Q1 2026 Northern Trust Corp Earnings Call

April 21, 2026

First quarter 'twenty twenty-six earnings conference call today's.

Today's conference is being recorded at this time I would like to turn the call over to Jennifer Childe Director of Investor Relations. Please go ahead.

Thank you operator, and good morning, everyone welcome to Northern Trust Corporation's first quarter 2026 earnings Conference call. Joining me on our call. This morning is Mike O'grady, our chairman and CEO, Dave Fox, Our Chief Financial Officer, John lenders, our controller and Steve Carell and trade segment from our Investor Relations team our fares.

Quarter earnings press release, and financial trends report are both available on our website at Northern Trust Dot Com also on our website you will find our quarterly earnings review presentation, which we will use to guide today's conference call. This April 20, <unk> call is being webcast live on Northern Trust Dot com. The only authorized rebroadcast of this call is the re.

Speaker #1: Good day, and welcome to the Northern Trust Corp first quarter 2026 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the call over to Jennifer Childe, Director of Investor Relations.

Play that will be made available on our website through may 21.

Northern Trust disclaims any continuing accuracy of the information provided in this call. After today. Please refer to our safe Harbor statement regarding forward looking statements in the back of the accompanying presentation, which will apply to our commentary on this call. During today's question and answer session. Please limit your initial query to one question and one related follow up this.

Speaker #1: Please go ahead.

Speaker #2: Thank you, Operator, and good morning, everyone. Welcome to NORTHERN TRUST Corporation's first quarter 2026 earnings conference call. Joining me on our call this morning is Michael OGrady, our Chairman and CEO; Dave Fox, our Chief Financial Officer; John Landers, our Controller; and Steve Carroll and Trace Stegemann from our Investor Relations team.

It will allow us to move through the queue and enable as many people as possible the opportunity to ask questions as time permits. Thank you again for joining US today, let me turn the call over to Mike O'grady.

Speaker #2: Our first quarter earnings press release and Financial Trends Report are both available on our website at northerntrust.com. Also on our website, you will find our quarterly earnings review presentation, which we will use to guide today's conference call.

Thank you Jennifer let me join in welcoming you to our first quarter 2026 earnings call.

We're off to a strong start in 2026, reflecting our ability to capitalize on a constructive market and rate environment, while continuing to advance our one northern trust's strategic priorities.

Speaker #2: This April 21st call is being webcast live on NORTHERNTRUST.com. The only authorized rebroadcast of this call is the replay that will be made available on our website through May 21st.

Against this backdrop first quarter trust fees increased 11% net interest income grew 15% and total revenue rose, 14% all on a year over year basis.

Speaker #2: NORTHERNTRUST disclaims any continuing accuracy of the information provided in this call after today. Please refer to our Safe Harbor statement regarding forward-looking statements in the back of the accompanying presentation, which will apply to our commentary on this call.

While continuing to invest in key growth initiatives, we generated more than 700 basis points of positive operating leverage driving our pre tax margin up nearly 500 basis points to 32% and fueling EPS growth of 43%.

Speaker #2: During today's question-and-answer session, please limit your initial query to one question and one related follow-up. This will allow us to move through the queue and enable as many people as possible the opportunity to ask questions as time permits.

Return on average common equity reached 17, 4%, which is at the higher end of our new medium term target range, and we returned $510 million to shareholders, representing a total payout ratio of 100%.

Speaker #2: Thank you again for joining us today. Let me turn the call over to Mike OGrady.

Speaker #3: Thank you, Jennifer. Let me join in welcoming you to our first quarter 2026 earnings call. We're off to a strong start in 2026, reflecting our ability to capitalize on a constructive market and rate environment while continuing to advance our One Northern Trust strategic priorities.

This included $359 million in share repurchases in the first quarter contributing to a 5% reduction in share count as compared to the previous year.

These results confirm that our one northern trust strategy is driving steady improvement in inorganic growth consistent efficiency gains and resiliency in a volatile environment.

Speaker #3: Against this backdrop, first-quarter trust fees increased 11%, net interest income grew 15%, and total revenue rose 14%, all on a year-over-year basis. While continuing to invest in key growth initiatives, we generated more than 700 basis points of positive operating leverage.

AI is increasingly embedded in how we operate enabling our teams to deliver more value with greater consistency and speed.

Moving forward, we are accelerating its deployment in ways that will further advance our strategy and financial objectives for.

Speaker #3: Driving our pre-tax margin up nearly 500 basis points to 32% and fueling EPS growth of 43%. Return on average common equity reached 17.4%, which is at the higher end of our new medium-term target range.

We're applying AI not only to drive incremental efficiency, but also to scale knowledge and expertise while.

While maintaining the resilience governance and client confidence that define our franchise.

Speaker #3: And we returned $510 million to shareholders, representing a total payout ratio of 100%. This included $359 million in share repurchases in the first quarter, contributing to a 5% reduction in share count as compared to the previous year.

<unk> AI strategy is anchored in three outcomes hyper personalization AI generated alpha and infinite scalability.

Together these outcomes focused investment where it matters the most.

Hansen, the client experience improving decision quality and increasing operating leverage hyper personalization allows us to move toward highly contextual tailored engagement.

Speaker #3: These results confirm that our One Northern Trust strategy is driving steady improvement in organic growth, consistent efficiency gains, and resiliency in a volatile environment.

A tangible example is our one wealth assistant which integrates the Northern Trust Institute insights directly into workflows.

Speaker #3: AI is increasingly embedded in how we operate, enabling our teams to deliver more value with greater consistency and speed. Moving forward, we are accelerating its deployment in ways that will further advance our strategy and financial objectives.

With future enhancements this will equip our wealth management advisers with real time client specific context connecting market insights portfolio considerations and client objectives to support more informed high touch conversations with speed at scale.

Speaker #3: We're applying AI not only to drive incremental efficiency, but also to scale knowledge and expertise. While maintaining the resilience, governance, and client confidence that define our franchise.

AI generated alpha focuses on strengthening investment outcomes through faster synthesis of information and generating deeper insight.

Speaker #3: Our AI strategy is anchored in three outcomes: hyper-personalization, AI-generated alpha, and infinite scalability. Together, these outcomes focus investment where it matters the most: enhancing the client experience, improving decision quality, and increasing operating leverage.

Within asset management.

Assisted research and product construction tools are enabling teams to process significantly larger structured and unstructured datasets identified patterns more quickly and test scenarios more efficiently. This.

Speaker #3: Hyper-personalization allows us to move toward highly contextual, tailored engagement. A tangible example is our One Wealth Assistant, which integrates the Northern Trust Institute insights directly into workflows.

This enhances both investment decision, making and operational execution supporting stronger client outcomes without adding complexity.

Infinite scalability is a key driver of operating leverage by digitizing work through agents, we further disconnected relationship between growth in staffing.

Speaker #3: With future enhancements, this will equip our wealth management advisors with real-time, client-specific context. Connecting market insights, portfolio considerations, and client objectives. To support more informed, high-touch conversations with speed at scale.

Allowing for consistent execution across value chain, and supporting stronger controls all of which enable us to scale, while maintaining rigorous risk management.

With that backdrop, let me now turn to business performance for the quarter, beginning with wealth management.

Speaker #3: AI-generated alpha focuses on strengthening investment outcomes through faster synthesis of information and generating deeper insight. Within asset management, AI-assisted research and product construction tools are enabling teams to process significantly larger structured and unstructured data sets, identify patterns more quickly, and test scenarios more efficiently.

Momentum from last year carried into the first quarter as improved organic growth underpinned by both strong advisory and product fees drove low double digit trust fee growth.

The regions delivered another quarter of solid results with trust fee growth accelerating to 11% supported by especially robust performance in the central region.

Speaker #3: This enhances both investment decision-making and operational execution, supporting stronger client outcomes without adding complexity. Infinite scalability is a key driver of operating leverage. By digitizing work through agents, we further disconnect the relationship between growth and staffing, allowing for consistent execution across value chains and supporting stronger controls.

We made good progress implementing various client acquisition initiatives across talent centers of influence and digital channels.

Talent is our most important growth driver, we're advancing plans to increase revenue generating roles by high single digit percentages by year end. This includes significant increases in critical producer roles.

Centers of influence which include attorneys accountants and other professionals are a vital referral source driving nearly 25% of our new business activity.

Speaker #3: All of which enable us to scale while maintaining rigorous risk management. With that backdrop, let me now turn to business performance for the quarter.

Speaker #3: Beginning with Wealth Management. Momentum from last year carried into the first quarter, as improved organic growth—underpinned by both strong advisory and product fees—drove low double-digit trust fee growth.

In the first quarter, we introduced a more robust and structured outreach framework to engage key centers of influence, including hiring a senior leader to accelerate this initiative targeting a 10% increase in opportunities in 2026.

Speaker #3: The region delivered another quarter of solid results, with trust fee growth accelerating to 11%, supported by especially robust performance in the Central region. We made good progress implementing various client acquisition initiatives across talent, centers of influence, and digital channels.

Digital channels also continue to be an increasingly important source of new business to.

To boost the transition from interest to conversion, we're enhancing data integration.

Lead qualification and personalization at scale, notably.

Notably the opportunities originated from digital channels in the first quarter grew by nearly 50% year over year.

Speaker #3: Talent is our most important growth driver. We're advancing plans to increase revenue-generating roles by high single-digit percentages by year-end. This includes significant increases in critical producer roles.

Within our global family office business strength in international markets and investment management fees drove healthy performance.

Speaker #3: Centers of influence, which include attorneys, accountants, and other professionals, are a vital referral source, driving nearly 25% of our new business activity. In the first quarter, we introduced a more robust and structured outreach framework to engage key centers of influence, including hiring a senior leader to accelerate this initiative, targeting a 10% increase in opportunities in 2026.

We also continued to scale family office solutions with early traction and client wins across several new markets.

Our investment offerings, particularly within alternatives remains an important focus area. We had seven funds in the market during the first quarter up from five in the previous quarter booking.

Looking ahead, we will continue to build out our alternatives platform with a number of new alternative investment funds and strategies planned for launch later this year with the goal of increasing <unk> fund raising by 25%.

Speaker #3: Digital channels also continue to be an increasingly important source of new business. To boost the transition from interest to conversion, we're enhancing data integration, lead qualification, and personalization at scale.

These offerings spanning areas such as venture capital co investments and secondary funds will broaden access and flexibility for clients seeking diversified sources of return, while maintaining our disciplined approach to portfolio construction and manager selection.

Speaker #3: Notably, the opportunities originating from digital channels in the first quarter grew by nearly 50% year over year. Within our global family office business, strengthened international markets and investment management fees drove healthy performance.

Collectively these initiatives are strengthening our ability to generate repeatable scalable growth, while enhancing both the client and employee experience.

Speaker #3: We also continue to scale family office solutions, with early traction and client wins across several new markets. Expanding our investment offerings, particularly within alternatives, remains an important focus area.

Turning to asset servicing the business delivered another quarter of solid organic growth and strength and profitability driven by disciplined execution of our strategic priorities.

Speaker #3: We had seven funds in the market during the first quarter, up from five in the previous quarter. Looking ahead, we will continue to build out our alternatives platform, with a number of new alternative investment funds and strategies planned for launch later this year, with the goal of increasing alts fundraising by 25%.

Trust fee growth of 10%, coupled with significant NII and capital markets activity fueled over 700 basis points of year over year pre tax margin expansion.

Our differentiated service model deep institutional expertise and strength and supporting complex client needs continues to resonate, particularly with global asset owners during.

Speaker #3: These offerings, spanning areas such as venture capital, co-investments, and secondary funds, will broaden access and flexibility for clients seeking diversified sources of return, while maintaining our disciplined approach to portfolio construction and manager selection.

During the quarter, we secured nine new mandates across foundations endowments and health care institutions, including for not for profit healthcare systems. As a result, we now serve three quarters of the top 50 health care systems in the United States.

Speaker #3: Collectively, these initiatives are strengthening our ability to generate repeatable, scalable growth while enhancing both the client and employee experience. Turning to asset servicing. The business delivered another quarter of solid organic growth and strengthened profitability.

Within alternatives, we remain a market leader with assets under administration approaching one trillion across hedge funds private capital and semi liquid vehicles.

Demand for scalable institutional grade services remained strong supported by more than a dozen wins during the quarter. These.

Speaker #3: Driven by disciplined execution of our strategic priorities. Trust fee growth of 10%, coupled with significant NII and capital markets activity, fueled over $700 basis points of year-over-year pre-tax margin expansion.

These included igneous planned second quarter launch of a new private equity fund focused on non energy infrastructure in Europe.

Further expanding our global relationship across Europe, Australia, and the U S.

Speaker #3: Our differentiated service model, deep institutional expertise, and strength in supporting complex client needs continues to resonate. Particularly with global asset owners. During the quarter, we secured nine new mandates across foundations and endowments and healthcare institutions, including four not-for-profit healthcare systems.

We also announced an expansion of our CLO Middle office services, delivering a unified operational and compliance framework that supports the full lifecycle of CLO as interest in this offering continues to grow.

Strong momentum in capital markets continued in the first quarter as elevated volatility and heightened client activity drove 34% growth, including another quarter of robust FX and core brokerage fees.

Speaker #3: As a result, we now serve three-quarters of the top 50 healthcare systems in the United States. Within alternatives, we remain a market leader, with assets under administration approaching $1 trillion across hedge funds, private capital, and semi-liquid vehicles.

We're also seeing continued interest in our digital asset strategy, particularly in custody reporting and servicing of <unk> assets as token addition moves towards scale <unk>.

Speaker #3: Demand for scalable, institutional-grade services remains strong, supported by more than a dozen wins during the quarter. These included IGNEOS' planned second quarter launch of a new private equity fund focusing on energy infrastructure in Europe.

During the quarter, we on boarded five new clients, providing custody and other services for token is real world assets U S stable coins European money market funds and carbon credits.

Speaker #3: Further expanding our global relationships across Europe, Australia, and the US, we also announced an expansion of our CLO middle office services, delivering a unified operational and compliance framework that supports the full lifecycle of CLOs as interest in this offering continues to grow.

Turning to asset management.

And Tim made good progress in the first quarter with strength across liquidity alternatives and equity positioning the business well to meet its 2026 targets.

Within liquidity, we extended our streak to 13 consecutive quarters of positive flows with associated AUM, increasing to $350 billion.

Speaker #3: Strong momentum in capital markets continued in the first quarter. As elevated volatility and heightened client activity drove 34% growth, including another quarter of robust FX and core brokerage fees.

Importantly, we continued to diversify our funding sources across global liquidity vehicles, and third party platforms, while gaining overall market share.

Speaker #3: We're also seeing continued interest in our digital asset strategy, particularly in custody, reporting, and servicing of tokenized assets as tokenization moves toward scale. During the quarter, we onboarded five new clients, providing custody and other services for tokenized real-world assets, U.S. stablecoins, European money market funds, and carbon credits.

We also launched a token I share class for our treasury instruments portfolio during the quarter marketing Northern Trust's entry into the digital asset marketplace.

By applying <unk> to institutional grade liquidity strategies.

We're offering clients a modern digital first way to access money market investments, while maintaining our high standards for risk management and service.

Speaker #3: Turning to asset management. NTAM made good progress in the first quarter. With strength across liquidity, alternatives, and equities. Positioning the business well to meet its 2026 targets.

Within equities ETF momentum remained strong with a fourth consecutive quarter of positive flows.

This was supported by the successful launch of the Northern Trust's U S equity ETF, our latest active ETF designed to deliver tax efficient outcomes for investors.

Speaker #3: Within Liquidity, we extended our streak to 13 consecutive quarters of positive flows, with associated AUM increasing to $350 billion. Importantly, we continue to diversify our funding sources across global liquidity vehicles and third-party platforms, while gaining overall market share.

We also launched our first Saudi Arabia equity index strategy with $1 billion in client capital, reflecting our expanded presence in strategic partnerships in the middle East and.

<unk> continued to broaden its alternatives capabilities through active fundraising, which included three new sizable custom solutions and advisory mandates spanning secondary private credit and private equity.

Speaker #3: We also launched a tokenized share class for our NIF Treasury Instruments portfolio during the quarter, marking Northern Trust's entry into the digital asset marketplace.

Speaker #3: By applying tokenization to institutional-grade liquidity strategies, we're offering clients a modern, digital-first way to access money market investments while maintaining our high standards for risk management and service.

Earlier in the quarter, we announced an important milestone in our third party distribution strategy.

Our institutional quality direct indexing capabilities became available on investments platform, the largest independent tamp, which supports approximately one third of all financial advisers in the U S.

Speaker #3: Within equities, ETF momentum remains strong, with a fourth consecutive quarter of positive flows. This was supported by the successful launch of the Northern Trust US Equity ETF, our latest active ETF designed to deliver tax-efficient outcomes for investors.

This will enable advisers to access our diverse lineup of equity strategies empowering them to personalized portfolios at scale, while managing tax outcomes.

Finally, reflecting the strength of our active investment platform and the expertise of our investment professionals and Tam was recognized by Barron's as a top fund family in 2025 ranking fourth overall and fifth in general equity out of 46 fund families.

Speaker #3: We also launched our first Saudi Arabia equity index strategy with $1 billion in client capital, reflecting our expanded presence and strategic partnerships in the Middle East.

Speaker #3: NTAM continued to broaden its alternatives capabilities through active fundraising, which included three new sizable custom solutions and advisory mandates, spanning secondaries, private credit, and private equity.

To wrap up as we enter the second quarter, our priorities are clear and we remain focused on disciplined execution.

With that I'll turn it over to Dave to walk through our first quarter financial results.

Speaker #3: Earlier in the quarter, we announced an important milestone in our third-party distribution strategy. Our institutional-quality direct indexing capabilities became available on Envestnet's platform.

Thanks, Mike, Let me joined Jennifer and Mike and welcome you to our first quarter 2026 earnings call.

Operator: Good day, and welcome to the Northern Trust Corporation Q1 2026 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to Jennifer Childe, Director of Investor Relations. Please go ahead.

Let's discuss the financial results of the quarter starting on page four.

Speaker #3: The largest independent TAMP, which supports approximately one-third of all financial advisors in the US. This will enable advisors to access our diverse lineup of equity strategies, empowering them to personalize portfolios at scale while managing tax outcomes.

This morning, we reported first quarter net income of $526 million earnings per share of $2 71 and.

And our return on average common equity was 17, 4%.

Jennifer Childe: Thank you, operator, and good morning, everyone. Welcome to Northern Trust Corporation's Q1 2026 earnings conference call. Joining me on our call this morning is Michael O'Grady, our Chairman and CEO, David Fox, our Chief Financial Officer, John Landers, our Controller, and Steve Carroll and Trace Stegeman from our Investor Relations team. Our Q1 earnings press release and financial trends report are both available on our website at northerntrust.com. Also on our website, you will find our quarterly earnings review presentation, which we will use to guide today's conference call. This 21 April 2026 call is being webcast live on northerntrust.com. The only authorized rebroadcast of this call is the replay that will be made available on our website through 21 May 2026. Northern Trust disclaims any continuing accuracy of the information provided in this call after today.

We're off to a strong start to the year, we delivered our seventh consecutive quarter of positive organic growth positive operating leverage and year over year improvement in our expense to trust fee ratio all excluding notables.

Speaker #3: Finally, reflecting the strength of our active investment platform and the expertise of our investment professionals, NTAM was recognized by Barron's as a top fund family in 2025, ranking fourth overall and fifth in general equity out of 46 fund families.

We also returned 100% of our earnings to shareholders.

Relative to the prior year currency movements favorably impacted our revenue growth by approximately 120 basis points and unfavorably impacted our expense growth by approximately 130 basis points.

Speaker #3: To wrap up, as we enter the second quarter, our priorities are clear and we remain focused on disciplined execution. With that, I'll turn it over to Dave to walk through our first quarter financial results.

Relative to the prior period currency movements were immaterial in both revenue and expense growth.

Speaker #2: Thanks, Mike. Let me join Jennifer and Mike in welcoming you to our first quarter 2026 earnings call. Let's discuss the financial results of the quarter starting on page four.

Trust investment and other servicing fees totaled $1 3 billion, an 11% increase compared to last year, driven by favorable markets currency and new business generation.

Speaker #2: This morning, we reported first quarter net income of $526 million. Earnings per share of $2.71, and a return on average common equity was 17.4%.

Jennifer Childe: Please refer to our safe harbor statement regarding forward-looking statements in the back of the accompanying presentation, which will apply to our commentary on this call. During today's question and answer session, please limit your initial query to one question and one related follow-up. This will allow us to move through the queue and enable as many people as possible the opportunity to ask questions as time permits. Thank you again for joining us today. Let me turn the call over to Michael O'Grady.

Other noninterest income was up 33% year over year, reflecting very strong FX trading and Securities Commission and trading income, which benefited from elevated macro volatility and uncertainty.

Speaker #2: We're off to a strong start to the year. We delivered our seventh consecutive quarter of positive organic growth, positive operating leverage, and year-over-year improvement in our expense-to-trust fee ratio, all excluding notables.

Net interest income on an FTE basis was up 1% sequentially to $662 million, a new quarterly record and up 15% from a year ago.

Speaker #2: We also returned 100% of our earnings to shareholders. Relative to the prior year, currency movements favorably impacted our revenue growth by approximately 120 basis points, and unfavorably impacted our expense growth by approximately 130 basis points.

Michael O'Grady: Thank you, Jennifer. Let me join in welcoming you to our Q1 2026 Earnings Call. We're off to a strong start in 2026, reflecting our ability to capitalize on a constructive market and rate environment while continuing to advance our One Northern Trust strategic priorities. Against this backdrop, Q1 trust fees increased 11%, net interest income grew 15%, and total revenue rose 14%, all on a year-over-year basis. While continuing to invest in key growth initiatives, we generated more than 700 basis points of positive operating leverage, driving our pre-tax margin up nearly 500 basis points to 32% and fueling EPS growth of 43%. Return on average common equity reached 17.4%, which is at the higher end of our new medium-term target range, and we returned $510 million to shareholders, representing a total payout ratio of 100%.

Our assets under custody administration were down 1% sequentially, but up 10% compared to the prior year.

Our assets under management were also down 1% sequentially and up 11% year over year.

Speaker #2: Relative to the prior period, currency movements were immaterial to both revenue and expense growth. Trust, investment, and other servicing fees totaled $1.3 billion, an 11% increase compared to last year, driven by favorable markets, currency, and new business generation.

Overall, our credit quality remains very strong with all key credit metrics in line with historical standards.

We recorded a $3 million reserve release in the first quarter driven by improvements to the C&I portfolio, which was partially offset by a small number of nonperforming loans.

Speaker #2: Other non-interest income was up 33% year-over-year, reflecting very strong FX trading and securities commission and trading income, which benefited from elevated macro volatility and uncertainty.

Our effective tax rate was 25% down 150 basis points from the previous quarter due to higher benefits associated with share based compensation.

We still expect the effective tax rate in 2026 to be approximately 26 to 26, 5%.

Speaker #2: Net interest income on an FTE basis was up 1% sequentially, to $662 million, a new quarterly record, and up 15% from a year ago.

There were no notables in either the first quarter of 2026 for the first quarter of 2025.

Speaker #2: Our assets under custody/administration were down 1% sequentially, but up 10% compared to the prior year. Our assets under management were also down 1% sequentially, and up 11% year-over-year.

Michael O'Grady: This included $359 million in share repurchases in Q1, contributing to a 5% reduction in share count as compared to the previous year. These results confirm that our One Northern Trust strategy is driving steady improvement in organic growth, consistent efficiency gains, and resiliency in a volatile environment. AI is increasingly embedded in how we operate, enabling our teams to deliver more value with greater consistency and speed. Moving forward, we are accelerating its deployment in ways that will further advance our strategy and financial objectives. We're applying AI not only to drive incremental efficiency, but also to scale knowledge and expertise while maintaining the resilience, governance, and client confidence that define our franchise. Our AI strategy is anchored in three outcomes. Hyper-personalization, AI-generated alpha, and infinite scalability.

Turning to our wealth management business on page five.

Wealth management has started the year well with strength in trust fees across both CFO and the regions spanning both advisory and product channels.

Speaker #2: Overall, our credit quality remains very strong, with all key credit metrics in line with historical standards. We recorded a $3 million reserve release in the first quarter, driven by improvements to the CNI portfolio.

Assets under management for our wealth management clients were $498 billion, this quarter and down 2% sequentially, but up 11% year over year.

Trust investment and other servicing fees for wealth management clients were $601 million up 11% year over year, with particularly robust organic growth within GSO.

Speaker #2: This was partially offset by a small number of non-performing loans. Our effective tax rate was 25%, down 150 basis points from the previous quarter due to higher benefits associated with share-based compensation.

Average deposits within wealth management were flat sequentially, while average loans were up 1%.

Wealth management's pre tax profit rose, 9% over the prior year period, while the pre tax margin remained flat at 37, 1% as we continued to reinvest in the business to support future growth.

Speaker #2: We still expect the effective tax rate in 2026 to be approximately 26% to 26.5%. There were no notables in either the first quarter of 2026 or the first quarter of 2025.

Moving to our asset servicing results on page six.

Speaker #2: Turning to our Wealth Management business on page five. Wealth Management started the year well, with strength in trust fees across both GFO and the regions, spanning both advisory and product channels.

Michael O'Grady: Together, these outcomes focus investment where it matters the most, enhancing the client experience, improving decision quality, and increasing operating leverage. Hyper-personalization allows us to move toward highly contextual, tailored engagement. A tangible example is our One Wealth Assistant, which integrates the Northern Trust Institute insights directly into workflows. With future enhancements, this will equip our Wealth Management advisors with real-time, client-specific context, connecting market insights, portfolio considerations, and client objectives to support more informed, high-touch conversations with speed at scale. AI-generated alpha focuses on strengthening investment outcomes through faster synthesis of information and generating deeper insight. Within Asset Management, AI-assisted research and product construction tools are enabling teams to process significantly larger structured and unstructured datasets, identify patterns more quickly, and test scenarios more efficiently. This enhances both investment decision-making and operational execution, supporting stronger client outcomes without adding complexity. Infinite scalability is a key driver of operating leverage.

Our asset servicing business also had a good start to the year.

By helping new business generation, coupled with robust capital markets activity.

Assets under custody and administration for asset servicing clients were $17 three trillion at quarter end, reflecting a 9% year over year increase.

Speaker #2: Assets under management for our wealth management clients were $498 billion at quarter end, down 2% sequentially but up 11% year-over-year. Trust, investment, and other servicing fees for wealth management clients were $601 million, up 11% year-over-year, with particularly robust organic growth within GFO.

Asset servicing fees totaled $741 million up 10% over the prior year.

Custody and fund administration fees were 498 million also up 10% year over year, largely reflecting the impact from strong equity markets favorable currency movements and net new business.

Speaker #2: Average deposits within Wealth Management were flat sequentially, while average loans were up 1%. Wealth Management's pre-tax profit rose 9% over the prior-year period, while the pre-tax margin remained flat at 37.1%.

Assets under management for asset servicing clients were one three trillion up 11% over the prior year.

Investment management fees within asset servicing were $169 million up 11% year over year due to favorable markets and new business activities.

Speaker #2: As we continued to reinvest in the business to support future growth. Moving to our Asset Servicing results on page six. Our Asset Servicing business also had a good start to the year.

Asset servicing average deposits were unusually strong increasing 11% sequentially, while average loan volume decreased 2% from fourth quarter levels, albeit off a small base.

Speaker #2: Boosted by healthy new business generation, coupled with robust capital markets activity. Assets under custody and administration for asset servicing clients were $17.3 trillion at quarter end, reflecting a 9% year-over-year increase.

Asset servicing pretax profit grew 59% over the prior year period, and the pre tax margin expanded 740 basis points year over year to 28, 3% benefiting from elevated deposit levels higher volatility driven capital markets activities and the pivot in our new business.

Speaker #2: Asset servicing fees totaled $741 million, up 10% over the prior year. Custody and fund administration fees were $498 million, also up 10% year-over-year, largely reflecting the impact from strong equity markets, favorable currency movements, and net new business.

Michael O'Grady: By digitizing work through agents, we further disconnect the relationship between growth and staffing, allowing for consistent execution across value chains and supporting stronger controls, all of which enable us to scale while maintaining rigorous risk management. With that backdrop, let me now turn to business performance for the quarter, beginning with Wealth Management. Momentum from last year carried into Q1 as improved organic growth, underpinned by both strong advisory and product fees, drove low double-digit trust fee growth. The regions delivered another quarter of solid results, with trust fee growth accelerating to 11%, supported by especially robust performance in the Central Region. We made good progress implementing various client acquisition initiatives across talent, centers of influence, and digital channels. Talent is our most important growth driver. We're advancing plans to increase revenue-generating roles by high single-digit percentages by year-end. This includes significant increases in critical producer roles.

Approach.

Moving to page seven on our balance sheet, our net interest income trends.

Our average, earning assets were up 7% on a linked quarter basis as higher deposit levels drove an increase in money market assets and in our securities portfolio.

Speaker #2: Assets under management for asset servicing clients were $1.3 trillion, up 11% over the prior year. Investment management fees within asset servicing were $169 million, up 11% year-over-year, due to favorable markets and new business activities.

The fix percentage of the securities portfolio remained flat at 52% in the first quarter, including the impact of swaps.

The duration of the securities portfolio dipped slightly to 144 at the end of the quarter and the duration of our total balance sheet continues to be under one year.

Speaker #2: Asset servicing average deposits were unusually strong. Increasing 11% sequentially, while average loan volume decreased 2% from fourth quarter levels, albeit off a small base.

Deposit levels were higher than expected throughout the quarter as a result of both elevated volatility and general uncertainty in the marketplace.

Speaker #2: Asset servicing pre-tax profit grew 59% over the prior-year period, and the pre-tax margin expanded 740 basis points year-over-year to 28.3%. This growth was driven by elevated deposit levels, higher volatility-driven capital markets activities, and the pivot in our new business approach.

Average deposits were 129 billion up 8% compared to fourth quarter levels and 11% year over year.

On the deposit base interest bearing deposits increased by 8% sequentially and noninterest bearing deposits increased by 5% remaining at 15% of the overall mix.

Michael O'Grady: Centers of influence, which include attorneys, accountants, and other professionals, are a vital referral source, driving nearly 25% of our new business activity. In Q1, we introduced a more robust and structured outreach framework to engage key centers of influence, including hiring a senior leader to accelerate this initiative, targeting a 10% increase in opportunities in 2026. Digital channels also continue to be an increasingly important source of new business. To boost the transition from interest to conversion, we're enhancing data integration, lead qualification, and personalization at scale. Notably, the opportunities originating from digital channels in Q1 grew by nearly 50% year over year. Within our global family office business, strength in international markets and investment management fees drove healthy performance. We also continued to scale family office solutions with early traction and client wins across several new markets.

Speaker #2: Moving to page seven on our balance sheet and net interest income trends. Our average earning assets were up 7% on a link quarter basis, as higher deposit levels drove an increase in money market assets and in our securities portfolio.

Net interest income on an FTE basis was up 1% to $662 million sequentially.

Up 15% compared to the prior year sequentially NII was favorably impacted by higher deposit levels, including growth in noninterest bearing deposits along with the impact from fixed asset repricing and deposit pricing actions, we've taken which was partially offset by the full quarter's impact from the fourth quarter rate cuts are needed.

Speaker #2: The fixed percentage of the securities portfolio remained flat at 52% in the first quarter, including the impact of swaps. The duration of the securities portfolio dipped slightly to 1.44 at the end of the quarter, and the duration of our total balance sheet continued to be under one year.

<unk> margin on an FTE basis decreased sequentially to 175%, primarily reflecting several large short term institutional deposits and the absence of the higher FTE adjustment recorded in the fourth quarter.

Speaker #2: Deposit levels were higher than expected throughout the quarter, as a result of both elevated volatility and general uncertainty in the marketplace. Average deposits were $129 billion, up 8% compared to fourth quarter levels, and 11% year-over-year.

Turning to our expenses on page eight.

Speaker #2: Within the deposit base, interest-bearing deposits increased by 8% sequentially, and non-interest-bearing deposits increased by 5%, remaining at 15% of the overall mix. Net interest income on an FTE basis was up 1% to $662 million sequentially, and up 15% compared to the prior year.

Expenses increased 6% year over year.

We delivered 410 basis points of trust fee operating leverage and 740 basis points of total operating leverage and our expense to trust fee ratio, while seasonally higher at 112, 4% was down 440 basis points year over year.

Michael O'Grady: Expanding our investment offerings, particularly within alternatives, remains an important focus area. We had seven funds in the market during Q1, up from five in the previous quarter. Looking ahead, we will continue to build out our alternatives platform with a number of new alternative investment funds and strategies planned for launch later this year, with the goal of increasing alts fundraising by 25%. These offerings, spanning areas such as venture capital, co-investments, and secondary funds, will broaden access and flexibility for clients seeking diversified sources of return while maintaining our disciplined approach to portfolio construction and manager selection. Collectively, these initiatives are strengthening our ability to generate repeatable, scalable growth while enhancing both the client and employee experience. Turning to Asset Servicing. The business delivered another quarter of solid organic growth and strengthened profitability, driven by disciplined execution of our strategic priorities.

Speaker #2: Sequentially, NII was favorably impacted by higher deposit levels, including growth in non-interest-bearing deposits, along with the impact from fixed asset repricing and deposit pricing actions we've taken.

This translated to a pretax margin of 32% up nearly 500 basis points year over year.

Turning to page nine our capital levels and regulatory ratios remained strong in the quarter.

Speaker #2: which was partially offset by the full quarter's impact from the fourth quarter rate cuts. Our net interest margin on an FTE basis decreased sequentially to 1.75%, primarily reflecting several large

And we continue to operate at levels, well above our required regulatory minimums.

Our common equity tier one ratio under the standardized approach decreased by 60 basis points on a linked quarter basis to 12%.

Speaker #1: Short-term institutional deposits and the absence of the higher FTE adjustment recorded in the fourth quarter. Turning to our expenses on page eight.

Driven by an increase in <unk> related to elevated capital markets activities.

Our tier one leverage ratio was seven 3%.

50 basis points from the prior quarter, driven by our larger balance sheet.

Speaker #1: Expenses increased 6% year over year. We delivered 410 basis points of trust fee operating leverage, and 740 basis points of total operating leverage.

At quarter end, our unrealized after tax loss on available for sale Securities was $446 million.

Speaker #1: And our expense to trust fee ratio . While seasonally higher at 112.4% , was down 440 basis points year over year This translated to a pre-tax margin of 32% , up nearly 500 basis points year over year .

We returned $510 million to common shareholders in the quarter through cash dividends of $151 million and stock repurchases of $359 million, reflecting a 100% payout ratio.

Michael O'Grady: Trust fee growth of 10%, coupled with significant NII and capital markets activity, fueled over 700 basis points of year-over-year pre-tax margin expansion. Our differentiated service model, deep institutional expertise, and strength in supporting complex client needs continues to resonate, particularly with global asset owners. During the quarter, we secured nine new mandates across foundations, endowments, and healthcare institutions, including four not-for-profit healthcare systems. As a result, we now serve three-quarters of the top 50 healthcare systems in the United States. Within alternatives, we remain a market leader, with assets under administration approaching $1 trillion across hedge funds, private capital, and semi-liquid vehicles. Demand for scalable institutional-grade services remains strong, supported by more than a dozen wins during the quarter. These included Igneo's planned Q2 launch of a new private equity fund focusing on energy infrastructure in Europe, further expanding our global relationship across Europe, Australia, and the US.

Turning to our guidance for the full year, we now expect NII to grow by mid to high single digits over the prior year.

Speaker #1: Turning to page nine , our capital levels and regulatory ratios remain strong in the quarter , and we continue to operate at levels well above our required regulatory minimums Our common equity tier one ratio under the standardized approach decreased by 60 basis points on a linked quarter basis to 12% , driven by an increase in RWA related to elevated capital markets activities Our tier one leverage ratio was 7.3% , down 50 basis points from the prior quarter , driven by our larger balance sheet at quarter end .

Which is an increase from our previous guide of up low to mid single digits.

We still expect to generate more than 100 basis points of positive operating leverage and we expect to return at least 100% of our earnings to shareholders.

Before we open it up for questions I'd like to take a moment to thank Jennifer Childe, our head of Investor Relations and congratulate her on her upcoming retirement.

Steve Carell currently the CFO of Northern Trust asset management will be stepping into the role and we will work closely with Jennifer over the coming weeks to ensure continuity.

Speaker #1: Our unrealized after tax loss on available for sale securities was 446 million . We returned 510 million to common shareholders in the quarter through cash dividends A positive operating leverage .

Jennifer has been a trusted partner to me and our leadership team and we're very grateful for her many contributions over the years.

And with that operator, please open the line for questions.

Okay.

Thank you and if you would like to ask a question. Please signal by pressing star one on your telephone keypad.

Michael O'Grady: We also announced an expansion of our CLO middle office services, delivering a unified operational and compliance framework that supports the full life cycle of CLOs as interest in this offering continues to grow. Strong momentum in capital markets continued in Q1 as elevated volatility and heightened client activity drove 34% growth, including another quarter of robust FX and core brokerage fees. We're also seeing continued interest in our digital asset strategy, particularly in custody, reporting, and servicing of tokenized assets as tokenization moves towards scale. During the quarter, we onboarded five new clients providing custody and other services for tokenized real-world assets, US stable coins, European money market funds, and carbon credits. Turning to Asset Management, NTAM made good progress in Q1 with strength across liquidity, alternatives, and equities, positioning the business well to meet its 2026 targets.

If you are using a speaker phone. Please make sure your mute function is turned off to allow.

Now your signal to reach our equipment.

Speaker #1: And we expect to return at least 100% of our earnings to shareholders . Before we open it up for questions , I'd like to take a moment to thank Jennifer Childe , our head of Investor Relations , and congratulate her on her upcoming retirement .

We ask that you please limit yourself to one question and with one follow up question again <unk> wanted to ask a question, we'll pause for just a moment to allow everyone an opportunity to signal for questions.

Yeah.

Speaker #1: Steve Carell, currently the CFO of Northern Trust Asset Management, will be stepping into the role and will work closely with Jennifer over the coming weeks to ensure continuity. Jennifer has been a trusted partner to me and the leadership team, and we're very grateful for her.

We will now take your first question coming from the line of Abraham <unk> with Bank of America.

Speaker #1: Many contributions over the years. And with that, operator, please open the line for questions.

Hey, good morning.

Good morning, Brian I guess, maybe just two questions one.

Just at the very top of the house when we look at the pre tax margin the auto <unk> performance this quarter, including in asset servicing for the entire business.

Speaker #2: Thank you And if you would like to ask the question , please signal by pressing star one on your telephone keypad . If you are using a speakerphone , please make sure your mute function is turned off to allow your signal to reach our equipment We ask that you please limit yourself to one question with one follow up question Again , you can press star one to ask a question .

Yeah.

Given just the there is a component of the macro being very strong for northern but there's also a self help component that was kicked off about a couple of years ago.

Michael O'Grady: Within liquidity, we've extended our streak to 13 consecutive quarters of positive flows with associated AUM increasing to $350 billion. Importantly, we continue to diversify our funding sources across global liquidity vehicles and third-party platforms while gaining overall market share. We also launched a tokenized share class for our NIF Treasury Instruments Portfolio during the quarter, marking Northern Trust's entry into the digital asset marketplace. By applying tokenization to institutional-grade liquidity strategies, we're offering clients a modern, digital-first way to access money market investments while maintaining our high standards for risk management and service. Within equities, ETF momentum remains strong with a fourth consecutive quarter of positive flows. This was supported by the successful launch of the Northern Trust US Equity ETF, our latest active ETF designed to deliver tax-efficient outcomes for investors.

About the sustainability of the auto E or the pretax margin just maybe frame for US where you would think there might be a little bit of <unk>.

Speaker #2: We'll pause for just a moment to allow everyone an opportunity to signal for questions. We'll now take your first question, coming from the line of Ibrahim Poonawala with Bank of America.

Click tailwind, that's leading to what earning on these relative to structural actions that have been taken over the last couple of years that may improve the resiliency.

Relative to what we reported for <unk>.

Sure Ebrahim, it's Mike I'll take that so.

Speaker #3: Good morning

Our goal is to be a consistently high performing company and as you pointed out that's something we put out there a few years ago, along with our one Northern Trust strategy. So we're very focused on executing on the three pillars of that strategy.

Speaker #4: Good morning

Speaker #3: I guess maybe just two questions . One , just at the very top of the house . When we look at the pre-tax margin , the ROE performance , this quarter , including an asset servicing , but for the entire business The given just there's a component of the macro being very strong for northern .

We will do that in different environments and this past quarter was a very constructive environment and so there is no question that we got a lift in our financial performance as a result of that.

Speaker #3: But there's also a self-help component that was kicked off about a couple of years ago. As we think about the sustainability of the ROE or the pre-tax margin, just maybe frame for us where you think there might be a little bit of cyclical tailwinds.

Michael O'Grady: We also launched our first Saudi Arabia equity index strategy with $1 billion in client capital, reflecting our expanded presence and strategic partnerships in the Middle East. NTAM continued to broaden its alternatives capabilities through active fundraising, which included 3 new sizable custom solutions and advisory mandates spanning secondaries, private credit, and private equity. Earlier in the quarter, we announced an important milestone in our third-party distribution strategy. Our institutional-quality direct indexing capabilities became available on Envestnet's platform, the largest independent TAMP, which supports approximately 1/3 of all financial advisors in the US. This will enable advisors to access our diverse lineup of equity strategies, empowering them to personalize portfolios at scale while managing tax outcomes.

On equity levels are still relatively high.

The level of volatility is attractive for our capital markets business and there is a fair amount of liquidity broadly speaking in the market, which helps us with deposits.

Speaker #3: That's leading to over-earning on these, relative to structural actions that have been taken over the last couple of years that may improve the resiliency, relative to what we reported for Q1.

With money market funds as well, so very constructive on that front.

That said, we also to your point I think about it from a self help perspective and try to just execute as well as possible, whether it's a really strong environment or or not so strong.

Speaker #3: Q

Speaker #4: Sure , Abraham , it's Mike . I'll take that . So our goal is to be a consistently high performing company . And as you pointed out , that's something we put out there a few years ago .

As far as the targets.

Last earnings call, we put out medium term targets.

Speaker #4: Along with our one Northern Trust strategy. So we're very focused on executing on the three pillars of that strategy. We'll do that in different environments, and this past quarter was a very constructive environment.

Some of those as I mentioned, we've got it largely hit or close to that said it was in this strong environment. So we're going to keep driving towards those medium term targets.

Got it and I guess, maybe just.

Speaker #4: And so there's no question that we got a lift in our financial performance as a result of that. Equity levels are still relatively high.

Switching to the global family office has been.

Michael O'Grady: Finally, reflecting the strength of our active investment platform and the expertise of our investment professionals, NTAM was recognized by Barron's as a top fund family in 2025, ranking fourth overall and fifth in general equity out of 46 fund families. To wrap up, as we enter Q2, our priorities are clear, and we remain focused on disciplined execution. With that, I'll turn it over to Dave to walk through our Q1 financial results.

Our strong business over the last few years, maybe talk to us around the win rate and the competitive landscape there and does the evolution of that client win once they're onboard how do you think about just the growth runway.

Speaker #4: The level of volatility is attractive for our capital markets business . And there's a fair amount of liquidity . Broadly speaking , in the market , which helps us with deposits , with money market funds as well .

And.

The opportunity to improve the ROI on their clients once they are onboard another thanks.

Speaker #4: So very constructive on that front . That said , you know , we also , to your point , think about it from a self-help perspective and try to just execute as well as possible , whether it's a really strong environment or , or not .

Sure.

No.

The global family Office business is absolutely one of our strongest businesses, it's an area where truly we can deliver the entire firm.

David Fox: Thanks, Mike. Let me join Jennifer and Mike in welcoming you to our Q1 2026 earnings call. Let's discuss the financial results of the quarter starting on page four. This morning, we reported Q1 net income of $526 million, earnings per share of $2.71, and our return on average common equity was 17.4%. We're off to a strong start to the year. We delivered our seventh consecutive quarter of positive organic growth, positive operating leverage, and year-over-year improvement in our expense to trust fee ratio, all excluding notables. We also returned 100% of our earnings to shareholders. Relative to the prior year, currency movements favorably impacted our revenue growth by approximately 120 basis points and unfavorably impacted our expense growth by approximately 130 basis points.

Dave Fox: Thanks, Mike. Let me join Jennifer and Mike in welcoming you to our Q1 2026 earnings call. Let's discuss the financial results of the quarter starting on page four. This morning, we reported Q1 net income of $526 million, earnings per share of $2.71, and our return on average common equity was 17.4%. We're off to a strong start to the year. We delivered our seventh consecutive quarter of positive organic growth, positive operating leverage, and year-over-year improvement in our expense to trust fee ratio, all excluding notables. We also returned 100% of our earnings to shareholders. Relative to the prior year, currency movements favorably impacted our revenue growth by approximately 120 basis points and unfavorably impacted our expense growth by approximately 130 basis points.

Speaker #4: So strong as far as the targets at the last earnings call we put out medium term targets . You know , some of those , as I mentioned , we've kind of largely hit or close to .

It's the best of all three of the businesses.

Working together for these largest families and their family offices and as you pointed out it's grown at a high rate and once again here in the first quarter the organic growth rate for GMO was above the average for the for the businesses.

Speaker #4: That said, you know, it was in this strong environment. So we're going to keep driving towards those medium-term targets.

Speaker #3: Got it . And I guess maybe just switching to the global family office . It's been a strong business over the last few years .

And there's a number of dynamics that are allowing us to continue to grow at that high high rate. One is certainly just the competitive position that we have in our offering on that front.

Speaker #3: Maybe talk to us around the win rate and the competitive landscape there, and just the evolution of that client once they're on board.

Speaker #3: How do you think about just the growth runway and the opportunity to improve the ROI on that client once they're on board at Northern?

But second is that it's still largely a U S.

Domiciled, our focused business right.

Right now international is less than 15%.

Speaker #3: Thanks

Speaker #4: Sure . So the global family Office business is absolutely one of our strongest businesses . It's an area where , truly we can deliver the entire firm It's the best of all three of the business's .

The client base and the revenues and yet it's growing at a faster growth rate and we do believe that this is something that is not only I'll say attractive offering globally. But also there is something that is scalable globally and then to the latter part of your question Youre absolutely right that.

David Fox: Relative to the prior period, currency movements were immaterial to both revenue and expense growth. Trust investment and other servicing fees totaled $1.3 billion, an 11% increase compared to last year, driven by favorable markets, currency, and new business generation. Other non-interest income was up 33% year over year, reflecting very strong FX trading and securities commission and trading income, which benefited from elevated macro volatility and uncertainty. Net interest income on an FTE basis was up 1% sequentially to $662 million, a new quarterly record, and up 15% from a year ago. Our assets under custody administration were down 1% sequentially, but up 10% compared to the prior year. Our assets under management were also down 1% sequentially and up 11% year over year.

Dave Fox: Relative to the prior period, currency movements were immaterial to both revenue and expense growth. Trust investment and other servicing fees totaled $1.3 billion, an 11% increase compared to last year, driven by favorable markets, currency, and new business generation. Other non-interest income was up 33% year over year, reflecting very strong FX trading and securities commission and trading income, which benefited from elevated macro volatility and uncertainty. Net interest income on an FTE basis was up 1% sequentially to $662 million, a new quarterly record, and up 15% from a year ago. Our assets under custody administration were down 1% sequentially, but up 10% compared to the prior year. Our assets under management were also down 1% sequentially and up 11% year over year.

Speaker #4: And working together for these largest families and their family offices . And as you pointed out , it's grown at a high rate .

Often.

The relationship with the family office can start with a more limited.

Speaker #4: And once again , here in the first quarter , the organic growth rate for Gfo was above the average for the for the businesses .

Breadth of offering so it may focused primarily on custody and reporting to start but then that's the opportunity to do much more with the family office.

When it comes to other opportunities, particularly along the lines of investment management and you saw some of that in the first quarter as well so.

We think it's a great business and continues to have a lot of upside.

Got it thank you.

Sure.

Your next question will come from the line of Manan <unk> with Morgan Stanley.

Yes.

Hi, good morning.

David Fox: Overall, our credit quality remains very strong, with all key credit metrics in line with historical standards. We recorded a $3 million reserve release in Q1, driven by improvements to the C&I portfolio, which was partially offset by a small number of non-performing loans. Our effective tax rate was 25%, down 150 basis points from the previous quarter due to higher benefits associated with share-based compensation. We still expect the effective tax rate in 2026 to be approximately 26% to 26.5%. There were no notables in either Q1 2026 or Q1 2025. Turning to our Wealth Management business on page five. Wealth Management started the year well, with strength in trust fees across both GFO and the regions, spanning both advisory and product channels.

Dave Fox: Overall, our credit quality remains very strong, with all key credit metrics in line with historical standards. We recorded a $3 million reserve release in Q1, driven by improvements to the C&I portfolio, which was partially offset by a small number of non-performing loans. Our effective tax rate was 25%, down 150 basis points from the previous quarter due to higher benefits associated with share-based compensation. We still expect the effective tax rate in 2026 to be approximately 26% to 26.5%. There were no notables in either Q1 2026 or Q1 2025. Turning to our Wealth Management business on page five. Wealth Management started the year well, with strength in trust fees across both GFO and the regions, spanning both advisory and product channels.

I wanted to start on the on the operating leverage side, I mean 740 basis points of operating leverage this quarter really strong.

I think you reiterated the guide of generating over 100 basis points of operating leverage. This year can you help us just think through how.

How we should think about I guess expense growth this year.

Are there any investments that were maybe maybe got pushed out any timing differences or anything else, we should be considering here.

Our expense growth.

Methodologies.

Allergy Hasnt really changed if you think a little bit about.

The expense growth in this in this particular quarter most.

Most of it was driven by incentives.

And there was some noise from currency as well so we're actually when you make more money you, obviously youre going to have a rising expense line.

We still have in process the idea behind productivity funding investment.

And then solving for an expense growth.

David Fox: Assets under management for our Wealth Management clients were $498 billion at quarter end, down 2% sequentially, but up 11% year-over-year. Trust, investment, and other servicing fees for Wealth Management clients were $601 million, up 11% year-over-year, with particularly robust organic growth within GFO. Average deposits within Wealth Management were flat sequentially, while average loans were up 1%. Wealth Management's pre-tax profit rose 9% over the prior year period, while the pre-tax margin remained flat at 37.1% as we continued to reinvest in the business to support future growth. Moving to our Asset Servicing results on page 6. Our Asset Servicing business also had a good start to the year, boosted by healthy new business generation coupled with robust capital markets activity.

Dave Fox: Assets under management for our Wealth Management clients were $498 billion at quarter end, down 2% sequentially, but up 11% year-over-year. Trust, investment, and other servicing fees for Wealth Management clients were $601 million, up 11% year-over-year, with particularly robust organic growth within GFO. Average deposits within Wealth Management were flat sequentially, while average loans were up 1%. Wealth Management's pre-tax profit rose 9% over the prior year period, while the pre-tax margin remained flat at 37.1% as we continued to reinvest in the business to support future growth. Moving to our Asset Servicing results on page 6. Our Asset Servicing business also had a good start to the year, boosted by healthy new business generation coupled with robust capital markets activity.

As a result of that and so we haven't changed.

What I would say is the productivity targets for the first quarter hit their target.

The investments that we wanted to make we were able to make and the expense growth. We manage to was pretty much spot on what we thought it would be and so that discipline.

And flexibility is.

Built into our planning, which is why at the beginning of the year I talked more about operating leverage and I did about.

Attaching myself to a finite expense growth number we wanted to have the flexibility to react when markets were conducive, but also have the.

Discipline to be able to flex down in environments that are less so.

Yeah, our expense growth. Um uh methodology hasn't really changed um if you think a little bit about um the expense growth in this, in this particular quarter.

Yeah, our expense growth methodology hasn't really changed. If you think a little bit about the expense growth in this, in this particular quarter...

When I think about expenses I think about a dynamic expense line.

It basically is something we look at it on a very continuous basis and so.

Most of it was driven by incentives, and there was some noise from currency as well. So, actually, when you make more money, you obviously are going to have a rising expense line.

Most of it was driven by incentives, and there was some noise from currency as well. So actually, when you make more money, obviously you're going to have a rising expense line.

It's very much driven today by the productivity on the investment side of the equation.

David Fox: Assets under custody and administration for Asset Servicing clients were $17.3 trillion at quarter end, reflecting a 9% year-over-year increase. Asset Servicing fees totaled $741 million, up 10% over the prior year. Custody and fund administration fees were $498 million, also up 10% year-over-year, largely reflecting the impact from strong equity markets, favorable currency movements, and net new business. Assets under management for Asset Servicing clients were $1.3 trillion, up 11% over the prior year. Investment management fees within Asset Servicing were $169 million, up 11% year-over-year due to favorable markets and new business activities.

Dave Fox: Assets under custody and administration for Asset Servicing clients were $17.3 trillion at quarter end, reflecting a 9% year-over-year increase. Asset Servicing fees totaled $741 million, up 10% over the prior year. Custody and fund administration fees were $498 million, also up 10% year-over-year, largely reflecting the impact from strong equity markets, favorable currency movements, and net new business. Assets under management for Asset Servicing clients were $1.3 trillion, up 11% over the prior year. Investment management fees within Asset Servicing were $169 million, up 11% year-over-year due to favorable markets and new business activities.

Got it.

And then maybe to pivot over to capital.

Any thoughts on the new Basel that gave proposal and.

Maybe how it impacts your capital deployment strategy going forward.

Yes, I think it's too soon to to to.

Think about how it might impact the capital return part of it I will say that on measure our preliminary view of it is and that could be a net positive for us as it relates to obviously the commercial loan side and on the operational risk is something that we probably have less of them from some other peers.

We still have in process, the idea behind productivity funding investment and then solving for an expense growth, uh, as a result of that. And so we haven't changed. And what I would say is the productivity targets for the first quarter, hit their target, uh, the Investments that we wanted to make, we were able to make. And the expense growth, we managed to was pretty much spot on where we thought it would be. And so that that discipline and flexibility uh is built into our planning which is why at the beginning of the year I talked more about operating leverage and I did about attaching myself to a finite expense growth number.

We still have in process the idea behind productivity, funding investment, and then solving for an expense growth as a result of that. And so we haven't changed. And what I would say is the productivity targets for the first quarter hit their target. Of the investments that we wanted to make, we were able to make. And the expense growth we managed to was pretty much spot on where we thought it would be. And so that discipline and flexibility is built into our planning, which is why at the beginning of the year I talked more about operating leverage than I did about attaching myself to a finite expense growth number.

Peer banks and so net net we think that it's going to be a positive for our WMA.

But it's still early days, we're in the comment period, and so I would say is.

David Fox: Asset Servicing average deposits were unusually strong, increasing 11% sequentially, while average loan volume decreased 2% from Q4 levels, albeit off a small base. Asset Servicing pre-tax profit grew 59% over the prior year period, and the pre-tax margin expanded 740 basis points year over year to 28.3%, benefiting from elevated deposit levels, higher volatility-driven capital markets activities, and the pivot in our new business approach. Moving to page seven on our balance sheet and net interest income trends. Our average earning assets were up 7% on a linked quarter basis, as higher deposit levels drove an increase in money market assets and in our securities portfolio. The fixed percentage of the securities portfolio remained flat at 52% in Q1, including the impact of swaps.

Dave Fox: Asset Servicing average deposits were unusually strong, increasing 11% sequentially, while average loan volume decreased 2% from Q4 levels, albeit off a small base. Asset Servicing pre-tax profit grew 59% over the prior year period, and the pre-tax margin expanded 740 basis points year over year to 28.3%, benefiting from elevated deposit levels, higher volatility-driven capital markets activities, and the pivot in our new business approach. Moving to page seven on our balance sheet and net interest income trends. Our average earning assets were up 7% on a linked quarter basis, as higher deposit levels drove an increase in money market assets and in our securities portfolio. The fixed percentage of the securities portfolio remained flat at 52% in Q1, including the impact of swaps.

Taking a cautious look to it don't think its going to have a massive impact but if it does it will certainly be net positive at this point.

We wanted to have the flexibility to react when markets were conducive but also have the, uh, discipline to be able to flex down in in environments that are less. So, when I think about expenses, I think about a dynamic expense line, uh, that that basically is something we look at on a very continuous basis. And so, um, it's very much driven today, by the productivity and the investment side of the equation.

Okay.

Got it thanks, very much and congratulations Jennifer.

Thank you.

Your next question will come from the line of Mike Mayo with Wells Fargo Securities.

Got it. Um and then maybe to Pivot over to uh Capital um any thoughts on uh the new Baseline game proposal and uh maybe how it impacts your Capital deployment strategy going forward.

Hi.

Look.

<unk> is growing double digits as you said.

Revenues up 14% the higher end of return targets. So it seems like it was working this quarter, but what caught my attention is I think new news that you look to grow well producers by 7% to 9% I think that's this year.

And so.

And correct me if you disagree, but I think this is the most competitive market we've seen in the wealth business.

David Fox: The duration of the securities portfolio dipped slightly to 1.44 at the end of the quarter, and the duration of our total balance sheet continued to be under 1 year. Deposit levels were higher than expected throughout the quarter as a result of both elevated volatility and general uncertainty in the marketplace. Average deposits were $129 billion, up 8% compared to Q4 levels and 11% year-over-year. Within the deposit base, interest-bearing deposits increased by 8% sequentially, and non-interest-bearing deposits increased by 5%, remaining at 15% of the overall mix. Net interest income on an FTE basis was up 1% to $662 million sequentially, and up 15% compared to the prior year.

Dave Fox: The duration of the securities portfolio dipped slightly to 1.44 at the end of the quarter, and the duration of our total balance sheet continued to be under 1 year. Deposit levels were higher than expected throughout the quarter as a result of both elevated volatility and general uncertainty in the marketplace. Average deposits were $129 billion, up 8% compared to Q4 levels and 11% year-over-year. Within the deposit base, interest-bearing deposits increased by 8% sequentially, and non-interest-bearing deposits increased by 5%, remaining at 15% of the overall mix. Net interest income on an FTE basis was up 1% to $662 million sequentially, and up 15% compared to the prior year.

Almost ever.

The question is I'm, not saying, it's a wrong strategy.

Why now do you look to increase that.

Producers and what's your pitch because I think every literally every large bank large brokerage firms looking to expand wealth at this time what is your pitch when you try to get the new producers.

Yeah, I think it's too soon to to to to um, think about how it might impact the capital, uh, Return part of it. I will say that on measure our preliminary view of it as it is. A net, could be a net positive for us, uh, as it relates to, obviously, the commercial loan side. And on the operational risk is something that we probably have less of and some some other, uh, peer pure Banks. And so net, net. We think that it's going to be a positive for rwa, uh, but it's still early days, we're in the comment period. And so, I would say is having taking a cautious look to it. Don't think it's going to have a massive impact, but if it does, it will certainly be net positive at this point.

I think it's too soon to to to um, think about how it might impact the capital, uh, Return part of it. I will say that on measure our preliminary view of it is it is a net, could be a net positive for us, uh, as it relates to, obviously the commercial loan side and on the operational risk is something that we probably have less of and some, some other uh, pure pure Banks. And so net net, we think that it's going to be a positive for rwa, uh, but it's still early days, we're in the comment period. And so, I would say is having taking a cautious look to it. Don't think it's going to have a massive impact, but if it does, it will certainly be net positive at this point.

Got it. Thanks so much. And, uh, congratulations, Jennifer.

Thank you.

Thanks, Mike. So you are right, we are focus on hiring and investing in talent in the wealth management business and I, you're absolutely right. It's a very competitive marketplace for the best talent, which is what we're looking for and we are trying to focus on roles that are.

Your next question will come from the line of Mike Mayo with Wells Fargo Securities.

Or hi. Um,

Revenue generating for us and within that producer roles and part of it is as we look back.

David Fox: Sequentially, NII was favorably impacted by higher deposit levels, including growth in non-interest-bearing deposits, along with the impact from fixed asset repricing and deposit pricing actions we've taken, which was partially offset by the full quarter's impact from the Q4 rate cuts. Our net interest margin on an FTE basis decreased sequentially to 1.75%, primarily reflecting several large short-term institutional deposits and the absence of the higher FTE adjustment recorded in the Q4. Turning to our expenses on page eight. Expenses increased 6% year over year. We delivered 410 basis points of trust fee operating leverage and 740 basis points of total operating leverage, and our expense to trust fee ratio, while seasonally higher at 112.4%, was down 440 basis points year over year. This translated to a pre-tax margin of 32%, up nearly 500 basis points year over year. Turning to page nine.

Dave Fox: Sequentially, NII was favorably impacted by higher deposit levels, including growth in non-interest-bearing deposits, along with the impact from fixed asset repricing and deposit pricing actions we've taken, which was partially offset by the full quarter's impact from the Q4 rate cuts. Our net interest margin on an FTE basis decreased sequentially to 1.75%, primarily reflecting several large short-term institutional deposits and the absence of the higher FTE adjustment recorded in the Q4. Turning to our expenses on page eight. Expenses increased 6% year over year. We delivered 410 basis points of trust fee operating leverage and 740 basis points of total operating leverage, and our expense to trust fee ratio, while seasonally higher at 112.4%, was down 440 basis points year over year. This translated to a pre-tax margin of 32%, up nearly 500 basis points year over year. Turning to page nine.

Over the last several years, although that that group has grown it has grown at a lower rate.

Look, uh, wealth is growing double digits. Uh, as you said, um, firmwide revenues up 14%, the higher end of return targets. So it seems like it was working this quarter, but what got my attention is, I think, new news that you look to grow wealth producers by 7 to 9%. I think that's this year. Um, and so

And then the growth of the business itself and so there's an acknowledgment that we need more talent to increase the growth rate the organic growth rate within wealth.

Look, uh, wealth is growing double digits. Uh, as you said, firmwide revenues up 14%—the higher end of return targets. So it seems like it was working this quarter, but what got my attention is, I think new news that you look to grow wealth producers by 7 to 9%—I think that's this year. Um, and so, and correct me if you disagree, but I think this is the most competitive market we've seen in the wealth business, like almost ever.

As far as being able to.

Have an attractive value proposition.

For wealth wealth management professionals and advisors, we think we have a very different.

And correct me if you disagree. But I think this is the most competitive market we've seen in the wealth business like almost ever. Um, so the question is, I'm not saying it's a wrong strategy, is the question is why? Now, if you look to increase the wealth producers and what's your pitch because I think every literally, every large Bank large brokerage firm is looking to expand wealth at this time. What's your pitch when you try to get the, the new producers?

Um so the question is, I'm not saying it's a wrong strategy because the question is why. Now, if you look to increase the wealth producers and what's your pitch because I think every literally every large Bank large brokerage firm is looking to expand wealth at this time. What's your pitch when you try to get the, the new producers?

Value proposition.

Have an excellent brand.

We are positioned within the upper tiers of the market, which I'll say the highest levels of expertise.

I want to be able to not only serve that client base, but look to bring on new clients on that front.

We've been investing in the platform to do that we've talked a lot about.

Thanks, Mike. So uh, you were right. We are focused on uh, hiring and investing in talent in the wealth management business, and uh, you're absolutely right. It's a very competitive marketplace for the best talent, uh, which is what we're looking for. And we are trying to focus on roles that are re

We offer solutions.

Which we believe really is a differentiated offering.

In our view.

Better and more attractive than standalone.

Virtual family offices.

It brings a full set.

David Fox: Our capital levels and regulatory ratios remained strong in the quarter, and we continue to operate at levels well above our required regulatory minimums. Our common equity Tier 1 ratio under the standardized approach decreased by 60 basis points on a linked quarter basis to 12%, driven by an increase in RWA related to elevated capital markets activities. Our Tier 1 leverage ratio was 7.3%, down 50 basis points from the prior quarter, driven by our larger balance sheet. At quarter end, our unrealized after-tax loss on available-for-sale securities was $446 million. We returned $510 million to common shareholders in the quarter through cash dividends of $151 million and stock repurchases of $359 million, reflecting 100% payout ratio. Turning to our guidance.

Dave Fox: Our capital levels and regulatory ratios remained strong in the quarter, and we continue to operate at levels well above our required regulatory minimums. Our common equity Tier 1 ratio under the standardized approach decreased by 60 basis points on a linked quarter basis to 12%, driven by an increase in RWA related to elevated capital markets activities. Our Tier 1 leverage ratio was 7.3%, down 50 basis points from the prior quarter, driven by our larger balance sheet. At quarter end, our unrealized after-tax loss on available-for-sale securities was $446 million. We returned $510 million to common shareholders in the quarter through cash dividends of $151 million and stock repurchases of $359 million, reflecting 100% payout ratio. Turning to our guidance.

Set of resources and banking capabilities that we have.

And yet it's also.

An opportunity to leverage.

The history and the fiduciary capabilities that we have in trust capabilities.

So we think for an advisor or a professional thats looking to be.

Thanks Mike. So uh, you're you're right, we are focused on hiring and investing in talent in the wealth management business and I you're absolutely right. It's a very competitive Marketplace for the best talent, uh, which is what we're looking for. And we are trying to focus on roles that are Revenue generating for us and within that producer roles. And, you know, part of it is as we look back, uh, over the last, uh, several years. Although that, that group has grown, it has grown at a, a lower rate, uh, than the, the growth of the business itself. And so there's an acknowledgement that we need, you know, more talent to increase the, the growth rate, the organic growth rate within wealth. Um, as far as being able to uh have an attractive value proposition uh for wealth, uh wealth management professionals. And advisors, you know, we think we have a very different uh value proposition. Uh we have

Be able to apply their trade if you will and succeed.

We offer the best platform for them to be able to do that so.

That's a big part of it is it is a different model here at northern.

And that as you know that's part of why we think it's it's more attractive.

And as part of this increase investing for growth, whether it's wealth or firm wide can you rattled through a lot of growth initiatives.

Is that maybe I got this wrong, but you're still guiding for 100 basis points of operating leverage this year, but you had over 700 basis points of operating leverage in the first quarter is the reason for no change in that guide.

David Fox: For the full year, we now expect NII to grow by mid to high single digits over the prior year, which is an increase from our previous guide of up low to mid single digits. We still expect to generate more than 100 basis points of positive operating leverage, and we expect to return at least 100% of our earnings to shareholders. Before we open it up for questions, I'd like to take a moment to thank Jennifer Childe, our Head of Investor Relations, and congratulate her on her upcoming retirement. Steve Carroll, currently the CFO of Northern Trust Asset Management, will be stepping into the role and will work closely with Jennifer over the coming weeks to ensure continuity. Jennifer has been a trusted partner to me and the leadership team, and we're very grateful for her many contributions over the years.

Dave Fox: For the full year, we now expect NII to grow by mid to high single digits over the prior year, which is an increase from our previous guide of up low to mid single digits. We still expect to generate more than 100 basis points of positive operating leverage, and we expect to return at least 100% of our earnings to shareholders. Before we open it up for questions, I'd like to take a moment to thank Jennifer Childe, our Head of Investor Relations, and congratulate her on her upcoming retirement. Steve Carroll, currently the CFO of Northern Trust Asset Management, will be stepping into the role and will work closely with Jennifer over the coming weeks to ensure continuity. Jennifer has been a trusted partner to me and the leadership team, and we're very grateful for her many contributions over the years.

It just conservatism or off because you think you might be ramping up some spending as you bring on these new producers.

Yes, so as I mentioned before obviously, it's a very constructive backdrop and macro environment for us. So there is definitely some acknowledgement that the strong revenue growth here.

Uh, wealth management professionals. And advisors, you know, we think we have a very different, uh, value proposition. Uh, we have an excellent brand. Uh, we are positioned within the upper tiers of the market, which I'll say the highest levels of of expertise, you know, want to be able to not only serve that client base, but look to bring on new clients, on that front. Um, we've been investing in the platform to do that. We've talked a lot about, uh, family Office Solutions, uh, which we believe really is a differentiated offering. Uh, it's in our view, uh, you know, better and more attractive than Standalone. Uh, you know, virtual family offices, uh, because it brings the full, uh, set of resources and banking capabilities that we have. Um, and yet it's also, you know, an opportunity to, to leverage, uh, the the history and the fiduciary capabilities that we have and Trust capabilities.

We have an excellent brand. Uh, we are positioned within the upper tiers of the market, which I'll say are the highest levels of expertise. You know, we want to be able to not only serve that client base, but look to bring on new clients on that front. Um, we've been investing in the platform to do that. We've talked a lot about, uh, Family Office Solutions, which we believe really is a differentiated offering. Uh, it's in our view, uh, you know, better and more attractive than standalone, uh, you know, virtual family offices, uh, because it brings the full, uh, set of resources and banking capabilities that we have. Um, and yet it's also, you know, an opportunity to leverage the history and the fiduciary capabilities that we have and trust capabilities. Um, so we think for an advisor, or a professional, that's looking to, uh, be able to—

Was driven and supported by that backdrop, we don't know what's going to happen as we go through the year.

And there are also some tough comps in the sense of last year, we had strong second third fourth quarters.

Um, so we think for an advisor or a professional that's looking to, uh, be able to, you know, apply their trade, if you will, and succeed, uh, we offer the best platform for them to be able to do that. So, um, that's a big part of it. It is—it is a different model here at Northern, uh, and that, as you know, that's part of why we think it's, uh, it's more attractive.

So acknowledging that that's ahead of us as well and as Dave mentioned, we've really tried to align our I'll say resource deployment strategy based on productivity.

You know, apply their trade, if you will, and succeed. Uh, we offer the best platform for them to be able to do that. So, um, that's a big part of it. It is, it is a different model here at Northern, uh, and that, as you know, that's part of why we think it's, uh, it's more attractive.

David Fox: With that, operator, please open the line for questions.

Dave Fox: With that, operator, please open the line for questions.

And as part of this, um, increased investing for growth, whether it's wealth or firm load—because you rattled through a lot of growth initiatives.

And as part of this, um, increased investing for growth, whether it’s wealth or, or firm load, because you rattled through a lot of growth initiatives.

And looking to ensure that we're driving productivity to fund that investment.

Operator: Thank you. If you would like to ask the question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We ask that you please limit yourself to one question and with one follow-up question. Again, you can press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. We'll now take your first question, coming from the line of Ebrahim Poonawala with Bank of America.

So we haven't pulled off of that.

Yes, we expect to continue to invest in these areas that we talked about but the plan is to try to generate more productivity to do it and not necessarily change the.

Is that—and maybe I got this wrong—but you're still guiding for 100 basis points of operating leverage this year, but you had over 700 basis points of operating leverage in the first quarter. Is the reason for no change in that guide just conservatism, or is it because you think you might be ramping up some spending as you bring on these new producers?

Is that—and I maybe got this wrong—but are you still guiding for 100 basis points of operating leverage this year? You had over 700 basis points of operating leverage in the first quarter. Is the reason for no change in that guide just conservatism, or is there something else? For example, do you think you might be ramping up some spending as you bring on these new producers?

The expense growth profile that we've been on.

Got it thank you.

Add to that the direction of travel on expenses is down.

For the remainder of the year.

Okay. That's helpful. Thank you.

Next question will come from the line of Brennan Hawken with BMO capital markets.

Yeah.

Ebrahim Poonawala: Good morning.

Good morning, Thanks for taking my question.

David Fox: Morning.

Michael O'Grady: Morning.

Operator: Morning.

Dave Fox: Morning.

Ebrahim Poonawala: I guess maybe just two questions. One, just at the very top of the house, when we look at the pre-tax margin, the ROE performance this quarter, including in asset servicing, but for the entire business. Given just there's a component of the macro being very strong for Northern, but there's also a self-help component that was kicked off about a couple of years ago. As we think about the sustainability of the ROE or the pre-tax margin, just maybe frame for us where you think there might be a little bit of cyclical tailwinds that's leading to over-earning on these relative to structural actions that have been taken over the last couple of years. That may improve the resiliency relative to what we reported for Q1.

So.

Dave.

You flagged strength as far as the deposit growth goes.

And it looks like a lot of from a presentation a lot of the deposit growth was driven by the servicing business. You also quite some large institutional deposits weighing on NIM. So was that part of that deposit strength from some large.

Institutional deposits and how should we be thinking about the profile of deposits as we move forward and what your expectations are for that through the course of the year.

Yeah, so as I uh mentioned before, obviously it's a very constructive backdrop and macro environment for us. So there's definitely some acknowledgement that the strong Revenue growth here. Uh, was driven and supported by that that backdrop. We don't know what's going to happen as we go through the year. Um, and there are also some tough comps in the sense of last year. Uh, we had strong second third, fourth quarters, uh so acknowledging that that that's ahead of us as well. And as as Dave mentioned, we've really tried to align our. I'll say resource deployment strategy based on productivity uh and and looking to ensure that we're driving productivity to fund that investment. Um and so we we haven't pulled off of that. Uh yes. Uh we expect to continue to invest in these areas that we talked about but but the plan is to try to generate more productivity to do it and and not necessarily change the the expense growth

Profile that we've been on.

Happen as we go through the year. Um, and there are also some tough comps in the sense of last year. Uh we had strong second third, fourth quarters. Um so acknowledging that that that's ahead of us as well. And as Dave mentioned, we've really tried to align our. I'll say resource deployment strategy based on productivity uh and and looking to ensure that we're driving productivity to fund that investment. Um and so we we haven't pulled off of that. Uh yes. Uh we expect to continue to invest in these areas that we talked about but but the plan is to try to generate more productivity to do it and and not necessarily change the the expense growth profile that we've been on.

Yeah, and I just like that.

I added that, see, the direction of travel on expenses is down.

I can add to that. You see, the direction of travel on expenses is down.

Yes, we had some.

The remainder of the year.

Largely unexpected extremely large deposits I mean, you've heard me speak in the past about why we keep our capital ratios, where we keep them and we want our balance sheet to be opened at all times for our largest clients and so occasionally some of our clients will do some strategic repositioning and we want to be in a position to cash.

Okay, that's helpful. Thank you.

Michael O'Grady: Sure, Ebrahim. It's Mike. I'll take that. Our goal is to be a consistently high-performing company, and as you pointed out, that's something we put out there a few years ago, along with our One Northern Trust strategy. We're very focused on executing on the three pillars of that strategy. We'll do that in different environments. This past quarter was a very constructive environment. There's no question that we got a lift in our financial performance as a result of that. Equity levels are still relatively high. The level of volatility is attractive for our capital markets business, and there's a fair amount of liquidity, broadly speaking in the market, which helps us with deposits, with money market funds as well. Very constructive on that front.

Next question will come from the line of Brennan Hawken with BMO Capital Markets.

Next question will come from the line of Brennan Hawkins with BMO Capital Markets.

Those deposits when they do that they're not core operational deposits.

Are there for a long period of time, but we want to be able to accommodate them. So in this particular quarter.

It really drove up the average deposit levels significantly and that isn't going to obviously translate into Q2, although I do think the increase was.

Uh, good morning. Thanks for taking my question. Um, so, so, um, Dave, uh, you know, you, uh, flagged strength, uh, as far as the deposit growth goes, and, um, it looks like a lot of—from the presentation—a lot of the deposit growth was driven by the servicing business. You also,

It was roughly $9 billion and I think we're going to keep four to five of that so in terms of average deposits, but at the end of the day. That's really what you saw there was client driven specific or very large deposits from just a handful of just really important did clients.

Uh good morning. Thanks for taking my question. Um so so um Dave uh you know you uh flagged strength uh as far as the deposit growth goes and um and it looks like a lot of from the presentation. A lot of the deposit growth was was driven by the servicing business. You also flagged some large institutional, deposits, Weighing on Nim. So was that part of that deposit strength, some some large uh, institutional deposits. And how should we be thinking about the profile of deposits as we move?

Forward. And what your expectations are for that, uh, through the course of the year? Thanks.

Flags Marge, institutional deposits, weighing on NIM. So was that part of that deposit strength, some large institutional deposits? And how should we be thinking about the profile of deposits as we move forward, and what your expectations are for that through the course of the year? Thanks.

Yeah. Yeah, we had some, uh,

Got it okay that makes a lot of sense and you.

Michael O'Grady: That said, we also, to your point, think about it from a self-help perspective and try to just execute as well as possible, whether it's a really strong environment or not so strong. As far as the targets, at the last earnings call, we put out medium-term targets. Some of those, as I mentioned, we've kind of largely hit or are close to. That said, it was in this strong environment. We're going to keep driving towards those medium-term targets.

You also spoke to robust organic growth and the CFO business.

But we didn't see a lot of deposit trends, we certainly saw the revenue look good.

Is the.

Organic growth in that business less tied to deposits. The way, we normally think about that and therefore, that's the divergence and also maybe you could you give a little color around your new efforts around the GSO.

You know, largely unexpected extremely large deposits. I mean, you, you've heard me speak in the past about why we keep our Capital ratios where we keep them, and we want our balance sheet to be open at all times for our largest clients. And so occasionally, uh, some of our clients will do, you know, some strategic repositioning and we want to be in a position to capture those deposits when they do that, they're not core operational deposits. They they aren't there for a long period of time, but we want to be able to accommodate them. So in this particular quarter,

You know, largely unexpected, extremely large deposits. I mean, you’ve heard me speak in the past about why we keep our capital ratios where we keep them, and we want our balance sheet to be open at all times for our largest clients. And so occasionally, uh, some of our clients will do, you know, some strategic repositioning, and we want to be in a position to capture those deposits when they do that. They’re not core operational deposits—they aren’t there for a long period of time—but we want to be able to accommodate them. So in this particular quarter,

Ebrahim Poonawala: Got it. I guess maybe just switching to the Global Family Office. It's been a strong business over the last few years. Maybe talk to us around the win rate and the competitive landscape there, and just the evolution of that client once they're on board. How do you think about just the growth runway and the opportunity to improve the ROI on that client once they're on board and all those things?

And how that's going and when you guys talk about GFR do you categorize those two together.

Sure. So just just on the liquidity part of the question there Brennan. So these family offices have significant liquidity, which they are.

I'll say utilizing and moving around quite a bit and so it can move from.

Specific very large deposits from just a handful of really important, big clients.

You know, it really drove up the, um, average deposit level significantly and that isn't going to obviously translate into a Q2. Although I, I do think the increase, uh, was roughly 9 billion, and I think we're going to keep 4 to 5 of that. So in terms of average deposits, but at the end of the day, that that's really what you saw, there was client driven specific. Well, a very large deposits from just a handful of just really important. Big clients.

On the balance sheet as deposits to into our money market funds or short term treasuries. So it's a I'll say a pretty active management of liquidity that we do I'll stay on their part and for them.

Michael O'Grady: Sure. The global family office business is absolutely one of our strongest businesses. It's an area where truly we can deliver the entire firm. It's the best of all three of the businesses in working together for these largest families and their family offices. As you pointed out, it's grown at a high rate. Once again, here in Q1, the organic growth rate for GFO was above the average for the businesses. There's a number of dynamics that are allowing us to continue to grow at that high rate. One is certainly just the competitive position that we have and our offering on that front. Second is that it's still largely a US-domiciled or focused business. Right now, international is less than 15% of the client base and the revenues, and yet it's growing at a faster growth rate.

So from quarter to quarter for example, those deposit numbers can move up and down and to your point, it's less of an indicator I would say of the organic growth in more of an indicator of just their activity.

To the second part of your question.

We have the benefit of having this strong family office business, which we've been in for quite a while and have built up the capabilities and to your point, what we'd look to do with family office solutions is leverage those capabilities, but in such a way that we can create the virtual family office experience for her.

Got it. Okay. That that that makes a lot of sense and um, you also spoke to, you know, robust organic growth in uh, the gfo business. Um, but the we didn't see a lot of deposit Trends. We certainly saw the revenue look good. Um, is the organic growth in that business less tied to the deposits, the way. We normally think about that and therefore that's the Divergence and also maybe could you give a little color around, um, your new efforts around the gso um and how that's going? And and when you guys talk about gfo, do you do you categorize those 2 together? Thanks.

Got it. Okay. That that that makes a lot of sense and um, you also spoke to, you know, robust organic growth in uh, the gfo business. Um, but the we didn't see a lot of deposit Trends. We certainly saw the revenue look good. Um, is the organic growth in that business less tied to deposits the way. We normally think about that and and therefore that's the Divergence and also maybe could you give a little color around, um, your new efforts around the gso um and how that's going? And and when you guys talk about gfo, do you do you categorize those 2 together? Thanks.

Family that doesn't want to have to set up their own office. So that it's not run as one business together, but I would say two businesses that are very closely related and highly.

Coordinated and what they're doing because they are leveraging some of the technological capabilities. Some of the expertise that cuts across that and it's just a different service model, where we're acting as essentially the head of that family office for them as opposed to that person.

Michael O'Grady: We do believe that this is something that is not only, I'll say, attractive offering globally, but also is something that is scalable globally. To the latter part of your question, you're absolutely right that often the relationship with the family office can start with a more limited breadth of offering. It may focus primarily on custody and reporting to start, but then that's the opportunity to do much more with the family office, when it comes to other opportunities, particularly along the lines of investment management. You saw some of that in Q1 as well. We think it's a great business and continues to have a lot of upside.

<unk> been employees of the client family office.

Sure. So just just on the liquidity part of the question there. Brandon, so these family offices have significant liquidity, which they are, uh, I'll say utilizing and moving around quite a bit and it so it can move from uh, on the balance sheet as deposits to into our money market funds or short-term treasuries. So it it's I'll say a pretty active management of liquidity, uh, that we do, I'll say on their part, and for them. Um, and so from quarter to quarter, for example, those deposit numbers can move up and down and, and, to your point, it's, it's less of an indicator. I would say of the organic growth and more of an indicator of just

Okay. Thanks for taking my questions and Jennifer Congrats on your retirement.

Sure. So just just on the liquidity part of the question there. Brandon, so these family offices have significant liquidity, which they are, uh, I'll say utilizing and moving around quite a bit and it's so it can move from uh, on the balance sheet as deposits to into our money market funds or short-term treasuries. So it it's I'll say a pretty active management of liquidity, uh, that we do, I'll say on their part, and for them. Um, and so from quarter to quarter, for example, those deposit. Numbers can move up and down and, and, to your point, it's, it's less of an indicator. I would say of the organic growth. They're more of an indicator of just, their activity, um, to to the second part of your question. I, you know, we, we have the benefit of having this

Thank you so much.

Your next question will come from the line of Alex Blaustein with Goldman Sachs.

Yes.

Hey, good morning, Thank you.

Top of the house question. So the tone in your prepared remarks and to some of the Q&A fuels like leans on organic growth acceleration a little bit more than we heard from you guys in the past when you talk about some of the investments you are making to sort of support that can we talk through maybe the areas, where you see the most opportunity to accelerate growth.

Ebrahim Poonawala: Got it. Thank you.

Michael O'Grady: Sure.

Operator: Your next question will come from the line of Manan Gosalia with Morgan Stanley.

Manan Gosalia: Hi, good morning.

Michael O'Grady: Good morning.

Manan Gosalia: I wanted to start on the operating leverage side. I mean, 740 basis points of operating leverage this quarter, really strong. I think you reiterated the guide of generating over 100 basis points of operating leverage this year. Can you help us just think through how we should think about, I guess, expense growth this year? Are there any investments that maybe got pushed out, any timing differences, or anything else we should be considering here?

And ultimately what you think northern's organic fee growth. So ex markets should look like over the next couple of years. If you achieve these goals both across the institutional business and the wealth.

Sure.

I would start Alex by saying that we see the organic growth opportunity across all three businesses.

Capabilities—some of the expertise that cuts across that, and it's just a different service model where we're acting as, essentially, the head of that family office for them, as opposed to that person and team being, you know, employees of the client's family office.

Their activity, um, to, to the second part of your question. I, you know, we, we have the benefit of having this strong family Office business, which we've been in, for quite a while and have built up the capabilities and to your point. What we've looked to do with family, Office Solutions is leverage those capabilities but in such a way that we can create the the virtual family office experience for a family that doesn't want to have to set up their own office so that it's not run as 1 business together. But I would say, you know, 2 businesses that are very closely related and highly uh, you know, coordinated in what they're doing, because they're leveraging some of the, uh, technological capabilities. Some of the expertise that cuts that and it's just a, a different service model where we're acting as essentially, the head of that family office for them, uh, as opposed to that person, uh, in team being, you know, employees of the, the client's family office.

The nature of it is going to be different.

Okay, thanks for taking my questions, and, uh, Jennifer, congrats on your retirement.

Okay, thanks for taking my questions, and uh, Jennifer, congrats on your retirement.

And we've talked somewhat on the call here about wealth management.

Thank you so much.

A lot of the investment, but also then the opportunity on the wealth management front is to add talent to that to increase the growth rate. So I think we've talked through that part of it but it also cuts across other aspects that drive growth.

Michael O'Grady: Yeah, our expense growth methodology hasn't really changed. If you think a little bit about the expense growth in this particular quarter, most of it was driven by incentives. There was some noise from currency as well. Actually, when you make more money, you obviously are going to have a rising expense line. We still have in process the idea behind productivity funding investment, and then solving for an expense growth as a result of that. We haven't changed. What I would say is the productivity targets for Q1 hit their target. The investments that we wanted to make, we were able to make, and the expense growth we managed too was pretty much spot on where we thought it would be.

Your next question will come from the line of Alex Blastic with Goldman Sachs.

Your next question will come from the line of Alex Blasting with Goldman Sachs.

And thinking about marketing I talked about digital marketing that we're doing a focus on centers of influence.

There are other areas, where we're trying to essentially bring in more opportunities at the top of the funnel.

In order to increase that growth rate and many of them require investment to be able to do that and I would also say on that front. That's an area, where we believe that AI is going to create opportunities.

Hey, good morning, thank you. Um so my top of the house question, so the tone in your prepared remarks, in to some of the Q&A feels like you know liens and organic growth acceleration. A little bit more than we heard from you guys in the past and you talk about some of the Investments you're making to to sort of support that c. Can we talk through maybe uh the areas where we see the most opportunity to accelerate growth and ultimately what you think, Northerns organic fig growth. So X markets uh should look like over the next couple of years. If you achieve these goals both across the institutional business and the wealth.

Hey, good morning, thank you. Um so my top of the house question, so the tone in your prepared remarks, in to some of the Q&A feels like you know liens and organic growth acceleration. A little bit more than we heard from you guys in the past and you talk about some of the Investments you're making to to sort of support that c. Can we talk through maybe uh the areas where we see the most opportunity to accelerate growth and ultimately what you think northern's organic fig growth? So X markets uh should look like over the next couple of years. If you achieve these goals, both the institutional business, and the wealth.

Opportunities for us to continue to transform the client experience and the adviser experience, particularly as you work down the wealth tier. So we're excited about that but that also does require investment to be able to drive that.

Michael O'Grady: that discipline and flexibility is built into our planning, which is why, at the beginning of the year, I talked more about operating leverage than I did about attaching myself to a finite expense growth number. We wanted to have the flexibility to react when markets were conducive, but also have the discipline to be able to flex down in environments that are less. When I think about expenses, I think about a dynamic expense line. That basically is something we look at on a very continuous basis. It's very much driven today by the productivity on the investment side of the equation.

Within the asset servicing business.

As we've talked about there the real goal is around scalable growth.

And I would say staying focused on our current footprint our current offering the segments that we're in.

Thats, where we expect to get this continued growth at a profitable very profitable level and expect to continue to drive the margins up in that business and then within asset management.

Manan Gosalia: Got it. Maybe to pivot over to capital. Any thoughts on the new Basel III Endgame proposal and maybe how it impacts your capital deployment strategy going forward?

<unk> seen a lot of <unk>.

Growth has come from the core products for us certainly liquidity, but where we're really investing there is on the ETF front.

Sure. So I would start Alex by saying that that we see the organic growth opportunity across all 3 businesses. Um the nature of it is is going to be different. We've talked to someone on the call here about wealth management, um, a lot of the investment, but also then the opportunity on the wealth management front is to add Talent uh, to that to, uh, increase the the growth rate. So, I I think we've talked through that part of it, but it also cuts across, uh, you know, other aspects that drive growth. Um, and thinking about, uh, marketing. I talked about digital marketing that we're doing a focus on centers of influence. Uh, there are other areas where we're we're trying to essentially you know bring in more opportunities at the top of the funnel uh in order to increase that growth rate and you know, many of them uh require investment uh to be able to do that.

As well as tax advantaged equity and also quant.

Michael O'Grady: Yeah, I think it's too soon to think about how it might impact the capital return part of it. I will say that on measure, our preliminary view of it is it could be a net positive for us as it relates to, obviously, the commercial loan side and the operational risk is something that we probably have less of than some other peer banks. Net-net, we think that it's going to be a positive for RWA. It's still early days. We're in the comment period. I would say is taking a cautious look to it, don't think it's going to have a massive impact, but if it does, it'll certainly be net positive at this point.

Sure. So I would start Alex by saying that that we see the organic growth opportunity across all 3 businesses. Um the nature of it is is going to be different. We've talked some on the call here about wealth management, um a lot of the investment, but also then the opportunity on the wealth management front is to add Talent uh, to that to, uh, increase the the growth rate. So, I I think we've talked through that part of it, but it also cuts across, uh, you know, other aspects that drive growth. Um, and thinking about, uh, marketing. I talked about digital marketing that we're doing a focus on centers of influence. Uh, there are other areas where we're we're trying to essentially, you know, bring in more opportunities at the top of the funnel uh in order to increase that growth rate and you know many of them uh require investment uh, to be able to do that. And I would also say on that front, that's an area where we believe that AI is going to create, uh,

And that requires investment in the sense of building out our distribution.

Capabilities for third party.

But we believe that's an avenue, which right now represents a relatively small part of our asset management business that could grow at a much higher growth rate. So that's I'll say that the combination across the businesses.

We've talked about an organic growth rate.

That we've targeted around 3%.

Opportunities for us to continue to, to transform the the client experience and the advisor experience, particularly as you work down, the, the wealth tears. So we're excited about that. But that also does, uh, require investment to, to be able to drive that, um, within the asset servicing business. Um, as we've talked about there that the real goal is around scalable growth. Uh, and and I would say, staying focused on our current footprint, our current offerings, the segments that

And certainly from what I talked through there that's going to drive the 3%, but we hope about that as well.

Okay.

And then a quick follow up just around capital management with the visa shares become available to you guys. This year can you maybe just talk through the amount of proceeds that you expect the use of these proceeds and timing when it comes to potentially bigger buybacks. Thank you.

Manan Gosalia: Got it. Thanks so much, and congratulations, Jennifer.

Jennifer Childe: Thank you.

Operator: Your next question will come from the line of Mike Mayo with Wells Fargo Securities.

Yeah, so roughly half of our position, let's say $470 million pre tax of $3 15.

Mike Mayo: Hi. Look, wealth is growing double digits, as you said. Firm-wide revenue is up 14%, the higher end of return targets. Seems like it was working this quarter. What got my attention is, I think, new news that you look to grow wealth producers by 7% to 9%. I think that's this year. Correct me if you disagree, but I think this is the most competitive market we've seen in the wealth business, like almost ever. The question is, I'm not saying it's a wrong strategy. The question is, why now do you look to increase the wealth producers? What's your pitch? Because I think literally every large bank, large brokerage firm is looking to expand wealth at this time. What's your pitch when you try to get the new producers?

Post tax depending on the share price.

And we've only just begun to sort of think about.

We're going to do with it I don't think we're going to use the same obviously playbook, we had a few years ago.

We've got other options at this point, but we're going to weigh it against.

All of our other priorities and take a look at what to do at that point in time, but but haven't landed yet on that.

Okay. Thank you very much.

Yeah.

We're in that. That's where we expect to get this continued growth at a, a profitable very profitable level and expect to continue to drive the, the margins up in that business. And then within Asset Management, uh, really you've seen a, a lot of, uh, growth that's come from the, the core products for us. Certainly, uh, liquidity, but where we're really investing there is on the ETF front, as well as tax advantaged Equity, uh, and also Quant. Um, and that requires investment in the sense of, you know, building out our distribution uh, capabilities for third-party. Um, but we believe that's a an Avenue, which right now represents a relatively small part of our asset management business, that could grow at a much higher growth rate. So that that's the, I'll say that the combination across the businesses. Um and we've talked about an organic growth rate, uh, that we've targeted around 3% and and, and certainly from

Your next question comes from the line of Ken <unk> with <unk>.

This continued growth at a, a profitable very profitable level and expect to continue to drive the, the margins up in that business. And then within Asset Management, uh, really you've seen a, a lot of, uh, growth that's come from the, the core products for us. Certainly, uh, liquidity, but where we're really investing there is on the ETF front, as well as tax advantaged Equity, uh, and also Quant. Um, and that requires investment in the sense of, you know, building out our distribution, uh, capabilities for third-party. Um, but we believe that's a an Avenue, which right now represents a relatively small part of our asset management business, that could grow at a much higher growth rate. So, that that's the, I'll say that the combination of the businesses, um, and we've talked about an organic growth rate, uh, that we've targeted around 3% and and, and certainly from what I talked through there, that's going to drive the 3%, but we hope

To go above that as well.

What I talked through there—that's going to drive the 3%, but we hope above that as well.

Thomas Research.

Okay.

Alright, thanks, good morning.

I wanted to ask a question just about the balance sheet you mentioned that.

The benefits that came through the size of the balance sheet and the deposits maybe some of that doesn't say maybe some of it does but just given the higher for longer environment. How do you think just about the duration of the securities portfolio and any any any other changes to that or is it really more of a wait and see because youre not.

Michael O'Grady: Thanks, Mike. You are right. We are focused on hiring and investing in talent in the Wealth Management business. You're absolutely right. It's a very competitive marketplace for the best talent, which is what we're looking for. We are trying to focus on roles that are revenue-generating for us, and within that, producer roles. Part of it is as we look back over the last several years, although that group has grown, it has grown at a lower rate than the growth of the business itself. There's an acknowledgment that we need more talent to increase the growth rate, the organic growth rate within Wealth. As far as being able to have an attractive value proposition for wealth management professionals and advisors, we think we have a very different value proposition. We have an excellent brand.

Thank you. And then, uh, quick follow-up just around capital management. With the Visa shares becoming available to you guys this year, can you maybe just talk through the amount of proceeds you expect and the use of these? Thank you.

Got it, thank you. And then, uh, quick follow-up just around Capital Management. Um, with the VISA shares, uh, becoming available to you guys this year, can maybe you just talk through the amount of proceeds you expect, the use of these proceeds, and timing when it comes to potentially bigger buybacks? Thank you.

100% sure if this elevated.

Size of the balance sheet.

<unk>, yes.

Yeah.

So when you think about the upside to our balance sheet into our NII during the course of the year.

There's a bunch of different things, we think of and trying to figure out what we're going to guide and so the first one would be the investment securities maturity replacement.

Yeah. So roughly get half of our position. Let's say 470 million pre-tax. So 350 uh post tax depending on the share price. Um and we've only just begun to sort of think about uh what we're going to do with it. I I don't think we're going to use the same obviously Playbook. We had a few years ago. Uh we've got other options at this point but we're going to weigh it against all our other priorities and take a look at what to do at that point in time. But, but haven't landed yet on that.

Yeah, so we'll roughly get half of our position, let's say 470 million pre-tax. So 350 uh post tax depending on the share price. Um and we've only just begun to sort of think about uh what we're going to do with it. I I don't think we're going to use the same obviously Playbook. We had a few years ago. Uh we've got other options at this point but we're going to weigh it against all our other priorities and take a look at what to do at that point in time. But, but haven't landed yet on that.

Okay, thank you very much.

Thank you.

Obviously, we still have back book repricing and we can take advantage of that through the full year in 2006.

Your next question comes from the line of Ken, used in with Autonomous Research.

We did take some deposit pricing actions as well towards the end.

End of last year, let's say third and fourth quarter and we haven't lapped those yet so those are built in <unk>.

Hi, thanks. Good morning. Um, I—I want to ask a question, just about the balance sheet. You know, you mentioned.

Increases that we see coming in the year.

We've been leaning a bit more into some incremental investment strategies around higher yielding opportunities.

Michael O'Grady: We are positioned within the upper tiers of the market, which, I'll say, the highest levels of expertise want to be able to not only serve that client base but look to bring on new clients on that front. We've been investing in the platform to do that. We've talked a lot about family office solutions, which we believe really is a differentiated offering. It's, in our view, better and more attractive than standalone virtual family offices because it brings a full set of resources and banking capabilities that we have. Yet it's also an opportunity to leverage the history and the fiduciary capabilities that we have and trust capabilities. We think for an advisor or a professional that's looking to be able to ply their trade, if you will, and succeed, we offer the best platform for them to be able to do that.

We've been looking at our wholesale funding mix a little bit more.

Leaning a bit more into effect repo as well and so when you when you put all those together.

That, you know, the benefits that came through with the size of the balance sheet and the deposits. Maybe some of that doesn't say maybe some of it does, but just given the higher for longer environment. How do you think it's just about duration of the security portfolio and any any, any other changes to that or is it really more of a wait and see? Because you're not, you know, 100% sure if this elevated

You know, the benefits that came through the size of the balance sheet and the deposits. Maybe some of that doesn't say maybe some of it does, but just given the higher for longer environment. How do you think it's just about duration of the security portfolio and any any, any other changes to that or is it really more of a wait and see? Because you're not, you know, 100% sure if this elevated

And then obviously the deposit growth. So we still are we're thinking about.

Size of the balance sheet, uh, you know, lingers,

Yeah.

Having some deposit growth in line with the businesses and we also no longer have the potential headwind in our mind anyway of rate cut in the U S and.

We've taken that off the table and may even have some rate increases in <unk>.

Europe, and so you put all that together and thats sort of how we come up with it it doesn't we're not going to reach for yield we're not going to materially change our.

So when you think about the upside to our balance sheet and to our NII, during the course of the year there's a bunch of different things we think of in trying to figure out what we're going to guide. And so the first one would be the investment securities maturity replacement.

So, when you think about the upside to our balance sheet and to our NII during the course of the year, there's a bunch of different things we think of in trying to figure out what we're going to guide. And so, the first one would be the investment securities maturity replacement.

Our profile in terms of duration to try to get there we don't need to to be honest with you to get there. We feel we can do it without that so.

And there's a lot of uncertainty out there. So I think our positioning right now is pretty stable.

Got it thank you.

Thanks for that and just a bigger picture follow up we've got potential new fed chair coming on talks about potentially shrinking the size of the fed balance sheet.

Obviously we still have back book repricing and we can take advantage of that through the full year in 26. Um we we did take some deposit pricing actions as well towards the uh end of last year. Let's say third and fourth quarter and we haven't lapped those yet. So those are built in uh increases that we see coming in the in the year. Um we've been leaning a bit more into some incremental investment strategies around higher yielding opportunities.

Obviously we still have bakbuk repricing and we can take advantage of that through the full year in 26. Um we we did take some deposit pricing actions as well towards the uh end of last year. Let's say third and fourth quarter and we haven't left those yet. So those are built in uh increases that we see coming in the in the year. Um we've been leaning a bit more into some incremental investment strategies around higher yielding opportunities.

Um, we've been looking at our wholesale funding mix a little bit more.

Michael O'Grady: That's a big part of it. It is a different model here at Northern. As you know, that's part of why we think it's more attractive.

Our balance sheet is already been down $2 five trillion in trust bank deposits keep growing but.

Just remind us of the rule of thumb to think about.

<unk> balance sheet continues to shrink over time.

Mike Mayo: As part of this increased investing for growth, whether it's wealth or firm-wide, because you rattled through a lot of growth initiatives. Maybe I got this wrong, but you're still guiding for 100 basis points of operating leverage this year, but you had over 700 basis points of operating leverage in Q1. Is the reason for no change in that guide just conservatism or also because you think you might be ramping up some spending as you bring on these new producers?

Insulated as the balances at your balance sheet from that in terms of deposits.

So Ken I would say that is something that.

We.

Obviously, observing oven and what's happening and frankly, I'll say, a little surprised that liquidity levels have remained so high on our balance sheet and in our funds given that the fed has reduced its balance sheet as much as it has.

Uh, leaning a bit more into thick repo as well. And so when you when you put all those together um you know and and then obviously the deposit growth, so we still are, we're thinking about um, you know, having some deposit growth in line with the businesses and we also no longer have the potential headwind in our mind anyway of rate cut in the US and, um, uh, we've taken that off the table and they even have some rate increases in, uh, Europe. And so, you put all that together and that's sort of how we come up with it. It doesn't, we're not going to reach for yield. We're not going to materially change our, uh, you know, our profile, in terms of duration to try to get there. I we don't

To the extent that we're in okay say some level of stabilization there I think thats good because that means our deposit levels in money market fund levels will grow with our organic growth. So yes. There is definitely some exposure to the extent the fed were to really shrink its balance sheet more I think that pulls liquidity out of the marketplace.

Michael O'Grady: Yeah. As I mentioned before, obviously, it's a very constructive backdrop and macro environment for us. There's definitely some acknowledgment that the strong revenue growth here was driven and supported by that backdrop. We don't know what's going to happen as we go through the year. There are also some tough comps in the sense of last year we had strong Q2, Q3, and Q4. Acknowledging that's ahead of us as well. As Dave mentioned, we've really tried to align our, I'll say, resource deployment strategy based on productivity and looking to ensure that we're driving productivity to fund that investment. We haven't pulled off of that.

Need to, to be honest with you, to get there. We feel we can do it without that. So, uh, and there's a lot of uncertainty out there. So I think our positioning right now is pretty stable.

Uh, leaning a bit more into thick repo as well. And so when you when you put all those together um you know, and and then obviously the deposit growth, so we still are, we're thinking about um, you know, having some deposit growth in line with the businesses and we also no longer have the potential headwind in our mind, anyway, of rate Cuts in the US and, um, uh, we've taken that off the table and may even have some rate increases in, uh, Europe. And so, you put all that together and that's sort of how we come up with it. It doesn't, we're not going to reach for yield. We're not going to materially change our, uh, you know, our profile, in terms of duration to try to get there. We don't need to, to be honest with you, to get there. We we feel we can do it without that. So, uh, and there's a lot of uncertainty out there. So I think our positioning right now is pretty stable.

Yeah, thank you. And

Yep, thank you. And

And our.

Our model as well as others.

<unk> tends to.

Expanding contract with that somewhat.

Yes, well some exposure on the downside I think les on the upside.

Okay, that's alright, thanks, Mike.

Thanks for that, and just a follow a bigger picture, follow-up. You know, we've got potential new bed, chair coming on, who talks about potentially shrinking, the size of the FED, balance sheet, you know, that, that balance, you've already been down 2 and a half trillion and Trust Bank deposits. Keep growing. But, you know, you just remind us of the rule of thumb to think about, you know, if the FED balance sheet continues to shrink over time, you know how insulated it is? The balance is is your balance sheet from that? In terms of deposits?

Thanks for that. And and just to bigger picture, follow-up. You know, we've got potential new bed, chair coming on and talks about potentially shrinking the size of the FED, balance sheet, you know, that, that balance you've already been down to 2 and a half trillion and Trust Bank deposits. Keep growing. But you know, you just remind us of the rule of thumb to think about. You know, if the FED balance sheet continues to shrink over time, you know how insulated it is to balance? Is it is your balance sheet from that in terms of deposits?

Yes.

Your next question will come from the line of Steven <unk> with Wolfe Research.

So can I—I would say that is something that, uh, you know, we...

Hi, Good morning, this is actually Sharon Leung filling in for Paul.

Michael O'Grady: Yes, we expect to continue to invest in these areas that we talked about, but the plan is to try to generate more productivity to do it and not necessarily change the expense growth profile that we've been on.

Wanted to ask on.

Margins in the business segments.

Margins in ethanol in asset servicing have expanded nicely.

The margin was flat year on year, despite some strong revenue growth.

Mike Mayo: Yeah. I'd just like to add.

Dave Fox: Yeah. I'd just like to add.

Michael O'Grady: Got it. Thank you.

Mike Mayo: I'd like to add to that. The direction of travel on expenses is down for the remainder of the year. Okay. That's helpful. Thank you.

Dave Fox: I'd like to add to that. The direction of travel on expenses is down for the remainder of the year.

Just wanted to understand like what are the components of that.

Alright going to drive the.

I guess the path towards your medium term target of 33% in the margin.

Mike Mayo: Okay. That's helpful. Thank you.

So.

Operator: Next question will come from the line of Brennan Hawken with BMO Capital Markets.

The goal of the asset servicing business as I've mentioned is scalable growth in as much as we did have a strong pre tax margin here in the quarter. This is something that we're trying to consistently move up and so the.

Brennan Hawken: Good morning. Thanks for taking my question.

Michael O'Grady: Sure.

Remained. So high on our balance sheet and in our funds given that the FED has reduced its balance sheet as much as it has to the extent that we're in, okay? Say some some level of stabilization there. I, I think that's good because that means, you know, our deposit levels and money market fund levels. You know, we'll grow with our organic growth. So, yes, there is definitely some exposure to the extent. The FED were to really shrink its balance sheet, uh, more. I think that pulls liquidity out of the marketplace and, you know, our our model is well as others, uh, it tends to, uh, you know, expand and contract with that somewhat. So, uh, yeah, some exposure on the downside, I think, uh, Less on, on the upside,

You know, our um, obviously, observant of and what's happening. And frankly, I'll say a little surprised that liquidity levels have remained so high on our balance sheet and in our funds given that the FED has reduced its balance sheet as much as it has to the extent that we're in, okay? Say some some level of stabilization there. I, I think that's good because that means, you know, our deposit levels and money market fund levels. You know, we'll grow with our organic growth. So, yes, there is definitely some exposure to the extent. The FED were to really shrink its balance sheet, uh, more. I think that pulls liquidity out of the marketplace and, you know, our our model as well as others, uh, it tends to, uh, you know, expand and contract with that somewhat. So, uh, yeah, some exposure on the downside, I think, uh, Less on, on the upside,

Brennan Hawken: Dave, you flagged strength as far as the deposit growth goes, and it looks like from the presentation, a lot of the deposit growth was driven by the servicing business. You also flagged some large institutional deposits weighing on NIM. Was that part of that deposit strength, some large institutional deposits? How should we be thinking about the profile of deposits as we move forward and what your expectations are for that through the course of the year? Thanks.

Okay, that's worth. Thanks Mike.

Okay, that's the worst. Thanks, Mike.

Yep.

The expectation is that.

Yep.

We will continue to try to see a higher margin in the asset servicing business.

You talked about a particularly strong.

Your next question will come from the line of Steven Schubach with Wolfe Research.

Your next question will come from the line of Stephen Shoe with Wolfe Research.

Macro backdrop here, so capital markets very strong NII very strong in asset servicing so that definitely contributed to the higher pre tax margin for this quarter, but we want to make that even more sustainable if you will and more resilient.

Hi, good morning. This is actually Sharon longing and for Stephen today. Um just wanted to ask on the margins in the business segments the margin and asset loss. Uh in asset servicing has extended nicely. But in while the marginal spot you're on here despite like some strong Revenue growth

Hi, good morning. This is actually uh Sharon long family and for Stephen today. Um just wanted to ask on the margins in the business segments the margin and asset loss. Uh in asset servicing has extended nicely. But in while the marginal spot you're on here despite like some strong Revenue growth

High level of margin, so theres more opportunity on that front on wealth management.

Michael O'Grady: Yeah. We had some largely unexpected, extremely large deposits. You've heard me speak in the past about why we keep our capital ratios where we keep them, and we want our balance sheet to be open at all times for our largest clients. Occasionally, some of our clients will do some strategic repositioning, and we want to be in a position to capture those deposits when they do that. They're not core operational deposits. They aren't there for a long period of time, but we want to be able to accommodate them. In this particular quarter, it really drove up the average deposit level significantly. That isn't going to obviously translate into a Q2. Although I do think the increase was roughly $9 billion, and I think we're going to keep 4 to 5 of that. In terms of average deposits.

Dave Fox: Yeah. We had some largely unexpected, extremely large deposits. You've heard me speak in the past about why we keep our capital ratios where we keep them, and we want our balance sheet to be open at all times for our largest clients. Occasionally, some of our clients will do some strategic repositioning, and we want to be in a position to capture those deposits when they do that. They're not core operational deposits. They aren't there for a long period of time, but we want to be able to accommodate them. In this particular quarter, it really drove up the average deposit level significantly. That isn't going to obviously translate into a Q2. Although I do think the increase was roughly $9 billion, and I think we're going to keep 4 to 5 of that. In terms of average deposits.

We have had a very attractive pre tax margin, that's an area you've heard a lot.

They just wanted to understand, like, what are the components that are going to drive the, I guess, the path towards your medium-term target of 33% in the margin. Thanks.

Where we've talked about growth and making investments for growth.

So we feel like we're in a I'll say a good range for that margin.

But we are emphasizing growth as opposed to trying to see that that margin go up and to the extent we did have some pressure on the wealth management.

Margin as we make some of these investments in the near term.

The expectation is that well.

Make up for those.

With improvement in asset servicing.

Okay. Thank you very much.

Sure.

Your next question comes from the line of David Smith with <unk> Securities.

Hey, good morning.

Michael O'Grady: At the end of the day, that's really what you saw there was client-driven, specific, very large deposits from just a handful of just really important big clients.

Dave Fox: At the end of the day, that's really what you saw there was client-driven, specific, very large deposits from just a handful of just really important big clients.

Good morning.

On organic growth, you said had seven consecutive quarters of positive growth in the business as a whole and then there is a 3% target that you put out there, but you think there is opportunity to do better over time.

Brennan Hawken: Got it. Okay. That makes a lot of sense. You also spoke to robust organic growth in the GFO business. We didn't see a lot of deposit trends. We certainly saw the revenue look good. Is the organic growth in that business less tied to deposits the way we normally think about that, and therefore that's the divergence? Also, maybe could you give a little color around your new efforts around the GSO and how that's going? When you guys talk about GFO, do you categorize those two together? Thanks.

To get a sense of where organic growth is today, and where you were a year ago.

So, uh, the the goal of the asset servicing business is, I've mentioned, it is scalable growth. And as much as we did, have a strong pre-tax margin here in the quarter, uh, this is something that we're trying to consistently move up and so, um, the the expectation is that, uh, we will continue to try to to see a higher margin in the asset servicing business. You know, we've talked about a particularly strong uh, macro backdrop here. So Capital markets, very strong knee, very strong and asset servicing, so that definitely contributed to to the higher, uh, pre-tax margin for this quarter. But we, we want to make that even more sustainable if you will, and in a more resilient, uh, high level of margin. So there, there's more opportunity on that front on on wealth management, uh, where we have had a, you know, a very attractive pre-tax margin. You know, that scenario, you've heard a lot, uh, where we've talked about growth and making Investments for growth.

GSO has above average.

Servicing and the reasonable kind of wealth.

Barely pause today, 1% or so 2% or so circle around some quarter to quarter, but maybe over the past year, what kind of organic growth of each of those.

Businesses earned in.

Then wherever those say like the year prior thank you Jay.

Um, so we feel like we're in a, you know, I'll say, a good range for that margin. Um, but we are emphasizing growth as opposed to trying to see that margin go up, and to the extent, we did have some pressure on the Wealth Management margin as we make some of these investments in the near term. Uh, the expectation is that, uh, we'll more than make up for those with improvement, nested servicing.

High level of margin. So there, there's more opportunity on that front on on wealth management, uh, where we have had a, you know, a very attractive pre-tax margin. You know, that's an area. You've heard a lot, uh, where we've talked about growth and making Investments for growth. Um, so we feel like we're in a, you know, I'll say a good range for that margin, um, but we are emphasizing growth as opposed to trying to see that that margin go up and to the extent, we did have some pressure on the The Wealth Management, uh, margin as we make some of these investments in the near term. Uh, the expectation is that uh will more than make up for those uh with Improvement nested servicing.

Sure so.

To just start with this quarter.

Great, thank you so much.

Sure.

Each of the three businesses had positive organic growth.

And that would also be true.

Michael O'Grady: Sure. Just on the liquidity part of the question there, Brennan. These family offices have significant liquidity, which they are, I'll say, utilizing and moving around quite a bit. It can move from on the balance sheet as deposits into our money market funds or short-term Treasury. It's, I'll say, a pretty active management of liquidity that we do, I'll say, on their part and for them. From quarter to quarter, for example, those deposit numbers can move up and down. To your point, it's less of an indicator, I would say, of the organic growth and more of an indicator of just their activity. To the second part of your question, we have the benefit of having this strong family office business, which we've been in for quite a while and have built up the capabilities.

Within the major segments of the business.

Your next question comes from the line of David Smith with Truist Securities.

Hey, good morning.

But to your point, if we look at each of them individually in a little bit I'll say over time.

Good morning.

Within wealth management, the organic growth has been closer to a consistent I'll say, 1% with.

With CFO being above that and the regions being a little bit below that and that's where we're looking certainly for <unk> to continue to grow at a high rate.

But it's more with the regions.

Incrementally increasing that growth rate as we go forward this year and into next year to move it up in total about the 3% so make progress this quarter, but again.

Uh on organic growth. You said it's 7 consecutive quarters of of positive growth in the business as a whole. And then there's a 3% Target uh that you've put out there, but you think there's opportunity to do better over time. Few of us, get a sense of where organic growth is today and where you are a year ago. You know, we know uh, gfo is above average but is that servicing and the regional power of wealth? Um you know barely positive today 1% or so 2% or so circum bump around um some quarter to quarter but maybe over the past year what kind of organic growth

All about consistency.

In the asset servicing business, just given the nature of some of the larger mandates that organic growth rate can I'll say swing or very more from quarter to quarter or even in a year. So we did if you went back a few years, we did have some periods, where we had some.

Uh, on organic growth. You said it's seven consecutive quarters of positive growth in the business as a whole. And then there's a 3% target, uh, that you've put out there but you think there's an opportunity to do better over time. Do you—help us get a sense of where organic growth is today and where you were a year ago? You know, we know GFO is above average, but is that servicing and the regional power of wealth, um, you know, barely positive today—1% or so, 2% or so, sort of bump around, um, some quarter to quarter. But maybe over the past year, what kind of organic growth have each of those businesses earned, and, um, then where were those, say, like the year prior? Thank you.

For each of those businesses, businesses earned, and then where were those, say like, be your prior. Thank you.

Michael O'Grady: To your point, what we've looked to do with family office solutions is leverage those capabilities, but in such a way that we can create the virtual family office experience for a family that doesn't want to have to set up their own office. It's not run as one business together, but I would say two businesses that are very closely related and highly coordinated in what they're doing because they're leveraging some of the technological capabilities, some of the expertise that cuts across that, and it's just a different service model where we're acting as essentially the head of that family office for them, as opposed to that person and team being employees of the client's family office.

Business that rolled off.

It did bring that down to kind of flat to negative organic growth as I mentioned, it's positive right now again at about the same range as the wealth management business.

But we see the opportunity likewise to continue to see that that growth rate increase but with the focus on profitability and scalability for it and asset management overall, a lot of the organic growth.

More recently has been primarily driven by liquidity.

But we're seeing greater diversification in the growth with that business as well so.

In the past quarter here Likewise, some of the areas that I mentioned around Etfs in for some time period tax advantaged equity.

Brennan Hawken: Okay. Thanks for taking my questions. Jennifer, congrats on your retirement.

Jennifer Childe: Thank you so much.

Sure. So, uh, to to just start with this quarter, uh, each of the 3 businesses had positive organic growth and that would also be true, you know, within the, the major segments, uh, of the business. Uh, but to your point, if we, if we look at each of them individually and and a little bit, I'll say, uh, over time, um, within wealth management. You know, the organic growth has been closer to a consistent. I'll say 1%, um, with gfo, you know, being above that. And the Region's being a little bit, uh, below that. And that's where we're looking certainly for gfo, to continue to grow at a high rate, um, but it's it's more with the regions, uh, you know, incrementally, increasing that growth rate, uh, as we go forward this year and into next year, to move it up, you know, in total above the, the 3%. So made progress this quarter. But, uh, again, it's all about consistency. Um, in the asset servicing business. Just given the nature of some of

Sure. So, uh, to to just start with this quarter, uh, each of the 3 businesses had positive organic growth and that would also be true, you know, within the, the major segments, uh, of the business. Uh, but to your point, if we, if we look at each of them individually and and a little bit, I'll say, uh, over time, um, within wealth management. You know, the organic growth has been closer to a consistent. I'll say 1%, um, with gfo, you know, being above that. And the Region's being a little bit, uh, below that. And that's where we're looking certainly for gfo, to continue to grow at a high rate, um, but it's it's more with the regions, uh, you know, incrementally, increasing that growth rate, uh, as we go forward this year and into next year, to move it up, you know, in total about the, the 3%. So made progress this quarter. But uh, again, it's all about consistency. Um, in the asset servicing business, just given the nature of some of

Have had nice organic growth across that front. So once again at about the same range, there and same expectations to see that increase.

Operator: Your next question will come from the line of Alex Blostein with Goldman Sachs.

Alex Blostein: Hi, good morning. Thank you.

Got it and.

Michael O'Grady: Good morning.

Alex Blostein: Mike, top of the house question. The tone in your prepared remarks and to some of the Q&A feels like leans on organic growth acceleration a little bit more than we heard from you guys in the past. You talk about some of the investments you're making to sort of support that. Can we talk through maybe the areas where you see the most opportunity to accelerate growth? Ultimately, what you think Northern's organic fee growth, so ex markets, should look like over the next couple of years if you achieve these goals, both across the institutional business and the wealth?

Do you expect over time.

All of the major businesses to be doing 3% organic or <unk>.

Medium term would you expect.

The larger mandates that organic growth rate, can I'll say swing or vary more from quarter to quarter or even in a year. So we did if you went back, uh, a few years, we did have some periods where we had some, uh, uh, business that rolled off. Uh, that did bring that down to kind of flat to negative organic growth. As I mentioned, uh, it's positive right now.

To get there for the company as a whole, but some to be above and some to be below.

Yes so.

The target is for all of them to be above the 3%, but just given the way that it varies from quarter to quarter, even year to year. They may not all be but thats the benefit of having the three businesses.

Got it thank you.

Sure.

Michael O'Grady: Sure. I would start, Alex, by saying that we see the organic growth opportunity across all three businesses. The nature of it is going to be different. We've talked somewhat on the call here about Wealth Management. A lot of the investment, but also then the opportunity on the Wealth Management front is to add talent to that to increase the growth rate. I think we've talked through that part of it, but it also cuts across other aspects that drive growth. In thinking about marketing, I talked about digital marketing that we're doing, a focus on centers of influence. There are other areas where we're trying to essentially bring in more opportunities at the top of the funnel in order to increase that growth rate. Many of them require investment to be able to do that.

Yeah.

Your final question will be coming from the line of Gerard Cassidy with RBC.

And Mike and Dave.

Good morning.

I think you've called out in your prepared remarks that you saw outsized growth in the wealth management area in your Central region can you highlight what drove that.

So, we did, if you went back, uh, a few years, we did have some periods where we had some, uh, uh, business that rolled off. Uh, that did bring that down to kind of flat to negative organic growth. As I mentioned, uh, it's positive right now again, in about the same range as the wealth management business, uh, but we see the opportunity likewise to continue to see that growth rate increase. But with the focus on profitability and scalability for it and asset management overall, a lot of the organic growth, uh, more recently has been, uh, primarily driven by liquidity. Um, but we're seeing greater diversification, uh, in the growth, uh, with that business as well. So, uh, in the past quarter here, likewise, some of the areas that I mentioned around ETFs, and for some time period, uh, tax-advantaged equity, uh, have had nice organic growth on that front. So once again, in about the same range there and same expectation to see that increase.

Again in about the same range as as the wealth management business, uh but we see the opportunity likewise to continue to see that that growth rate increase. But with the focus on profitability and and scalability for it and asset management overall, a lot of the organic growth. Uh, more recently has been uh primarily driven by liquidity. Um but we're seeing greater diversification uh in the growth uh with that business as well. So uh in the past quarter here, likewise some of the areas that I mentioned around ETFs and and for some time period, uh, tax advantage Equity, uh, have had nice organic growth, across that front. So once again in about the same range, there and same expectation to see that increase.

Sure.

Youre right draw that we did and I would say.

Often given that the company has.

Then in the central region in headquarter in Chicago for a very long time.

Got it. And do you expect over time? All of all, of all, of the major businesses to be doing 3%, organic or, you know, medium-term would you expect um, you know, to get there for those companies as a whole but some to be above and some to be below.

Got it. And do you expect over time? All of all, of all, of the major businesses to be doing 3%, organic or, you know, medium-term would you expect, um, you know, to get there for the company as a whole but something to be above and some to be below.

We have a very strong business here and often people think that it's.

A mature business that is not going to grow at the same rate or even a higher rate, but the fact of the matter is.

The team and the leadership of this region, particularly under John <unk> and his team.

Yeah, so— you know, the target is for all of them to be above the 3%, but just given the way that it varies, you know, say from quarter to quarter, even year to year, you know, they may not all be. But that's the benefit of having the three businesses.

Yeah, so I—you know, the target is for all of them to be above the 3%, but just given the way that it varies, you know, say from quarter to quarter, even year to year, you know, they may not all be. But that's the benefit of having the three businesses.

Michael O'Grady: I would also say on that front, that's an area where we believe that AI is going to create opportunities for us to continue to transform the client experience and the advisor experience, particularly as you work down the wealth tier. We're excited about that, but that also does require investment to be able to drive that. Within the asset servicing business, as we've talked about there, the real goal is around scalable growth. I would say staying focused on our current footprint, our current offerings, the segments that we're in, that's where we expect to get this continued growth at a very profitable level and expect to continue to drive the margins up in that business. Then within asset management, really you've seen a lot of growth that's come from the core products for us, certainly liquidity.

Got it. Thank you.

Have consistently leveraged that strength to be able to grow it at a higher rate.

Your final question will be coming from the line of Gerard Cassidy with RBC.

One of the areas and I would say more recently is around the family office solutions that I talked about.

Your final question will be coming from the line of Gerard Cassidy with RBC.

Hey, Mike. Hey Dave.

Good morning. Hey.

Morning. Hey,

That's the area, where we started with that solution set and with that offering.

It's already gained momentum in this region and now we're in the process of rolling that out to the other regions in the same way. So that's part of the driver of the strong quarter.

Mike, I think you called out in your prepared remarks that you saw outsized growth in the wealth management area in your Central region. Can you highlight what drove that?

Very good.

Obviously.

The dominance of questions are all about the wealth management and the custody business. So I want to pivot because it's always good to ask you folks about credit quality since its always so superb superb.

You guys, obviously don't take a lot of risk in lending your portfolio is not that big relative to your asset size can you share with US what are you guys seeing in the credit quality trends. They are very strong and we understand that.

Michael O'Grady: Where we're really investing there is on the ETF front, as well as tax-advantaged equity, and also quant. That requires investment in the sense of building out our distribution capabilities for third party. We believe that's an avenue which right now represents a relatively small part of our asset management business that could grow at a much higher growth rate. That's, I'll say, the combination across the businesses. We've talked about an organic growth rate that we've targeted around 3%. Certainly from what I talked through there, that's going to drive the 3%, but we hope above that as well.

Have things changed meaningfully from the financial crisis, and pandemic that customers are more resilient today any color there.

Sure, you're you're right Gerard, we did and I I would say, you know, often, you know, given that the company has, uh, been in the, the central region and headquartered in Chicago for a very long time. Uh, we have a very strong business here and often people think that it's, you know, a mature business that is, is not going to grow at the same rate or even a higher rate. But the fact of the matter is uh, the team and and the leadership of this uh region particularly under John fumagalli, and his team um have consistently leveraged that strength uh to be able to grow at at a higher rate. Um, and 1 of the areas in, I I would say more recently uh, is around the family Office Solutions that I talked

Sure, Yes, I mean, so just keep in mind when I look at northern portfolio that we have.

Very.

We're very tilted towards investment grade on the corporate side and then.

And our clients in wealth, we usually doing secured facilities and so.

Talked about, uh, that that's the area where, uh, we started, you know, with that solution set and with that offering, um, it's already gained momentum, uh, in this region and now, we're in the, in the process of rolling that out to the other regions, uh, in the same way. So that, that's a part of the, the driver of the, the strong quarter.

Central region and headquartered in Chicago for a very long time. Uh, we have a very strong business here and often people think that it's, you know, a mature business that is, is not going to grow at the same rate or even a higher rate. Um, but the fact of the matter is, uh, the team and and the leadership of this, uh, region particularly under John fumagalli, and his team, um, have consistently leveraged that strength uh, to be able to grow at at a higher rate. Um, and 1 of the areas in, I I would say more recently uh, is around the family Office Solutions that I talked about, uh, that that's the area where, uh, we started, you know, with that solution set and with that offering, um, it's already gained momentum, uh, in this region and now we're in the, in the process of rolling that out to the other regions, uh, in the same way. So that, that's a part of the, the driver of the, the strong quarter.

At the end of the day for those to be in the stress scenario would take quite a bit of downside to do that so that's why you see our credit quality, So high and we're not obviously also exposed to the same extent.

Alex Blostein: Got it. Thank you. A quick follow-up just around capital management. With the Visa shares becoming available to you guys this year, can maybe you just talk through the amount of proceeds you expect, the use of these proceeds, and timing when it comes to potentially bigger buybacks? Thank you.

Very good. Um, obviously the dominance of questions are all about the wealth management and the custody business. So I want to pivot because it's always good to ask you folks.

And the private equity <unk>.

Private credit space, either where theres some pressure right now we.

We don't lend on the evaluation of performance of the underlying fund investments and so we do subscription facilities, where the underlying obligor, which most of whom are our institutional borrowers are really quite strong and so from our perspective, we're not in the high yield market were not in the.

David Fox: Yeah. We'll roughly get half of our position, let's say $470 million pre-tax, so $350 million post-tax, depending on the share price. We've only just begun to sort of think about what we're going to do with it. I don't think we're going to use the same, obviously, playbook we had a few years ago. We've got other options at this point. We're going to weigh it against all our other priorities and take a look at what to do at that point in time, but haven't landed yet on that.

Dave Fox: Yeah. We'll roughly get half of our position, let's say $470 million pre-tax, so $350 million post-tax, depending on the share price. We've only just begun to sort of think about what we're going to do with it. I don't think we're going to use the same, obviously, playbook we had a few years ago. We've got other options at this point. We're going to weigh it against all our other priorities and take a look at what to do at that point in time, but haven't landed yet on that.

Very good. Um, obviously the dominance of questions are all about the wealth management and the custody business. So I would want to Pivot because it's always good to ask you folks about credit quality since it's always, so sub superb. Um, you guys obviously don't take a lot of risk. In lending, your portfolio is not that big relative to your asset size. Can you share with us? What do you guys think in the credit quality Trends? They're they're very strong and we understand that um have have think

And the.

Leverage loan market. If you will so we're not seeing the same kind of pressures that other firms might be experiencing in that regard.

About credit quality since it's always. So sub superb. Um, you guys, obviously don't take a lot of risk. In lending, your portfolio is not that big relative to your asset size. Can you share with us? What do you guys think in the credit quality Trends? They're they're very strong and we understand that um have things changed meaningfully from the financial crisis and pandemic that customers are more resilient today any color there.

Things changed meaningfully from the financial crisis and pandemic, that customers are more resilient today. Any color there?

Very good thank you Dave.

Sure. Thanks sure.

Yeah.

Alex Blostein: Okie dokes. Thank you very much.

And it appears there are no additional questions at this time I will now turn the call back to Jennifer Childe for closing remarks.

David Fox: Thank you.

Dave Fox: Thank you.

Operator: Your next question comes from the line of Ken Usdin with Autonomous Research.

Thanks for joining us and we look forward to speaking with you again.

Sure.

Ken Usdin: Hi, thanks. Good morning. I want to ask a question just about the balance sheet. You mentioned that the benefits that came through the size of the balance sheet and the deposits, maybe some of that doesn't stay, maybe some of it does. Just given the higher for longer environment, how do you think just about duration of the securities portfolio and any other changes to that? Is it really more of a wait and see because you're not 100% sure if this elevated size of the balance sheet lingers?

Again, Jennifer Thank you very much thank.

Sure, Dave. Yeah, I mean, so just keep in mind, when I look at Northern’s portfolio, that we have a very, uh, we’re very tilted toward investment grade on the corporate side. And then, um, and our clients in wealth, we’re usually doing secured facilities. And so, you know, at the end of the day, uh, for those to be in the stress scenario, it would take quite a bit of downside to do that. So that’s why you see our credit quality, uh, so high. And we’re not, obviously, also—

Thank you.

This concludes today's call. Thank you for your participation you may now disconnect.

David Fox: Yeah. When you think about the upside to our balance sheet and to our NII during the course of the year, there's a bunch of different things we think of in trying to figure out what we're going to guide. The first one would be the investment securities maturity replacement. Obviously, we still have back book repricing, and we can take advantage of that through the full year in 2026. We did take some deposit pricing actions as well towards the end of last year, let's say Q3 and Q4, and we haven't lapped those yet. Those are built in increases that we see coming in the year. We've been leaning a bit more into some incremental investment strategies around higher yielding opportunities. We've been looking at our wholesale funding mix a little bit more, leaning a bit more into FICC repo as well.

Dave Fox: Yeah. When you think about the upside to our balance sheet and to our NII during the course of the year, there's a bunch of different things we think of in trying to figure out what we're going to guide. The first one would be the investment securities maturity replacement. Obviously, we still have back book repricing, and we can take advantage of that through the full year in 2026. We did take some deposit pricing actions as well towards the end of last year, let's say Q3 and Q4, and we haven't lapped those yet. Those are built in increases that we see coming in the year. We've been leaning a bit more into some incremental investment strategies around higher yielding opportunities. We've been looking at our wholesale funding mix a little bit more, leaning a bit more into FICC repo as well.

Sure Dave. Yeah, I mean, so just keep in mind when I look at northern's portfolio that, you know, we have a very, uh, we're very tilted toward investment grade on the corporate side. And then, um, and our clients and wealth. We're usually doing secured facilities. And so, you know, at the end of the day, uh, for those to be in the stress scenario, it would take quite a bit of downside to do that. So that's why you see our credit quality, uh, so high and we're not obviously also exposed to the, to the same extent, uh, you know, in the private equity and or, uh, uh, private credit space, either where there's some pressure right now. Uh, you know, we don't lend on the valuation or performance of the underlying fund Investments. And so we, we do subscription facilities, where the underlying obligor, which most of whom are inter. Our institutional borrowers are are really quite strong. And so from our perspective, we're not in a high yield Market. We're not in the, you know, in the in the um uh leveraged loan Market, if you will. So we're not seeing the same kind of pressures that other firms.

Might be experiencing in that regard.

So exposed to this to the same extent, um, you know, in the private Equity Andor, uh, uh, private credit space, either where there's some pressure right now. Uh, you know, we don't lend on the valuation or performance of the underlying fund Investments. And so we do subscription facilities, where the underlying obligor, which most of whom are are institutional borrowers are are really quite strong. And so from our perspective, we're not in a high yield Market. We're not in the you know, in the in the um uh leveraged loan Market, if you will. So we're not seeing the same kind of pressures that other firms might be experiencing in that regard.

Very good. Thank you, Dave.

Sure, thanks. J.

Sure. Thanks George.

It appears there are no additional questions at this time. I will now turn the call back to Jennifer Childe for closing remarks.

And it appears there are no additional questions at this time. I will now turn the call back to Jennifer Childe for closing remarks.

Thanks for joining us, and we look forward to speaking with you again in the future. And once again, Jennifer, thank you very much. Thank you. Thank you.

This concludes today's call. Thank you for your participation. You may now disconnect.

David Fox: When you put all those together, and then obviously the deposit growth. We still are, we're thinking about having some deposit growth in line with the businesses. We also no longer have the potential headwind, in our mind anyway, of rate cut in the US and we've taken that off the table and may even have some rate increases in Europe. You put all that together, and that's sort of how we come up with it. We're not going to reach for yield. We're not going to materially change our profile in terms of duration to try to get there. We don't need to be honest with you, to get there. We feel we can do it without that. There's a lot of uncertainty out there. I think our positioning right now is pretty stable.

Dave Fox: When you put all those together, and then obviously the deposit growth. We still are, we're thinking about having some deposit growth in line with the businesses. We also no longer have the potential headwind, in our mind anyway, of rate cut in the US and we've taken that off the table and may even have some rate increases in Europe. You put all that together, and that's sort of how we come up with it. We're not going to reach for yield. We're not going to materially change our profile in terms of duration to try to get there. We don't need to be honest with you, to get there. We feel we can do it without that. There's a lot of uncertainty out there. I think our positioning right now is pretty stable.

Ken Usdin: Yeah. Thank you. Thanks for that. Just a bigger picture follow-up. We've got potential new Fed chair coming on who talks about potentially shrinking the size of the Fed balance sheet. The Fed balance sheet's already been down $2.5 trillion and trust bank deposits keep growing. Can you just remind us of the rule of thumb to think about if the Fed balance sheet continues to shrink over time, how insulated is your balance sheet from that in terms of deposits?

Michael O'Grady: Ken, I would say that is something that we are obviously observant of and what's happening. Frankly, I'm a little surprised that liquidity levels have remained so high on our balance sheet and in our funds, given that the Fed has reduced its balance sheet as much as it has. To the extent that we're in, say, some level of stabilization there, I think that's good because that means our deposit levels and money market fund levels will grow with our organic growth. Yes, there is definitely some exposure to the extent the Fed were to really shrink its balance sheet more. I think that pulls liquidity out of the marketplace and our model as well as others tends to expand and contract with that somewhat. Yeah, some exposure on the downside, I think less on the upside.

Ken Usdin: Yep. Okay. That's all. Thanks, Mike.

Michael O'Grady: Yep.

Operator: Your next question will come from the line of Steven Chubak with Wolfe Research.

Sharon Wang: Hi. Good morning. It's actually Sharon Wang filling in for Steven today. Just wanted to ask on the margins in the business segments. The margin in Asset Servicing has expanded nicely. In Wealth, the margin was flat year-on-year, despite some strong revenue growth. Just wanted to understand, what are the components that are going to drive the path towards your medium-term target of 33% in the margin? Thanks.

Michael O'Grady: The goal of the Asset Servicing business, as I've mentioned, is scalable growth. As much as we did have a strong pre-tax margin here in the quarter, this is something that we're trying to consistently move up. The expectation is that we will continue to try to see a higher margin in the Asset Servicing business. We've talked about a particularly strong macro backdrop here. Capital markets, very strong. NII, very strong in Asset Servicing. That definitely contributed to the higher pre-tax margin for this quarter. We want to make that even more sustainable, if you will, and a more resilient, high level of margin. There's more opportunity on that front. On Wealth Management, where we have had a very attractive pre-tax margin, that's an area you've heard a lot where we've talked about growth and making investments for growth.

Michael O'Grady: We feel like we're in a, I'll say, a good range for that margin, but we are emphasizing growth as opposed to trying to see that margin go up. To the extent we did have some pressure on the Wealth Management margin as we make some of these investments in the near term, the expectation is that we'll more than make up for those with improvement in Asset Servicing.

Sharon Wang: Great. Thank you so much.

Michael O'Grady: Sure.

Operator: Your next question comes from the line of David Smith with Truist Securities.

David Smith: Hey, Good morning.

Michael O'Grady: Morning.

David Smith: On organic growth, you said it's seven consecutive quarters of positive growth for the business as a whole, and then there's a 3% target that you've put out there, but you think there's an opportunity to do better over time. Can you help us get a sense of where organic growth is today and where you were a year ago? We know GFO is above average, but is asset servicing and the regional part of wealth barely positive today, 1% or so, 2% or so? I'm sure it can bump around some quarter to quarter, but maybe over the past year, what kind of organic growth has each of those businesses earned? Where were those, say, like the year prior? Thank you.

Michael O'Grady: Sure. To just start with this quarter, each of the three businesses had positive organic growth. That would also be true within the major segments of the business. To your point, if we look at each of them individually and a little bit, I'll say, over time. Within Wealth Management, the organic growth has been closer to a consistent, I'll say 1%, with GFO being above that and the regions being a little bit below that. That's where we're looking certainly for GFO to continue to grow at a high rate. It's more with the regions incrementally increasing that growth rate as we go forward this year and into next year to move it up, in total above the 3%. Made progress this quarter, but again, it's all about consistency.

Michael O'Grady: In the Asset Servicing business, just given the nature of some of the larger mandates, that organic growth rate can, I'll say, swing or vary more from quarter to quarter or even in a year. If you went back a few years ago, we did have some periods where we had some business that rolled off that did bring that down to kind of flat to negative organic growth. As I mentioned, it's positive right now, again, in about the same range as the Wealth Management business. We see the opportunity likewise to continue to see that growth rate increase, but with the focus on profitability and scalability for it. In Asset Management overall, a lot of the organic growth more recently has been primarily driven by liquidity. We're seeing greater diversification in the growth with that business as well.

Michael O'Grady: In the past quarter here, likewise, some of the areas that I mentioned around ETFs and, for some time period, tax-advantaged equity have had nice organic growth across that front. Once again, at about the same range there and same expectations to see that increase.

David Smith: Got it. Do you expect over time all of the major businesses to be doing 3% organic? Or medium term, would you expect to get there for the company as a whole, but some to be above and some to be below?

Michael O'Grady: Yeah. The target is for all of them to be above the 3%, but just given the way that it varies from quarter to quarter, even year to year, they may not all be, but that's the benefit of having the three businesses.

David Smith: Got it. Thank you.

Michael O'Grady: Sure.

Operator: Your final question will be coming from the line of Gerard Cassidy with RBC.

Gerard Cassidy: Hi, Mike. Hi, Dave.

Michael O'Grady: Good morning.

David Fox: Hey.

Dave Fox: Hey.

Sharon Wang: Mike, I think you called out in your prepared remarks that you saw outsized growth in the Wealth Management area in your Central Region. Can you highlight what drove that?

Gerard Cassidy: Mike, I think you called out in your prepared remarks that you saw outsized growth in the Wealth Management area in your Central Region. Can you highlight what drove that?

Michael O'Grady: Sure. You're right, Gerard. We did. I would say, often, given that the company has been in the Central Region and headquartered in Chicago for a very long time, we have a very strong business here. Often people think that it's a mature business that is not going to grow at the same rate or even at a higher rate. The fact of the matter is, the team and the leadership of this region, particularly under John Fumagalli and his team, have consistently leveraged that strength to be able to grow at a higher rate. One of the areas I would say more recently is around the family office solutions that I talked about. That's the area where we started with that solution set and with that offering.

Michael O'Grady: It's already gained momentum in this region, and now we're in the process of rolling that out to the other regions in the same way. That's a part of the driver of the strong quarter.

Gerard Cassidy: Very good. Obviously, the dominance of questions are all about the wealth management and the custody business. I want to pivot because it's always good to ask you folks about credit quality since it's always so superb. You guys obviously don't take a lot of risk in lending. Your portfolio is not that big relative to your asset size. Can you share with us what are you guys seeing in the credit quality trends? They're very strong. We understand that. Have things changed meaningfully from the financial crisis and pandemic that customers are more resilient today? Any color there?

Michael O'Grady: Sure. Dave?

David Fox: Yeah. Just keep in mind when we look at Northern's portfolio that we're very tilted toward investment grade on the corporate side. Our clients in wealth, we're usually doing secured facilities. At the end of the day, for those to be in the stress scenario would take quite a bit of downside to do that. That's why you see our credit quality so high, and we're not obviously also exposed to the same extent in the private equity and/or private credit space either, where there's some pressure right now. We don't lend on the valuation or performance of the underlying fund investments. We do subscription facilities where the underlying obligor, which most of whom are institutional borrowers, are really quite strong. From our perspective, we're not in the high yield market. We're not in the leveraged loan market, if you will.

Dave Fox: Yeah. Just keep in mind when we look at Northern's portfolio that we're very tilted toward investment grade on the corporate side. Our clients in wealth, we're usually doing secured facilities. At the end of the day, for those to be in the stress scenario would take quite a bit of downside to do that. That's why you see our credit quality so high, and we're not obviously also exposed to the same extent in the private equity and/or private credit space either, where there's some pressure right now. We don't lend on the valuation or performance of the underlying fund investments. We do subscription facilities where the underlying obligor, which most of whom are institutional borrowers, are really quite strong. From our perspective, we're not in the high yield market. We're not in the leveraged loan market, if you will.

David Fox: We're not seeing the same kind of pressures that other firms might be experiencing in that regard.

Dave Fox: We're not seeing the same kind of pressures that other firms might be experiencing in that regard.

Gerard Cassidy: Very good. Thank you, Dave.

David Fox: Sure. Thanks, Gerard.

Dave Fox: Sure. Thanks, Gerard.

Operator: It appears there are no additional questions at this time. I will now turn the call back to Jennifer Childe for closing remarks.

Jennifer Childe: Thanks for joining us, and we look forward to speaking with you again in the future.

David Fox: Once again, Jennifer, thank you very much.

Michael O'Grady: Once again, Jennifer, thank you very much.

Gerard Cassidy: Thanks, Jennifer.

Dave Fox: Thanks, Jennifer.

Michael O'Grady: Thank you.

Jennifer Childe: Thank you.

Operator: This concludes today's call. Thank you for your participation. You may now disconnect.

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