Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2014

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, 2014						December 31, 2013
	Notional Value		Fair Value				Notional Value		Fair Value
(In Millions)			Asset		Liability				Asset		Liability
Foreign Exchange Contracts	$	270,022.4	$	4,132.8	$	4,125.5	$	243,135.0	$	2,844.7	$	2,846.2
Interest Rate Contracts		5,048.9		100.2		95.9		5,001.7		122.8		117.0
Total	$	275,071.3	$	4,233.0	$	4,221.4	$	248,136.7	$	2,967.5	$	2,963.2

Location and Amount of Gains and Losses Recorded in Consolidated Statement of 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, 2014, and 2013.

	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)		2014		2013		2014		2013
Foreign Exchange Contracts	Foreign Exchange Trading Income	$	46.4	$	62.8	$	149.4	$	193.6
Interest Rate Contracts	Security Commissions and Trading Income		0.6		4.4		4.6		11.4
Total		$	47.0	$	67.2	$	154.0	$	205.0

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.

			September 30, 2014						December 31, 2013
(In Millions)	Derivative Instrument	Risk Classification	Notional Value		Fair Value				Notional Value		Fair Value
					Asset		Liability				Asset		Liability
Fair Value Hedges
Available for Sale Investment Securities	Interest Rate Swap Contracts	Interest Rate	$	2,939.7	$	20.8	$	24.9	$	3,296.9	$	31.5	$	44.8
Senior Notes and Long-Term Subordinated Debt	Interest Rate Swap Contracts	Interest Rate		1,250.0		92.4		2.0		1,250.0		83.6		33.4
Cash Flow Hedges
Forecasted Foreign Currency Denominated Transactions	Foreign Exchange Contracts	Foreign Currency		341.0		5.2		9.5		314.0		10.2		5.5
Available for Sale Investment Securities	Interest Rate Swap Contracts	Interest Rate		10.0		—		—		—		—		—
Available for Sale Investment Securities	Interest Rate Option Contracts	Interest Rate		375.0		0.1		0.7		—		—		—
Net Investment Hedges
Net Investments in Non-U.S. Affiliates	Foreign Exchange Contracts	Foreign Currency		1,753.6		65.5		3.1		1,684.9		9.8		52.8
Total			$	6,669.3	$	184.0	$	40.2	$	6,545.8	$	135.1	$	136.5

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, 2014, and 2013.

(In Millions)	Derivative Instrument	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,
			2014		2013			2014			2013
Available for Sale Investment Securities	Interest Rate Swap Contracts	Interest Income	$	5.1	$	(16.4	)	$	(21.9	)	$	21.6
Senior Notes and Long-Term Subordinated Debt	Interest Rate Swap Contracts	Interest Expense		5.8		(3.6	)		66.0			(16.1	)
Total			$	10.9	$	(20.0	)	$	44.1		$	5.5

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, 2014, and 2013.

(In Millions)	Foreign Exchange Contracts (Before Tax)						Interest Rate Swap Contracts (Before Tax)				Interest Rate Option Contracts (Before Tax)
Three Months Ended September 30,	2014			2013			2014		2013		2014			2013
Net Gain/(Loss) Recognized in AOCI	$	(6.9	)	$	5.3		$	—	$	—	$	(0.7	)	$	—
Net Gain/(Loss) Reclassified from AOCI to Earnings
Other Operating Income		0.7			—			—		—		—			—
Interest Income		—			—			—		—		0.1			—
Other Operating Expense		—			(1.1	)		—		—		—			—
Total	$	0.7		$	(1.1	)	$	—	$	—	$	0.1		$	—

(In Millions)	Foreign Exchange Contracts (Before Tax)						Interest Rate Swap Contracts (Before Tax)				Interest Rate Option Contracts (Before Tax)
Nine Months Ended September 30,	2014			2013			2014		2013		2014			2013
Net Gain/(Loss) Recognized in AOCI	$	(5.8	)	$	(4.0	)	$	—	$	—	$	(0.7	)	$	—
Net Gain/(Loss) Reclassified from AOCI to Earnings
Other Operating Income		3.4			(1.8	)		—		—		—			—
Interest Income		—			—			—		—		0.1			—
Other Operating Expense		(0.2	)		(3.9	)		—		—		—			—
Total	$	3.2		$	(5.7	)	$	—	$	—	$	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, 2014, and 2013.

	Hedging Gain/(Loss) Recognized in OCI (Before Tax)
	Three Months Ended September 30,					Nine Months Ended September 30,
(In Millions)	2014		2013			2014		2013
Foreign Exchange Contracts	$	106.2	$	(73.8	)	$	74.3	$	(9.5	)
Sterling Denominated Subordinated Debt		13.7		(15.0	)		5.4		0.2
Total	$	119.9	$	(88.8	)	$	79.7	$	(9.3	)

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.

(In Millions)	September 30, 2014						December 31, 2013
	Notional Value		Fair Value				Notional Value		Fair Value
			Asset		Liability				Asset		Liability
Foreign Exchange Contracts	$	192.3	$	0.3	$	3.5	$	168.8	$	1.0	$	1.2

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, 2014, and 2013.

(In Millions)	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,
		2014			2013		2014			2013
Credit Default Swap Contracts	Other Operating Income	$	—		$	—	$	—		$	(0.1	)
Foreign Exchange Contracts	Other Operating Income		(10.1	)		6.7		(9.3	)		(4.3	)
Total		$	(10.1	)	$	6.7	$	(9.3	)	$	(4.4	)