following table reflects the future minimum lease payments required under capital leases, net of any payments received on the long-term financing, and the present value of net capital lease obligations at December 31, 2017. TABLE 72: PRESENT VALUE UNDER CAPITAL LEASE OBLIGATIONS
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Goodwill and Other Intangibles |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Intangibles | Goodwill and Other Intangibles Goodwill. Changes by reporting segment in the carrying amount of goodwill for the years ended December 31, 2017 and 2016, including the effect of foreign exchange rates on non-U.S.-dollar-denominated balances, were as follows: TABLE 73: GOODWILL
Other Intangible Assets Subject to Amortization. The gross carrying amount and accumulated amortization of other intangible assets subject to amortization as of December 31, 2017 and 2016 were as follows: TABLE 74: OTHER INTANGIBLE ASSETS
Other intangible assets consist primarily of the value of acquired client relationships and are included within other assets in the consolidated balance sheets. Amortization expense related to other intangible assets was $11.4 million, $8.8 million, and $10.9 million for the years ended December 31, 2017, 2016, and 2015, respectively. Amortization for the years 2018, 2019, 2020, 2021, and 2022 is estimated to be $17.5 million, $17.4 million, $17.3 million, $14.8 million, and $10.1 million respectively. On October 1, 2017, Northern Trust completed its acquisition of UBS Asset Management’s fund administration servicing business in Luxembourg and Switzerland. The purchase price recorded in connection with the closing of the acquisition, which remains subject to adjustment through May 2018, totaled $190.8 million and was comprised of $188.5 million of cash and $2.3 million of contingent consideration. Goodwill and other intangible assets associated with the acquisition totaled $78.3 million and $126.0 million, respectively. In May 2016, Northern Trust completed its acquisition of Aviate Global LLP (Aviate), an institutional equity brokerage firm offering market research and execution services, with offices in the U.S., Europe, and the Asia-Pacific region. The purchase price, which is subject to certain performance-related adjustments over a three-year period after the acquisition date, totaled $18.8 million inclusive of contingent consideration. Goodwill and other intangible assets associated with the acquisition totaled $10.5 million and $5.8 million, respectively. |
Senior Notes and Long-Term Debt |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Notes and Long-Term Debt | Senior Notes and Long-Term Debt Senior Notes. A summary of senior notes outstanding at December 31, 2017 and 2016 is presented below. TABLE 75: SENIOR NOTES
Long-Term Debt. A summary of long-term debt outstanding at December 31, 2017 and 2016 is presented below. TABLE 76: LONG-TERM DEBT
(1) Not redeemable prior to maturity. (2) The subordinated notes will bear interest from the date they were issued to, but excluding, May 8, 2027, at an annual rate of 3.375%, payable semi-annually in arrears. From, and including, May 8, 2027, the subordinated notes will bear interest at an annual rate equal to three-month LIBOR plus 1.131%, payable quarterly in arrears. The subordinated notes are unsecured and may be redeemed, in whole but not in part, on, and only on, May 8, 2027, at a redemption price equal to 100% of the principal amount of the subordinated notes to be redeemed, plus accrued and unpaid interest, if any, up to but excluding the redemption date. (3) Under the terms of its current Offering Circular dated November 6, 2013, the Bank has the ability to offer from time to time its senior bank notes in an aggregate principal amount of up to $4.5 billion at any one time outstanding and up to an additional $1.0 billion of subordinated notes. Each senior note will mature from 30 days to fifteen years, and each subordinated note will mature from five years to fifteen years, following its date of original issuance. Each note will mature on such date as selected by the initial purchaser and agreed to by the Bank. (4) Refer to Note 10, “Lease Commitments.” (5) As of December 31, 2017, debt issue costs of $0.9 million and $1.7 million are included as a direct deduction from the carrying amount of Senior Notes and Long-Term Debt, respectively. Debt issue costs are amortized on a straight-line basis over the life of the Note. (6) Notes issued at a discount of 0.117% (7) Notes issued at a discount of 0.437% (8) Notes issued at a discount of 0.283% (9) Notes issued at a discount of 0.02% (10) Notes issued at a discount of 0.114% (11) Interest rate swap contracts were entered into to modify the interest expense on these subordinated notes from fixed rates to floating rates. The swaps are recorded as fair value hedges and at December 31, 2017, increases in the carrying values of subordinated notes outstanding of $37.4 million were recorded. As of December 31, 2016, net adjustments in the carrying values of subordinated notes outstanding of $59.6 million were recorded. |
Floating Rate Capital Debt |
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Brokers and Dealers [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Floating Rate Capital Debt | Floating Rate Capital Debt In January 1997, the Corporation issued $150 million of Floating Rate Capital Securities, Series A, through a statutory business trust wholly owned by the Corporation (NTC Capital I). In April 1997, the Corporation also issued, through a separate wholly owned statutory business trust (NTC Capital II), $120 million of Floating Rate Capital Securities, Series B. The sole assets of the trusts are subordinated debentures of Northern Trust Corporation that have the same interest rates and maturity dates as the corresponding distribution rates and redemption dates of the Floating Rate Capital Securities. The Series A Securities were issued at a discount to yield 60.5 basis points above the three-month London Interbank Offered Rate (LIBOR) and are due January 15, 2027. The Series B Securities were issued at a discount to yield 67.9 basis points above the three-month LIBOR and are due April 15, 2027. Under the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the regulatory capital treatment of these securities is required to be phased out over a period that began on January 1, 2013. In 2017, 50% of these securities are eligible for Tier 2 capital treatment, declining at an incremental 10% a year until they are fully phased out in 2022. The Corporation has fully, irrevocably and unconditionally guaranteed all payments due on the Series A and B securities. The holders of the Series A and B securities are entitled to receive preferential cumulative cash distributions quarterly in arrears (based on the liquidation amount of $1,000 per security) at an interest rate equal to the rate on the corresponding subordinated debentures. The interest rate on the Series A and Series B securities is equal to three-month LIBOR plus 0.52% and 0.59%, respectively. Subject to certain exceptions, the Corporation has the right to defer payment of interest on the subordinated debentures at any time or from time to time for a period not exceeding 20 consecutive quarterly periods provided that no extension period may extend beyond the stated maturity date. If interest is deferred on the subordinated debentures, distributions on the Series A and B securities will also be deferred and the Corporation will not be permitted, subject to certain exceptions, to pay or declare any cash distributions with respect to the Corporation’s capital stock or debt securities that rank the same as or junior to the subordinated debentures, until all past due distributions are paid. The subordinated debentures are unsecured and subordinated to substantially all of the Corporation’s existing indebtedness. The Corporation has the right to redeem the Series A and Series B subordinated debentures, in whole or in part, at a price equal to the principal amount plus accrued and unpaid interest. The following table summarizes the book values of the outstanding subordinated debentures as of December 31, 2017 and 2016. TABLE 77: SUBORDINATED DEBENTURES
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Stockholders' Equity |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | Stockholders’ Equity Preferred Stock. The Corporation is authorized to issue 10 million shares of preferred stock without par value. The Board of Directors is authorized to fix the particular designations, preferences and relative, participating, optional and other special rights and qualifications, limitations or restrictions for each series of preferred stock issued. As of December 31, 2017, the Corporation had issued and outstanding 500,000 depositary shares (the “Depositary Shares”), each representing a 1/100th ownership interest in a share of Series D Non-Cumulative Perpetual Preferred Stock (the “Series D Preferred Stock”) issued in August 2016. Equity related to Series D Preferred Stock as of December 31, 2017 and 2016 was $493.5 million. Shares of the Series D Preferred Stock have no par value and a liquidation preference of $100,000 (equivalent to $1,000 per depositary share). Dividends on the Series D Preferred Stock, which are not mandatory, accrue and are payable on the liquidation preference amount, on a non-cumulative basis, at a rate per annum equal to (i) 4.60% from the original issue date of the Series D Preferred Stock to but excluding October 1, 2026; and (ii) a floating rate equal to Three-Month LIBOR plus 3.202% from and including October 1, 2026. Fixed rate dividends are payable in arrears on the 1st day of April and October of each year, through and including October 1, 2026, and floating rate dividends will be payable in arrears on the 1st day of January, April, July and October of each year, commencing on January 1, 2027. The Series D Preferred Stock has no maturity date and is redeemable at the Corporation’s option, in whole or in part, on any dividend payment date on or after October 1, 2026. The Series D Preferred Stock is redeemable at the Corporation’s option in whole, but not in part, including prior to October 1, 2026, within 90 days of a regulatory capital treatment event, as described in the Series D Preferred Stock Certificate of Designation. As of December 31, 2017, the Corporation also had issued and outstanding 16 million depositary shares, each representing 1/1000th ownership interest in a share of Series C Non-Cumulative Perpetual Preferred Stock (“Series C Preferred Stock”), issued in August 2014. Equity related to Series C Preferred Stock as of December 31, 2017 and 2016 totaled $388.5 million. Series C Preferred Stock has no par value and has a liquidation preference of $25,000 (equivalent to $25 per depositary share). Dividends on the Series C Preferred Stock, which are not mandatory, accrue and are payable on the liquidation preference amount, on a non-cumulative basis, quarterly in arrears on the first day of January, April, July and October of each year, at a rate per annum equal to 5.85%. The Series C Preferred Stock has no maturity date and is redeemable at the Corporation’s option, in whole or in part, on any dividend payment date on or after October 1, 2019. The Series C Preferred stock is redeemable at the Corporation’s option, in whole, but not in part, prior to October 1, 2019, within 90 days of a regulatory capital treatment event, as described in the Series C Preferred Stock Certificate of Designation. Shares of the Series C Preferred Stock and Series D Preferred Stock rank senior to the Corporation’s common stock, and will rank at least equally with any other series of preferred stock it may issue (except for any senior series that may be issued with the requisite consent of the holders of the Series C Preferred Stock and Series D Preferred Stock, respectively) and all other parity stock, with respect to the payment of dividends and distributions upon liquidation, dissolution or winding up. Common Stock. Stock repurchases through July 18, 2017 were made pursuant to the repurchase program announced by the Corporation on April 21, 2015, under which the Corporation’s Board of Directors authorized the Corporation to repurchase up to 15.0 million shares of the Corporation’s common stock. This program was terminated and replaced with a new repurchase program, announced on July 18, 2017, under which the Corporation’s Board of Directors authorized the Corporation to repurchase up to 9.5 million shares of the Corporation’s Common Stock. Repurchases after July 18, 2017 were made pursuant to the new repurchase program, which has no expiration date. Shares repurchased by the Corporation are used for general purposes, including management of the Corporation’s capital levels and the issuance of shares under stock option and other incentive plans of the Corporation. Under the Corporation’s 2017 Capital Plan, which was reviewed without objection by the Federal Reserve, the Corporation may repurchase up to $454.6 million of common stock after December 31, 2017 through June 2018. The average price paid per share for common stock repurchased in 2017, 2016, and 2015 was $90.25, $67.91, and $72.52, respectively. An analysis of changes in the number of shares of common stock outstanding follows: TABLE 78: SHARES OF COMMON STOCK
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Accumulated Other Comprehensive Income (Loss) |
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss) | Accumulated Other Comprehensive Income (Loss) The following tables summarize the components of AOCI at December 31, 2017, 2016, and 2015, and changes during the years then ended. TABLE 79: SUMMARY OF CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
* Includes net unrealized gains on securities transferred from available for sale to held to maturity during the year ended December 31, 2017. TABLE 80: DETAILS OF CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table provides the location and before-tax amounts of reclassifications out of AOCI during the years ended December 31, 2017, 2016 and 2015. TABLE 81: RECLASSIFICATION ADJUSTMENT OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME
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Net Income per Common Share |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income per Common Share | Net Income per Common Share The computations of net income per common share are presented below. TABLE 82: NET INCOME PER COMMON SHARE
Note: Common stock equivalents totaling 115,491, 1,108,067, and 371,059 for the years ended December 31, 2017, 2016, and 2015, respectively, were not included in the computation of diluted net income per common share because their inclusion would have been antidilutive. |
Net Interest Income |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Banking and Thrift, Interest [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Interest Income | Net Interest Income The components of net interest income were as follows: TABLE 83: NET INTEREST INCOME
(1) Interest-Bearing Due from and Deposits with Banks includes the interest-bearing component of Cash and Due from Banks and Interest-Bearing Deposits with Banks as presented on the consolidated balance sheets. |
Other Operating Income |
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Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Operating Income | Other Operating Income The components of other operating income were as follows: TABLE 84: OTHER OPERATING INCOME
Other income in 2016 included a $123.1 million net gain on the sale of 1.1 million Visa Class B common shares. Other income in 2015 included a $99.9 million net gain on the sale of 1.0 million Visa Class B common shares. Other Operating Expense The components of other operating expense were as follows: TABLE 85: OTHER OPERATING EXPENSE
Other expenses in 2016 included charges in connection with an agreement to settle certain securities lending litigation of $50.0 million and charges related to contractual modifications associated with existing C&IS clients of $18.6 million. Other expenses in 2015 included a charge related to voluntary cash contributions to certain constant dollar NAV funds totaling $45.8 million to bring the NAVs of these funds to $1.00. |
Other Operating Expense |
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Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Operating Expense | Other Operating Income The components of other operating income were as follows: TABLE 84: OTHER OPERATING INCOME
Other income in 2016 included a $123.1 million net gain on the sale of 1.1 million Visa Class B common shares. Other income in 2015 included a $99.9 million net gain on the sale of 1.0 million Visa Class B common shares. Other Operating Expense The components of other operating expense were as follows: TABLE 85: OTHER OPERATING EXPENSE
Other expenses in 2016 included charges in connection with an agreement to settle certain securities lending litigation of $50.0 million and charges related to contractual modifications associated with existing C&IS clients of $18.6 million. Other expenses in 2015 included a charge related to voluntary cash contributions to certain constant dollar NAV funds totaling $45.8 million to bring the NAVs of these funds to $1.00. |
Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes The following table reconciles the total provision for income taxes recorded in the consolidated statements of income with the amounts computed at the statutory federal tax rate of 35%. TABLE 86: INCOME TAXES
The tax provision for 2017 includes a net benefit attributable to the Tax Cuts and Jobs Act of $53.1 million as outlined below, an increased income tax benefit derived from the vesting of restricted stock units and stock option exercises, and Federal and State research tax credits of $20.9 million, $17.6 million of which were recognized related to the Corporation’s technology spend between 2013 and 2016, each resulting in a reduction of the effective tax rate. The Tax Cuts and Jobs Act was enacted on December 22, 2017, and reduces the U.S. federal corporate tax rate from 35% to 21%. It also requires companies to pay a mandatory deemed repatriation tax on earnings of foreign subsidiaries that were previously tax deferred. At December 31, 2017, Northern Trust has made a reasonable estimate as to the impact of the Tax Cuts and Jobs Act as follows: TABLE 87: IMPACT OF TAX CUTS AND JOBS ACT
The amounts related to federal taxes on mandatory deemed repatriation and certain other adjustments are considered provisional as of December 31, 2017, as Northern Trust did not have the necessary information available to complete its accounting for the change in tax law and as such has provided a reasonable estimate. Northern Trust will continue to refine the related calculations as additional analyses are completed. In addition, these provisional amounts may require adjustment based on an evolving understanding of the new tax law and the issuance of guidance by the IRS. The Corporation files income tax returns in the U.S. federal, various state, and foreign jurisdictions. The Corporation is no longer subject to income tax examinations by U.S. federal authorities before 2013, U.S. state or local tax authorities for years before 2011, or non-U.S. tax authorities for years before 2010. Included in other liabilities within the consolidated balance sheets at December 31, 2017 and 2016 were $27.7 million and $17.2 million of unrecognized tax benefits, respectively. If recognized, 2017 and 2016 net income would have increased by $21.7 million and $11.9 million, respectively, resulting in a decrease of those years’ effective income tax rates. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: TABLE 88: UNRECOGNIZED TAX BENEFITS
Unrecognized tax benefits had net increases of $10.5 million, resulting in a remaining balance of $27.7 million at December 31, 2017, compared to net increases of $4.9 million resulting in a remaining balance of $17.2 million at December 31, 2016. It is possible that changes in the amount of unrecognized tax benefits could occur in the next 12 months due to changes in judgment related to recognition or measurement, settlements with taxing authorities, or expiration of statute of limitations. Management does not believe that future changes, if any, would have a material effect on the consolidated financial position or liquidity of Northern Trust, although they could have a material effect on operating results for a particular period. A provision for interest and penalties of $0.1 million, net of tax, was included in the provision for income taxes for the year ended December 31, 2017. This compares to a benefit of interest and penalties of $1.6 million, net of tax, for the year ended December 31, 2016. As of December 31, 2017 and 2016, the liability for the potential payment of interest and penalties totaled $10.3 million and $9.9 million, net of tax, respectively. Pre-tax earnings of non-U.S. subsidiaries are subject to U.S. taxation when effectively repatriated. Northern Trust provides for income taxes on the undistributed earnings of non-U.S. subsidiaries, except to the extent that those earnings are indefinitely reinvested outside the U.S. Northern Trust elected to indefinitely reinvest $246.1 million, $237.1 million, and $257.4 million of 2017, 2016, and 2015 earnings, respectively, of certain non-U.S. subsidiaries and, therefore, no U.S. deferred income taxes were recorded on those earnings. As of December 31, 2017, the cumulative amount of the undistributed earnings in the Corporation’s foreign subsidiaries was approximately $1.9 billion. As a result of the Tax Cuts and Jobs Act being enacted on December 22, 2017, these earnings and the earnings from prior years which have been reinvested indefinitely outside of the United States are deemed to have been repatriated to the U.S. and subject to a repatriation tax. The repatriation tax has been estimated to be $150.0 million and recorded as an income tax provision. The repatriation tax will be paid in installments over eight years as permitted under U.S. income tax laws. The components of the consolidated provision for income taxes for each of the three years ended December 31 are as follows: TABLE 89: PROVISION FOR INCOME TAXES
In addition to the amounts shown above, tax charges and benefits have been recorded directly to stockholders’ equity for the following: TABLE 90: TAX CHARGES AND BENEFITS RECORDED DIRECTLY TO STOCKHOLDERS’ EQUITY
Deferred taxes result from temporary differences between the amounts reported in the consolidated financial statements and the tax bases of assets and liabilities. As a result of the Tax Cuts and Jobs Act being enacted on December 22, 2017, deferred tax assets and liabilities have been remeasured based on the federal tax rate at which they are expected to reverse in the future, which is 21%. Deferred tax assets and liabilities have been computed as follows: TABLE 91: NET DEFERRED TAX LIABILITIES
Northern Trust had various state net operating loss carryforwards as of December 31, 2017, 2016, and 2015. The income tax benefits associated with these loss carryforwards were approximately $1.1 million as of December 31, 2017, $0.9 million as of December 31, 2016, and $1.6 million as of December 31, 2015. A valuation allowance of $1.1 million was recorded at December 31, 2017, $0.9 million as of December 31, 2016, and $1.6 million as of December 31, 2015, as management believes the net operating losses will not be fully realized. No valuation allowance related to the remaining deferred tax assets was recorded at December 31, 2017, 2016, and 2015, as management believes it is more likely than not that the deferred tax assets will be fully realized. |
Employee Benefits |
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Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Employee Benefits | Employee Benefits The Corporation and certain of its subsidiaries provide various benefit programs, including defined benefit pension, postretirement health care, and defined contribution plans. A description of each major plan and related disclosures are provided below. Pension. A noncontributory qualified defined benefit pension plan covers substantially all U.S. employees of Northern Trust. Employees of certain European subsidiaries retain benefits in local defined benefit plans, although those plans are closed to new participants and to future benefit accruals. Employees continue to accrue benefits under the Swiss pension plan, which is accounted for as a defined benefit plan under GAAP. Northern Trust also maintains a noncontributory supplemental pension plan for participants whose retirement benefit payments under the U.S. plan are expected to exceed the limits imposed by federal tax law. Northern Trust has a nonqualified trust, referred to as a “Rabbi” Trust, used to hold assets designated for the funding of benefits in excess of those permitted in certain of its qualified retirement plans. This arrangement offers participants a degree of assurance for payment of benefits in excess of those permitted in the related qualified plans. As the “Rabbi” Trust assets remain subject to the claims of creditors and are not the property of the employees, they are accounted for as corporate assets and are included in other assets in the consolidated balance sheets. Total assets in the “Rabbi” Trust related to the nonqualified pension plan at December 31, 2017 and 2016 amounted to $116.7 million and $106.9 million, respectively. Contributions of $11.5 million and $8.5 million were made to the “Rabbi” Trust in 2017 and 2016, respectively. The following tables set forth the status, amounts included in AOCI, and net periodic pension expense of the U.S. plan, non-U.S. plans, and supplemental plan for 2017, 2016, and 2015. Prior service costs are being amortized on a straight-line basis over 11 years for the U.S. plan and 9 years for the supplemental plan. TABLE 92: EMPLOYEE BENEFIT PLAN STATUS
TABLE 93: AMOUNTS INCLUDED IN ACCUMULATED OTHER COMPREHENSIVE INCOME
TABLE 94: NET PERIODIC PENSION EXPENSE
The components of net periodic pension expense are included in the line item “Employee Benefits” expense in the consolidated statements of income. Pension expense for 2018 is expected to include approximately $36.5 million related to the amortization of net loss from AOCI. TABLE 95: CHANGE IN PROJECTED BENEFIT OBLIGATION
TABLE 96: ESTIMATED FUTURE BENEFIT PAYMENTS
TABLE 97: CHANGE IN PLAN ASSETS
The minimum required and maximum remaining deductible contributions for the U.S. qualified plan in 2018 are estimated to be zero and $250.0 million, respectively. During 2017, the investment strategy employed for Northern Trust's U.S. pension plan was changed to utilize a dynamic glide path based on a set of pre-approved asset allocations to return-seeking and liability-hedging assets that vary in accordance with the plan's projected benefit obligation funded ratio. In general, as the plan’s projected benefit obligation funded ratio increases beyond an established threshold, the plan’s allocation to liability-hedging assets will increase while the allocation to return-seeking assets will decrease. Conversely, a decrease in the plan’s projected benefit obligation funded ratio beyond an established threshold will result in a decrease in the plan’s allocation to liability-hedging assets and increase in the allocation to return-seeking assets. Liability-hedging assets include U.S. long credit bonds, U.S. long government bonds, and a custom completion strategy used to hedge more closely the liability duration of projected plan benefits with bond duration across all durations. Return-seeking assets include: U.S. equity, international developed equity, emerging markets equity, real estate, high yield bonds, global listed infrastructure, emerging market debt, private equity and hedge funds. Northern Trust utilizes an asset/liability methodology to determine the investment policies that will best meet its short and long-term objectives. The process is performed by modeling current and alternative strategies for asset allocation, funding policy and actuarial methods and assumptions. The financial modeling uses projections of expected capital market returns and expected volatility of those returns to determine alternative asset mixes having the greatest probability of meeting the plan’s investment objectives. Risk tolerance is established through careful consideration of plan liabilities, plan funded status, and corporate financial condition. The intent of this strategy is to minimize plan expenses by outperforming growth in plan liabilities over the long run. The target allocation of plan assets since May 2017 is 45% U.S. long credit bonds, 10% U.S. long government bonds, 10% custom completion, 8% U.S. equities, 5% international developed equity, 3% emerging markets equity, 3% real estate, 4% high yield bonds, 3% global listed infrastructure, 4% emerging market debt, 2% private equity, and 3% hedge funds. Equity investments include common stocks that are listed on an exchange and investments in commingled funds that invest primarily in publicly traded equities. Equity investments are diversified across U.S. and non-U.S. stocks and divided by investment style and market capitalization. Fixed income securities held include U.S. treasury securities and investments in commingled funds that invest in a diversified blend of longer duration fixed income securities; the custom completion strategy uses U.S. treasury securities and interest rate futures (or similar instruments) to align more closely with the target hedge ratio across maturities. Alternative investments, including private equity, hedge funds, real estate, and global infrastructure, are used judiciously to enhance long-term returns while improving portfolio diversification. Private equity assets consist primarily of investments in limited partnerships that invest in individual companies in the form of non-public equity or non-public debt positions. Direct or co-investment in non-public stock by the plan is prohibited. The plan’s private equity investments are limited to 2% of the total limited partnership and the maximum allowable loss cannot exceed the commitment amount. The plan holds two investments in hedge funds of funds, which invest, either directly or indirectly, in diversified portfolios of funds or other pooled investment vehicles. Investment in real estate is designed to provide stable income and added diversification. Though not a primary strategy for meeting the plan’s objectives, derivatives may be used from time to time, depending on the nature of the asset class to which they relate, to gain market exposure in an efficient and timely manner, to hedge foreign currency exposure or interest rate risk, or to alter the duration of a portfolio. There were five derivatives held by the plan at December 31, 2017. There were no derivatives held by the plan at December 31, 2016. Investment risk is measured and monitored on an ongoing basis through monthly liability measurements, periodic asset/liability studies, and quarterly investment portfolio reviews. Standards used to evaluate the plan’s investment manager performance include, but are not limited to, the achievement of objectives, operation within guidelines and policy, and comparison against a relative benchmark. In addition, each manager of the investment funds held by the plan is ranked against a universe of peers and compared to a relative benchmark. Total plan performance analysis includes an analysis of the market environment, asset allocation impact on performance, risk and return relative to other ERISA plans, and manager impacts upon plan performance. The following describes the hierarchy of inputs used to measure fair value and the primary valuation methodologies used by Northern Trust for the U.S. qualified plan assets measured at fair value. Level 1 – Quoted, active market prices for identical assets or liabilities. The Plan’s Level 1 investments are comprised of a mutual fund and domestic common stocks. The Plan’s Level 1 investments that are exchange traded are valued at the closing price reported by the respective exchanges on the day of valuation. Level 2 – Observable inputs other than Level 1 prices, such as quoted active market prices for similar assets or liabilities, quoted prices for identical or similar assets in inactive markets, and model-derived valuations in which all significant inputs are observable in active markets. The Plan’s Level 2 assets are comprised of U.S. government obligations and collective trust funds. The investments in collective trust funds fair values are calculated on a scheduled basis using the closing market prices and accruals of securities in the funds (total value of the funds) divided by the number of fund shares currently issued and outstanding. Redemptions of the collective trust funds occur by contract at the respective fund’s redemption date NAV. Level 3 – Valuation techniques in which one or more significant inputs are unobservable in the marketplace. The Plan’s Level 3 assets are comprised of private equity and hedge funds which invest in underlying groups of investment funds or other pooled investment vehicles that are selected by the respective funds’ investment managers. The investment funds and the underlying investments held by these investment funds are valued at fair value. In determining the fair value of the underlying investments of each fund, the fund’s investment manager or general partner takes into account the estimated value reported by the underlying funds as well as any other considerations that may, in their judgment, increase or decrease such estimated value. While Northern Trust believes its valuation methods for plan assets are appropriate and consistent with other market participants, the use of different methodologies or assumptions, particularly as applied to Level 3 assets, could have a material effect on the computation of the estimated fair values. The following table presents the fair values of Northern Trust’s U.S. pension plan assets, by major asset category, and their level within the fair value hierarchy defined by GAAP as of December 31, 2017 and 2016. TABLE 98: FAIR VALUE OF U.S. PENSION PLAN ASSETS
The following table presents the changes in Level 3 assets for the years ended December 31, 2017 and 2016. TABLE 99: CHANGE IN LEVEL 3 ASSETS
Note: The return on plan assets represents the change in the unrealized gain (loss) on assets still held at December 31. A building block approach is employed for Northern Trust’s U.S. pension plan in determining the long-term rate of return for plan assets. Historical markets and long-term historical relationships between equities, fixed income and other asset classes are studied using the widely accepted capital market principle that assets with higher volatility generate a greater return over the long-run. Current market factors such as inflation expectations and interest rates are evaluated before long-term capital market assumptions are determined. The long-term portfolio rate of return is established with consideration given to diversification and rebalancing. The rate is reviewed against peer data and historical returns to verify the return is reasonable and appropriate. Based on this approach and the plan’s target asset allocation, the expected long-term rate of return on assets as of the plan’s December 31, 2017, measurement date was set at 6.00%. Postretirement Health Care. Northern Trust maintains an unfunded postretirement health care plan under which those employees who retire at age 55 or older under the provisions of the U.S. defined benefit plan and had attained 15 years of service as of December 31, 2011 may be eligible for subsidized postretirement health care coverage. The provisions of this plan may be changed further at the discretion of Northern Trust, which also reserves the right to terminate these benefits at any time. The following tables set forth the postretirement health care plan status and amounts included in AOCI at December 31, the net periodic postretirement benefit cost of the plan for 2017 and 2016, and the change in the accumulated postretirement benefit obligation during 2017 and 2016. TABLE 100: POSTRETIREMENT HEALTH CARE PLAN STATUS
TABLE 101: AMOUNTS INCLUDED IN ACCUMULATED OTHER COMPREHENSIVE INCOME
TABLE 102: NET PERIODIC POSTRETIREMENT (BENEFIT) EXPENSE
TABLE 103: CHANGE IN ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION
Northern Trust uses the aggregate RP-2014 mortality table with adjustment from 2014 to 2006. Northern Trust’s pension obligations reflect proposed future improvement under scale MP-2017, released by the Society of Actuaries in October 2017. This assumption was updated at December 31, 2017 from improvement scale MP-2016. TABLE 104: ESTIMATED FUTURE BENEFIT PAYMENTS
Net periodic postretirement (benefit) expense for 2018 is expected to include $0.1 million amortization from AOCI of the net actuarial loss. The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 3.79% at December 31, 2017, and 4.46% at December 31, 2016. For measurement purposes, a 6.8% annual increase in the cost of pre-age 65 medical benefits and post-age 65 medical benefits were assumed for 2017. For drug claims, an 8.75% annual increase in cost was assumed for 2017. These rates are both assumed to gradually decrease until they reach 4.5% in 2026 and 2027, respectively. The health care cost trend rate assumption has an effect on the amounts reported. For example, increasing or decreasing the assumed health care trend rate by one percentage point in each year would have the following effect. TABLE 105: HEALTH CARE COST TREND RATE ASSUMPTION
Defined Contribution Plans. The Corporation and its subsidiaries maintain various defined contribution plans covering substantially all employees. The Corporation’s contribution to the U.S. plan and to certain European-based plans includes a matching component. The expense associated with defined contribution plans is charged to employee benefits and totaled $53.4 million in 2017, $50.0 million in 2016, and $46.8 million in 2015. |
Share-Based Compensation Plans |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation Plans | Share-Based Compensation Plans Northern Trust recognizes expense for the grant-date fair value of share-based compensation granted to employees and non-employee directors. Total compensation expense for share-based payment arrangements to employees and the associated tax impacts were as follows for the periods presented. TABLE 106: TOTAL COMPENSATION EXPENSE FOR SHARE-BASED PAYMENT ARRANGEMENTS TO EMPLOYEES
As of December 31, 2017, there was $110.2 million of unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Corporation’s share-based compensation plans. That cost is expected to be recognized as expense over a weighted-average period of approximately two years. The Northern Trust Corporation 2017 Long-Term Incentive Plan (2017 Plan) is administered by the Compensation and Benefits Committee (Committee) of the Board of Directors. All employees of the Corporation and its subsidiaries and all directors of the Corporation are eligible to receive awards under the 2017 Plan. The 2017 Plan provides for the grant of nonqualified and incentive stock options; tandem and free-standing stock appreciation rights; stock awards in the form of restricted stock, restricted stock units and other stock awards; and performance awards. Beginning with grants made on February 21, 2017 under the Northern Trust Corporation 2012 Stock Plan (2012 Plan), restricted stock unit and performance stock unit grants continue to vest in accordance with the original terms of the award if the applicable employee retires, after satisfying applicable age and service requirements. For all applicable periods, stock option grants continue to vest in accordance with the original terms of the award if the applicable employee retires, after satisfying applicable age and service requirements. Grants are outstanding under the 2017 Plan, the 2012 Plan, and the Amended and Restated Northern Trust Corporation 2002 Stock Plan (2002 Plan). The 2017 Plan was approved by stockholders in April 2017. Upon approval of the 2017 Plan, no additional shares have been or will be granted under the 2012 Plan or 2002 Plan. The total number of shares of the Corporation’s common stock authorized for issuance under the 2017 Plan is 20,000,000 plus shares forfeited under the 2012 Plan and 2002 Plan. As of December 31, 2017, shares available for future grant under the 2017 Plan, including shares forfeited under the 2012 Plan and 2002 Plan, totaled 20,265,477. The following describes Northern Trust’s share-based payment arrangements and applies to awards under the 2017 Plan, 2012 Plan and the 2002 Plan, as applicable. Stock Options. Stock options consist of options to purchase common stock at prices not less than 100% of the fair value thereof on the date the options are granted. Options have a maximum 10 year life and generally vest and become exercisable in 1 year to 4 years after the date of grant. All options terminate at such time as determined by the Committee and as provided in the terms and conditions of the respective option grants. The weighted-average assumptions used for options granted during the years ended December 31, 2017, 2016, and 2015 are as follows: TABLE 107: WEIGHTED-AVERAGE ASSUMPTIONS USED FOR OPTIONS GRANTED
The expected term of options represents the period of time options granted are expected to be outstanding based primarily on the historical exercise behavior attributable to previous option grants. Dividend yield represents the estimated yield from dividends paid on the Corporation’s common stock over the expected term of the options. Expected volatility is determined based on a combination of the historical volatility of Northern Trust’s stock price and the implied volatility of traded options on Northern Trust stock. The risk-free interest rate is based on the U.S. Treasury yield curve at the time of grant for a period equal to the expected term of the options granted. The following table provides information about stock options granted, vested, and exercised in the years ended December 31, 2017, 2016, and 2015. TABLE 108: STOCK OPTIONS GRANTED, VESTED, AND EXERCISED
The following is a summary of changes in nonvested stock options for the year ended December 31, 2017. TABLE 109: CHANGES IN NONVESTED STOCK OPTIONS
A summary of the status of stock options at December 31, 2017, and changes during the year then ended, are presented in the table below. TABLE 110: STATUS OF STOCK OPTIONS AND CHANGES
Restricted Stock Unit Awards. Restricted stock unit awards may be granted to participants which entitle them to receive a payment in the Corporation’s common stock or cash and such other terms and conditions as the Committee deems appropriate. Each restricted stock unit provides the recipient the opportunity to receive one share of stock for each stock unit that vests. The restricted stock units granted in 2017 predominately vest at a rate equal to 50% on the third anniversary date of the grant and 50% on the fourth anniversary date. Restricted stock unit grants totaled 863,308, 1,301,693, and 970,317, with weighted average grant-date fair values of $88.19, $59.17, and $70.79 per share, for the years ended December 31, 2017, 2016, and 2015, respectively. The total fair value of restricted stock units vested during the years ended December 31, 2017, 2016, and 2015, was $88.7 million, $52.3 million, and $58.1 million, respectively. A summary of the status of outstanding restricted stock unit awards at December 31, 2017, and changes during the year then ended, is presented in the table below. TABLE 111: OUTSTANDING RESTRICTED STOCK UNIT AWARDS
The following is a summary of nonvested restricted stock unit awards at December 31, 2017, and changes during the year then ended. TABLE 112: NONVESTED RESTRICTED STOCK UNIT AWARDS
Performance Stock Units. Each performance stock unit provides the recipient the opportunity to receive one share of stock for each stock unit that vests over a three-year performance period, subject to satisfaction of specified performance targets that are a function of return on equity and continued employment until the end of the vesting period. For performance stock units outstanding as of December 31, 2017, and granted in 2015 or 2016, the number of such units that may vest ranges from 0% to 125% of the original award granted based on the attainment of the applicable 3-year average annual return on equity target. For performance stock units outstanding at December 31, 2017, and granted in 2017, the number of such units that may vest ranges from 0% to 150% of the original award granted based on the attainment of the applicable 3-year average annual return on equity target. Distribution of the shares is then made after vesting. Performance stock unit grants totaled 231,269, 354,606, and 272,319 for the years ended December 31, 2017, 2016, and 2015, respectively, with weighted average grant-date fair values of $69.80, $62.67, and $61.14. Performance stock units outstanding at target level performance totaled 817,432, 859,502, and 787,140 at December 31, 2017, 2016, and 2015, respectively. Performance stock units had aggregate intrinsic values of $81.7 million, $76.5 million, and $56.7 million, and weighted average remaining vesting terms of 1.1 years, 1.5 years, and 1.8 years, at December 31, 2017, 2016, and 2015, respectively. Non-employee Director Stock Awards. Stock units with total values of $1.2 million (13,354 units), $1.3 million (18,001 units), and $1.2 million (16,449 units) were granted to non-employee directors in 2017, 2016, and 2015, respectively, which vest or vested on the date of the annual meeting of the Corporation’s stockholders in the following years. Total expense recognized on these grants was $1.3 million, $1.3 million, and $1.1 million in 2017, 2016, and 2015, respectively. Stock units granted to non-employee directors do not have voting rights. Each stock unit entitles a director to one share of common stock at vesting, unless a director elects to defer receipt of the shares. Directors may elect to defer the payment of their annual stock unit grant and cash-based compensation until termination of services as director. Deferred cash compensation is converted into stock units representing shares of common stock of the Corporation. Distributions of deferred stock units are made in stock. Distributions of the stock unit accounts that relate to cash-based compensation are made in cash based on the fair value of the stock units at the time of distribution. |
Cash-Based Compensation Plans |
12 Months Ended |
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Dec. 31, 2017 | |
Compensation Related Costs [Abstract] | |
Cash-Based Compensation Plans | Cash-Based Compensation Plans Various incentive plans provide for cash incentives and bonuses to selected employees based upon accomplishment of corporate net income objectives, goals of the reporting segments and support functions, and individual performance. The provision for awards under these plans is charged to compensation expense and totaled $289.8 million in 2017, $250.7 million in 2016, and $233.0 million in 2015. |
Contingent Liabilities |
12 Months Ended |
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Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingent Liabilities | Contingent Liabilities Legal Proceedings. In the normal course of business, the Corporation and its subsidiaries are routinely defendants in or parties to pending and threatened legal actions, and are subject to regulatory examinations, information-gathering requests, investigations, and proceedings, both formal and informal. In certain legal actions, claims for substantial monetary damages are asserted. In regulatory matters, claims for disgorgement, restitution, penalties and/or other remedial actions or sanctions may be sought. Based on current knowledge, after consultation with legal counsel and after taking into account current accruals, management does not believe that the losses, fines or penalties, if any, arising from pending litigation or threatened legal actions or regulatory matters either individually or in the aggregate, after giving effect to applicable reserves and insurance coverage will have a material adverse effect on the consolidated financial position or liquidity of the Corporation, although such matters could have a material adverse effect on the Corporation’s operating results for a particular period. Under GAAP, (i) an event is “probable” if the “future event or events are likely to occur”; (ii) an event is “reasonably possible” if “the chance of the future event or events occurring is more than remote but less than likely”; and (iii) an event is “remote” if “the chance of the future event or events occurring is slight.” The outcome of litigation and regulatory matters is inherently difficult to predict and/or the range of loss often cannot be reasonably estimated, particularly for matters that (i) will be decided by a jury, (ii) are in early stages, (iii) involve uncertainty as to the likelihood of a class being certified or the ultimate size of the class, (iv) are subject to appeals or motions, (v) involve significant factual issues to be resolved, including with respect to the amount of damages, (vi) do not specify the amount of damages sought or (vii) seek very large damages based on novel and complex damage and liability legal theories. Accordingly, the Corporation cannot reasonably estimate the eventual outcome of these pending matters, the timing of their ultimate resolution or what the eventual loss, fines or penalties, if any, related to each pending matter will be. In accordance with applicable accounting guidance, the Corporation records accruals for litigation and regulatory matters when those matters present loss contingencies that are both probable and reasonably estimable. When loss contingencies are not both probable and reasonably estimable, the Corporation does not record accruals. No material accruals have been recorded for pending litigation or threatened legal actions or regulatory matters. For a limited number of matters for which a loss is reasonably possible in future periods, whether in excess of an accrued liability or where there is no accrued liability, the Corporation is able to estimate a range of possible loss. As of December 31, 2017, the Corporation has estimated the range of reasonably possible loss for these matters to be from zero to approximately $30 million in the aggregate. The Corporation’s estimate with respect to the aggregate range of reasonably possible loss is based upon currently available information and is subject to significant judgment and a variety of assumptions and known and unknown uncertainties. The matters underlying the estimated range will change from time to time, and actual results may vary significantly from the current estimate. In certain other pending matters, there may be a range of reasonably possible loss (including reasonably possible loss in excess of amounts accrued) that cannot be reasonably estimated for the reasons described above. Such matters are not included in the estimate of reasonably possible loss discussed above. In January 2015, the Public Prosecutor’s Office of France recommended that certain charges be brought against Northern Trust Fiduciary Services (Guernsey) Limited (NTFS), an indirect subsidiary of the Corporation, relating to the administration of two trusts for which NTFS serves as trustee. In April 2015, a French investigating magistrate judge charged NTFS with complicity in estate tax fraud. Charges also were brought against a number of other persons and entities related to this matter. The trial related to this matter concluded in October 2016. In January 2017, the French court found no estate tax fraud had occurred and NTFS and all other persons and entities charged were acquitted. The Public Prosecutor’s Office of France has appealed the court decision. The proceedings in the appellate court are scheduled to begin in March 2018. As trustee, NTFS provided no tax advice and had no involvement in the preparation or filing of the challenged estate tax filings. Visa Class B Common Shares. Northern Trust, as a member of Visa U.S.A. Inc. (Visa U.S.A.) and in connection with the 2007 restructuring of Visa U.S.A. and its affiliates and the 2008 initial public offering of Visa Inc. (Visa), received certain Visa Class B common shares. The Visa Class B common shares are subject to certain selling restrictions until the final resolution of the covered litigation noted below, at which time the shares are convertible into Visa Class A common shares based on a conversion rate dependent upon the ultimate cost of resolving the covered litigation. Certain members of Visa U.S.A. are obligated to indemnify Visa for losses resulting from certain litigation relating to interchange fees (the covered litigation). On October 19, 2012, Visa signed a settlement agreement with plaintiff representatives for binding settlement of the covered litigation. On January 14, 2014, the United States District Court for the Eastern District of New York entered a final judgment order approving the settlement with the class plaintiffs. A number of objectors appealed from that order and more than 30 opt-out cases have been filed by merchants in various federal district courts. On June 30, 2016, the United States Court of Appeals for the Second Circuit reversed the District Court's approval of the settlement and remanded the case to the District Court for further proceedings. In November 2016, a subset of plaintiffs filed a certiorari petition with the Supreme Court of the United States. In March 2017, the Supreme Court denied that petition. The ultimate resolution of the covered litigation and the timing for removal of the selling restrictions on the Visa Class B common shares are uncertain. In June 2016 and 2015, Northern Trust recorded a $123.1 million and $99.9 million net gain on the sale of 1.1 million and 1.0 million of its Visa Class B common shares, respectively. These sales do not affect Northern Trust’s risk related to the impact of the covered litigation on the rate at which such shares will ultimately convert into Visa Class A common shares. Northern Trust continued to hold approximately 4.1 million Visa Class B common shares, which are recorded at their original cost basis of zero as of both December 31, 2017 and 2016. |
Derivative Financial Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments | Derivative Financial Instruments Northern Trust is a party to various derivative financial instruments that are used in the normal course of business to meet the needs of its clients; as part of its trading activity for its own account; and as part of its risk management activities. These instruments include foreign exchange contracts, interest rate contracts, total return swap contracts, credit default swap contracts, and swaps related to the sale of certain Visa Class B common shares Northern Trust’s primary risks associated with these instruments is the possibility that interest rates, foreign exchange rates, equity prices, or credit spreads could change in an unanticipated manner, resulting in higher costs or a loss in the underlying value of the instrument. These risks are mitigated by establishing limits, monitoring the level of actual positions taken against such established limits, and monitoring the level of any interest rate sensitivity gaps created by such positions. When establishing position limits, market liquidity and volatility, as well as experience in each market, are taken into account. Credit risk associated with derivative instruments relates to the failure of the counterparty and the failure of Northern Trust to pay based on the contractual terms of the agreement, and is generally limited to the unrealized fair value gains and losses on these instruments, net of any collateral received or deposited. The amount of credit risk will increase or decrease during the lives of the instruments as interest rates, foreign exchange rates, equity prices or credit spreads fluctuate. Northern Trust’s risk is controlled by limiting such activity to an approved list of counterparties and by subjecting such activity to the same credit and quality controls as are followed in lending and investment activities. Credit Support Annexes and other similar agreements are currently in place with a number of Northern Trust’s counterparties which mitigate the aforementioned credit risk associated with derivative activity conducted with those counterparties by requiring that significant net unrealized fair value gains be supported by collateral placed with Northern Trust. Northern Trust has elected to net derivative assets and liabilities when legally enforceable master netting arrangements or similar agreements exist between Northern Trust and the counterparty. Derivative assets and liabilities recorded in the consolidated balance sheets were each reduced by $1.4 billion and $1.7 billion as of December 31, 2017 and 2016, respectively, as a result of master netting arrangements and similar agreements in place. Derivative assets and liabilities recorded at December 31, 2017 also reflect reductions of $427.6 million and $189.0 million, respectively, as a result of cash collateral received from and deposited with derivative counterparties. This compares with reductions of derivative assets and liabilities of $461.3 million and $722.1 million, respectively, at December 31, 2016. Additional cash collateral received from and deposited with derivative counterparties totaling $67.0 million and $143.1 million, respectively, as of December 31, 2017, and $70.8 million and $324.5 million, respectively, as of December 31, 2016, was not offset against derivative assets and liabilities on the consolidated balance sheets as the amounts exceeded the net derivative positions with those counterparties. Northern Trust centrally clears certain interest rate derivative instruments as required under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The following table presents the fair value of securities that have been either pledged to or accepted from counterparties for these derivative transactions. TABLE 113: FAIR VALUE OF SECURITIES COLLATERAL FOR DERIVATIVE TRANSACTIONS
Securities pledged or accepted as collateral are not offset against derivative assets or liabilities in the consolidated balance sheets. There was no repledged or sold collateral at December 31, 2017 or December 31, 2016. Certain master netting arrangements Northern Trust enters into with derivative counterparties contain credit risk-related contingent features in which the counterparty has the option to declare Northern Trust in default and accelerate cash settlement of net derivative liabilities with the counterparty in the event Northern Trust’s credit rating falls below specified levels. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a liability position was $223.7 million and $358.2 million at December 31, 2017 and 2016, respectively. Cash collateral amounts deposited with derivative counterparties on those dates included $35.8 million and $317.5 million, respectively, posted against these liabilities, resulting in a net maximum amount of termination payments that could have been required at December 31, 2017 and 2016 of $187.9 million and $40.7 million, respectively. Accelerated settlement of these liabilities would not have a material effect on the consolidated financial position or liquidity of Northern Trust. Foreign exchange contracts are agreements to exchange specific amounts of currencies at a future date, at a specified rate of exchange. Foreign exchange contracts are entered into primarily to meet the foreign exchange needs of clients. Foreign exchange contracts are also used for trading purposes and risk management. For risk management purposes, Northern Trust uses foreign exchange contracts to reduce its exposure to changes in foreign exchange rates relating to certain forecasted non-functional currency denominated revenue and expenditure transactions, foreign currency denominated assets and liabilities, including investment securities and net investments in non-U.S. affiliates. Interest rate contracts include swap and option contracts. Interest rate swap contracts involve the exchange of fixed and floating rate interest payment obligations without the exchange of the underlying principal amounts. Northern Trust enters into interest rate swap contracts with its clients and also may utilize such contracts to reduce or eliminate the exposure to changes in the cash flows or fair value of hedged assets or liabilities due to changes in interest rates. Interest rate option contracts may include caps, floors, collars and swaptions, and provide for the transfer or reduction of interest rate risk, typically in exchange for a fee. Northern Trust enters into option contracts as a seller of interest rate protection to clients. Northern Trust receives a fee at the outset of the agreement for the assumption of the risk of an unfavorable change in interest rates. This assumed interest rate risk is then mitigated by entering into an offsetting position with an outside counterparty. Northern Trust may also purchase or enter into option contracts for risk management purposes including to reduce the exposure to changes in the cash flows of hedged assets due to changes in interest rates. Client-Related and Trading Derivative Instruments. Approximately 96% of Northern Trust’s derivatives outstanding at December 31, 2017 and 2016, measured on a notional value basis, relate to client-related and trading activities. These activities consist principally of providing foreign exchange services to clients in connection with Northern Trust’s global custody business. However, in the normal course of business, Northern Trust also engages in trading of currencies for its own account. The following table shows the notional and fair values of client-related and trading derivative financial instruments. Notional amounts of derivative financial instruments do not represent credit risk, and are not recorded in the consolidated balance sheets. They are used merely to express the volume of this activity. Northern Trust’s credit-related risk of loss is limited to the positive fair value of the derivative instrument, net of any collateral received, which is significantly less than the notional amount. TABLE 114: NOTIONAL AND FAIR VALUES OF CLIENT-RELATED AND TRADING DERIVATIVE FINANCIAL INSTRUMENTS
Changes in the fair value of client-related and trading derivative instruments are recognized currently in income. The following table shows the location and amount of gains and losses recorded in the consolidated statements of income for the years ended December 31, 2017, 2016, and 2015. TABLE 115: LOCATION AND AMOUNT OF CLIENT-RELATED AND TRADING DERIVATIVE GAINS AND LOSSES RECORDED IN INCOME
Risk Management Instruments. Northern Trust uses derivative instruments to hedge its exposure to foreign currency, interest rate, equity price, and credit risk. The following table identifies the types and classifications of derivative instruments formally designated as hedges under GAAP and used by Northern Trust to manage risk, their notional and fair values, and the respective risks addressed. TABLE 116: NOTIONAL AND FAIR VALUES OF DESIGNATED RISK MANAGEMENT DERIVATIVE FINANCIAL INSTRUMENTS
Derivatives are designated as fair value hedges to limit Northern Trust’s exposure to changes in the fair value of assets and liabilities due to movements in interest rates. The following table shows the location and amount of derivative gains and losses recognized in the consolidated statements of income related to fair value hedges for the years ended December 31, 2017, 2016, and 2015. TABLE 117: LOCATION AND AMOUNT OF FAIR VALUE HEDGE DERIVATIVE GAINS AND LOSSES RECORDED IN INCOME
Derivatives are also designated as cash flow hedges in order to minimize the variability in cash flows of earning assets or forecasted transactions caused by movements in interest or foreign exchange rates. There was no ineffectiveness recognized in earnings for cash flow hedges during the years ended December 31, 2017, 2016, or 2015. As of December 31, 2017, 23 months was the maximum length of time over which the exposure to variability in future cash flows of forecasted foreign currency denominated transactions was being hedged. The following table provides cash flow hedge derivative gains and losses that were recognized in AOCI and the amounts reclassified to earnings during the years ended December 31, 2017, 2016 and 2015. TABLE 118: CASH FLOW HEDGE DERIVATIVE GAINS AND LOSSES RECOGNIZED IN AOCI AND RECLASSIFIED TO INCOME
There were no material gains or losses reclassified during the years ended December 31, 2017, 2016, and 2015 as a result of the discontinuance of forecasted transactions that were no longer probable of occurring. It is estimated that a net gain of $6.2 million and $1.6 million will be reclassified into net income within the next twelve months relating to cash flow hedges of foreign currency denominated transactions and cash flow hedges of foreign currency denominated investment securities, respectively. It is estimated that a net loss of $0.1 million will be reclassified into earnings upon the receipt of interest payments on earning assets within the next twelve months relating to cash flow hedges of available for sale investment securities. Certain foreign exchange contracts and qualifying nonderivative instruments are designated as net investment hedges to minimize Northern Trust’s exposure to variability in the foreign currency translation of net investments in non-U.S. branches and subsidiaries. For net investment hedges, there was no ineffectiveness recorded for these hedges during the years ended December 31, 2017, 2016, and 2015. Net investment hedge losses recognized in AOCI related to foreign exchange contracts were $223.2 million for the year ended December 31, 2017. Net investment hedge gains recognized in AOCI related to foreign exchange contracts were $212.4 million for the year ended December 31, 2016. Derivatives that are not formally designated as hedges under GAAP are entered into for risk management purposes. Foreign exchange contracts are entered into to manage the foreign currency risk of non-U.S.-dollar-denominated assets and liabilities, the net investment in certain non-U.S. affiliates, commercial loans, and forecasted foreign-currency-denominated transactions. Swaps related to the sale of certain Visa Class B common shares were entered into which retain the risks associated with the ultimate conversion of the Visa Class B common shares into shares of Visa Class A common shares. Credit default swaps were entered into to manage the credit risk associated with certain loans and loan commitments. Total return swaps are entered into to manage the equity price risk associated with certain investments. The following table identifies the types of risk management derivative instruments not formally designated as hedges and their notional amounts and fair values. TABLE 119: NOTIONAL AND FAIR VALUES OF NON-DESIGNATED RISK MANAGEMENT DERIVATIVE INSTRUMENTS
(1) This line consists of swaps related to the sale of certain Visa Class B common shares and total return swap contracts. The following table provides the location and amount of gains and losses recorded in the consolidated statements of income for the years ended December 31, 2017, 2016, and 2015 for derivative instruments not formally designated as hedges under GAAP. TABLE 120: LOCATION AND AMOUNT OF GAINS AND LOSSES RECORDED IN INCOME FOR NON-DESIGNATED RISK MANAGEMENT DERIVATIVE INSTRUMENTS
(1) This line includes the statement of income impact of swaps related to the sale of certain Visa Class B common shares, total return swap contracts, and credit default swap contracts. |
Offsetting of Assets and Liabilities |
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Offsetting of Assets and Liabilities | Offsetting of Assets and Liabilities The following tables provide information regarding the offsetting of derivative assets and of securities purchased under agreements to resell within the consolidated balance sheets as of December 31, 2017 and 2016. TABLE 121: OFFSETTING OF DERIVATIVE ASSETS AND SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
(1) Derivative assets are reported in other assets in the consolidated balance sheets. Other assets (excluding derivative assets) totaled $3.9 billion and $3.3 billion as of December 31, 2017 and 2016, respectively. (2) Securities purchased under agreements to resell are reported in federal funds sold and securities purchased under agreements to resell in the consolidated balance sheets. Federal funds sold totaled $21.0 million and $6.8 million as of December 31, 2017 and 2016, respectively. (3) Northern Trust did not possess any cash collateral that was not offset in the consolidated balance sheets that could have been used to offset the net amounts presented in the consolidated balance sheets as of December 31, 2017 and 2016. The following table provides information regarding the offsetting of derivative liabilities and of securities sold under agreements to repurchase within the consolidated balance sheets as of December 31, 2017 and 2016. TABLE 122: OFFSETTING OF DERIVATIVE LIABILITIES AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
(1) Derivative liabilities are reported in other liabilities in the consolidated balance sheets. Other liabilities (excluding derivative liabilities) totaled $2.4 billion and $2.7 billion as of December 31, 2017 and 2016, respectively. (2) Northern Trust did not place any cash collateral with counterparties that was not offset in the consolidated balance sheets that could have been used to offset the net amounts presented in the consolidated balance sheets as of December 31, 2017 and 2016. All of Northern Trust’s securities sold under agreements to repurchase (repurchase agreements) and securities purchased under agreements to resell (reverse repurchase agreements) involve the transfer of financial assets in exchange for cash subject to a right and obligation to repurchase those assets for an agreed upon amount. In the event of a repurchase failure, the cash or financial assets are available for offset. All of Northern Trust’s repurchase agreements and reverse repurchase agreements are subject to a master netting arrangement, which sets forth the rights and obligations for repurchase and offset. Under the master netting arrangement, Northern Trust is entitled to set off receivables from and collateral placed with a single counterparty against obligations owed to that counterparty. In addition, collateral held by Northern Trust can be offset against receivables from that counterparty. Derivative asset and liability positions with a single counterparty can be offset against each other in cases where legally enforceable master netting arrangements or similar agreements exist. Derivative assets and liabilities can be further offset by cash collateral received from, and deposited with, the transacting counterparty. The basis for this view is that, upon termination of transactions subject to a master netting arrangement or similar agreement, the individual derivative receivables do not represent resources to which general creditors have rights and individual derivative payables do not represent claims that are equivalent to the claims of general creditors. Northern Trust centrally clears certain interest rate derivative instruments as required under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act. These transactions are subject to an agreement similar to a master netting arrangement, which has the same rights of offset as described above. |
Off-Balance-Sheet Financial Instruments |
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Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
Off-Balance-Sheet Financial Instruments | Off-Balance-Sheet Financial Instruments Commitments and Letters of Credit. Northern Trust, in the normal course of business, enters into various types of commitments and issues letters of credit to meet the liquidity and credit enhancement needs of its clients. The contractual amounts of these instruments represent the potential credit exposure should the instrument be fully drawn upon and the client default. To control the credit risk associated with entering into commitments and issuing letters of credit, Northern Trust subjects such activities to the same credit quality and monitoring controls as its lending activities. Commitments and letters of credit consist of the following: Legally Binding Commitments to Extend Credit generally have fixed expiration dates or other termination clauses. Since a significant portion of the commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future loans or liquidity requirements. Standby Letters of Credit obligate Northern Trust to meet certain financial obligations of its clients, if, under the contractual terms of the agreement, the clients are unable to do so. These instruments are primarily issued to support public and private financial commitments, including commercial paper, bond financing, initial margin requirements on futures exchanges, and similar transactions. Northern Trust is obligated to meet the entire financial obligation of these agreements and in certain cases is able to recover the amounts paid through recourse against collateral received or other participants. Commercial Letters of Credit are instruments issued by Northern Trust on behalf of its clients that authorize a third party (the beneficiary) to draw drafts up to a stipulated amount under the specified terms and conditions of the agreement. Commercial letters of credit are issued primarily to facilitate international trade. The following table shows the contractual amounts of commitments and letters of credit. TABLE 123: COMMITMENTS AND LETTERS OF CREDIT
(1)These amounts exclude $385.5 million and $377.2 million of commitments participated to others at December 31, 2017 and 2016, respectively. (2)These amounts include $92.5 million and $134.2 million of standby letters of credit secured by cash deposits or participated to others as of December 31, 2017 and 2016, respectively. The weighted average maturity of standby letters of credit was 22 months at December 31, 2017 and 24 months at December 31, 2016. Other Off-Balance-Sheet Financial Instruments. As part of its securities custody activities and at the direction of its clients, Northern Trust lends securities owned by clients to borrowers who are reviewed and approved by the Northern Trust Capital Markets Credit Committee. In connection with these activities, Northern Trust has issued indemnifications to certain clients against certain losses that are a direct result of a borrower’s failure to return securities when due, should the value of such securities exceed the value of the collateral required to be posted. Borrowers are required to collateralize fully securities received with cash or marketable securities. As securities are loaned, collateral is maintained at a minimum of 100% of the fair value of the securities plus accrued interest. The collateral is revalued on a daily basis. The amount of securities loaned as of December 31, 2017 and 2016 subject to indemnification was $143.6 billion and $102.3 billion, respectively. Because of the credit quality of the borrowers and the requirement to fully collateralize securities borrowed, management believes that the exposure to credit loss from this activity is not significant and no liability was recorded related to these indemnifications. The Bank is a participating member of various cash, securities, and foreign exchange clearing and settlement organizations such as The Depository Trust Company in New York. It participates in these organizations on behalf of its clients and on its own behalf as a result of its own activities. A wide variety of cash and securities transactions are settled through these organizations, including those involving obligations of states and political subdivisions, asset-backed securities, commercial paper, dollar placements, and securities issued by the Government National Mortgage Association. As a result of its participation in cash, securities, and foreign exchange clearing and settlement organizations, the Bank could be responsible for a pro rata share of certain credit-related losses arising out of the clearing activities. The method in which such losses would be shared by the clearing members is stipulated in each clearing organization’s membership agreement. Credit exposure related to these agreements varies from day to day, primarily as a result of fluctuations in the volume of transactions cleared through the organizations. The estimated credit exposure at December 31, 2017 and 2016 was approximately $62 million and $59 million, respectively, based on the membership agreements and clearing volume for those days. Controls related to these clearing transactions are closely monitored by management to protect the assets of Northern Trust and its clients. |
Variable Interest Entities |
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Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Variable Interest Entities | Variable Interest Entities Variable Interest Entities (VIEs) are defined within GAAP as entities which either have a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial interest. Investors that finance a VIE through debt or equity interests, or other counterparties that provide other forms of support, such as guarantees, subordinated fee arrangements, or certain types of derivative contracts, are variable interest holders in the entity and the variable interest holder, if any, that has both the power to direct the activities that most significantly impact the entity and a variable interest that could potentially be significant to the entity is deemed to be the VIE’s primary beneficiary and is required to consolidate the VIE. Leveraged Leases. In leveraged leasing transactions, Northern Trust acts as lessor of the underlying asset subject to the lease and typically funds 20-30% of the asset’s cost via an equity ownership in a trust with the remaining 70-80% provided by third party non-recourse debt holders. In such transactions, the trusts, which are VIEs, are created to provide the lessee use of the property with substantially all of the rights and obligations of ownership. The lessee’s maintenance and operation of the leased property has a direct effect on the fair value of the underlying property, and the lessee also has the ability to increase the benefits it can receive and limit the losses it can suffer by the manner in which it uses the property. As a result, Northern Trust has determined that it is not the primary beneficiary of these VIEs given it lacks the power to direct the activities that most significantly impact the economic performance of the VIEs. Northern Trust’s maximum exposure to loss as a result of its involvement with the leveraged lease trust VIEs is limited to the carrying amounts of its leveraged lease investments. As of December 31, 2017 and 2016, the carrying amounts of these investments, which are included in loans and leases in the consolidated balance sheets, were $131.0 million and $183.5 million, respectively. Northern Trust’s funding requirements relative to the VIEs are limited to its invested capital. Northern Trust has no other liquidity arrangements or obligations to purchase assets of the VIEs that would expose Northern Trust to a loss. Tax Credit Structures. Northern Trust invests in qualified affordable housing projects and community development entities (collectively, community development projects) that are designed to generate a return primarily through the realization of tax credits. The community development projects are formed as limited partnerships and limited liability companies in which Northern Trust invests as a limited partner/investor member through equity contributions. The economic performance of the community development projects, which are VIEs, is subject to the performance of their underlying investment and their ability to operate in compliance with the rules and regulations necessary for the qualification of tax credits generated by equity investments. Northern Trust has determined that it is not the primary beneficiary of any community development projects as it lacks the power to direct the activities that most significantly impact the economic performance of the underlying investments or to affect their ability to operate in compliance with the rules and regulations necessary for the qualification of tax credits generated by equity investments. This power is held by the general partners and managing members who exercise full and exclusive control of the operations of the VIEs. Northern Trust’s maximum exposure to loss as a result of its involvement with community development projects is limited to the carrying amounts of its investments, including any undrawn commitments. As of December 31, 2017 and 2016, the carrying amounts of these investments in community development projects that generate tax credits, included in other assets in the consolidated balance sheets, totaled $415.3 million and $218.9 million, respectively, of which $386.1 million and $186.5 million are VIEs as of December 31, 2017 and 2016, respectively. As of December 31, 2017 and 2016, liabilities related to unfunded commitments on investments in tax credit community development projects, included in other liabilities in the consolidated balance sheets, totaled $241.1 million and $82.9 million, respectively, of which $215.2 million and $56.7 million related to undrawn commitments on VIEs as of December 31, 2017 and 2016, respectively. Northern Trust’s funding requirements are limited to its invested capital and unfunded commitments for future equity contributions. Northern Trust has no exposure to loss from liquidity arrangements and no obligation to purchase assets of the community development projects. Tax credits and other tax benefits attributable to community development projects totaled $57.9 million and $48.8 million, respectively, as of December 31, 2017 and 2016. Investment Funds. Northern Trust acts as asset manager for various funds in which clients of Northern Trust are investors. As an asset manager of funds, Northern Trust earns a competitively priced fee that is based on assets managed and varies with each fund’s investment objective. Based on its analysis, Northern Trust has determined that it is not the primary beneficiary of these VIEs under GAAP. Some of the funds for which Northern Trust acts as asset manager comply or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds and therefore the funds are exempt from the consolidation requirements in Accounting Standards Codification 810-10. Northern Trust voluntarily waived $1.0 million and $8.1 million of money market mutual fund fees for the year ended December 31, 2017 and 2016, respectively. Northern Trust does not have any contractual obligations to provide financial support to the funds. Any potential future support of the funds will be at the discretion of Northern Trust after an evaluation of the specific facts and circumstances. Periodically, Northern Trust makes seed capital investments to certain funds. As of December 31, 2017, Northern Trust had a $10.0 million investment, valued using net asset value per share and included in other assets, and no unfunded commitments related to seed capital investments. As of December 31, 2016, Northern Trust had no seed capital investments and no unfunded commitments related to seed capital investments. |
Pledged and Restricted Assets |
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Dec. 31, 2017 | |
Financial Instruments Owned and Pledged as Collateral [Abstract] | |
Pledged and Restricted Assets | Pledged and Restricted Assets Certain of Northern Trust’s subsidiaries, as required or permitted by law, pledge assets to secure public and trust deposits, repurchase agreements and Federal Home Loan Bank borrowings, as well as for other purposes, including support for securities settlement, primarily related to client activities, for potential Federal Reserve Bank discount window borrowings, and for derivative contracts. As of December 31, 2017, securities and loans totaling $40.1 billion ($30.8 billion of government-sponsored agency and other securities, $684.3 million of obligations of states and political subdivisions and $8.6 billion of loans) were pledged. This compares to $38.9 billion ($28.3 billion of government-sponsored agency and other securities, $939.8 million of obligations of states and political subdivisions and $9.6 billion of loans) at December 31, 2016. Collateral required for these purposes totaled $11.0 billion and $9.3 billion at December 31, 2017 and December 31, 2016, respectively. Available for sale securities with a total fair value of $833.4 million and $494.7 million, as of December 31, 2017 and December 31, 2016, respectively, were included in the total pledged assets, which were pledged as collateral for agreements to repurchase securities sold transactions and derivative contracts. The secured parties to these transactions have the right to repledge or sell these securities. Northern Trust is not permitted, by contract or custom, to repledge or sell securities accepted as collateral under certain repurchase agreements. The total fair value of securities accepted as collateral was $1.2 billion as of December 31, 2017 and $1.8 billion as of December 31, 2016. Northern Trust has the right to repledge or sell securities accepted as collateral under certain repurchase agreements. The fair value of these securities accepted as collateral was $78.3 million as of December 31, 2017 and $217.5 million as of December 31, 2016. There was no repledged or sold collateral as of December 31, 2017 or December 31, 2016. Northern Trust has the right to repledge or sell securities accepted as collateral under derivative contracts. The total fair value of securities accepted as collateral was $4.6 million as of December 31, 2017. There were no securities accepted as collateral under derivative contracts as of December 31, 2016. Deposits maintained to meet Federal Reserve Bank reserve requirements averaged $3.1 billion in 2017 as compared to $2.2 billion in 2016. |
Restrictions on Subsidiary Dividends and Loans or Advances |
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Dec. 31, 2017 | |
Banking and Thrift [Abstract] | |
Restrictions on Subsidiary Dividends and Loans or Advances | Restrictions on Subsidiary Dividends and Loans or Advances Various federal and state statutory provisions limit the amount of dividends the Bank can pay to the Corporation without regulatory approval. Approval of the Federal Reserve Board is required for payment of any dividend by a state-chartered bank that is a member of the Federal Reserve System if the total of all dividends declared by the bank in any calendar year would exceed the total of its retained net income (as defined by regulatory agencies) for that year combined with its retained net income for the preceding two years. In addition, a state member bank may not pay a dividend in an amount greater than its “undivided profits,” as defined, without regulatory and stockholder approval. Under Illinois law, an Illinois state bank, prior to paying a dividend, must carry over to surplus at least one-tenth of its net profits since the date of the declaration of the last preceding dividend, until the bank’s surplus is equal to its capital. In addition, an Illinois state bank may not pay any dividend in an amount greater than its net profits then on hand, after deduction of losses and bad debts (defined as debts due to a state bank on which interest is past due and unpaid for a period of six months or more, unless the same are well secured and in the process of collection). The Bank is also prohibited under federal law from paying any dividends if the Bank is undercapitalized or if the payment of the dividends would cause the Bank to become undercapitalized. In addition, the federal regulatory agencies are authorized to prohibit a bank or bank holding company from engaging in an unsafe or unsound banking practice. The payment of dividends could, depending on the financial condition of the Bank, be deemed to constitute an unsafe or unsound practice. The Dodd-Frank Wall Street Reform and Consumer Protection Act and Basel III impose additional restrictions on the ability of banking institutions to pay dividends (e.g., the Corporation must include proposed dividends in the capital plan that it submits to the Federal Reserve Board and such dividends may only be declared if the Federal Reserve Board does not object to the Corporation’s capital plan). Under federal law, financial transactions by the Bank, the Corporation’s insured banking subsidiary, with the Corporation and its affiliates that are in the form of loans or extensions of credit, investments, guarantees, derivative transactions, repurchase agreements, securities lending transactions or purchases of assets, are restricted. Transfers of this kind to the Corporation or a nonbanking subsidiary by the Bank are limited to 10% of the Bank’s capital and surplus with respect to any single affiliate, and to 20% of the Bank’s capital and surplus with all affiliates in the aggregate, and are also subject to certain collateral requirements (in the case of credit transactions) and other restrictions on covered transactions. These transactions, as well as other transactions between the Bank and the Corporation or its affiliates, also must be on terms substantially the same as, or at least as favorable as, those prevailing at the time for comparable transactions with non-affiliated companies or, in the absence of comparable transactions, on terms, or under circumstances, including credit standards, that would be offered to, or would apply to, non-affiliated companies. Other state and federal laws may limit the transfer of funds by the Corporation’s banking subsidiaries to the Corporation and certain of its affiliates. |
Reporting Segments and Related Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reporting Segments and Related Information | Reporting Segments and Related Information Segment Information. Northern Trust is organized around its two client-focused reporting segments: C&IS and Wealth Management. Asset management and related services are provided to C&IS and Wealth Management clients primarily by the Asset Management business. The revenue and expenses of Asset Management and certain other support functions are allocated fully to C&IS and Wealth Management. Income and expense associated with the Corporation’s and the Bank’s wholesale funding activities and investment portfolios, as well as certain corporate-based expense, executive level compensation and nonrecurring items are not allocated to C&IS and Wealth Management, and are reported in Northern Trust’s third reporting segment, Treasury and Other, in the tables below. C&IS and Wealth Management results are presented to promote a greater understanding of their financial performance. The information, presented on an internal management-reporting basis as opposed to GAAP which is used for consolidated financial reporting purposes, derives from internal accounting systems that support Northern Trust’s strategic objectives and management structure. The accounting policies used for management reporting are consistent with those described in Note 1, “Summary of Significant Accounting Policies.” The following tables show the earnings contribution of Northern Trust’s reporting segments for the years ended December 31, 2017, 2016, and 2015. TABLE 124: CORPORATE AND INSTITUTIONAL SERVICES RESULTS OF OPERATIONS
Note: Stated on an FTE basis. TABLE 125: WEALTH MANAGEMENT RESULTS OF OPERATIONS
Note: Stated on an FTE basis. TABLE 126: TREASURY AND OTHER RESULTS OF OPERATIONS
Note: Stated on an FTE basis. TABLE 127: CONSOLIDATED FINANCIAL INFORMATION
Note: Stated on an FTE basis. The consolidated figures include $45.8 million, $25.1 million, and $25.3 million, of FTE adjustments for 2017, 2016, and 2015, respectively. Further discussion of reporting segment results is provided within the “Reporting Segments and Related Information” section of Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Geographic Area Information. Northern Trust’s non-U.S. activities are primarily related to its asset servicing, asset management, foreign exchange, cash management, and commercial banking businesses. The operations of Northern Trust are managed on a reporting segment basis and include components of both U.S and non-U.S. source income and assets. Non-U.S. source income and assets are not separately identified in Northern Trust’s internal management reporting system. However, Northern Trust is required to disclose non-U.S. activities based on the domicile of the customer. Due to the complex and integrated nature of Northern Trust’s activities, it is difficult to segregate with precision revenues, expenses and assets between U.S. and non-U.S.-domiciled customers. Therefore, certain subjective estimates and assumptions have been made to allocate revenues, expenses and assets between U.S. and non-U.S. operations. For purposes of this disclosure, all foreign exchange trading income has been allocated to non-U.S. operations. Interest expense is allocated to non-U.S. operations based on specifically matched or pooled funding. Allocations of indirect noninterest expenses, when made, are based on various methods such as time, space, and number of employees. The table below summarizes Northern Trust’s performance based on the allocation process described above without regard to guarantors or the location of collateral. TABLE 128: DISTRIBUTION OF TOTAL ASSETS AND OPERATING PERFORMANCE
Note: Total revenue is comprised of net interest income and noninterest income. |
Regulatory Capital Requirements |
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Regulatory Capital Requirements | Regulatory Capital Requirements Northern Trust and the Bank are subject to various regulatory capital requirements administered by the federal bank regulatory authorities. Under these requirements, banks must maintain specific ratios of total and Tier 1 capital to risk-weighted assets and of Tier 1 capital to adjusted average quarterly assets in order to be classified as “well-capitalized.” The regulatory capital requirements impose certain restrictions upon banks that meet minimum capital requirements but are not “well-capitalized” and obligate the federal bank regulatory authorities to take “prompt corrective action” with respect to banks that do not maintain such minimum ratios. Such prompt corrective action could have a direct material effect on a bank’s financial statements. As of December 31, 2017 and 2016, the Bank had capital ratios above the levels required for classification as a “well-capitalized” institution and had not received any regulatory notification of a lower classification. Additionally, Northern Trust’s subsidiary banks located outside the U.S. are subject to regulatory capital requirements in the jurisdictions in which they operate. As of December 31, 2017 and 2016, Northern Trust’s non-U.S. banking subsidiaries had capital ratios above their specified minimum requirements. There were no conditions or events since December 31, 2017, that management believes have adversely affected the capital categorization of any Northern Trust subsidiary bank. The table below provides capital ratios for the Corporation and the Bank determined by Basel III phased in requirements. TABLE 129: RISK-BASED CAPITAL AMOUNTS AND RATIOS
(1) Effective January 1, 2018, the Corporation will be subject to a minimum supplementary leverage ratio of 3 percent. The risk-based capital guidelines that apply to the Corporation and the Bank, commonly referred to as Basel III, are based upon the 2011 capital accord of the Basel Committee. The Basel III rules are currently being phased in, and will come into full effect by January 1, 2022. Under the final Basel III rules, the Corporation and the Bank are required to calculate and publicly disclose risk-based capital ratios using two methodologies: an advanced approach and a standardized approach. Under the advanced approach, credit risk weighted assets (RWA) are based on internal credit models and parameters. Additionally, the advanced approach incorporates operational risk RWA. Under the standardized approach, RWA are based on supervisory prescribed risk weights that are primarily dependent on counterparty type and asset class. As required by the Collins Amendment of the Dodd-Frank Act, the capital adequacy of the Corporation and the Bank is assessed based on the lower of the advanced approach or standardized approach capital ratios. The U.S.’s implementation of Basel III has increased the minimum capital thresholds for banking organizations and tightened the standards for what qualifies as capital. The Corporation and the Bank believe their capital strength, balance sheets and business models leave them well positioned for the continued U.S. implementation of Basel III. |
Northern Trust Corporation (Corporation only) |
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Condensed Financial Information of Parent Company Only Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Northern Trust Corporation (Corporation only) | Northern Trust Corporation (Corporation only) Condensed financial information is presented below. Investments in wholly-owned subsidiaries are carried on the equity method of accounting. TABLE 130: CONDENSED BALANCE SHEETS
TABLE 131: CONDENSED STATEMENTS OF INCOME
TABLE 132: CONDENSED STATEMENTS OF CASH FLOWS
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Summary of Significant Accounting Policies (Policies) |
12 Months Ended |
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Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation. The consolidated financial statements include the accounts of Northern Trust Corporation (Corporation) and its wholly-owned subsidiary, The Northern Trust Company (Bank), and various other wholly-owned subsidiaries of the Corporation and Bank. Throughout the notes, the term “Northern Trust” refers to the Corporation and its subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. The consolidated statements of income include results of acquired subsidiaries from the dates of acquisition. Certain prior-year balances have been reclassified consistent with the current-year’s presentation. |
Nature of Operations | Nature of Operations. The Corporation is a bank holding company that has elected to be a financial holding company under the Bank Holding Company Act of 1956, as amended. The Bank is an Illinois banking corporation headquartered in Chicago and the Corporation’s principal subsidiary. The Corporation conducts business in the United States (U.S.) and internationally through various U.S. and non-U.S. subsidiaries, including the Bank. Northern Trust generates the majority of its revenue from its two client-focused reporting segments: Corporate & Institutional Services (C&IS) and Wealth Management. Asset management and related services are provided to C&IS and Wealth Management clients primarily by the Asset Management business. C&IS is a leading global provider of asset servicing and related services to corporate and public retirement funds, foundations, endowments, fund managers, insurance companies, sovereign wealth funds, and other institutional investors around the globe. Asset servicing and related services encompass a full range of capabilities including but not limited to: global custody; fund administration; investment operations outsourcing; investment management; investment risk and analytical services; employee benefit services; securities lending; foreign exchange; treasury management; brokerage services; transition management services; banking and cash management. Client relationships are managed through the Bank and the Bank’s and the Corporation’s other subsidiaries, including support from locations in North America, Europe, the Middle East, and the Asia-Pacific region. Wealth Management focuses on high-net-worth individuals and families, business owners, executives, professionals, retirees, and established privately-held businesses in its target markets. The business also includes the Global Family Office, which provides customized services to meet the complex financial needs of individuals and family offices in the U.S. and throughout the world with assets typically exceeding $200 million. In supporting these targeted segments, Wealth Management provides trust, investment management, custody, and philanthropic services; financial consulting; guardianship and estate administration; family business consulting; family financial education; brokerage services; and private and business banking. Wealth Management services are delivered by multidisciplinary teams through a network of offices in 18 U.S. states and Washington, D.C., as well as offices in London, Guernsey, and Abu Dhabi. |
Use of Estimates in the Preparation of Financial Statements | Use of Estimates in the Preparation of Financial Statements. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. |
Foreign Currency Remeasurement and Translation | Foreign Currency Remeasurement and Translation. Asset and liability accounts denominated in nonfunctional currencies are remeasured into functional currencies at period-end rates of exchange, except for certain balance sheet items including buildings and equipment, goodwill and other intangible assets, which are remeasured at historical exchange rates. Results from remeasurement of asset and liability accounts are reported in other operating income as currency translation gains (losses), net. Income and expense accounts are remeasured at period-average rates of exchange. Asset and liability accounts of entities with functional currencies that are not the U.S. dollar are translated at period-end rates of exchange. Income and expense accounts are translated at period-average rates of exchange. Translation adjustments, net of applicable taxes, are reported directly to accumulated other comprehensive income (AOCI), a component of stockholders’ equity. |
Securities | Securities. Securities Available for Sale are reported at fair value, with unrealized gains and losses credited or charged, net of the tax effect, to AOCI. Realized gains and losses on securities available for sale are determined on a specific identification basis and are reported within other security gains (losses), net, in the consolidated statements of income. Interest income is recorded on the accrual basis, adjusted for the amortization of premium and accretion of discount. Securities Held to Maturity consist of debt securities that management intends to, and Northern Trust has the ability to, hold until maturity. Such securities are reported at cost, adjusted for amortization of premium and accretion of discount. Interest income is recorded on the accrual basis adjusted for the amortization of premium and accretion of discount. Securities Held for Trading are stated at fair value. Realized and unrealized gains and losses on securities held for trading are reported in the consolidated statements of income within security commissions and trading income. Nonmarketable Securities primarily consist of Federal Reserve Bank of Chicago and Federal Home Loan Bank stock and community development investments, each of which are recorded in other assets on the consolidated balance sheets. Federal Reserve and Federal Home Loan Bank stock are reported at cost, which represents redemption value. Community development investments are typically reported at amortized cost. Those community development investments that are designed to generate a return primarily through realization of tax credits and other tax benefits, which are discussed in further detail in Note 28, “Variable Interest Entities,” are reported at amortized cost using the effective yield method or proportional amortization method and amortized over the lives of the related tax credits and other tax benefits. Other-Than-Temporary Impairment (OTTI). A security is considered to be other-than-temporarily impaired if the present value of cash flows expected to be collected are less than the security’s amortized cost basis (the difference being defined as the credit loss) or if the fair value of the security is less than the security’s amortized cost basis and the investor intends, or more-likely-than-not will be required, to sell the security before recovery of the security’s amortized cost basis. If OTTI exists, the charge to earnings is limited to the amount of credit loss if the investor does not intend to sell the security, and it is more-likely-than-not that it will not be required to sell the security, before recovery of the security’s amortized cost basis. Any remaining difference between fair value and amortized cost is recognized in AOCI, net of applicable taxes. Otherwise, the entire difference between fair value and amortized cost is charged to earnings. |
Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase | Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase. Securities purchased under agreements to resell and securities sold under agreements to repurchase are accounted for as collateralized financings and recorded at the amounts at which the securities were acquired or sold plus accrued interest. To minimize any potential credit risk associated with these transactions, the fair value of the securities purchased or sold is monitored, limits are set on exposure with counterparties, and the financial condition of counterparties is regularly assessed. It is Northern Trust’s policy to take possession, either directly or via third-party custodians, of securities purchased under agreements to resell. Securities sold under agreements to repurchase are held by the counterparty until the repurchase. |
Derivative Financial Instruments | Derivative Financial Instruments. Northern Trust is a party to various derivative instruments that are used in the normal course of business to meet the needs of its clients; as part of its trading activity for its own account; and as part of its risk management activities. These instruments include foreign exchange contracts, interest rate contracts, total return swap contracts and credit default swap contracts. Derivative financial instruments are recorded on the consolidated balance sheets at fair value within other assets and other liabilities. Derivative asset and liability positions with the same counterparty are reflected on a net basis on the consolidated balance sheets in cases where legally enforceable master netting arrangements or similar agreements exist. Derivative assets and liabilities are further reduced by cash collateral received from, and deposited with, derivative counterparties. The accounting for changes in the fair value of a derivative in the consolidated statements of income depends on whether or not the contract has been designated as a hedge and qualifies for hedge accounting under GAAP. Derivative financial instruments are recorded on the consolidated statements of cash flows within the line item, “other operating activities, net,” except for net investment hedges which are recorded within “other investing activities, net”. Changes in the fair value of client-related and trading derivative instruments, which are not designated hedges under GAAP, are recognized currently in either foreign exchange trading income or security commissions and trading income. Changes in the fair value of derivative instruments entered into for risk management purposes but not designated as hedges are recognized currently in other operating income. Certain derivative instruments used by Northern Trust to manage risk are formally designated and qualify for hedge accounting as fair value, cash flow, or net investment hedges. Derivatives designated as fair value hedges are used to limit Northern Trust’s exposure to changes in the fair value of assets and liabilities due to movements in interest rates. Changes in the fair value of the derivative instrument and changes in the fair value of the hedged asset or liability attributable to the hedged risk are recognized currently in income. For substantially all fair value hedges, Northern Trust applies the “shortcut” method of accounting, available under GAAP, which assumes there is no ineffectiveness in a hedge. As a result, changes recorded in the fair value of the hedged item are equal to the offsetting gain or loss on the derivative and are reflected in the same line item. For fair value hedges that do not qualify for the “shortcut” method of accounting, Northern Trust utilizes regression analysis, a “long-haul” method of accounting, in assessing whether these hedging relationships are highly effective at inception and quarterly thereafter. Ineffectiveness resulting from fair value hedges is recorded in either interest income or interest expense. Derivatives designated as cash flow hedges are used to minimize the variability in cash flows of earning assets or forecasted transactions caused by movements in interest or foreign exchange rates. The effective portion of changes in the fair value of such derivatives is recognized in AOCI, a component of stockholders’ equity, and there is no change to the accounting for the hedged item. Balances in AOCI are reclassified to earnings when the hedged forecasted transaction impacts earnings. Northern Trust applies the “shortcut” method of accounting for cash flow hedges of certain available for sale investment securities. For cash flow hedges of certain other available for sale investment securities, foreign currency denominated investment securities, and forecasted foreign currency denominated revenue and expenditure transactions, Northern Trust closely matches all terms of the hedged item and hedging derivative at inception and on an ongoing basis which limits hedge ineffectiveness. For cash flow hedges of available for sale investment securities, to the extent all terms are not perfectly matched, effectiveness is assessed using regression analysis and any ineffectiveness is measured using the hypothetical derivative method. For cash flow hedges of forecasted foreign currency denominated revenue and expenditure transactions and investment securities, to the extent all terms are not perfectly matched, effectiveness is assessed using the dollar-offset method and any ineffectiveness is measured using the hypothetical derivative method. Any ineffectiveness is recognized currently in earnings. Foreign exchange contracts and qualifying non-derivative instruments designated as net investment hedges are used to minimize Northern Trust’s exposure to variability in the foreign currency translation of net investments in non-U.S. branches and subsidiaries. The effective portion of changes in the fair value of the hedging instrument is recognized in AOCI consistent with the related translation gains and losses of the hedged net investment. For net investment hedges, all critical terms of the hedged item and the hedging instrument are matched at inception and on an ongoing basis to minimize the risk of hedge ineffectiveness. To the extent all terms are not perfectly matched, any ineffectiveness is measured using the hypothetical derivative method. Ineffectiveness resulting from net investment hedges is recorded in other operating income. Amounts recorded in AOCI are reclassified to earnings only upon the sale or liquidation of an investment in a non-U.S. branch or subsidiary. Fair value, cash flow, and net investment hedges are designated and formally documented as such contemporaneous with the transaction. The formal documentation describes the hedge relationship and identifies the hedging instruments and hedged items. Included in the documentation is a discussion of the risk management objectives and strategies for undertaking such hedges, the nature of the risk being hedged, a description of the method for assessing hedge effectiveness at inception and on an ongoing basis, as well as the method that will be used to measure hedge ineffectiveness. For hedges that do not qualify for the “shortcut” or the critical terms match methods of accounting, a formal assessment is performed on a calendar quarter basis to verify that derivatives used in hedging transactions continue to be highly effective in offsetting the changes in fair value or cash flows of the hedged item. Hedge accounting is discontinued if a derivative ceases to be highly effective, matures, is terminated or sold, if a hedged forecasted transaction is no longer expected to occur, or if Northern Trust removes the derivative’s hedge designation. Subsequent gains and losses on these derivatives are included in foreign exchange trading income or security commissions and trading income. For discontinued cash flow hedges, the accumulated gain or loss on the derivative remains in AOCI and is reclassified to earnings in the period in which the previously hedged forecasted transaction impacts earnings or is no longer probable of occurring. For discontinued fair value hedges, the previously hedged asset or liability ceases to be adjusted for changes in its fair value. Previous adjustments to the hedged item are amortized over the remaining life of the hedged item. |
Loans and Leases | Loans and Leases. Loans and leases are recognized assets that represent a contractual right to receive money either on demand or on fixed or determinable dates. Loans and leases are disaggregated for disclosure purposes by portfolio segment (segment) and by class. Northern Trust has defined its segments as commercial and personal. A class of loans and leases is a subset of a segment, the components of which has similar risk characteristics, measurement attributes, or risk monitoring methods. The classes within the commercial segment have been defined as commercial and institutional, commercial real estate, lease financing, net, non-U.S. and other. The classes within the personal segment have been defined as residential real estate, private client and other. Loan Classification. Loans that are held for investment are reported at the principal amount outstanding, net of unearned income. Loans classified as held for sale are reported at the lower of aggregate cost or fair value. Undrawn commitments relating to loans that are not held for sale are recorded in other liabilities and are carried at the amount of unamortized fees with an allowance for credit loss liability recognized for any estimated probable losses. Recognition of Income. Interest income on loans is recorded on an accrual basis unless, in the opinion of management, there is a question as to the ability of the debtor to meet the terms of the loan agreement, or interest or principal is more than 90 days contractually past due and the loan is not well-secured and in the process of collection. Loans meeting such criteria are classified as nonperforming and interest income is recorded on a cash basis. Past due status is based on how long since the contractual due date a principal or interest payment has been past due. For disclosure purposes, loans that are 29 days past due or less are reported as current. At the time a loan is determined to be nonperforming, interest accrued but not collected is reversed against interest income in the current period. Interest collected on nonperforming loans is applied to principal unless, in the opinion of management, collectability of principal is not in doubt. Management’s assessment of indicators of loan and lease collectability, and its policies relative to the recognition of interest income, including the suspension and subsequent resumption of income recognition, do not meaningfully vary between loan and lease classes. Nonperforming loans are returned to performing status when factors indicating doubtful collectability no longer exist. Factors considered in returning a loan to performing status are consistent across all classes of loans and leases and, in accordance with regulatory guidance, relate primarily to expected payment performance. A loan is eligible to be returned to performing status when: (i) no principal or interest that is due is unpaid and repayment of the remaining contractual principal and interest is expected or (ii) the loan has otherwise become well-secured (possessing realizable value sufficient to discharge the debt, including accrued interest, in full) and is in the process of collection (through action reasonably expected to result in debt repayment or restoration to a current status in the near future). A loan that has not been brought fully current may be restored to performing status provided there has been a sustained period of repayment performance (generally a minimum of six payment periods) by the borrower in accordance with the contractual terms, and Northern Trust is reasonably assured of repayment within a reasonable period of time. Additionally, a loan that has been formally restructured so as to be reasonably assured of repayment and performance according to its modified terms may be returned to accrual status, provided there was a well-documented credit evaluation of the borrower’s financial condition and prospects of repayment under the revised terms, and there has been a sustained period of repayment performance (generally a minimum of six payment periods) under the revised terms. Impaired Loans. A loan is considered to be impaired when, based on current information and events, management determines that it is probable that Northern Trust will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans are identified through ongoing credit management and risk rating processes, including the formal review of past due and watch list credits. Payment performance and delinquency status are critical factors in identifying impairment for all loans and leases, particularly those within the residential real estate, private client and personal-other classes. Other key factors considered in identifying impairment of loans and leases within the commercial and institutional, lease financing, net, non-U.S., and commercial-other classes relate to the borrower’s ability to perform under the terms of the obligation as measured through the assessment of future cash flows, including consideration of collateral value, market value, and other factors. A loan is also considered to be impaired if its terms have been modified as a concession by Northern Trust or a bankruptcy court resulting from the debtor’s financial difficulties, referred to as a troubled debt restructuring (TDR). All TDRs are reported as impaired loans in the calendar year of their restructuring. In subsequent years, a TDR may cease being reported as impaired if the loan was modified at a market rate and has performed according to the modified terms for at least six payment periods. A loan that has been modified at a below market rate will return to performing status if it satisfies the six payment periods performance requirement; however, it will remain reported as impaired. Impairment is measured based upon the present value of expected future cash flows, discounted at the loan's original effective interest rate, the fair value of the collateral if the loan is collateral dependent, or the loan's observable market value. If the loan valuation is less than the recorded value of the loan, based on the certainty of loss, either a specific allowance is established, or a charge-off is recorded, for the difference. Smaller balance (individually less than $1,000,000) homogeneous loans are collectively evaluated for impairment and excluded from impaired loan disclosures as allowed under applicable accounting standards. Northern Trust’s accounting policies for material impaired loans is consistent across all classes of loans and leases. Premium, Discounts, Origination Costs and Fees. Premiums and discounts on loans are recognized as an adjustment of yield using the interest method based on the contractual terms of the loan. Certain direct origination costs and fees are netted, deferred and amortized over the life of the related loan as an adjustment to the loan’s yield. Direct Financing and Leveraged Leases. Unearned lease income from direct financing and leveraged leases is recognized using the interest method. This method provides a constant rate of return on the unrecovered investment over the life of the lease. The rate of return and the allocation of income over the lease term are recalculated from the inception of the lease if during the lease term assumptions regarding the amount or timing of estimated cash flows change. Lease residual values are established at the inception of the lease based on in-house valuations and market analyses provided by outside parties. Lease residual values are reviewed at least annually for OTTI. A decline in the estimated residual value of a leased asset determined to be other-than-temporary would be recorded in the period in which the decline is identified as a reduction of interest income. |
Allowance for Credit Losses | Allowance for Credit Losses. The allowance for credit losses represents management’s estimate of probable losses which have occurred as of the date of the consolidated financial statements. The loan and lease portfolio and other lending-related credit exposures are regularly reviewed to evaluate the level of the allowance for credit losses. In determining an appropriate allowance level, Northern Trust evaluates the allowance necessary for impaired loans and lending-related commitments and also estimates losses inherent in other lending-related credit exposures. The allowance for credit losses consists of the following components: Specific Allowance. The specific allowance is determined through an individual evaluation of loans and lending-related commitments considered impaired that is based on expected future cash flows, the value of collateral, and other factors that may impact the borrower’s ability to pay. For impaired loans where the amount of specific allowance, if any, is determined based on the value of the underlying real estate collateral, third-party appraisals are typically obtained and utilized by management. These appraisals are generally less than twelve months old and are subject to adjustments to reflect management’s judgment as to the realizable value of the collateral. Inherent Allowance. The inherent allowance estimation methodology is based on internally developed loss data specific to the Northern Trust loan and lease portfolio. The estimation methodology and the related qualitative adjustment framework segregate the loan and lease portfolio into homogeneous segments. For each segment, the probability of default and the loss given default are applied to the total exposure at default to determine a quantitative inherent allowance. The quantitative inherent allowance is then reviewed within the qualitative adjustment framework, where management applies judgment by assessing internal risk factors, potential limitations in the quantitative methodology and environmental factors that are not fully contemplated in the quantitative methodology to compute an adjustment to the quantitative inherent allowance for each segment of the loan portfolio. The results of the inherent allowance estimation methodology are reviewed quarterly by Northern Trust’s Loan Loss Reserve Committee, which includes representatives from Credit Risk Management, reporting segment management, and Corporate Finance. Loans, leases, and other extensions of credit deemed uncollectible are charged to the allowance for credit losses. Subsequent recoveries, if any, are credited to the allowance. Northern Trust’s policies relative to the charging-off of uncollectible loans and leases are consistent across both loan and lease segments. Determinations as to whether loan balances for which the collectability is in question are charged-off or a specific reserve is established are based on management’s assessment as to the level of certainty regarding the amount of loss. The provision for credit losses, which is charged to income, is the amount necessary to adjust the allowance for credit losses to the level determined to be appropriate through the above processes. Actual losses may vary from current estimates and the amount of the provision for credit losses may be either greater or less than actual net charge-offs. Northern Trust analyzes its exposure to credit losses from both on-balance-sheet and off-balance-sheet activity using a consistent methodology. For purposes of estimating the allowance for credit losses for undrawn loan commitments and standby letters of credit, the exposure at default includes an estimated drawdown of unused credit based on a credit conversion factor. The proportionate amount of the quantitative methodology calculation after any required adjustment in the qualitative framework results in the required allowance for undrawn loan commitments and standby letters of credit as of the reporting date. The portion of the allowance assigned to loans and leases is reported as a contra asset, directly following loans and leases in the consolidated balance sheets. The portion of the allowance assigned to undrawn loan commitments and standby letters of credit is reported in other liabilities in the consolidated balance sheets. |
Standby Letters of Credit | Standby Letters of Credit. Fees on standby letters of credit are recognized in other operating income using the straight-line method over the lives of the underlying agreements. Northern Trust’s recorded other liability for standby letters of credit, reflecting the obligation it has undertaken, is measured as the amount of unamortized fees on these instruments. |
Buildings and Equipment | Buildings and Equipment. Buildings and equipment owned are carried at original cost less accumulated depreciation. The charge for depreciation is computed using the straight-line method based on the following range of lives: buildings – up to 30 years; equipment – 3 to 10 years; and leasehold improvements–the shorter of the lease term or 15 years. Leased properties meeting certain criteria are capitalized and amortized using the straight-line method over the lease period. |
Other Real Estate Owned (OREO) | Other Real Estate Owned (OREO). OREO is comprised of commercial and residential real estate properties acquired in partial or total satisfaction of loans. OREO assets are carried at the lower of cost or fair value less estimated costs to sell and are recorded in other assets on the consolidated balance sheets. Fair value is typically based on third-party appraisals. Appraisals of OREO properties are updated on an annual basis and are subject to adjustments to reflect management’s judgment as to the realizable value of the properties. Losses identified during the 90-day period after the acquisition of such properties are charged against the allowance for credit losses assigned to loans and leases. Subsequent write-downs that may be required to the carrying value of these assets and gains or losses realized from asset sales are recorded within other operating expense. |
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets. Goodwill is not subject to amortization. Separately identifiable acquired intangible assets with finite lives are amortized over their estimated useful lives, primarily on a straight-line basis. Purchased software, software licenses, and allowable internal costs, including compensation relating to software developed for internal use, are capitalized. Software is amortized using the straight-line method over the estimated useful lives of the assets, generally ranging from 3 to 10 years. Fees paid for the use of software licenses that are not hosted by Northern Trust are expensed as incurred. Goodwill and other intangible assets are reviewed for impairment on an annual basis or more frequently if events or changes in circumstances indicate the carrying amounts may not be recoverable. |
Trust, Investment and Other Servicing Fees | Trust, Investment and Other Servicing Fees. Trust, investment and other servicing fees are recorded on an accrual basis, over the period in which the service is provided. Fees are a function of the market value of assets custodied, managed and serviced, the volume of transactions, securities lending volume and spreads, and fees for other services rendered, as set forth in the underlying client agreement. This revenue recognition involves the use of estimates and assumptions, including components that are calculated based on estimated asset valuations and transaction volumes. |
Client Security Settlement Receivables | Client Security Settlement Receivables. These receivables result from custody client withdrawals from short-term investment funds that settle on the following business day as well as custody client security sales executed under contractual settlement date accounting that have not yet settled. Northern Trust advances cash to the client on the date of either client withdrawal or trade execution and awaits collection from either the short-term investment funds or via the settled trade. |
Income Taxes | Income Taxes. Northern Trust follows an asset and liability approach to account for income taxes. The objective is to recognize the amount of taxes payable or refundable for the current year, and to recognize deferred tax assets and liabilities resulting from temporary differences between the amounts reported in the financial statements and the tax bases of assets and liabilities. The measurement of tax assets and liabilities is based on enacted tax laws and applicable tax rates. Tax positions taken or expected to be taken on a tax return are evaluated based on their likelihood of being sustained upon examination by tax authorities. Only tax positions that are considered more-likely-than-not to be sustained are recorded in the consolidated financial statements. Northern Trust recognizes any interest and penalties related to unrecognized tax benefits in the provision for income taxes. |
Cash Flow Statements | Cash Flow Statements. Cash and cash equivalents have been defined as “Cash and Due from Banks”. |
Pension and Other Postretirement Benefits | Pension and Other Postretirement Benefits. Northern Trust records the funded status of its defined benefit pension and other postretirement plans on the consolidated balance sheets. Funded pension and postretirement benefits are reported in other assets and unfunded pension and postretirement benefits are reported in other liabilities. Plan assets and benefit obligations are measured annually at December 31. Plan assets are determined based on fair value generally representing observable market prices. The projected benefit obligations are determined based on the present value of projected benefit distributions at an assumed discount rate. Pension costs are recognized ratably over the estimated working lifetime of eligible participants. |
Share-Based Compensation Plans | Share-Based Compensation Plans. Northern Trust recognizes as compensation expense the grant-date fair value of stock and stock unit awards and other share-based compensation granted to employees within the consolidated statements of income. The fair values of stock and stock unit awards, including performance stock unit awards and director awards, are based on the closing price of the Corporation’s stock on the date of grant. The fair value of stock options is estimated on the date of grant using the Black-Scholes option pricing model. The model utilizes weighted-average assumptions regarding the period of time that options granted are expected to be outstanding (expected term) based primarily on the historical exercise behavior attributable to previous option grants, the estimated yield from dividends paid on the Corporation’s stock over the expected term of the options, the historical volatility of Northern Trust’s stock price and the implied volatility of traded options on Northern Trust stock, and a risk free interest rate based on the U.S. Treasury yield curve at the time of grant for a period equal to the expected term of the options granted. Compensation expense for share-based award grants with terms that provide for a graded vesting schedule, whereby portions of the award vest in increments over the requisite service period, are recognized on a straight-line basis over the requisite service period for the entire award. Compensation expense for performance stock unit awards are recognized on a straight-line basis over the requisite service period of the award based on expected achievement of the performance condition. Northern Trust does not include an estimate of future forfeitures in its recognition of share-based compensation expense. Share-based compensation expense is adjusted based on forfeitures as they occur. Dividend equivalents are paid on performance stock unit awards granted prior to February 16, 2016 and restricted stock units granted prior to February 21, 2017 that are not yet vested. Dividend equivalents are accrued on performance stock unit awards granted on or after February 16, 2016, restricted stock units granted on or after February 21, 2017 and director awards not yet vested, and are paid upon vesting. Cash flows resulting from the realization of excess tax benefits are classified as operating cash flows. |
Net Income Per Common Share | Net Income Per Common Share. Basic net income per common share is computed by dividing net income/loss applicable to common stock by the weighted average number of common shares outstanding during each period. Diluted net income per common share is computed by dividing net income applicable to common stock and potential common shares by the aggregate of the weighted average number of common shares outstanding during the period and common share equivalents calculated for stock options outstanding using the treasury stock method. In a period of a net loss, diluted net income per common share is calculated in the same manner as basic net income per common share. Northern Trust has issued certain restricted stock unit awards, which are unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents. These units are considered participating securities. Accordingly, Northern Trust calculates net income applicable to common stock using the two-class method, whereby net income is allocated between common stock and participating securities. |
Recent Accounting Pronouncements | On January 1, 2017, the Corporation adopted ASU 2016-05, “Derivatives and Hedging (Topic 815): Effects of Derivative Contract Novations on Existing Hedge Accounting Relationships (a consensus of the Emerging Issues Task Force)” (ASU 2016-05). ASU 2016-05 clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument under Topic 815, does not, in and of itself, require dedesignation of that hedging relationship provided all other hedge accounting criteria continue to be met. Upon adoption of ASU 2016-05, the Corporation did not dedesignate any hedging relationships due to change in counterparty and therefore there was no impact to its consolidated financial condition or results of operations. On January 1, 2017, the Corporation adopted ASU 2016-06, “Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments (a consensus of the Emerging Issues Task Force)” (ASU 2016-06). The amendments in ASU 2016-06 clarify what steps are required when assessing whether the economic characteristics and risks of call (put) options are clearly and closely related to the economic characteristics and risks of their debt hosts, which is one of the criteria for bifurcating an embedded derivative. The Corporation had already applied the approach for analyzing potential embedded derivative instruments in debt instruments detailed in ASU 2016-06 and therefore upon adoption there was no impact to its consolidated financial condition or results of operations. On January 1, 2017, the Corporation adopted ASU 2016-07, “Investments - Equity Method and Joint Ventures (Topic 323), Simplifying the Transition to the Equity Method of Accounting” (ASU 2016-07), which requires that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. Upon adoption of ASU 2016-07, the Corporation did not hold an interest in an investee that subsequently qualified for the use of the equity method and therefore there was no impact to its consolidated financial condition or results of operations. On January 1, 2017, the Corporation adopted ASU 2016-17, “Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control” (ASU 2016-17). Under ASU 2016-17, a single decision maker evaluating whether it is the primary beneficiary of a variable interest entity will consider its indirect interests held by related parties that are under common control on a proportionate basis. Upon adoption of ASU 2016-17, there was no impact to the Corporation’s consolidated financial condition or results of operations. |
Fair Value Measurements (Tables) |
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Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets and Liabilities Measured at Fair Value on Recurring Basis Segregated by Fair Value Hierarchy Level | The following presents assets and liabilities measured at fair value on a recurring basis as of December 31, 2017 and 2016, segregated by fair value hierarchy level. TABLE 47: RECURRING BASIS HIERARCHY LEVELING
Note: Northern Trust has elected to net derivative assets and liabilities when legally enforceable master netting arrangements or similar agreements exist between Northern Trust and the counterparty. As of December 31, 2017, derivative assets and liabilities shown above also include reductions of $427.6 million and $189.0 million, respectively, as a result of cash collateral received from and deposited with derivative counterparties. (1) This line consists of swaps related to the sale of certain Visa Class B common shares and total return swaps.
Note: Northern Trust has elected to net derivative assets and liabilities when legally enforceable master netting arrangements or similar agreements exist between Northern Trust and the counterparty. As of December 31, 2016, derivative assets and liabilities shown above also include reductions of $461.3 million and $722.1 million, respectively, as a result of cash collateral received from and deposited with derivative counterparties. (1) This line consists of a swap related to the sale of certain Visa Class B common shares. |
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Changes in Level 3 Assets | The following tables present the changes in Level 3 assets and liabilities for the years ended December 31, 2017 and 2016. TABLE 48: CHANGES IN LEVEL 3 ASSETS AND LIABILITIES
(1) Unrealized gains (losses) are included in net unrealized gains (losses) on securities available for sale, within the consolidated statements of comprehensive income. |
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Changes in Level 3 Liabilities |
(1) Gains (losses) are recorded in other operating income (expense) within the consolidated statements of income. |
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Book and Fair Values of All Financial Instruments | The following tables summarize the fair values of all financial instruments. TABLE 50: FAIR VALUE OF FINANCIAL INSTRUMENTS
Note: Refer to the table located on page 102 for the disaggregation of available for sale securities. (1) This line consists of a swap related to the sale of certain Visa Class B common shares and total return swaps.
Note: Refer to the table located on page 103 for the disaggregation of available for sale securities. (1) This line consists of a swap related to the sale of certain Visa Class B common shares. |
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Fair Value, Measurements, Recurring | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Valuation Techniques, Significant Unobservable Inputs, and Quantitative Information | The following presents the fair values of, and the valuation techniques, significant unobservable inputs, and quantitative information used to develop significant unobservable inputs for, Northern Trust’s Level 3 assets and liabilities as of December 31, 2017 and 2016. TABLE 46: LEVEL 3 SIGNIFICANT UNOBSERVABLE INPUTS
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Fair Value, Measurements, Nonrecurring | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Valuation Techniques, Significant Unobservable Inputs, and Quantitative Information | The following table provides the fair value of, and the valuation technique, significant unobservable inputs, and quantitative information used to develop the significant unobservable inputs for, Northern Trust’s Level 3 assets that were measured at fair value on a nonrecurring basis as of December 31, 2017. TABLE 49: LEVEL 3 NONRECURRING BASIS SIGNIFICANT UNOBSERVABLE INPUTS
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Securities (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Reconciliation of Amortized Cost to Fair Value of Securities Available for Sale | The following tables provide the amortized cost, fair values, and remaining maturities of securities available for sale. TABLE 51: RECONCILIATION OF AMORTIZED COST TO FAIR VALUE OF SECURITIES AVAILABLE FOR SALE
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Reconciliation of Amortized Cost to Fair Values of Securities Held to Maturity | The following tables provide the amortized cost, fair values and remaining maturities of securities held to maturity. TABLE 53: RECONCILIATION OF AMORTIZED COST TO FAIR VALUES OF SECURITIES HELD TO MATURITY
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Securities Continuous Unrealized Loss Position | 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, 2017 and 2016. TABLE 55: SECURITIES WITH UNREALIZED LOSSES
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Credit Related Impairment Losses Recognized in Earnings on Other Than Temporarily Impaired 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, 2017, 2016, and 2015. TABLE 56: NET IMPAIRMENT LOSSES RECOGNIZED IN EARNINGS
(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. |
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Cumulative Credit-Related Losses Recognized in Earnings on Debt Securities Other-Than-Temporarily Impaired | Provided in the table below are the cumulative credit-related losses recognized in earnings on debt securities other-than-temporarily impaired. TABLE 57: CUMULATIVE CREDIT-RELATED LOSSES ON SECURITIES HELD
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Securities Available for Sale | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Remaining Maturity of Securities |
Note: Mortgage-backed and asset-backed securities are included in the above table taking into account anticipated future prepayments. |
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Held-to-maturity Securities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Remaining Maturity of Securities |
Note: Mortgage-backed and asset-backed securities are included in the above table taking into account anticipated future prepayments. |
Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
Securities Purchased under Agreements to Resell |
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Securities Sold under Agreements to Repurchase |
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Loans and Leases (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amounts Outstanding for Loans and Leases by Segment and Class | Amounts outstanding for loans and leases, by segment and class, are shown below. TABLE 60: LOANS AND LEASES
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Components of Net Investment in Direct Finance and Leveraged Leases | The components of the net investment in direct finance and leveraged leases are as follows: TABLE 61: DIRECT FINANCE AND LEVERAGED LEASES
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Future Minimum Lease Payments to be Received | The following schedule reflects the future minimum lease payments to be received over the next five years under direct finance leases. TABLE 62: FUTURE MINIMUM LEASE PAYMENTS
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Loan and Lease Segment and Class Balances Segregated by Borrower Ratings into "1 to 3", "4 to 5" and "6 to 9" (Watch List) Categories | Loan and lease segment and class balances at December 31, 2017 and 2016 are provided below, segregated by borrower ratings into “1 to 3”, “4 to 5”, and “6 to 9” (watch list), categories. TABLE 63: BORROWER RATINGS
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Balances and Delinquency Status of Performing and Nonperforming Loans and Leases by Segment and Class as well as Total Other Real Estate Owned and Nonperforming Asset Balances | The following table provides balances and delinquency status of performing and nonperforming loans and leases by segment and class, as well as the other real estate owned and total nonperforming asset balances, as of December 31, 2017 and 2016. TABLE 64: DELINQUENCY STATUS
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Impaired Loans By Segment and Class | The following table provides information related to impaired loans by segment and class. TABLE 65: IMPAIRED LOANS
Note: Average recorded investments in impaired loans are calculated as the average of the month-end impaired loan balances for the period. |
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Number of Loans and Leases Modified in TDRs and Total Recorded Investments and Unpaid Principal Balances | The following tables provide, by segment and class, the number of loans and leases modified in TDRs during the years ended December 31, 2017, and 2016, and the recorded investments and unpaid principal balances as of December 31, 2017 and 2016. TABLE 66: TROUBLED DEBT RESTRUCTURINGS
Note: Period-end balances reflect all paydowns and charge-offs during the year.
Note: Period-end balances reflect all paydowns and charge-offs during the year. |
Allowance for Credit Losses (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Allowance for Credit Losses by Segment | Changes in the allowance for credit losses by segment were as follows: TABLE 67: CHANGES IN THE ALLOWANCE FOR CREDIT LOSSES
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Allowances for Credit Losses and Recorded Investments in Loans and Leases by Segment | The following table provides information regarding the recorded investments in loans and leases and the allowance for credit losses by segment as of December 31, 2017 and 2016. TABLE 68: RECORDED INVESTMENTS IN LOANS AND LEASES
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Concentrations of Credit Risk (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Risks and Uncertainties [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial Real Estate Loan Types | The table below provides additional detail regarding commercial real estate loan types. TABLE 69: COMMERCIAL REAL ESTATE LOANS
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Buildings and Equipment (Tables) |
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Buildings and Equipment | A summary of buildings and equipment is presented below. TABLE 70: BUILDINGS AND EQUIPMENT
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Lease Commitments (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Future Minimum Lease payments for Non-cancelable Operating Leases | Minimum annual lease commitments as of December 31, 2017, for all non-cancelable operating leases with a term of one year or more are as follows: TABLE 71: MINIMUM LEASE PAYMENTS
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Future Minimum Lease Payments for Capital Leases | The following table reflects the future minimum lease payments required under capital leases, net of any payments received on the long-term financing, and the present value of net capital lease obligations at December 31, 2017. TABLE 72: PRESENT VALUE UNDER CAPITAL LEASE OBLIGATIONS
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Goodwill and Other Intangibles (Tables) |
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes by Reporting Segment in Carrying Amounts of Goodwill, including Effect of Foreign Exchange Rates on Non-U.S.-Dollar-Denominated Balances | Changes by reporting segment in the carrying amount of goodwill for the years ended December 31, 2017 and 2016, including the effect of foreign exchange rates on non-U.S.-dollar-denominated balances, were as follows: TABLE 73: GOODWILL
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Other Intangible Assets Subject to Amortization | The gross carrying amount and accumulated amortization of other intangible assets subject to amortization as of December 31, 2017 and 2016 were as follows: TABLE 74: OTHER INTANGIBLE ASSETS
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Senior Notes and Long-Term Debt (Tables) |
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Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Senior Notes Outstanding | A summary of senior notes outstanding at December 31, 2017 and 2016 is presented below. TABLE 75: SENIOR NOTES
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Summary of Long-Term Debt Outstanding | A summary of long-term debt outstanding at December 31, 2017 and 2016 is presented below. TABLE 76: LONG-TERM DEBT
(1) Not redeemable prior to maturity. (2) The subordinated notes will bear interest from the date they were issued to, but excluding, May 8, 2027, at an annual rate of 3.375%, payable semi-annually in arrears. From, and including, May 8, 2027, the subordinated notes will bear interest at an annual rate equal to three-month LIBOR plus 1.131%, payable quarterly in arrears. The subordinated notes are unsecured and may be redeemed, in whole but not in part, on, and only on, May 8, 2027, at a redemption price equal to 100% of the principal amount of the subordinated notes to be redeemed, plus accrued and unpaid interest, if any, up to but excluding the redemption date. (3) Under the terms of its current Offering Circular dated November 6, 2013, the Bank has the ability to offer from time to time its senior bank notes in an aggregate principal amount of up to $4.5 billion at any one time outstanding and up to an additional $1.0 billion of subordinated notes. Each senior note will mature from 30 days to fifteen years, and each subordinated note will mature from five years to fifteen years, following its date of original issuance. Each note will mature on such date as selected by the initial purchaser and agreed to by the Bank. (4) Refer to Note 10, “Lease Commitments.” (5) As of December 31, 2017, debt issue costs of $0.9 million and $1.7 million are included as a direct deduction from the carrying amount of Senior Notes and Long-Term Debt, respectively. Debt issue costs are amortized on a straight-line basis over the life of the Note. (6) Notes issued at a discount of 0.117% (7) Notes issued at a discount of 0.437% (8) Notes issued at a discount of 0.283% (9) Notes issued at a discount of 0.02% (10) Notes issued at a discount of 0.114% (11) Interest rate swap contracts were entered into to modify the interest expense on these subordinated notes from fixed rates to floating rates. The swaps are recorded as fair value hedges and at December 31, 2017, increases in the carrying values of subordinated notes outstanding of $37.4 million were recorded. As of December 31, 2016, net adjustments in the carrying values of subordinated notes outstanding of $59.6 million were recorded. |
Floating Rate Capital Debt (Tables) |
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Brokers and Dealers [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Book Values of Outstanding Subordinated Debentures | The following table summarizes the book values of the outstanding subordinated debentures as of December 31, 2017 and 2016. TABLE 77: SUBORDINATED DEBENTURES
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Stockholders' Equity (Tables) |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Analysis of Changes in Number of Shares of Common Stock Outstanding | An analysis of changes in the number of shares of common stock outstanding follows: TABLE 78: SHARES OF COMMON STOCK
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Accumulated Other Comprehensive Income (Loss) (Tables) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Accumulated Other Comprehensive Income (Loss) | The following tables summarize the components of AOCI at December 31, 2017, 2016, and 2015, and changes during the years then ended. TABLE 79: SUMMARY OF CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
* Includes net unrealized gains on securities transferred from available for sale to held to maturity during the year ended December 31, 2017. |
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Components of Changes in Accumulated Other Comprehensive Income (Loss) |
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Reclassification Out of Accumulated Other Comprehensive Income (Loss) | The following table provides the location and before-tax amounts of reclassifications out of AOCI during the years ended December 31, 2017, 2016 and 2015. TABLE 81: RECLASSIFICATION ADJUSTMENT OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME
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Net Income per Common Share (Tables) |
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computations of Net Income per Common Share | The computations of net income per common share are presented below. TABLE 82: NET INCOME PER COMMON SHARE
Note: Common stock equivalents totaling 115,491, 1,108,067, and 371,059 for the years ended December 31, 2017, 2016, and 2015, respectively, were not included in the computation of diluted net income per common share because their inclusion would have been antidilutive. |
Net Interest Income (Tables) |
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Banking and Thrift, Interest [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Net Interest Income | The components of net interest income were as follows: TABLE 83: NET INTEREST INCOME
(1) Interest-Bearing Due from and Deposits with Banks includes the interest-bearing component of Cash and Due from Banks and Interest-Bearing Deposits with Banks as presented on the consolidated balance sheets. |
Other Operating Income (Tables) |
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Components of Other Operating Income | The components of other operating income were as follows: TABLE 84: OTHER OPERATING INCOME
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Other Operating Expense (Tables) |
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Summary of other operating expenses | The components of other operating expense were as follows: TABLE 85: OTHER OPERATING EXPENSE
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Income Taxes (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Total Provision for Income Taxes with Amounts Computed at Federal Tax Rate of 35% | The following table reconciles the total provision for income taxes recorded in the consolidated statements of income with the amounts computed at the statutory federal tax rate of 35%. TABLE 86: INCOME TAXES
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Reconciliation of Beginning and Ending Amount of Unrecognized Tax Benefits | A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: TABLE 88: UNRECOGNIZED TAX BENEFITS
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Components of Consolidated Provision for Income Taxes | The components of the consolidated provision for income taxes for each of the three years ended December 31 are as follows: TABLE 89: PROVISION FOR INCOME TAXES
At December 31, 2017, Northern Trust has made a reasonable estimate as to the impact of the Tax Cuts and Jobs Act as follows: TABLE 87: IMPACT OF TAX CUTS AND JOBS ACT
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Tax Charges (Benefits) Recorded Directly to Stockholders' Equity | In addition to the amounts shown above, tax charges and benefits have been recorded directly to stockholders’ equity for the following: TABLE 90: TAX CHARGES AND BENEFITS RECORDED DIRECTLY TO STOCKHOLDERS’ EQUITY
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Deferred Tax Liabilities and Assets | Deferred tax assets and liabilities have been computed as follows: TABLE 91: NET DEFERRED TAX LIABILITIES
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Employee Benefits (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Defined Benefit Plan Disclosure [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in Plan Assets |
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Fair Values of U.S. Pension Plan Assets by Major Asset Category, and their Level within Fair Value Hierarchy | The following table presents the fair values of Northern Trust’s U.S. pension plan assets, by major asset category, and their level within the fair value hierarchy defined by GAAP as of December 31, 2017 and 2016. TABLE 98: FAIR VALUE OF U.S. PENSION PLAN ASSETS
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Health Care Cost Trend Rate Sensitivity Analysis | For example, increasing or decreasing the assumed health care trend rate by one percentage point in each year would have the following effect. TABLE 105: HEALTH CARE COST TREND RATE ASSUMPTION
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Pension Plans, Defined Benefit | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Defined Benefit Plan Disclosure [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Plan Status of U.S. Plan, Non-U.S. Plans and Supplemental Plan | The following tables set forth the status, amounts included in AOCI, and net periodic pension expense of the U.S. plan, non-U.S. plans, and supplemental plan for 2017, 2016, and 2015. Prior service costs are being amortized on a straight-line basis over 11 years for the U.S. plan and 9 years for the supplemental plan. TABLE 92: EMPLOYEE BENEFIT PLAN STATUS
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Amount Included in Accumulated Other Comprehensive Income |
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Components of Company's Net Periodic Benefit Cost |
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Change in Benefit Obligation, Postretirement Health Care, and in Accumulated Postretirement Benefit Obligation |
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Estimated Future Benefit Payments |
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Changes in Level 3 U.S. Pension Plan Assets | The following table presents the changes in Level 3 assets for the years ended December 31, 2017 and 2016. TABLE 99: CHANGE IN LEVEL 3 ASSETS
Note: The return on plan assets represents the change in the unrealized gain (loss) on assets still held at December 31. |
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Other Postretirement Plan | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Defined Benefit Plan Disclosure [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Plan Status of U.S. Plan, Non-U.S. Plans and Supplemental Plan | The following tables set forth the postretirement health care plan status and amounts included in AOCI at December 31, the net periodic postretirement benefit cost of the plan for 2017 and 2016, and the change in the accumulated postretirement benefit obligation during 2017 and 2016. TABLE 100: POSTRETIREMENT HEALTH CARE PLAN STATUS
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Amount Included in Accumulated Other Comprehensive Income |
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Components of Company's Net Periodic Benefit Cost |
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Change in Benefit Obligation, Postretirement Health Care, and in Accumulated Postretirement Benefit Obligation |
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Estimated Future Benefit Payments |
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Share-Based Compensation Plans (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation Expense for Share-Based Payment Arrangements and Associated Tax Impacts | Total compensation expense for share-based payment arrangements to employees and the associated tax impacts were as follows for the periods presented. TABLE 106: TOTAL COMPENSATION EXPENSE FOR SHARE-BASED PAYMENT ARRANGEMENTS TO EMPLOYEES
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Weighted Average Assumptions Used for Options Granted | The weighted-average assumptions used for options granted during the years ended December 31, 2017, 2016, and 2015 are as follows: TABLE 107: WEIGHTED-AVERAGE ASSUMPTIONS USED FOR OPTIONS GRANTED
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Information Pertaining to Stock Options Granted, Vested and Exercised | The following table provides information about stock options granted, vested, and exercised in the years ended December 31, 2017, 2016, and 2015. TABLE 108: STOCK OPTIONS GRANTED, VESTED, AND EXERCISED
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Summary of Status of Stock Options under 2012 Plan and 2002 Plan | A summary of the status of stock options at December 31, 2017, and changes during the year then ended, are presented in the table below. TABLE 110: STATUS OF STOCK OPTIONS AND CHANGES
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Unvested Options | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Nonvested Stock | The following is a summary of changes in nonvested stock options for the year ended December 31, 2017. TABLE 109: CHANGES IN NONVESTED STOCK OPTIONS
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Restricted Stock Unit Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Status of Outstanding Restricted Stock Unit Awards 2012 Plan and the 2002 Plan | A summary of the status of outstanding restricted stock unit awards at December 31, 2017, and changes during the year then ended, is presented in the table below. TABLE 111: OUTSTANDING RESTRICTED STOCK UNIT AWARDS
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Changes in Nonvested Restricted Stock Unit Awards | The following is a summary of nonvested restricted stock unit awards at December 31, 2017, and changes during the year then ended. TABLE 112: NONVESTED RESTRICTED STOCK UNIT AWARDS
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Derivative Financial Instruments (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Financial Instruments Owned and Pledged as Collateral | The following table presents the fair value of securities that have been either pledged to or accepted from counterparties for these derivative transactions. TABLE 113: FAIR VALUE OF SECURITIES COLLATERAL FOR DERIVATIVE TRANSACTIONS
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Notional and Fair Value Amounts of Client-related and Trading Derivative Financial Instruments | The following table shows the notional and fair values of client-related and trading derivative financial instruments. Notional amounts of derivative financial instruments do not represent credit risk, and are not recorded in the consolidated balance sheets. They are used merely to express the volume of this activity. Northern Trust’s credit-related risk of loss is limited to the positive fair value of the derivative instrument, net of any collateral received, which is significantly less than the notional amount. TABLE 114: NOTIONAL AND FAIR VALUES OF CLIENT-RELATED AND TRADING DERIVATIVE FINANCIAL INSTRUMENTS
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Location and Amount of Gains and Losses Recorded in Consolidated Statements of Income | The following table shows the location and amount of gains and losses recorded in the consolidated statements of income for the years ended December 31, 2017, 2016, and 2015. TABLE 115: LOCATION AND AMOUNT OF CLIENT-RELATED AND TRADING DERIVATIVE GAINS AND LOSSES RECORDED IN INCOME
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Types and Classifications of Derivative Instruments | The following table identifies the types and classifications of derivative instruments formally designated as hedges under GAAP and used by Northern Trust to manage risk, their notional and fair values, and the respective risks addressed. TABLE 116: NOTIONAL AND FAIR VALUES OF DESIGNATED RISK MANAGEMENT DERIVATIVE FINANCIAL INSTRUMENTS
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Gains/Losses of Derivative Financial Instruments | The following table shows the location and amount of derivative gains and losses recognized in the consolidated statements of income related to fair value hedges for the years ended December 31, 2017, 2016, and 2015. TABLE 117: LOCATION AND AMOUNT OF FAIR VALUE HEDGE DERIVATIVE GAINS AND LOSSES RECORDED IN INCOME
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Cash Flow Hedge Derivative Gains and Losses Recognized in AOCI and the Amounts Reclassified to Earnings | The following table provides cash flow hedge derivative gains and losses that were recognized in AOCI and the amounts reclassified to earnings during the years ended December 31, 2017, 2016 and 2015. TABLE 118: CASH FLOW HEDGE DERIVATIVE GAINS AND LOSSES RECOGNIZED IN AOCI AND RECLASSIFIED TO INCOME
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Types of Risk Management Derivative Instruments Not Formally Designated as Hedges, Including Notional Amounts and Fair Values | The following table identifies the types of risk management derivative instruments not formally designated as hedges and their notional amounts and fair values. TABLE 119: NOTIONAL AND FAIR VALUES OF NON-DESIGNATED RISK MANAGEMENT DERIVATIVE INSTRUMENTS
(1) This line consists of swaps related to the sale of certain Visa Class B common shares and total return swap contracts. |
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Gains/Losses of Derivative Financial Instruments | The following table provides the location and amount of gains and losses recorded in the consolidated statements of income for the years ended December 31, 2017, 2016, and 2015 for derivative instruments not formally designated as hedges under GAAP. TABLE 120: LOCATION AND AMOUNT OF GAINS AND LOSSES RECORDED IN INCOME FOR NON-DESIGNATED RISK MANAGEMENT DERIVATIVE INSTRUMENTS
(1) This line includes the statement of income impact of swaps related to the sale of certain Visa Class B common shares, total return swap contracts, and credit default swap contracts. |
Offsetting of Assets and Liabilities (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Securities Purchased Under Agreements to Resell and Derivative Assets in the Consolidated Balance Sheet | The following tables provide information regarding the offsetting of derivative assets and of securities purchased under agreements to resell within the consolidated balance sheets as of December 31, 2017 and 2016. TABLE 121: OFFSETTING OF DERIVATIVE ASSETS AND SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL
(1) Derivative assets are reported in other assets in the consolidated balance sheets. Other assets (excluding derivative assets) totaled $3.9 billion and $3.3 billion as of December 31, 2017 and 2016, respectively. (2) Securities purchased under agreements to resell are reported in federal funds sold and securities purchased under agreements to resell in the consolidated balance sheets. Federal funds sold totaled $21.0 million and $6.8 million as of December 31, 2017 and 2016, respectively. (3) Northern Trust did not possess any cash collateral that was not offset in the consolidated balance sheets that could have been used to offset the net amounts presented in the consolidated balance sheets as of December 31, 2017 and 2016. |
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Securities Sold Under Agreements to Repurchase and Derivative Liabilities in the Consolidated Balance Sheet | The following table provides information regarding the offsetting of derivative liabilities and of securities sold under agreements to repurchase within the consolidated balance sheets as of December 31, 2017 and 2016. TABLE 122: OFFSETTING OF DERIVATIVE LIABILITIES AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
(1) Derivative liabilities are reported in other liabilities in the consolidated balance sheets. Other liabilities (excluding derivative liabilities) totaled $2.4 billion and $2.7 billion as of December 31, 2017 and 2016, respectively. (2) Northern Trust did not place any cash collateral with counterparties that was not offset in the consolidated balance sheets that could have been used to offset the net amounts presented in the consolidated balance sheets as of December 31, 2017 and 2016. |
Off-Balance-Sheet Financial Instruments (Tables) |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Letters of Credit | The following table shows the contractual amounts of commitments and letters of credit. TABLE 123: COMMITMENTS AND LETTERS OF CREDIT
(1)These amounts exclude $385.5 million and $377.2 million of commitments participated to others at December 31, 2017 and 2016, respectively. (2)These amounts include $92.5 million and $134.2 million of standby letters of credit secured by cash deposits or participated to others as of December 31, 2017 and 2016, respectively. The weighted average maturity of standby letters of credit was 22 months at December 31, 2017 and 24 months at December 31, 2016. |
Reporting Segments and Related Information (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Contribution of Northern Trust's Reporting Segments | The following tables show the earnings contribution of Northern Trust’s reporting segments for the years ended December 31, 2017, 2016, and 2015. TABLE 124: CORPORATE AND INSTITUTIONAL SERVICES RESULTS OF OPERATIONS
Note: Stated on an FTE basis. TABLE 125: WEALTH MANAGEMENT RESULTS OF OPERATIONS
Note: Stated on an FTE basis. TABLE 126: TREASURY AND OTHER RESULTS OF OPERATIONS
Note: Stated on an FTE basis. TABLE 127: CONSOLIDATED FINANCIAL INFORMATION
Note: Stated on an FTE basis. The consolidated figures include $45.8 million, $25.1 million, and $25.3 million, of FTE adjustments for 2017, 2016, and 2015, respectively. |
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Distribution of Total Assets and Operating Performance | The table below summarizes Northern Trust’s performance based on the allocation process described above without regard to guarantors or the location of collateral. TABLE 128: DISTRIBUTION OF TOTAL ASSETS AND OPERATING PERFORMANCE
Note: Total revenue is comprised of net interest income and noninterest income. |
Regulatory Capital Requirements (Tables) |
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Banking and Thrift [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk-Based Capital Amounts and Ratios for Northern Trust on Consolidated Basis and for Bank | The table below provides capital ratios for the Corporation and the Bank determined by Basel III phased in requirements. TABLE 129: RISK-BASED CAPITAL AMOUNTS AND RATIOS
(1) Effective January 1, 2018, the Corporation will be subject to a minimum supplementary leverage ratio of 3 percent. |
Northern Trust Corporation (Corporation only) (Tables) - Parent Company |
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Condensed Financial Statements, Captions [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Balance Sheet |
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Condensed Statement of Income |
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Condensed Statement of Cash Flows |
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Fair Value Measurements - Changes in Level 3 Assets (Detail) - Auction Rate - USD ($) $ in Millions |
12 Months Ended | |
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Dec. 31, 2017 |
Dec. 31, 2016 |
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Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Balance at beginning of period | $ 4.7 | $ 17.1 |
Total Gains (Losses): | ||
Included in Other Comprehensive Income | 0.2 | (0.7) |
Purchases, Issues, Sales, and Settlements | ||
Sales | 0.0 | (10.1) |
Settlements | (0.6) | (1.6) |
Balance at end of period | $ 4.3 | $ 4.7 |
Fair Value Measurements - Changes in Level 3 Liabilities (Detail) - Visa Conversion Rate Swap - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
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Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Balance at beginning of period | $ 25.2 | $ 10.8 |
Total (Gains) Losses: | ||
Included in Earnings | 12.7 | 4.4 |
Purchases, Issues, Sales, and Settlements | ||
Issuance | 0.0 | 14.9 |
Settlements | (8.2) | (4.9) |
Balance at end of period | 29.7 | 25.2 |
Unrealized (Gains) Losses Included in Earnings Related to Financial Instruments Held at December 31 | $ (11.4) | $ (4.4) |
Securities - Remaining Maturity of Securities Available for Sale (Detail) - USD ($) $ in Millions |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Available for Sale - Amortized Cost | ||
Due in One Year or Less | $ 6,249.5 | $ 7,880.8 |
Due After One Year Through Five Years | 20,017.2 | 21,094.8 |
Due After Five Years Through Ten Years | 6,545.3 | 5,759.1 |
Due After Ten Years | 1,052.8 | 897.2 |
Total | 33,864.8 | 35,631.9 |
Available for Sale - Fair Value | ||
Due in One Year or Less | 6,227.0 | 7,876.6 |
Due After One Year Through Five Years | 19,937.8 | 21,058.7 |
Due After Five Years Through Ten Years | 6,535.1 | 5,753.6 |
Due After Ten Years | 1,042.2 | 890.9 |
Total | $ 33,742.1 | $ 35,579.8 |
Securities - Remaining Maturity of Securities Held to Maturity (Detail) - USD ($) $ in Millions |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Held to Maturity - Amortized Cost | ||
Due in One Year or Less | $ 5,691.9 | $ 3,631.6 |
Due After One Year Through Five Years | 6,667.8 | 5,072.7 |
Due After Five Years Through Ten Years | 612.2 | 158.7 |
Due After Ten Years | 77.1 | 58.1 |
AMORTIZED COST | 13,049.0 | 8,921.1 |
Held to Maturity - Fair Value | ||
Due in One Year or Less | 5,695.8 | 3,635.9 |
Due After One Year Through Five Years | 6,663.9 | 5,081.6 |
Due After Five Years Through Ten Years | 606.3 | 156.1 |
Due After Ten Years | 44.9 | 31.5 |
Total | $ 13,010.9 | $ 8,905.1 |
Securities - Net Impairment Losses Recognized In Earnings (Detail) - USD ($) |
12 Months Ended | ||
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Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
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Other than Temporary Impairment, Credit Losses Recognized in Earnings [Roll Forward] | |||
Changes in Other-Than-Temporary Impairment Losses | $ (200,000) | $ (3,700,000) | $ 0 |
Noncredit-related Losses Recorded in / (Reclassified from) OCI | 0 | 0 | 0 |
Net Impairment Losses Recognized in Earnings | $ (200,000) | $ (3,700,000) | $ 0 |
Securities - Cumulative Credit-Related Losses On Securities Held (Detail) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
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Other than Temporary Impairment, Credit Losses Recognized in Earnings [Roll Forward] | ||
Cumulative Credit-Related Losses on Securities Held – Beginning of Year | $ 3.4 | $ 5.2 |
Plus: Losses on Newly Identified Impairments | 0.1 | 0.5 |
Additional Losses on Previously Identified Impairments | 0.1 | 3.2 |
Less: Current and Prior Period Losses on Securities Sold or Matured During the Year | 0.0 | (5.5) |
Cumulative Credit-Related Losses on Securities Held – End of Year | $ 3.6 | $ 3.4 |
Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase - Securities Purchased under Agreements to Resell (Detail) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
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Investments, Debt and Equity Securities [Abstract] | ||
Balance at December 31 | $ 1,303.3 | $ 1,967.5 |
Average Balance During the Year | $ 1,832.0 | $ 1,764.1 |
Average Interest Rate Earned During the Year | 1.48% | 1.04% |
Maximum Month-End Balance During the Year | $ 2,064.1 | $ 2,050.9 |
Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase - Securities Sold under Agreements to Repurchase (Detail) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
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Investments, Debt and Equity Securities [Abstract] | ||
Balance at December 31 | $ 834.0 | $ 473.7 |
Average Balance During the Year | $ 738.9 | $ 847.1 |
Average Interest Rate Paid During the Year | 0.81% | 0.27% |
Maximum Month-End Balance During the Year | $ 834.0 | $ 565.5 |
Loans and Leases - Direct Finance and Leveraged Leases (Detail) - USD ($) $ in Millions |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Direct Finance Leases | ||
Lease Receivable | $ 26.6 | $ 37.6 |
Residual Value | 72.4 | 75.3 |
Initial Direct Costs | 0.7 | 1.0 |
Unearned Income | (1.5) | (3.5) |
Investment in Direct Finance Leases | 98.2 | 110.4 |
Leveraged Leases | ||
Net Rental Receivable | 76.1 | 110.1 |
Residual Value | 85.6 | 106.2 |
Unearned Income | (30.7) | (32.8) |
Investment in Leveraged Leases | 131.0 | 183.5 |
Lease Financing, net | $ 229.2 | $ 293.9 |
Loans and Leases - Future Minimum Lease Payments (Detail) $ in Millions |
Dec. 31, 2017
USD ($)
|
---|---|
Receivables [Abstract] | |
2018 | $ 11.2 |
2019 | 9.0 |
2020 | 3.9 |
2021 | 2.1 |
2022 | $ 0.0 |
Concentrations of Credit Risk - Narrative (Detail) - USD ($) $ in Billions |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Concentration Risk [Line Items] | ||
Credit risk to banks | $ 6.9 | $ 6.8 |
Credit risk to banks - non-interest bearing balances held at banks | 2.1 | 1.9 |
Residential Real Estate | $ 7.2 | $ 8.1 |
Residential real estate loans as percentage of total U.S. loans | 23.00% | 25.00% |
Lower limit of generally required loan to collateral value for residential real estate loans | 65.00% | |
Upper limit of generally required loan to collateral value for residential real estate loans | 80.00% | |
Legally binding undrawn commitments to extend credit | $ 1.0 | $ 1.2 |
Florida | ||
Concentration Risk [Line Items] | ||
Residential Real Estate | 1.9 | |
Greater Chicago Area | ||
Concentration Risk [Line Items] | ||
Residential Real Estate | 1.4 | |
California | ||
Concentration Risk [Line Items] | ||
Residential Real Estate | $ 1.4 |
Concentrations of Credit Risk - Commercial Real Estate Loans (Detail) - USD ($) $ in Millions |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Commercial Mortgages | ||
Office | $ 825.2 | $ 866.1 |
Apartment/ Multi-family | 623.3 | 784.8 |
Retail | 631.1 | 698.1 |
Industrial/ Warehouse | 311.1 | 359.7 |
Other | 445.6 | 457.6 |
Total Commercial Mortgages | 2,836.3 | 3,166.3 |
Construction, Acquisition and Development Loans | 350.8 | 445.0 |
Single Family Investment | 164.8 | 179.6 |
Other Commercial Real Estate Related | 130.8 | 211.6 |
Total Commercial Real Estate Loans | $ 3,482.7 | $ 4,002.5 |
- Buildings and Equipment (Detail) - USD ($) $ in Millions |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Property, Plant and Equipment [Line Items] | ||
ORIGINAL COST | $ 1,335.6 | |
ACCUMULATED DEPRECIATION | 871.0 | |
NET BOOK VALUE | 464.6 | $ 466.6 |
Land and Improvements | ||
Property, Plant and Equipment [Line Items] | ||
ORIGINAL COST | 15.3 | |
ACCUMULATED DEPRECIATION | 1.0 | |
NET BOOK VALUE | 14.3 | |
Buildings | ||
Property, Plant and Equipment [Line Items] | ||
ORIGINAL COST | 260.4 | |
ACCUMULATED DEPRECIATION | 144.1 | |
NET BOOK VALUE | 116.3 | |
Equipment | ||
Property, Plant and Equipment [Line Items] | ||
ORIGINAL COST | 590.5 | |
ACCUMULATED DEPRECIATION | 405.1 | |
NET BOOK VALUE | 185.4 | |
Leasehold Improvements | ||
Property, Plant and Equipment [Line Items] | ||
ORIGINAL COST | 389.4 | |
ACCUMULATED DEPRECIATION | 263.2 | |
NET BOOK VALUE | 126.2 | |
Buildings Leased under Capital Leases | ||
Property, Plant and Equipment [Line Items] | ||
ORIGINAL COST | 80.0 | |
ACCUMULATED DEPRECIATION | 57.6 | |
NET BOOK VALUE | $ 22.4 |
Buildings and Equipment - Narrative (Detail) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Property, Plant and Equipment [Abstract] | |||
Depreciation of assets | $ 101.2 | $ 89.2 | $ 90.4 |
Lease Commitments - Minimum Lease Payments (Detail) $ in Millions |
Dec. 31, 2017
USD ($)
|
---|---|
Leases [Abstract] | |
2018 | $ 95.9 |
2019 | 96.0 |
2020 | 92.2 |
2021 | 76.5 |
2022 | 66.7 |
Later Years | 360.5 |
Total Minimum Lease Payments | 787.8 |
Less: Sublease Rentals | (21.2) |
Net Minimum Lease Payments | $ 766.6 |
Lease Commitments - Narrative (Detail) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Leases [Abstract] | |||
Net rental expense | $ 76.7 | $ 76.1 | $ 71.6 |
Percentage of proceeds in excess of original project costs the bank would anticipate to receive, in addition to full repayment of outstanding loan, in the event of sale or refinancing | 42.00% |
Lease Commitments - Present Value Under Capital Lease Obligations (Detail) $ in Millions |
Dec. 31, 2017
USD ($)
|
---|---|
Leases [Abstract] | |
2018 | $ 8.4 |
2019 | 8.7 |
2020 | (1.7) |
2021 | 0.0 |
2022 | 0.0 |
Later Years | 0.0 |
Total Minimum Lease Payments, net | 15.4 |
Less: Amount Representing Interest | (1.0) |
Net Present Value under Capital Lease Obligations | $ 14.4 |
Goodwill and Other Intangibles - Goodwill (Detail) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Goodwill [Roll Forward] | ||
Beginning Balance | $ 519.4 | $ 526.4 |
Goodwill Acquired | 78.3 | 11.8 |
Measurement Period Adjustments | (1.3) | |
Foreign Exchange Rates | 9.2 | (18.8) |
Ending Balance | 605.6 | 519.4 |
CORPORATE & INSTITUTIONAL SERVICES | ||
Goodwill [Roll Forward] | ||
Beginning Balance | 448.4 | 455.1 |
Goodwill Acquired | 78.3 | 11.8 |
Measurement Period Adjustments | (1.3) | |
Foreign Exchange Rates | 9.1 | (18.5) |
Ending Balance | 534.5 | 448.4 |
WEALTH MANAGEMENT | ||
Goodwill [Roll Forward] | ||
Beginning Balance | 71.0 | 71.3 |
Goodwill Acquired | 0.0 | 0.0 |
Measurement Period Adjustments | 0.0 | |
Foreign Exchange Rates | 0.1 | (0.3) |
Ending Balance | $ 71.1 | $ 71.0 |
Goodwill and Other Intangibles - Other Intangible Assets (Detail) - USD ($) $ in Millions |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Gross Carrying Amount | $ 222.7 | $ 89.0 |
Less: Accumulated Amortization | 61.3 | 47.2 |
Net Book Value | $ 161.4 | $ 41.8 |
Senior Notes and Long-Term Debt - Senior Notes (Detail) - USD ($) $ in Millions |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Debt Instrument [Line Items] | ||
Senior Notes | $ 1,497.3 | $ 1,496.6 |
Fixed Rate Due Nov. 2020 | ||
Debt Instrument [Line Items] | ||
Interest Rate | 3.45% | |
Senior Notes | $ 499.6 | 499.4 |
Fixed Rate Due Aug. 2021 | ||
Debt Instrument [Line Items] | ||
Interest Rate | 3.38% | |
Senior Notes | $ 498.8 | 498.5 |
Fixed Rate Due Aug. 2022 | ||
Debt Instrument [Line Items] | ||
Interest Rate | 2.38% | |
Senior Notes | $ 498.9 | $ 498.7 |
Floating Rate Capital Debt - Subordinated Debentures (Detail) - USD ($) $ in Millions |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Debt Outstanding [Line Items] | ||
Floating Rate Capital Debt | $ 277.5 | $ 277.4 |
NTC Capital I Subordinated Debentures due January 15, 2027 | ||
Debt Outstanding [Line Items] | ||
Floating Rate Capital Debt | 154.2 | 154.1 |
NTC Capital II Subordinated Debentures due April 15, 2027 | ||
Debt Outstanding [Line Items] | ||
Floating Rate Capital Debt | $ 123.3 | $ 123.3 |
Stockholders' Equity - Shares of Common Stock (Detail) - shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | |||
Beginning balance (in shares) | 228,605,485 | 229,293,783 | 233,390,705 |
Incentive Plan and Awards (in shares) | 1,320,129 | 1,209,124 | 1,033,664 |
Stock Options Exercised (in shares) | 1,997,362 | 4,156,728 | 1,721,282 |
Treasury Stock Purchased (in shares) | (5,796,302) | (6,054,150) | (6,851,868) |
Ending balance (in shares) | 226,126,674 | 228,605,485 | 229,293,783 |
Net Interest Income - Net Interest Income (Detail) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Interest Income | |||
Loans and Leases | $ 919.1 | $ 806.5 | $ 731.9 |
Securities – Taxable | 594.1 | 428.8 | 332.2 |
Securities - Non-Taxable | 9.8 | 7.5 | 4.8 |
Interest-Bearing Due from and Deposits with Banks | 63.8 | 64.3 | 84.9 |
Federal Reserve and Other Central Bank Deposits and Other | 182.6 | 109.8 | 70.2 |
Total Interest Income | 1,769.4 | 1,416.9 | 1,224.0 |
Interest Expense | |||
Deposits | 182.1 | 83.5 | 74.3 |
Federal Funds Purchased | 10.4 | 1.5 | 0.7 |
Securities Sold under Agreements to Repurchase | 6.0 | 2.3 | 0.3 |
Other Borrowings | 50.7 | 18.0 | 5.0 |
Senior Notes | 46.9 | 46.8 | 46.8 |
Long-Term Debt | 39.2 | 26.4 | 24.4 |
Floating Rate Capital Debt | 4.9 | 3.5 | 2.4 |
Total Interest Expense | 340.2 | 182.0 | 153.9 |
Net Interest Income | $ 1,429.2 | $ 1,234.9 | $ 1,070.1 |
Other Operating Income - (Detail) - USD ($) $ in Millions |
1 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Components of Other Operating Income [Line Items] | |||||
Loan Service Fees | $ 50.7 | $ 56.6 | $ 59.1 | ||
Banking Service Fees | 48.6 | 50.6 | 48.2 | ||
Other Income | 58.2 | 134.0 | 139.8 | ||
Total Other Operating Income | $ 157.5 | 241.2 | 247.1 | ||
Visa Class B | |||||
Components of Other Operating Income [Line Items] | |||||
Net gain on sale of derivative | $ 123.1 | $ 99.9 | $ 123.1 | $ 99.9 | |
Shares sold (in shares) | 1,100,000 | 1,000,000 | 1,100,000.0 | 1,000,000.0 |
Other Operating Expense - (Detail) - USD ($) $ / shares in Units, $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Components Of Other Operating Expense [Line Items] | |||
Business Promotion | $ 95.4 | $ 83.6 | $ 85.1 |
FDIC Insurance Premiums | 34.7 | 31.7 | 25.2 |
Staff Related | 42.8 | 43.0 | 40.5 |
Other Intangibles Amortization | 11.4 | 8.8 | 10.9 |
Other Expenses | 147.3 | 197.3 | 166.3 |
Total Other Operating Expense | $ 331.6 | 364.4 | 328.0 |
Total NAV funds | $ (45.8) | ||
Net Asset Value (in dollars per share) | $ 1.00 | ||
Agreement To Settle Securities | |||
Components Of Other Operating Expense [Line Items] | |||
Litigation expense | 50.0 | ||
Contractual Modifications | |||
Components Of Other Operating Expense [Line Items] | |||
Litigation expense | $ 18.6 |
Income Taxes - Income Taxes (Detail) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Income Tax Disclosure [Abstract] | |||
Tax at Statutory Rate | $ 571.9 | $ 531.0 | $ 512.7 |
Tax Exempt Income | (9.6) | (7.2) | (4.8) |
Foreign Tax Rate Differential | (50.0) | (50.9) | (44.2) |
Excess Tax Benefit Related to Share-Based Compensation | (31.6) | (12.3) | 0.0 |
State Taxes, net | 41.0 | 31.1 | 33.1 |
Impact of Tax Cuts and Jobs Act | (53.1) | 0.0 | 0.0 |
Other | (33.7) | (7.1) | (5.6) |
Provision for Income Taxes | $ 434.9 | $ 484.6 | $ 491.2 |
Income Taxes - Impact of Tax Cuts and Jobs Act (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Income Tax Disclosure [Abstract] | |||
Federal Taxes on Mandatory Deemed Repatriation | $ 150.0 | ||
Impact Related to Federal Deferred Taxes | (210.0) | ||
Other Adjustments | 6.9 | ||
Provision (Benefit) for Income Taxes | $ 53.1 | $ 0.0 | $ 0.0 |
Income Taxes - Unrecognized Tax Benefits (Detail) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | ||
Beginning Balance | $ 17.2 | $ 12.3 |
Additions for Tax Positions Taken in the Current Year | 9.9 | 0.0 |
Additions for Tax Positions Taken in Prior Years | 6.2 | 6.6 |
Reductions for Tax Positions Taken in Prior Years | (5.4) | (1.2) |
Reductions Resulting from Expiration of Statutes | (0.2) | (0.5) |
Ending Balance | $ 27.7 | $ 17.2 |
Income Taxes - Provision for Income Taxes (Detail) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Current Tax Provision: | |||
Federal | $ 347.3 | $ 495.8 | $ 489.8 |
State | 38.3 | 65.3 | 64.5 |
Non-U.S. | 125.4 | 99.3 | 83.1 |
Total | 511.0 | 660.4 | 637.4 |
Deferred Tax Provision: | |||
Federal | (96.4) | (159.0) | (131.1) |
State | 24.6 | (18.9) | (13.6) |
Non-U.S. | (4.3) | 2.1 | (1.5) |
Total | (76.1) | (175.8) | (146.2) |
Provision for Income Taxes | $ 434.9 | $ 484.6 | $ 491.2 |
Income Taxes - Tax Charges and Benefits Recorded Directly to Stockholders' Equity (Detail) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Income Tax Disclosure [Abstract] | |||
Current Tax Benefit (Charge) for Employee Stock Options and Other Stock-Based Plans | $ 0.0 | $ (7.6) | $ 17.7 |
Tax Effect of Other Comprehensive Income | $ (112.4) | $ 72.4 | $ 17.0 |
Income Taxes - Deferred Tax Liabilities (Detail) - USD ($) $ in Millions |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|---|
Deferred Tax Liabilities: | |||
Lease Financing | $ 85.8 | $ 148.7 | $ 272.6 |
Software Development | 187.8 | 352.0 | 339.9 |
Accumulated Depreciation | 41.0 | 26.0 | 20.6 |
Compensation and Benefits | 0.0 | 50.2 | 70.7 |
State Taxes, net | 59.4 | 33.3 | 48.8 |
Other Liabilities | 145.7 | 243.1 | 169.1 |
Gross Deferred Tax Liabilities | 519.7 | 853.3 | 921.7 |
Deferred Tax Assets: | |||
Allowance for Credit Losses | 32.3 | 67.2 | 81.7 |
Compensation and Benefits | 35.5 | 0.0 | 0.0 |
Other Assets | 88.3 | 233.8 | 185.0 |
Gross Deferred Tax Assets | 156.1 | 301.0 | 266.7 |
Valuation Reserve | (1.1) | (0.9) | (1.6) |
Deferred Tax Assets, net of Valuation Reserve | 155.0 | 300.1 | 265.1 |
Net Deferred Tax Liabilities | $ 364.7 | $ 553.2 | $ 656.6 |
Employee Benefits - Estimated Future Benefit Payments (Detail) $ in Millions |
Dec. 31, 2017
USD ($)
|
---|---|
Supplemental Plan | |
Schedule of Pension Expected Future Benefit Payments [Line Items] | |
2018 | $ 8.0 |
2019 | 12.5 |
2020 | 12.7 |
2021 | 15.5 |
2022 | 14.9 |
2023-2027 | 66.8 |
Non U.S. Plans | Pension Plans, Defined Benefit | |
Schedule of Pension Expected Future Benefit Payments [Line Items] | |
2018 | 3.7 |
2019 | 3.5 |
2020 | 3.9 |
2021 | 4.2 |
2022 | 4.0 |
2023-2027 | 24.9 |
U.S. Plan | Pension Plans, Defined Benefit | |
Schedule of Pension Expected Future Benefit Payments [Line Items] | |
2018 | 77.2 |
2019 | 75.7 |
2020 | 78.0 |
2021 | 75.9 |
2022 | 74.8 |
2023-2027 | $ 375.1 |
Employee Benefits - Changes in Level 3 Assets (Detail) - U.S. Plan - Fair Value, Inputs, Level 3 - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Northern Trust Private Equity Funds | ||
Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward] | ||
Fair Value at beginning of year | $ 35.7 | $ 47.5 |
Actual Return on Plan Assets | (5.4) | (5.6) |
Purchases | 0.8 | 2.0 |
Sales | (1.8) | (8.2) |
Fair Value at end of year | 29.3 | 35.7 |
Northern Trust Hedge Funds | ||
Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward] | ||
Fair Value at beginning of year | 64.8 | 63.4 |
Actual Return on Plan Assets | (3.1) | 1.5 |
Realized Gain | 5.0 | 0.0 |
Purchases | 0.0 | 0.0 |
Sales | (22.1) | (0.1) |
Fair Value at end of year | $ 44.6 | $ 64.8 |
Employee Benefits - Postretirement Health Care Plan Status (Detail) - Other Postretirement Plan - USD ($) $ in Millions |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|---|
Defined Benefit Plan Disclosure [Line Items] | |||
Accumulated Postretirement Benefit Obligation | $ 34.4 | $ 34.1 | $ 32.2 |
Retirees and Dependents | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Accumulated Postretirement Benefit Obligation | 27.7 | 26.4 | |
Actives Eligible for Benefits | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Accumulated Postretirement Benefit Obligation | $ 6.7 | $ 7.7 |
Employee Benefits - Postretirement Amounts Included in Accumulated Other Comprehensive Income (Detail) - Other Postretirement Plan - USD ($) $ in Millions |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Net Actuarial Loss / (Gain) | $ 3.9 | $ 0.3 |
Prior Service Cost | 0.0 | 0.0 |
Gross Amount in Accumulated Other Comprehensive Income | 3.9 | 0.3 |
Income Tax Effect | 1.5 | 0.1 |
Net Amount in Accumulated Other Comprehensive Income | $ 2.4 | $ 0.2 |
Employee Benefits - Net Periodic Postretirement (Benefit) Expense (Detail) - Other Postretirement Plan - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Defined Benefit Plan Disclosure [Line Items] | |||
Service Cost | $ 0.1 | $ 0.1 | $ 0.1 |
Interest Cost | 1.4 | 1.5 | 1.4 |
Expected Return on Plan Assets | 0.0 | 0.0 | 0.0 |
Amortization | |||
Net Gain | 0.0 | 0.0 | 0.0 |
Prior Service Benefit | 0.0 | 0.0 | 0.0 |
Net Periodic Pension Expense | $ 1.5 | $ 1.6 | $ 1.5 |
Employee Benefits - Change in Accumulated Postreitrement Benefit Obligation (Detail) - Other Postretirement Plan - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward] | |||
Beginning Balance | $ 34.1 | $ 32.2 | |
Service Cost | 0.1 | 0.1 | $ 0.1 |
Interest Cost | 1.4 | 1.5 | 1.4 |
Actuarial Loss / (Gain) | (0.2) | 2.7 | |
Net Claims Paid | (1.0) | (2.4) | |
Medicare Subsidy | 0.0 | 0.0 | |
Ending Balance | $ 34.4 | $ 34.1 | $ 32.2 |
Employee Benefits - Postretirement Estimated Future Benefit Payments (Detail) - Other Postretirement Plan - Other Postretirement Plan $ in Millions |
Dec. 31, 2017
USD ($)
|
---|---|
Schedule of Pension and Other Postretirement Benefits Expected Benefit Payments [Line Items] | |
2018 | $ 2.7 |
2019 | 2.7 |
2020 | 2.7 |
2021 | 2.6 |
2022 | 2.5 |
2023-2027 | $ 11.4 |
Employee Benefits - Health Care Cost Trend Rate Assumption (Detail) $ in Millions |
12 Months Ended |
---|---|
Dec. 31, 2017
USD ($)
| |
Retirement Benefits [Abstract] | |
Effect on Postretirement Benefit Obligation - 1 Percentage Point Increase | $ 0.8 |
Effect on Total Service and Interest Cost Components - 1 Percentage Point Increase | 0.0 |
Effect on Postretirement Benefit Obligation - 1 Percentage Point Decrease | (0.7) |
Effect on Total Service and Interest Cost Components - 1 Percentage Point Decrease | $ 0.0 |
Share-Based Compensation Plans - Total Compensation Expense for Share-Based Payment Arrangements to Employees (Detail) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Total Share-Based Compensation Expense | $ 128.0 | $ 86.8 | $ 76.4 |
Tax Benefits Recognized | 48.7 | 32.8 | 28.8 |
Restricted Stock Unit Awards | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Total Share-Based Compensation Expense | 87.3 | 60.2 | 51.5 |
Stock Options | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Total Share-Based Compensation Expense | 9.0 | 9.0 | 10.0 |
Performance Stock Units | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Total Share-Based Compensation Expense | $ 31.7 | $ 17.6 | $ 14.9 |
Share-Based Compensation Plans - Weighted-Average Assumptions Used for Options Granted (Detail) - Equity Option |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Expected Term (in Years) | 6 years 10 months 8 days | 7 years | 7 years 1 month 6 days |
Dividend Yield | 1.81% | 2.57% | 2.07% |
Expected Volatility | 23.20% | 32.30% | 30.40% |
Risk-Free Interest Rate | 2.11% | 1.45% | 1.83% |
Share-Based Compensation Plans - Stock Options Granted, Vested, and Exercised (Detail) - USD ($) $ / shares in Units, $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||
Weighted Average Grant-Date Per Share Fair Value of Stock Options Granted | $ 19.18 | $ 14.84 | $ 18.72 |
Grant-Date Fair Value of Stock Options Vested | $ 7.3 | $ 9.6 | $ 16.0 |
Stock Options Exercised | |||
Intrinsic Value as of Exercise Date | 74.7 | 83.9 | 32.1 |
Cash Received | 108.0 | 233.8 | 94.0 |
Tax Deduction Benefits Realized | $ 73.1 | $ 80.0 | $ 30.1 |
Share-Based Compensation Plans - Changes in Nonvested Stock Options (Detail) - $ / shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Share | |||
Nonvested stock options outstanding, at beginning of the year (in shares) | 1,259,160 | ||
Granted (in shares) | 468,381 | ||
Vested (in shares) | (471,089) | ||
Forfeited or Cancelled (in shares) | (9,947) | ||
Nonvested stock options outstanding, at end of the year (in shares) | 1,246,505 | 1,259,160 | |
Weighted-average grant-date fair value per share | |||
Nonvested stock options weighted average grant date fair value at beginning of the year (in dollars per share) | $ 15.89 | ||
Granted (in dollars per share) | 19.18 | $ 14.84 | $ 18.72 |
Vested (in dollars per share) | 15.55 | ||
Forfeited or Cancelled (in dollars per share) | 16.17 | ||
Nonvested stock options weighted average grant date fair value at end of the year (in dollars per share) | $ 17.25 | $ 15.89 |
Share-Based Compensation Plans - Outstanding Restricted Stock Unit Awards (Detail) - Restricted Stock Unit Awards $ in Millions |
12 Months Ended |
---|---|
Dec. 31, 2017
USD ($)
shares
| |
NUMBER | |
Restricted Stock Unit Awards Outstanding, at beginning of the year (in shares) | 3,695,657 |
Granted (in shares) | 863,308 |
Distributed (in shares) | (1,040,725) |
Forfeited (in shares) | (118,802) |
Stock and Stock Unit Awards Outstanding, at the end of year (in shares) | 3,399,438 |
Units Convertible, at the end of year (in shares) | 168,111 |
AGGREGATE INTRINSIC VALUE | |
Restricted Stock Unit Awards Outstanding, at beginning of the year | $ | $ 329.1 |
Stock and Stock Unit Awards Outstanding, at the end of year | $ | 339.6 |
Units Convertible, at the end of year | $ | $ 16.8 |
Share-Based Compensation Plans - Nonvested Restricted Stock Unit Awards (Detail) - Restricted Stock Unit Awards - $ / shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
NUMBER | ||
Beginning Balance (in shares) | 3,515,632 | |
Granted (in shares) | 863,308 | |
Vested (in shares) | (1,028,835) | |
Forfeited (in shares) | (118,778) | |
Ending Balance (in shares) | 3,231,327 | 3,515,632 |
WEIGHTED AVERAGE GRANT-DATE FAIR VALUE PER UNIT | ||
Nonvested at beginning of year (in dollars per share) | $ 61.80 | |
Granted (in dollars per share) | 88.19 | |
Vested (in dollars per share) | 58.64 | |
Forfeited (in dollars per share) | 66.79 | |
Nonvested at end of year (in dollars per share) | $ 69.67 | $ 61.80 |
WEIGHTED AVERAGE REMAINING VESTING TERM (YEARS) | ||
Nonvested | 1 year 10 months 8 days | 2 years |
Cash-Based Compensation Plans - Narrative (Detail) - USD ($) $ in Millions |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|---|
Compensation Related Costs [Abstract] | |||
Cash based compensation expense | $ 289.8 | $ 250.7 | $ 233.0 |
Derivative Financial Instruments - Fair Value of Securities Collateral for Derivative Transactions (Details) - USD ($) |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Not permitted by contract or custom to sell or repledge | $ 39,900,000 | $ 70,700,000 |
Permitted by contract or custom to sell or repledge | $ 4,600,000 | $ 0 |
Derivative Financial Instruments - Notional and Fair Value Amounts of Client-related and Trading Derivative Financial Instruments (Detail) - USD ($) $ in Millions |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Derivative [Line Items] | ||
Fair Value Asset | $ 2,203.3 | $ 3,047.6 |
Fair Value Liability | 2,003.1 | 2,767.6 |
Client Related and Trading | ||
Derivative [Line Items] | ||
Notional Value | 325,300.5 | 280,181.4 |
Fair Value Asset | 2,592.1 | 3,361.2 |
Fair Value Liability | 2,586.6 | 3,306.9 |
Client Related and Trading | Foreign Exchange Contracts | ||
Derivative [Line Items] | ||
Notional Value | 317,882.5 | 273,213.1 |
Fair Value Asset | 2,527.0 | 3,274.2 |
Fair Value Liability | 2,522.5 | 3,221.7 |
Client Related and Trading | Interest Rate Contracts | ||
Derivative [Line Items] | ||
Notional Value | 7,418.0 | 6,968.3 |
Fair Value Asset | 65.1 | 87.0 |
Fair Value Liability | $ 64.1 | $ 85.2 |
Derivative Financial Instruments - Location and Amount of Client-Related and Trading Derivative Gains and Losses Recorded in Income (Detail) - Client Related and Trading - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Derivative Instruments, Gain (Loss) [Line Items] | |||
Amount of Derivative Gain/(Loss) Recognized in Income | $ 220.6 | $ 248.0 | $ 279.3 |
Foreign Exchange Contracts | Foreign Exchange Trading Income | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Amount of Derivative Gain/(Loss) Recognized in Income | 209.9 | 236.6 | 261.8 |
Interest Rate Contracts | Security Commissions and Trading Income | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Amount of Derivative Gain/(Loss) Recognized in Income | $ 10.7 | $ 11.4 | $ 17.5 |
Derivative Financial Instruments - Location and Amount of Fair Value Hedge Derivative Gains and Losses Recorded in Income (Detail) - Asset And Liability Management - Fair Value Hedges - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Derivative Instruments, Gain (Loss) [Line Items] | |||
Amount of Derivative Gain/(Loss) Recognized in Income | $ 2.6 | $ 68.4 | $ 13.6 |
Securities Available for Sale | Interest Rate Swaps | Interest Income | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Amount of Derivative Gain/(Loss) Recognized in Income | (0.8) | 63.4 | (21.1) |
Senior Notes and Long- Term Subordinated Debt | Interest Rate Swaps | Interest Expense | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Amount of Derivative Gain/(Loss) Recognized in Income | $ 3.4 | $ 5.0 | $ 34.7 |
Derivative Financial Instruments - Notional and Fair Values of Non-Designated Risk Management Derivative Instruments (Detail) - USD ($) $ in Millions |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Derivative [Line Items] | ||
Fair Value Asset | $ 2,203.3 | $ 3,047.6 |
Fair Value Liability | 2,003.1 | 2,767.6 |
Nondesignated | ||
Derivative [Line Items] | ||
Notional Value | 618.8 | 559.6 |
Fair Value Asset | 1.1 | 0.8 |
Fair Value Liability | 30.5 | 27.0 |
Nondesignated | Foreign Exchange Contracts | ||
Derivative [Line Items] | ||
Notional Value | 214.1 | 289.6 |
Fair Value Asset | 1.1 | 0.8 |
Fair Value Liability | 0.1 | 1.8 |
Nondesignated | Other Financial Derivatives | ||
Derivative [Line Items] | ||
Notional Value | 404.7 | 270.0 |
Fair Value Asset | 0.0 | 0.0 |
Fair Value Liability | $ 30.4 | $ 25.2 |
Derivative Financial Instruments - Location and Amount of Gains and Losses Recorded in Income For Non-Desgnated Risk Management Derivative Instruments (Detail) - Nondesignated - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Derivative Instruments, Gain (Loss) [Line Items] | |||
Amount Recognized in Income | $ (5.1) | $ (12.8) | $ (11.9) |
Foreign Exchange Contracts | Others Operating Income | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Amount Recognized in Income | 8.2 | (6.7) | (10.9) |
Other Financial Derivatives | Others Operating Income | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Amount Recognized in Income | $ (13.3) | $ (6.1) | $ (1.0) |
Off-Balance-Sheet Financial Instruments - Commitments and Letters of Credit (Detail) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Commercial Letters of Credit | ||
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | ||
Commitments and letters of credit | $ 37.7 | $ 24.0 |
Commitments to Extend Credit | ||
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | ||
Commitments and letters of credit | 26,822.6 | 32,768.1 |
Commitments, participated to others | 385.5 | 377.2 |
Standby Letters of Credit | ||
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | ||
Commitments and letters of credit | $ 2,970.0 | $ 3,846.1 |
Weighted average maturity, letters of credit | 22 months | 24 months |
Secured by Cash Deposits or Participated to Others | Standby Letters of Credit | ||
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | ||
Commitments and letters of credit | $ 92.5 | $ 134.2 |
Off-Balance-Sheet Financial Instruments - Narrative (Detail) - USD ($) |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | ||
Minimum collateral maintained against fair value of client securities loaned plus accrued interest | 100.00% | |
Estimated credit exposure from clearing activities | $ 62,000,000 | $ 59,000,000 |
Indemnification Agreement | ||
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | ||
Securities loaned and subject to indemnification | 143,600,000,000 | $ 102,300,000,000 |
Credit loss liability | $ 0 |
Reporting Segments and Related Information - Narrative (Detail) |
12 Months Ended |
---|---|
Dec. 31, 2017
Segment
| |
Segment Reporting [Abstract] | |
Number of client-focused reportable segment | 2 |
Reporting Segments and Related Information - Distribution of Total Assets and Operating Performance (Detail) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Segment Reporting Information [Line Items] | |||
TOTAL ASSETS | $ 138,590.5 | $ 123,926.9 | $ 116,749.6 |
TOTAL REVENUE | 5,375.3 | 4,961.8 | 4,702.6 |
INCOME BEFORE INCOME TAXES | 1,633.9 | 1,517.1 | 1,465.0 |
Net Income | 1,199.0 | 1,032.5 | 973.8 |
Non - U.S. | |||
Segment Reporting Information [Line Items] | |||
TOTAL ASSETS | 30,325.3 | 24,944.0 | 30,636.5 |
TOTAL REVENUE | 1,709.7 | 1,221.2 | 1,358.4 |
INCOME BEFORE INCOME TAXES | 613.5 | 284.3 | 483.2 |
Net Income | 430.0 | 225.1 | 344.4 |
U.S. | |||
Segment Reporting Information [Line Items] | |||
TOTAL ASSETS | 108,265.2 | 98,982.9 | 86,113.1 |
TOTAL REVENUE | 3,665.6 | 3,740.6 | 3,344.2 |
INCOME BEFORE INCOME TAXES | 1,020.4 | 1,232.8 | 981.8 |
Net Income | $ 769.0 | $ 807.4 | $ 629.4 |
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