Derivative Financial Instruments (Tables)

12 Months Ended

Dec. 31, 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.

TABLE 108: NOTIONAL AND FAIR VALUES OF CLIENT-RELATED AND TRADING DERIVATIVE FINANCIAL INSTRUMENTS

	DECEMBER 31, 2014						DECEMBER 31, 2013
			FAIR VALUE						FAIR VALUE
(In Millions)	NOTIONAL VALUE		ASSET		LIABILITY		NOTIONAL VALUE		ASSET		LIABILITY
Foreign Exchange Contracts	$	257,568.7	$	4,149.5	$	4,072.0	$	243,135.0	$	2,844.7	$	2,846.2
Interest Rate Contracts		5,353.8		105.5		101.3		5,001.7		122.8		117.0
Total	$	262,922.5	$	4,255.0	$	4,173.3	$	248,136.7	$	2,967.5	$	2,963.2

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 statement of income for the years ended December 31, 2014, 2013, and 2012.

TABLE 109: LOCATION AND AMOUNT OF GAINS AND LOSSES RECORDED IN INCOME

(In Millions)	LOCATION OF DERIVATIVE GAIN/(LOSS) RECOGNIZED IN INCOME	AMOUNT OF DERIVATIVE GAIN/ (LOSS) RECOGNIZED IN INCOME DECEMBER 31,
		2014		2013		2012
Foreign Exchange Contracts	Foreign Exchange Trading Income	$	210.1	$	244.4	$	206.1
Interest Rate Contracts	Security Commissions and Trading Income		9.3		12.7		11.6
Total		$	219.4	$	257.1	$	217.7

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 110: NOTIONAL AND FAIR VALUES OF DESIGNATED RISK MANAGEMENT DERIVATIVE FINANCIAL INSTRUMENTS

			DECEMBER 31, 2014						DECEMBER 31, 2013
					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	$	2,859.5	$	12.7	$	28.5	$	3,296.9	$	31.5	$	44.8
Senior Notes and Long-Term Subordinated Debt	Interest Rate Swap Contracts	Interest Rate		1,250.0		112.8		2.0		1,250.0		83.6		33.4
CASH FLOW HEDGES
Forecasted Foreign Currency Denominated Transactions	Foreign Exchange Contracts	Foreign Currency		344.9		6.0		14.8		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 Options Contracts	Interest Rate		625.0		1.3		–		–		–		–
NET INVESTMENT HEDGES
Net Investments in Non-U.S. Affiliates	Foreign Exchange Contracts	Foreign Currency		1,795.4		118.9		3.4		1,684.9		9.8		52.8
Total			$	6,884.8	$	251.7	$	48.7	$	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 years ended December 31, 2014, 2013, and 2012.

TABLE 111: LOCATION AND AMOUNT OF DERIVATIVE GAINS AND LOSSES RECORDED IN INCOME

	DERIVATIVE INSTRUMENT	LOCATION OF DERIVATIVE GAIN/(LOSS) RECOGNIZED IN INCOME	AMOUNT OF DERIVATIVE GAIN/ (LOSS) RECOGNIZED IN INCOME DECEMBER 31,
(In Millions)			2014			2013			2012
Available for Sale Investment Securities	Interest Rate Swap Contracts	Interest Income	$	(36.4	)	$	26.3		$	(48.4	)
Senior Notes and Long-Term Subordinated Debt	Interest Rate Swap Contracts	Interest Expense		104.0			(44.9	)		54.3
Total			$	67.6		$	(18.6	)	$	5.9

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, 2014, 2013 and 2012.

TABLE 112: CASH FLOW HEDGE DERIVATIVE GAINS AND LOSSES RECOGNIZED IN AOCI AND RECLASSIFIED TO EARNINGS

	FOREIGN EXCHANGE CONTRACTS (BEFORE TAX)									INTEREST RATE SWAP CONTRACTS (BEFORE TAX)							INTEREST RATE OPTION CONTRACTS (BEFORE TAX)
(In Millions)	2014			2013			2012			2014		2013		2012			2014		2013		2012
Net Gain/(Loss) Recognized in AOCI	$	(9.4	)	$	2.1		$	(3.2	)	$	–	$	–	$	–		$	0.7	$	–	$	–
Net Gain/(Loss) Reclassified from AOCI to Earnings
Other Operating Income		3.3			(2.1	)		(4.6	)		–		–		–			–		–		–
Interest Income		–			–			–			–		–		(0.2	)		1.2		–		–
Other Operating Expense		(0.5	)		(2.6	)		–			–		–		–			–		–		–
Total	$	2.8		$	(4.7	)	$	(4.6	)	$	–	$	–	$	(0.2	)	$	1.2	$	–	$	–

Net Investment Hedge Gains and Losses Recognized in AOCI

The following table provides net investment hedge gains and losses recognized in AOCI during the years ended December 31, 2014 and 2013.

TABLE 113: NET INVESTMENT HEDGE GAINS AND LOSSES RECOGNIZED IN AOCI

	AMOUNT OF HEDGING INSTRUMENT GAIN/(LOSS) RECOGNIZED IN AOCI (BEFORE TAX)
(In Millions)	2014		2013
Foreign Exchange Contracts	$	127.4	$	(101.6	)
Sterling Denominated Subordinated Debt		15.2		(5.7	)
Total	$	142.6	$	(107.3	)

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.

TABLE 114: NOTIONAL AND FAIR VALUES OF NON DESIGNATED RISK MANAGEMENT DERIVATIVE INSTRUMENTS

	DECEMBER 31, 2014						DECEMBER 31, 2013
			FAIR VALUE						FAIR VALUE
(In Millions)	NOTIONAL VALUE		ASSET		LIABILITY		NOTIONAL VALUE		ASSET		LIABILITY
Foreign Exchange Contracts	$	246.3	$	0.8	$	5.3	$	168.8	$	1.0	$	1.2
Total	$	246.3	$	0.8	$	5.3	$	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 years ended December 31, 2014, 2013, and 2012 for derivative instruments not formally designated as hedges under GAAP.

TABLE 115: LOCATION AND AMOUNT OF GAINS AND LOSSES RECORDED IN INCOME

	LOCATION OF DERIVATIVE GAIN/ (LOSS) RECOGNIZED IN INCOME	AMOUNT RECOGNIZED IN INCOME
(In Millions)		2014			2013			2012
Credit Default Swap Contracts	Other Operating Income	$	—		$	(0.1	)	$	(2.6	)
Foreign Exchange Contracts	Other Operating Income		(14.3	)		(4.0	)		11.3
Total		$	(14.3	)	$	(4.1	)	$	8.7