Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2012

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 sheet. 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, which is significantly less than the notional amount.

	September 30, 2012						December 31, 2011
	Notional		Fair Value				Notional		Fair Value
(In Millions)	Value		Asset		Liability		Value		Asset		Liability
Foreign Exchange Contracts	$	211,742.5	$	2,085.2	$	2,037.9	$	239,901.3	$	3,062.1	$	2,959.8
Interest Rate Option Contracts		32.1		—		—		100.5		—		—
Interest Rate Swap Contracts		4,932.4		196.3		190.1		4,570.4		188.7		184.6
Total	$	216,707.0	$	2,281.5	$	2,228.0	$	244,572.2	$	3,250.8	$	3,144.4

Location and Amount of Gains and Losses Recorded in Consolidated Statement of Income

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 statement of income for the three and nine months ended September 30, 2012 and 2011.

		Amount of Derivative Gain/(Loss) Recognized in Income
	Location of Derivative	Three Months Ended				Nine Months Ended
	Gain/(Loss) Recognized	September 30,				September 30,
(In Millions)	in Income	2012		2011		2012		2011
Foreign Exchange Contracts	Foreign Exchange Trading Income	$	44.0	$	87.2	$	165.3	$	252.8
Interest Rate Swap and Option Contracts	Security Commissions and Trading Income		3.7		1.0		8.9		3.9
Total		$	47.7	$	88.2	$	174.2	$	256.7

Types and Classifications of Derivative Instruments

The following table identifies the types and classifications of derivative instruments designated as hedges and used by Northern Trust to manage risk, their notional and fair values, and the respective risks addressed.

			September 30, 2012						December 31, 2011
	Derivative	Risk	Notional		Fair Value				Notional		Fair Value
(In Millions)	Instrument	Classification	Value		Asset		Liability		Value		Asset		Liability
Fair Value Hedges
Available for Sale Investment Securities	Interest Rate Swap Contracts	Interest Rate	$	3,535.2	$	3.6	$	76.7	$	2,172.0	$	2.6	$	46.8
Senior Notes and Long-Term Subordinated Debt	Interest Rate Swap Contracts	Interest Rate		1,100.0		135.7		0.5		1,100.0		147.0		0.5
Cash Flow Hedges
Forecasted Foreign Currency Denominated Transactions	Foreign Exchange Contracts	Foreign Currency		805.7		12.5		14.9		932.9		9.4		27.2
Net Investment Hedges
Net Investments in Non-U.S. Affiliates	Foreign Exchange Contracts	Foreign Currency		1,549.5		13.3		20.3		1,554.7		12.0		1.5
Total			$	6,990.4	$	165.1	$	112.4	$	5,759.6	$	171.0	$	76.0

Gains/Losses of Derivative Financial Instruments

The following table shows the location and amount of derivative gains and losses recorded in the consolidated statement of income related to fair value hedges for the three and nine months ended September 30, 2012 and 2011.

	Derivative Instrument	Location of Derivative Gain/(Loss) Recognized in Income	Amount of Derivative Gain/(Loss) Recognized in Income
			Three Months Ended						Nine Months Ended
			September 30,						September 30,
(In Millions)			2012			2011			2012			2011
Available for Sale Investment Securities	Interest Rate Swap Contracts	Interest Income	$	(23.3	)	$	(27.0	)	$	(93.5	)	$	(53.2	)
Senior Notes and Long-Term Subordinated Debt	Interest Rate Swap Contracts	Interest Expense		8.9			39.0			171.8			190.4
Total			$	(14.4	)	$	12.0		$	78.3		$	137.2

Cash Flow Hedge Derivative Gains and Losses Recognized in AOCI and the Amounts Reclassified to Earnings

The following tables provide cash flow hedge derivative gains and losses recognized in AOCI and the amounts reclassified to earnings during the three and nine months ended September 30, 2012 and 2011. Beginning in 2012, gains and losses associated with forecasted foreign currency denominated revenue and expenditure transactions are classified in Other Operating Income or Other Operating Expense.

(In Millions)	Foreign Exchange Contracts (Before Tax)						Interest Rate Swap Contracts (Before Tax)
Three Months Ended September 30,	2012			2011			2012			2011
Net Gain/(Loss) Recognized in AOCI	$	2.0		$	(24.8	)	$	—		$	0.2
Net Gain/(Loss) Reclassified from AOCI to Earnings
Trust, Investment and Other Servicing Fees		—			0.7			—			—
Other Operating Income		(1.0	)		(0.2	)		—			—
Interest Income		—			(0.2	)		—			0.1
Interest Expense		—			—			—			—
Compensation		—			0.6			—			—
Employee Benefits		—			0.2			—			—
Equipment and Software		—			—			—			—
Occupancy Expense		—			0.1			—			—
Other Operating Expense		(1.6	)		0.6			—			—
Total	$	(2.6	)	$	1.8		$	—		$	0.1
(In Millions)	Foreign Exchange Contracts (Before Tax)						Interest Rate Swap Contracts (Before Tax)
Nine Months Ended September 30,	2012			2011			2012			2011
Net Gain/(Loss) Recognized in AOCI	$	4.7		$	(9.0	)	$	—		$	0.2
Net Gain/(Loss) Reclassified from AOCI to Earnings
Trust, Investment and Other Servicing Fees		—			1.0			—			—
Other Operating Income		(3.3	)		—			—			—
Interest Income		—			(1.0	)		(0.2	)		0.1
Interest Expense		—			—			—			—
Compensation		—			3.0			—			—
Employee Benefits		—			0.9			—			—
Equipment and Software		—			0.1			—			—
Occupancy Expense		—			0.5			—			—
Other Operating Expense		(0.2	)		1.9			—			—
Total	$	(3.5	)	$	6.4		$	(0.2	)	$	0.1

Net Investment Hedge Gains and Losses Recognized in AOCI

The following table provides net investment hedge gains and losses recognized in AOCI during the three and nine months ended September 30, 2012 and 2011.

	Amount of Hedging Gain/(Loss) Recognized in OCI (Before Tax)
	Three Months Ended September 30,					Nine Months Ended September 30,
(In Millions)	2012			2011		2012			2011
Foreign Exchange Contracts	$	(35.4	)	$	75.6	$	(8.1	)	$	(1.9	)
Sterling Denominated Subordinated Debt		(9.4	)		5.7		(9.3	)		(2.2	)
Total	$	(44.8	)	$	81.3	$	(17.4	)	$	(4.1	)

Types and Classifications of Risk Management Derivative Instruments Not Formally Designated as Hedges, Including Notional and Fair Values

The following table identifies the types and classifications of risk management derivative instruments not formally designated as hedges, their notional and fair values, and the respective risks addressed.

			September 30, 2012						December 31, 2011
	Derivative Instrument	Risk Classification	Notional Value		Fair Value				Notional Value		Fair Value
(In Millions)					Asset		Liability				Asset		Liability
Commercial Loans and Loan Commitments	Credit Default Swap Contracts	Credit	$	65.5	$	—	$	1.1	$	60.5	$	0.7	$	0.1
Forecasted Foreign Currency Denominated Transactions	Foreign Exchange Contracts	Foreign Currency		—		—		—		127.3		2.1		2.6
Commercial Loans	Foreign Exchange Contracts	Foreign Currency		157.5		1.8		0.7		84.3		1.3		0.3
Net Investments in Non-U.S. Affiliates	Foreign Exchange Contracts	Foreign Currency		767.8		8.4		3.3		63.5		0.4		0.2
Total			$	990.8	$	10.2	$	5.1	$	335.6	$	4.5	$	3.2

Gains/Losses of Derivative Financial Instruments

The following table provides the location and amount of gains and losses recorded in the consolidated statement of income for the three and nine months ended September 30, 2012 and 2011.

	Location of Derivative Gain/ (Loss) Recognized in Income		Amount of Derivative Gain/(Loss) Recognized in Income
			Three Months Ended September 30,					Nine Months Ended September 30,
(In Millions)			2012			2011		2012			2011
Credit Default Swap Contracts		Other Operating Income	$	(0.6	)	$	1.1	$	(2.5	)	$	0.3
Forward Contracts		Other Operating Income		—			—		—			0.2
Foreign Exchange Contracts		Other Operating Income		5.0			6.1		3.8			(5.8	)
Total			$	4.4		$	7.2	$	1.3		$	(5.3	)