Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2021

Fair Value Measurement Inputs and Valuation Techniques

The following table presents the fair values of Northern Trust’s Level 3 liabilities as of June 30, 2021 and December 31, 2020, as well as the valuation techniques, significant unobservable inputs, and quantitative information used to develop significant unobservable inputs for such liabilities as of such dates.

TABLE 34: LEVEL 3 SIGNIFICANT UNOBSERVABLE INPUTS

JUNE 30, 2021

FINANCIAL INSTRUMENT

FAIR VALUE

VALUATION TECHNIQUE

UNOBSERVABLE INPUTS

INPUT VALUES

WEIGHTED-AVERAGE INPUT VALUES(1)

Swaps Related to Sale of Certain Visa Class B Common Shares

$38.4 million

Discounted Cash Flow

Conversion Rate

1.62x

Visa Class A Appreciation

10.49%

Expected Duration

33 months

20 months

(1) Weighted average of expected duration based on scenario probability.

DECEMBER 31, 2020

FINANCIAL INSTRUMENT

FAIR VALUE

VALUATION TECHNIQUE

UNOBSERVABLE INPUTS

INPUT VALUES

WEIGHTED-AVERAGE INPUT VALUES(1)

Swaps Related to Sale of Certain Visa Class B Common Shares

$35.3 million

Discounted Cash Flow

Conversion Rate

1.62x

Visa Class A Appreciation

8.73%

Expected Duration

33 months

20 months

(1) Weighted average of expected duration based on scenario probability.

The following table presents the fair values of Northern Trust’s Level 3 assets that were measured at fair value on a nonrecurring basis as of June 30, 2021 and December 31, 2020, as well as the valuation technique, significant unobservable inputs and quantitative information used to develop the significant unobservable inputs for such assets as of such dates.

TABLE 37: LEVEL 3 NONRECURRING BASIS SIGNIFICANT UNOBSERVABLE INPUTS

JUNE 30, 2021

FINANCIAL INSTRUMENT

FAIR VALUE(1)

VALUATION TECHNIQUE

UNOBSERVABLE INPUTS

INPUT VALUES

WEIGHTED-AVERAGE INPUT VALUES

Loans

$8.2 million

Market Approach

Discount factor applied to real estate collateral-based loans to reflect realizable value

15.0

20.0%

16.3%

(1) Includes real estate collateral-based loans and other collateral-based loans.

DECEMBER 31, 2020

FINANCIAL INSTRUMENT

FAIR VALUE(1)

VALUATION TECHNIQUE

UNOBSERVABLE INPUTS

INPUT VALUES

WEIGHTED-AVERAGE INPUT VALUES

Loans

$24.6 million

Market Approach

Discount factor applied to real estate collateral-based loans to reflect realizable value

15.0

20.0%

16.8%

(1) Includes real estate collateral-based loans and other collateral-based loans.

Recurring Basis Hierarchy Leveling

The following table presents assets and liabilities measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2020, segregated by fair value hierarchy level.

TABLE 35: RECURRING BASIS HIERARCHY LEVELING


	JUNE 30, 2021
(In Millions)	LEVEL 1		LEVEL 2		LEVEL 3		NETTING		ASSETS/LIABILITIES AT FAIR VALUE
Debt Securities
Available for Sale
U.S. Government	$	2,559.0	$	—	$	—	$	—	$	2,559.0
Obligations of States and Political Subdivisions	—		3,488.9		—		—		3,488.9
Government Sponsored Agency	—		17,645.8		—		—		17,645.8
Non-U.S. Government	—		623.8		—		—		623.8
Corporate Debt	—		2,462.9		—		—		2,462.9
Covered Bonds	—		535.4		—		—		535.4
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds	—		3,058.5		—		—		3,058.5
Other Asset-Backed	—		5,278.1		—		—		5,278.1
Commercial Mortgage-Backed	—		1,211.6		—		—		1,211.6
Total Available for Sale	2,559.0		34,305.0		—		—		36,864.0
Trading Account	—		0.5		—		—		0.5
Total Available for Sale and Trading Debt Securities	2,559.0		34,305.5		—		—		36,864.5
Other Assets
Derivative Assets
Foreign Exchange Contracts	—		2,608.9		—		(884.1)		1,724.8
Interest Rate Contracts	—		207.4		—		(2.7)		204.7
Total Derivative Assets	—		2,816.3		—		(886.8)		1,929.5
Other Liabilities
Derivative Liabilities
Foreign Exchange Contracts	—		2,406.3		—		(2,021.1)		385.2
Interest Rate Contracts	—		106.2		—		(67.2)		39.0
Other Financial Derivatives(1)	—		—		38.4		—		38.4
Total Derivative Liabilities	$	—	$	2,512.5	$	38.4	$	(2,088.3)	$	462.6

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 June 30, 2021, derivative assets and liabilities shown above also include reductions of $126.4 million and $1,327.9 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.


	DECEMBER 31, 2020
(In Millions)	LEVEL 1		LEVEL 2		LEVEL 3		NETTING		ASSETS/LIABILITIES AT FAIR VALUE
Debt Securities
Available for Sale
U.S. Government	$	2,799.9	$	—	$	—	$	—	$	2,799.9
Obligations of States and Political Subdivisions	—		3,083.6		—		—		3,083.6
Government Sponsored Agency	—		24,956.7		—		—		24,956.7
Non-U.S. Government	—		714.0		—		—		714.0
Corporate Debt	—		2,539.6		—		—		2,539.6
Covered Bonds	—		553.1		—		—		553.1
Sub-Sovereign, Supranational and Non-U.S. Agency Bonds	—		2,345.8		—		—		2,345.8
Other Asset-Backed	—		3,997.5		—		—		3,997.5
Commercial Mortgage-Backed	—		1,031.8		—		—		1,031.8
Total Available for Sale	2,799.9		39,222.1		—		—		42,022.0
Trading Account	—		0.5		—		—		0.5
Total Available for Sale and Trading Debt Securities	2,799.9		39,222.6		—		—		42,022.5
Other Assets
Derivative Assets
Foreign Exchange Contracts	—		4,260.7		—		(3,505.3)		755.4
Interest Rate Contracts	—		297.5		—		(2.5)		295.0
Total Derivative Assets	—		4,558.2		—		(3,507.8)		1,050.4
Other Liabilities
Derivative Liabilities
Foreign Exchange Contracts	—		4,722.5		—		(2,718.6)		2,003.9
Interest Rate Contracts	—		125.0		—		(98.5)		26.5
Other Financial Derivatives(1)	—		—		35.3		—		35.3
Total Derivative Liabilities	$	—	$	4,847.5	$	35.3	$	(2,817.1)	$	2,065.7

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, 2020, derivative assets and liabilities shown above also include reductions of $1,867.8 million and $1,177.2 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.

Changes in Level 3 Liabilities

The following table presents the changes in Level 3 liabilities for the three and six months ended June 30, 2021 and 2020.

TABLE 36: CHANGES IN LEVEL 3 LIABILITIES


(In Millions)	SWAPS RELATED TO SALE OF CERTAIN VISA CLASS B COMMON SHARES
THREE MONTHS ENDED JUNE 30,	2021		2020
Fair Value at April 1	$	34.6	$	26.5
Total (Gains) Losses:
Included in Earnings(1)	8.5		8.6
Purchases, Issues, Sales, and Settlements
Settlements	(4.7)		(3.8)
Fair Value at June 30	$	38.4	$	31.3

(1) (Gains) losses are recorded in Other Operating Income on the consolidated statements of income.



SIX MONTHS ENDED JUNE 30,	2021		2020
Fair Value at January 1	$	35.3	$	33.4
Total (Gains) Losses:
Included in Earnings(1)	12.1		5.7
Purchases, Issues, Sales, and Settlements
Settlements	(9.0)		(7.8)
Fair Value at June 30	$	38.4	$	31.3

(1) (Gains) losses are recorded in Other Operating Income on the consolidated statements of income.

Fair Value of Financial Instruments

The following table summarizes the fair values of all financial instruments.

TABLE 38: FAIR VALUE OF FINANCIAL INSTRUMENTS


	JUNE 30, 2021
					FAIR VALUE
(In Millions)	BOOK VALUE		TOTAL FAIR VALUE		LEVEL 1		LEVEL 2		LEVEL 3
ASSETS
Cash and Due from Banks	$	4,799.3	$	4,799.3	$	4,799.3	$	—	$	—
Federal Reserve and Other Central Bank Deposits	54,232.9		54,232.9		—		54,232.9		—
Interest-Bearing Deposits with Banks	3,848.4		3,848.4		—		3,848.4		—
Federal Funds Sold	0.1		0.1		—		0.1		—
Securities Purchased under Agreements to Resell	947.8		947.8		—		947.8		—
Debt Securities
Available for Sale(1)	36,864.0		36,864.0		2,559.0		34,305.0		—
Held to Maturity	21,655.3		21,579.6		99.0		21,480.6		—
Trading Account	0.5		0.5		—		0.5		—
Loans (excluding Leases)
Held for Investment	37,116.1		37,152.9		—		—		37,152.9
Held for Sale	131.2		150.3		—		150.3		—
Client Security Settlement Receivables	2,011.6		2,011.6		—		2,011.6		—
Other Assets
Federal Reserve and Federal Home Loan Bank Stock	230.0		230.0		—		230.0		—
Community Development Investments	903.8		903.8		—		903.8		—
Employee Benefit and Deferred Compensation	224.5		227.1		123.7		103.4		—
LIABILITIES
Deposits
Demand, Noninterest-Bearing, Savings, Money Market and Other Interest-Bearing	$	73,627.1	$	73,627.1	$	73,627.1	$	—	$	—
Savings Certificates and Other Time	877.7		879.7		—		879.7		—
Non U.S. Offices Interest-Bearing	71,705.4		71,705.4		—		71,705.4		—
Federal Funds Purchased	0.2		0.2		—		0.2		—
Securities Sold Under Agreements to Repurchase	529.1		529.1		—		529.1		—
Other Borrowings	5,140.6		5,141.1		—		5,141.1		—
Senior Notes	3,036.0		3,137.0		—		3,137.0		—
Long-Term Debt
Subordinated Debt	1,165.3		1,226.3		—		1,226.3		—
Floating Rate Capital Debt	277.8		271.9		—		271.9		—
Other Liabilities
Standby Letters of Credit	17.9		17.9		—		—		17.9
Loan Commitments	67.0		67.0		—		—		67.0
Derivative Instruments
Asset/Liability Management
Foreign Exchange Contracts
Assets	$	147.3	$	147.3	$	—	$	147.3	$	—
Liabilities	28.2		28.2		—		28.2		—
Interest Rate Contracts
Assets	8.9		8.9		—		8.9		—
Liabilities	7.2		7.2		—		7.2		—
Other Financial Derivatives
Liabilities(2)	38.4		38.4		—		—		38.4
Client-Related and Trading
Foreign Exchange Contracts
Assets	2,461.6		2,461.6		—		2,461.6		—
Liabilities	2,378.1		2,378.1		—		2,378.1		—
Interest Rate Contracts
Assets	198.5		198.5		—		198.5		—
Liabilities	99.0		99.0		—		99.0		—

(1) Refer to the table located on page 41 for the disaggregation of AFS debt securities.

(2) This line consists of swaps related to the sale of certain Visa Class B common shares.


	DECEMBER 31, 2020
					FAIR VALUE
(In Millions)	BOOK VALUE		TOTAL FAIR VALUE		LEVEL 1		LEVEL 2		LEVEL 3
ASSETS
Cash and Due from Banks	$	4,389.5	$	4,389.5	$	4,389.5	$	—	$	—
Federal Reserve and Other Central Bank Deposits	55,503.6		55,503.6		—		55,503.6		—
Interest-Bearing Deposits with Banks	4,372.6		4,372.6		—		4,372.6		—
Securities Purchased under Agreements to Resell	1,596.5		1,596.5		—		1,596.5		—
Debt Securities
Available for Sale(1)	42,022.0		42,022.0		2,799.9		39,222.1		—
Held to Maturity	17,791.1		17,797.4		90.0		17,707.4		—
Trading Account	0.5		0.5		—		0.5		—
Loans (excluding Leases)
Held for Investment	33,558.0		34,017.5		—		—		34,017.5
Client Security Settlement Receivables	1,160.2		1,160.2		—		1,160.2		—
Other Assets
Federal Reserve and Federal Home Loan Bank Stock	275.0		275.0		—		275.0		—
Community Development Investments	919.6		919.6		—		919.6		—
Employee Benefit and Deferred Compensation	215.8		228.9		138.6		90.3		—
LIABILITIES
Deposits
Demand, Noninterest-Bearing, Savings, Money Market and Other Interest-Bearing	$	71,742.5	$	71,742.5	$	71,742.5	$	—	$	—
Savings Certificates and Other Time	937.1		943.0		—		943.0		—
Non U.S. Offices Interest-Bearing	71,198.4		71,198.4		—		71,198.4		—
Federal Funds Purchased	260.2		260.2		—		260.2		—
Securities Sold Under Agreements to Repurchase	39.8		39.8		—		39.8		—
Other Borrowings	4,011.5		4,012.7		—		4,012.7		—
Senior Notes	3,122.4		3,222.6		—		3,222.6		—
Long-Term Debt
Subordinated Debt	1,189.3		1,250.1		—		1,250.1		—
Floating Rate Capital Debt	277.8		264.6		—		264.6		—
Other Liabilities
Standby Letters of Credit	22.4		22.4		—		—		22.4
Loan Commitments	77.0		77.0		—		—		77.0
Derivative Instruments
Asset/Liability Management
Foreign Exchange Contracts
Assets	$	15.6	$	15.6	$	—	$	15.6	$	—
Liabilities	311.8		311.8		—		311.8		—
Interest Rate Contracts
Assets	8.3		8.3		—		8.3		—
Liabilities	10.2		10.2		—		10.2		—
Other Financial Derivatives
Liabilities(2)	35.3		35.3		—		—		35.3
Client-Related and Trading
Foreign Exchange Contracts
Assets	4,245.1		4,245.1		—		4,245.1		—
Liabilities	4,410.7		4,410.7		—		4,410.7		—
Interest Rate Contracts
Assets	289.2		289.2		—		289.2		—
Liabilities	114.8		114.8		—		114.8		—

(1) Refer to the table located on page 42 for the disaggregation of AFS debt securities.

(2) This line consists of swaps related to the sale of certain Visa Class B common shares.