Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2015

Assets and Liabilities Measured at Fair Value on Recurring Basis Segregated by Fair Value Hierarchy Level

The following tables present assets and liabilities measured at fair value on a recurring basis as of March 31, 2015, and December 31, 2014, segregated by fair value hierarchy level.

Table 22: Recurring Basis Hierarchy Leveling

(In Millions)

Level 1

Level 2

Level 3

Netting

Assets/Liabilities
at Fair Value

March 31, 2015

Securities

Available for Sale

U.S. Government

4,627.4

—

4,627.4

Obligations of States and Political Subdivisions

—

4.5

—

4.5

Government Sponsored Agency

—

16,634.2

—

16,634.2

Non-U.S. Government

—

311.4

—

311.4

Corporate Debt

—

3,651.3

—

3,651.3

Covered Bonds

—

2,049.3

—

2,049.3

Sub-Sovereign, Supranational and Non-U.S. Agency Bonds

—

561.0

—

561.0

Residential Mortgage-Backed

—

4.4

—

4.4

Other Asset-Backed

—

2,949.3

—

2,949.3

Auction Rate

—

17.5

—

17.5

Other

—

135.4

—

135.4

Total Available for Sale

4,627.4

26,300.8

17.5

—

30,945.7

Trading Account

—

1.4

—

1.4

Total Available for Sale and Trading Securities

4,627.4

26,302.2

17.5

—

30,947.1

Other Assets

Derivative Assets

Foreign Exchange Contracts

—

4,798.6

—

4,798.6

Interest Rate Contracts

—

272.0

—

272.0

Total Derivative Assets

—

5,070.6

—

(2,884.2

)

2,186.4

Other Liabilities

Derivative Liabilities

Foreign Exchange Contracts

—

4,714.1

—

4,714.1

Interest Rate Swaps

—

148.2

—

148.2

Total Derivative Liabilities

—

4,862.3

—

(3,510.9

)

1,351.4

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 March 31, 2015, derivative assets and liabilities shown above also include reductions of $440.8 million and $1.1 billion, respectively, as a result of cash collateral received from and deposited with derivative counterparties.


(In Millions)	Level 1		Level 2		Level 3		Netting			Assets/Liabilities at Fair Value
December 31, 2014
Securities
Available for Sale
U.S. Government	$	4,506.9	$	—	$	—	$	—		$	4,506.9
Obligations of States and Political Subdivisions		—		4.6		—		—			4.6
Government Sponsored Agency		—		16,389.2		—		—			16,389.2
Non-U.S. Government		—		310.4		—		—			310.4
Corporate Debt		—		3,577.7		—		—			3,577.7
Covered Bonds		—		1,907.5		—		—			1,907.5
Supranational and Non-U.S. Agency Bonds		—		360.6		—		—			360.6
Residential Mortgage-Backed		—		6.4		—		—			6.4
Other Asset-Backed		—		2,321.3		—		—			2,321.3
Auction Rate		—		—		18.1		—			18.1
Other		—		155.8		—		—			155.8

Total Available for Sale		4,506.9		25,033.5		18.1		—			29,558.5

Trading Account		—		4.7		—		—			4.7

Total Available for Sale and Trading Securities		4,506.9		25,038.2		18.1		—			29,563.2

Other Assets
Derivative Assets
Foreign Exchange Contracts		—		4,275.2		—		—			4,275.2
Interest Rate Contracts		—		232.3		—		—			232.3

Total Derivative Assets		—		4,507.5		—		(2,257.1	)		2,250.4

Other Liabilities
Derivative Liabilities
Foreign Exchange Contracts		—		4,095.5		—		—			4,095.5
Interest Rate Swaps		—		131.8		—		—			131.8

Total Derivative Liabilities	$	—	$	4,227.3	$	—	$	(3,173.3	)	$	1,054.0

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, 2014, derivative assets and liabilities shown above also include reductions of $315.8 million and $1.2 billion, respectively, as a result of cash collateral received from and deposited with derivative counterparties.

Changes in Level 3 Assets

The following tables present the changes in Level 3 assets and liabilities for the three months ended March 31, 2015, and 2014.

Table 23: Changes in Level 3 Assets


Level 3 Assets (In Millions)	Auction Rate Securities
Three Months Ended March 31,	2015			2014
Fair Value at January 1	$	18.1		$	98.9
Total Gains (Losses):
Included in Earnings		—			—
Included in Other Comprehensive Income (1)		(0.3	)		(0.2	)
Purchases, Issues, Sales, and Settlements
Sales		—			0.1
Settlements		(0.3	)		(0.3	)

Fair Value at March 31	$	17.5		$	98.5

(1)

Unrealized gains (losses) are included in net unrealized gains (losses) on securities available for sale in the consolidated statements of comprehensive income.

Changes in Level 3 Liabilities

Table 24: Changes in Level 3 Liabilities


Level 3 Liabilities (In Millions)	Contingent Consideration
Three Months Ended March 31	2015		2014
Fair Value at January 1	$	—	$	55.4
Total (Gains) Losses:
Included in Earnings (1)		—		(0.1	)
Included in Other Comprehensive Income		—		—
Purchases, Issues, Sales, and Settlements		—		—
Purchases		—		—
Settlements		—		(55.3	)

Fair Value at March 31	$	—	$	—

Unrealized (Gains) Losses Included in Earnings Related to Financial Instruments Held at March 31 (1)	$	—	$	—

(1)

(Gains) losses are recorded in other operating income (expense) in the consolidated statements of income.

Book and Fair Values of All Financial Instruments

The following tables summarize the fair values of all financial instruments.

Table 26: Fair Value of Financial Instruments

(In Millions)

March 31, 2015

Book
Value

Total
Fair Value

Fair Value

Level 1

Level 2

Level 3

Assets

Cash and Due from Banks

4,074.8

—

Federal Funds Sold and Resell Agreements

1,113.9

—

1,113.9

—

Interest-Bearing Deposits with Banks

15,432.3

—

15,432.3

—

Federal Reserve Deposits

8,804.2

—

8,804.2

—

Securities

Available for Sale (1)

30,945.7

4,627.4

26,300.8

17.5

Held to Maturity

5,655.8

5,665.0

—

5,665.0

—

Trading Account

1.4

—

1.4

—

Loans (excluding Leases)

Held for Investment

31,503.8

31,747.7

—

31,747.7

Client Security Settlement Receivables

2,219.3

—

2,219.3

—

Other Assets

Federal Reserve and Federal Home Loan Bank Stock

207.5

—

207.5

—

Community Development Investments

198.4

198.7

—

198.7

—

Employee Benefit and Deferred Compensation

162.1

165.5

113.9

51.6

—

Liabilities

Deposits

Demand, Noninterest-Bearing, Savings and Money Market

39,016.4

—

Savings Certificates and Other Time

1,777.9

1,783.1

—

1,783.1

—

Non U.S. Offices Interest-Bearing

45,942.2

—

45,942.2

—

Federal Funds Purchased

410.7

—

410.7

—

Securities Sold under Agreements to Repurchase

613.2

—

613.2

—

Other Borrowings

2,874.1

2,875.7

—

2,875.7

—

Senior Notes

1,497.1

1,566.9

—

1,566.9

—

Long Term Debt (excluding Leases)

Subordinated Debt

1,368.6

1,374.9

—

1,374.9

—

Floating Rate Capital Debt

277.2

241.4

—

241.4

—

Other Liabilities

Standby Letters of Credit

58.3

—

58.3

Loan Commitments

26.8

—

26.8

Derivative Instruments

Asset/Liability Management

Foreign Exchange Contracts

Assets

67.4

—

67.4

—

Liabilities

27.7

—

27.7

—

Interest Rate Contracts

Assets

148.9

—

148.9

—

Liabilities

28.9

—

28.9

—

Client-Related and Trading

Foreign Exchange Contracts

Assets

4,731.2

—

4,731.2

—

Liabilities

4,686.4

—

4,686.4

—

Interest Rate Contracts

Assets

123.1

—

123.1

—

Liabilities

119.3

—

119.3

—

(1)	Refer to the table located on page 31 for the disaggregation of available for sale securities.


(In Millions)	December 31, 2014
	Book Value		Total Fair Value		Fair Value
	Book Value		Total Fair Value		Level 1		Level 2		Level 3
Assets
Cash and Due from Banks	$	3,050.6	$	3,050.6	$	3,050.6	$	—	$	—
Federal Funds Sold and Resell Agreements		1,062.7		1,062.7		—		1,062.7		—
Interest-Bearing Deposits with Banks		14,928.3		14,928.3		—		14,928.3		—
Federal Reserve Deposits		17,386.3		17,386.3		—		17,386.3		—
Securities
Available for Sale (1)		29,558.5		29,558.5		4,506.9		25,033.5		18.1
Held to Maturity		4,170.8		4,176.1		—		4,176.1		—
Trading Account		4.7		4.7		—		4.7		—
Loans (excluding Leases)
Held for Investment		30,458.0		30,600.4		—		—		30,600.4
Held for Sale		2.5		2.5		—		—		2.5
Client Security Settlement Receivables		1,568.8		1,568.8		—		1,568.8		—
Other Assets
Federal Reserve and Federal Home Loan Bank Stock		207.5		207.5		—		207.5		—
Community Development Investments		209.9		210.8		—		210.8		—
Employee Benefit and Deferred Compensation		143.2		146.7		96.7		50.0		—

Liabilities
Deposits
Demand, Noninterest-Bearing, Savings and Money Market	$	41,454.6	$	41,454.6	$	41,454.6	$	—	$	—
Savings Certificates and Other Time		1,757.4		1,757.4		—		1,757.4		—
Non U.S. Offices Interest-Bearing		47,545.0		47,545.0		—		47,545.0		—
Federal Funds Purchased		932.9		932.9		—		932.9		—
Securities Sold under Agreements to Repurchase		885.1		885.1		—		885.1		—
Other Borrowings		1,685.2		1,686.2		—		1,686.2		—
Senior Notes		1,497.0		1,541.8		—		1,541.8		—
Long Term Debt (excluding Leases)
Subordinated Debt		1,583.3		1,583.3		—		1,583.3		—
Floating Rate Capital Debt		277.1		242.8		—		242.8		—
Other Liabilities
Standby Letters of Credit		60.1		60.1		—		—		60.1
Loan Commitments		28.3		28.3		—		—		28.3

Derivative Instruments
Asset/Liability Management
Foreign Exchange Contracts
Assets	$	125.7	$	125.7	$	—	$	125.7	$	—
Liabilities		23.5		23.5		—		23.5		—
Interest Rate Contracts
Assets		126.8		126.8		—		126.8		—
Liabilities		30.5		30.5		—		30.5		—
Client-Related and Trading
Foreign Exchange Contracts
Assets		4,149.5		4,149.5		—		4,149.5		—
Liabilities		4,072.0		4,072.0		—		4,072.0		—
Interest Rate Contracts
Assets		105.5		105.5		—		105.5		—
Liabilities		101.3		101.3		—		101.3		—

(1)	Refer to the table located on page 32 for the disaggregation of available for sale securities.

Fair Value, Measurements, Recurring

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 as of March 31, 2015.

Table 21: Level 3 Significant Unobservable Inputs


Financial Instrument	Fair Value		Valuation Technique	Unobservable Inputs	Range of Lives and Rates
Auction Rate Securities	$	17.5 million	Discounted Cash Flow	Remaining lives Discount rates	1.2 — 8.6 years 0.1% — 8.4%

Fair Value, Measurements, Nonrecurring

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 March 31, 2015.

Table 25: Level 3 Nonrecurring Basis Significant Unobservable Inputs


Financial Instrument	Fair Value	Valuation Technique	Unobservable Input	Range of Discounts Applied
Loans	$23.1 million	Market Approach	Discount to reflect realizable value	15% — 25%
OREO	$0.3 million	Market Approach	Discount to reflect realizable value	15% — 20%

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

+ References+ Details

- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

+ References+ Details

- Definition

Tabular disclosure of the fair value measurement of liabilities using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and gains or losses recognized in other comprehensive income (loss) and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs) by class of liability.

+ References+ Details