Good day, and welcome to the Northern Trust Q4 2021 earnings conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to the Director of Investor Relations, Mark Bette. Please go ahead. Thank you, Allie. Hello, everyone, and welcome to Northern Trust Corporation's Q4 2021 earnings conference call. Joining me on our call this morning are Mike O'Grady, our Chairman and CEO, Jason Tyler, our Chief Financial Officer, and Lauren Allnutt, our Controller. Our Q4 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 January 20 call is being webcast live on northerntrust.com. The only authorized rebroadcast of this call is the replay that will be available on our website through February 17. 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 on page 13 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 Mike O'Grady. Thank you, Mark. Let me join in welcoming you to our Q4 2021 earnings call. I hope you and your families are healthy and well. Our performance in the Q4 generated a 9% increase in revenue compared to the prior year and a return on average common equity of 14.5%. Revenue growth reflected strong organic growth across each of our businesses, which also contributed to full-year earnings growth and a return on average common equity of 13.9%. Throughout 2021, we continued to have success executing on our growth strategies across each of our businesses while enhancing our foundational strength through advancements in our data and digital efforts. In our wealth management business, we have driven growth across each of our regions and our global family office business. We continue to see improved levels of engagement and new business activities with both existing and new clients. We ended the year with a continuation of the strong growth in loans and deposits that we have seen throughout 2021. During the quarter, we began executing on our plans to expand our Florida footprint into Jacksonville, one of the fastest-growing northeast regions within Florida. We were honored to be recognized by the Financial Times Group as the best private bank in the U.S. for the 11th time in the past 13 years. We were also named the best private bank in the U.S. for family offices, recognizing our global family office group for its commitment to families of significant wealth, their private foundations, and the family offices that serve them. Within asset management, we continued to see strong organic growth across key strategic areas of focus, highlighted by our money funds surpassing $330 billion in AUM during the quarter. Our FlexShares ETFs reaching $20 billion in assets and ESG strategies growing to more than $165 billion in assets. During the year, we also benefited from growth in our multi-manager strategies and our outsourced chief investment officer services. Our asset servicing business continues to experience growth that is well diversified across regions, products, and client segments. A highlight of our new business success is the recent announcement of the expansion of our relationship with Pendal Group across Australia, the U.K., Ireland, and the U.S. Northern Trust has provided fund administration, global custody, and transfer agency services to Pendal since establishing its first mutual fund offering in the U.S. in 2009. This mandate will now be extended to include fund accounting, regulatory reporting, collateral management, foreign exchange, and middle office services across all of Pendal's businesses. This is an excellent example of how we grow our asset servicing business by targeting a premier asset management firm, developing a relationship, providing exceptional service, growing along with their success in increasing their assets under management, and then expanding the relationship by consolidating their activities and providing a broader set of capabilities. I wanna commend the efforts of our employees around the world, whose commitment, expertise, and professionalism is serving our clients and communities and continues to be extraordinary. As we enter 2022, we remain focused on our long-term priorities and investing wisely for future profitable growth to deliver long-term value to our various stakeholders. Now, let me turn the call to Jason to review our financial results in greater detail. Thank you, Mike. Let me join Mark and Mike in welcoming you to our Q4 2021 earnings call. Let's dive into the financial results of the quarter starting on page two. This morning, we reported Q4 net income of $406.4 million. Earnings per share were $1.91, and our return on average common equity was 14.5%. Results for the quarter included a severance charge of $6.1 million, a pension settlement charge of $3.4 million, a $13 million gain within other operating income relating to property sales, and net one-time tax benefits of $13.9 million, primarily relating to a lower net tax impact from international operations. Let's move to page three and review the financial highlights of the quarter. Year-over-year, revenue was up 9% and expenses increased 2%. Net income was up 69%. In the sequential comparison, revenue was up 2% and expenses were up 4%, while net income was up 3%. The provision for credit losses reflected a release of $11.5 million in the current quarter compared to a release of $13 million in the prior quarter and $2.5 million in the prior year. Return on average common equity was 14.5% for the quarter, up from 8.8% a year ago and up from 13.7% in the prior quarter. Let's look at the results in greater detail, starting with revenue on page four. Trust, investment, and other servicing fees, representing the largest component of our revenue, totaled $1.1 billion and were up 8% from last year and flat sequentially. Foreign exchange trading income was $77 million in the quarter, up 12% year-over-year and up 16% sequentially. The year-over-year growth was driven by higher volumes, partially offset by lower volatility, while the sequential increase was due to higher volumes as well as higher volatility. The remaining components of non-interest income totaled $119 million in the quarter, up 28% from one year ago and up 8% sequentially. Within this, securities commissions and trading income was up 11% from the prior year and down 1% sequentially. The year-over-year growth was driven by higher core brokerage revenue. Other operating income totaled $72 million and was up 46% from one year ago and up 16% sequentially. The increase compared to the prior year was primarily driven by the previously referenced $13 million in gains from property sales, distributions from investments in community development projects, and higher banking and credit-related service charges, partially offset by lower miscellaneous income. The sequential increase was primarily due to the gains on property sales, also partially offset by lower miscellaneous income. Net interest income, which I'll discuss in more detail later, was $371 million and was up 7% from one year ago and up 4% sequentially. Let's look at the components of our trust and investment fees on page 5. For our corporate institutional services business, fees totaled $625 million and were up 5% year-over-year and down 1% sequentially. Custody and fund administration fees were $458 million and up 9% year-over-year and down 1% sequentially. The year-over-year growth was primarily driven by favorable markets and new business, partially offset by lower transaction-based fees. The sequential decline was driven by lower transaction-based fees and unfavorable currency translation, partially offset by favorable markets and new business. Assets under custody administration for CNIS clients were $15.2 trillion at quarter end, up 11% year-over-year and up 3% sequentially. The year-over-year growth was primarily driven by favorable markets and new business. The sequential performance was primarily attributable to favorable markets. Investment management fees in CNIS of $113 million were down 9% year-over-year and were flat sequentially. The year-over-year performance was driven by higher money market fund fee waivers, partially offset by new business and favorable markets. Fee waivers in CNIS totaled $50.9 million in the Q4 compared to $49.9 million in the prior quarter and $11.4 million in the prior year quarter. Assets under management for CNIS clients were $1.2 trillion, up 13% year over year and up 3% sequentially. The growth from the prior year was driven by favorable markets and client flows. The sequential increase was primarily driven by favorable markets. Securities lending fees were $19 million, up 8% year over year and down 6% sequentially. Average collateral levels were up 16% year over year and down 1% sequentially. Moving to our wealth management business, trust, investment, and other servicing fees were $486 million and were up 13% compared to the prior year and up 1% from the prior quarter. Fee waivers in wealth management totaled $30.2 million in the current quarter compared to $26.7 million in the prior quarter and $12.2 million in the prior year quarter. Within the regions, the year-over-year growth was driven by favorable markets and new business, partially offset by higher fee waivers. For the sequential performance, the growth within the regions was primarily driven by new business. Within Global Family Office, the year-over-year performance was driven by favorable markets and new business being more than offset by higher fee waivers. The sequential decline was mainly related to higher fee waivers. Assets under management for our wealth management clients were $416 billion at quarter end, up 20% year-over-year and up 12% on a sequential basis. Both the year-over-year and sequential increases were driven by client flows and favorable markets. Moving to page six. Net interest income was $371 million in the quarter and was up 7% from the prior year. Earning assets averaged $149 billion in the quarter, up 13% versus the prior year. Average deposits were $136 billion and were up 18% versus the prior year, while loan balances averaged $40 billion and were up 20% compared to the prior year. On a sequential quarter basis, net interest income grew 4%. Average earning assets grew 3% and average deposits grew 5%, while average loan balances were up 4%. The net interest margin increased 1 basis point sequentially. Turning to page seven. Expenses were $1.2 billion in the Q4 and were 2% higher than the prior year and up 4% from the prior quarter. As mentioned earlier, the current quarter included $9.5 million in charges related to severance and a pension settlement, while the prior quarter included a $6.9 million pension settlement charge. Also, recall that last year's results included a severance charge of $55 million and an occupancy charge of $11.9 million. Excluding these items, expenses were up 7% versus the prior year and up 3% sequentially. Excluding severance charges, compensation expense was up 7% compared to the prior quarter and was up 2% sequentially. The year-over-year growth was primarily driven by higher cash-based incentive accruals as well as higher salaries. The sequential increase was primarily due to higher salaries, partially offset by lower equity-based incentives. Excluding the previously mentioned pension settlement charges, employee benefits expense was up 3% from one year ago and up 10% sequentially. Both increases were impacted by higher medical costs and lower payroll withholding. Outsourced services expense was $224 million and was up 8% from a year ago and up 6% from the prior quarter. Revenue and business volume expenses accounted for just over a third of the year-over-year growth. The remaining year-over-year growth, as well as the sequential growth within the category, included higher technical services, consulting, and data processing related costs, reflecting investment in the business as well as the timing of engagements. Higher legal services costs also contributed to the sequential increase, but were down compared to the prior year. Equipment software expense of $196 million was up 11% from one year ago and up 6% sequentially. Both the year-over-year and sequential increases reflected higher software support and amortization costs. Excluding the prior year charge, occupancy expense of $52 million was down 6% from a year ago and down 4% sequentially. Other operating expense of $79 million was up 9% from one year ago and down 3% sequentially. The year-over-year increase is driven by higher business promotion expense, partially offset by lower miscellaneous expenses. The sequential decline was impacted by higher costs associated with the Northern Trust sponsored PGA golf tournament in the prior quarter, partially offset by increases within other business promotion spend and miscellaneous expenses within the category. Turning to the full year. Our results in 2021 are summarized on page eight. Net income was $1.5 billion, up 28% compared to 2020, and earnings per share were $7.14, up 31% from the prior year. On the right margin of this page, we outline the non-recurring impacts that we called out for both years. We achieved a return on equity for the year of 13.9% compared to 11.2% in 2020. The full year revenue and expense trends are outlined on page nine. Trust, investment, and other servicing fees grew 9% in 2021. The growth during the year was primarily driven by new business and favorable markets, partially offset by the impact of money market fee waivers. Net interest income declined 4%. Average earning assets during the year increased by 16%, while the net interest margin declined 20 basis points driven by lower average interest rates. The net result was revenue growth of 6% in 2021 compared to 2020. On a reported basis, expenses were up 4% from the prior year. Adjusting for the expense items noted in both years, expenses were up 6% from 2020. Turning to page 10. Our capital ratios remain strong with our common equity Tier 1 ratio of 12.1% under the standardized approach, up slightly from the prior quarter. Our Tier 1 leverage ratio is 6.9%, down slightly from the prior quarter. We declared cash dividends of $0.70 per share, totaling $146.8 million to common stockholders. The current environment continues to demonstrate the importance of a strong capital base and liquid balance sheet profile to support our clients' needs, and we continue to provide our clients with the exceptional service and solution expertise they've come to expect. As we begin 2022, our focus is on balancing a variety of factors in the months ahead. With the prospect of higher interest rates benefiting our revenue, but conversely, the higher levels of inflation and the competitive labor market impacting expenses. We are relentlessly focused on strengthening our competitive position within each of our businesses, investing in our workforce and technology, all while delivering attractive returns. Thank you again for participating in Northern Trust Q4 earnings conference call today. Mike, Mark, Lauren, and I'd be happy to answer your questions. Allie, will you please open the line? Of course. Thank you. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. Microphone, please make sure mute function is turned off to allow your signal to reach our equipment. As a reminder, please ask one question and one follow-up question. We'll go ahead and take our first question from the line from Evercore. Please go ahead. Morning, Glenn. Hi, Glenn. Good morning. How are you? Quick question for you. On that last comment you made about focusing all those things. You are not alone there. You had nice fee operating leverage for the year. The fee-to-expense ratio came up a little bit, obviously because it was a super low number in the Q3. As you balance all those things as we look out into 2022, can that be the same key focus that it's been in the past as you balance all those things? Meaning you'll get the benefit of rates over time, but the cost inflation is here now. Should we be prepared for, you know, 2022 being a tougher year for that metric? Yeah. We should, Glenn. I mean, you're hitting on an important point which is that we all are seeing the prospects of rates and we're extremely leveraged at the front end of the rate curve, both in NII and also in waivers obviously. But the inflation is hitting faster. We saw it in Q3 as we were looking at incentive comp rules. We saw it in Q4 as we made some off-cycle adjustments which we can talk about in salaries. That inflationary component, and by the way it's not just in compensation, it shows up in other areas of the income statement. It's gonna hit first, but at the same time, the leverage we have to the front end of the yield curve means that when rates do go up, it's extremely beneficial to us. We've been talking about that for two years obviously, how much net interest margin and also waivers in the money market products have been impacted. I appreciate all that. I'll let one of my peers ask on the NII stuff. I did want to ask a quick question on organic growth as a follow-up. You mentioned it, you spoke to it. It's clearly there because you can see it in your asset growth. Can you talk about whether it be new business wins in asset servicing and asset management or a won but not yet funded pipeline? Thank you. Sure. Thanks, Glenn. You know, both of the businesses, and as you know, when we talk about the organic growth, we tend to talk about year-over-year, not on a last quarter basis. That's a really important distinction. That said, you touched on it, both asset servicing and wealth management had good lift from an organic perspective year-over-year, and frankly in the quarter as well. You saw, we've been talking about increased momentum in the wealth management business. You're starting to see that come through with higher fees on a quarter-over-quarter basis that's driven by new business, and we get the same effect coming in asset servicing. The pipeline in both of the businesses, you know, in the short run it looks strong. The pipeline for the businesses has different timing but in both instances they're reflecting good activity in new business. I think in the CNIS in particular, they see good activity overall. In the front end it might be a little bit different. The back end is a little bit harder to tell. Okay, thanks. Sure. Thanks, Glenn. We'll move on to our next question from Steven Chubak with Baird. Please go ahead. Steve. Thanks. Good morning everyone. Wanted to start with just a question on capital management. As you noted, capital ratios continue to be quite strong. I believe, Jason, on the last call you had talked to or spoken to the fact that the RWA inflation, the loan growth was consuming a lot of the capital build that you guys were generating. This quarter that wasn't the case. We didn't really see any RWA growth and yet you tempered the buyback. I was hoping you can give some perspective as to what informed that decision and how should we be thinking about the pace of buyback from here, especially if the pace of RWA growth does begin to moderate. Sure. Well, you know, a couple thoughts there. You know, one just for the quarter, what the RWA growth is one dynamic but of course, you know, AOCI hits capital and that's another dynamic we have to manage as well, which is why we were flattish quarter-over-quarter. That said, you know, as we think about the overall, I know a lot of people are wondering what our game plan is from a buyback perspective. It's a good time to just take a look back at the year and we generated $1.5 billion in capital last year from earnings. You take a step back and just say, where did, just the math you're doing, where did the $1.5 billion go? Well, we did return $600 million to shareholders in the form of dividends over the course of the year. We very intentionally grew the loan book. We saw high quality opportunities on the horizon and we wanted to be there for clients. You look year-over-year and loans are up $7 billion. Even within this quarter they are up $1 billion, one or two billion dollars. If you think about where our capital ratios are, that $7 billion increase in loans, that takes another $900 million in the capital that we generated. You look at dividends and what happened with loans. That's right there, that's 100% of the capital we generated. Now, even so, we did buybacks in the year of about $250 million, that's why you saw CET1 drift down a little bit. The next important question is the loan growth good? It was very good. It's good strategically for us because we supported clients, but it's also good economically. If you think about the ROE of loans, it's very attractive, particularly in a low interest rate environment. We feel really good with what we did in 2021. In 2020, the door was closed. Last year, we think we did the right thing for clients and shareholders by growing relationships and earnings. As you're trying to predict what we're gonna do in 2022, it's very different. We don't see the same loan growth on the horizon. We've even talked about the fact that some of the loan growth we've had is in some of the areas of our business where it can be very spiky. Just as our clients put on, they can put on $1 or $2 or $3 billion in a deposit, they can do the same thing in lending. We could see lending be spiky both up and down, but don't see that same type of $7 billion growth year over year. Thanks for that color, Jason. Just for my follow-up, wanted to add, sorry about that, on the expense side, you did give that perspective noting that on an adjusted basis, the expenses grew 6%-7% this past year. Obviously, we had some nice market tailwinds which will drive some impact on the variable expense lines. As we think about some of the inflationary pressures that started to manifest late last year and are gonna continue into this year versus that up 6%-7% that you had talked about in 2021, should we expect the expense growth to be similar or even above that given the inflationary pressures that you spoke to? Well, let me hit the big three. Maybe I'll hit comp and then I'll hit technology, which gets into outside services and equipment and software expense. If you look at the comp line, again, we've already seen some inflation hit that line this year. You see it was, you know, just the increase in comp this quarter, linked quarter, you know, $13 million of that alone came from salaries. The impact of what we've done in these off-cycle adjustments, not done yet. Just from the actions we've already taken, we're gonna see another $3 million lift in the comp line just from those salary adjustments. Now secondly, there's what are we going to do with our normal base pay adjustments? Which as you know, that starts in Q2, but that's gonna be higher and it's reflective of inflation. It's usually we see that be a $8 million-$10 million a quarter impact. This year, it's gonna be more like $20 million a quarter. Those salary actions combined are gonna give just in and of itself, that'll lift the total comp line 5% year-over-year for the year. You know, and on top of it, we then have to think about what hiring are we gonna do and what other adjustments might we have to take. That at least gives you a lens of what we can see at this point. Now let me switch to tech. That's the other area where all financial services companies are spending a lot of time and a lot of investment. That hits us all across the P&L, but mostly in outside services and equipment and software. You saw big sequential increases of about 6% in both of those categories this quarter. As we look forward, very different impacts of what we think is gonna be existing in 2022. In outside services, there's tech services within that category, a lot of project work that we're doing. We got a lot of that done in Q4. We do not see significant impact and significant lift in 2022 in outside services. In fact, the number you see now for Q4, that's a good starting point for 2022. Any motion from there is gonna be driven more by business activity. Obviously there's a lot of business-related activity in that line item that could drive it. The tech component, largely done and from an increase perspective. Equipment and software, very different. We are on a ramp there against 6% increase there. We ended that year well with the category was up 9% year over year over 2020. We're gonna see that same type of lift in that category in 2022, maybe slightly higher. So what are we doing there? It's really four factors. One, depreciation. That alone is we know we can see as we sit today, that's gonna be up $45 million or $50 million. So just depreciation, which is kind of in the bank at this point, we know is gonna grow equipment and software by about 7% alone. We know that there's some other increases coming. Two, inflation of the underlying costs, and that hits in different ways. Three, we're continuing to invest in technology to get stronger and maintain a very strong foundation. Lastly, business growth, including digital. A lot of investment going on there in a handful of different categories. Those are the three big categories of expenses to give you a sense of what we know at this point. No, very helpful breakdown. Thanks so much for taking my questions. Thanks. We'll take our next question from Ken Usdin from Jefferies. Please go ahead. Hey, thanks. Hey, Ken. Good morning. Jason, you mentioned earlier that, you know, the company is meaningfully asset sensitive. I wanted to ask you know, your disclosures in the 10-Q and 10-K give you know, an expected change over base forecast. I wonder if you could give us a more simple way of thinking about, you know, this cycle, what each 25 basis points of rates would give you in terms of NII dollars. Sure. Well, first of all, you know, and you know this really well, it's not linear. Let me give you the first one. I wish that the fourth and fifth were the same. The first alone is at a high level, if you think about, you know, we've got about $70 billion in floating rate earning assets, and we think we'll get about a $40 million lift on a quarterly basis alone on the asset side. We'll give up maybe $5 million of that in higher borrowing costs, so that's net $35 million before we really talk about significant beta. We think that first lift is probably in that $35 million a quarter range. Now that Yeah. The first lift, it also gets to waivers, Ken. We've talked about the fact that our money market mutual fund family is priced much more institutionally. It only takes one lift to work fully through the duration of the portfolio to get the vast, if not all, of the waivers off the table as well. As you know, this past quarter, we waived $80 million, and run rate on that's lower now, but I think it's important to think about both of those. Go back to NII as we get those, you know, second, third, fourth rate hikes, then that's when we start to give up some of the gain coming from the deposit cost. Yep. Yep, perfect. Just the second one quickly on CNIS. You mentioned lower transaction activity. That line was flattish. Can you just kind of give us some help on the magnitude of what type of holdback that might have been, and maybe just talk through, you know, FX translation headwinds as well? Sure. You know, it's interesting, as we talk about transaction costs and transaction volume, I think people look to FX, and they look to securities commissions trading. Even within the custody and fund administration fees, there are transaction-related fees that feed into that line. That's what we're referencing when we're saying that those costs were lower in the quarter. You'll note in FX, for example, good quarter. Just transaction volumes in FX and other areas were high. But within as we really dug into what happened within the custody and fund admin lines within CNIS, it was more the transaction component, the non-asset, the AUC, non-AUM based fees that were light in the quarter. Okay. I guess, was that meaningful, and was FX translation a meaningful, you know, headwind this quarter too, sequentially? Yeah. Yeah. Oh, man. Yeah. Mark, go ahead, Mark. Yeah. Ken, Mark. Combined, you're looking at about 2% there, with the transaction-based fees being more than half of that. The two were a, you know, I'd say a fairly significant drag when you look at custody and fund administration on a sequential basis. Okay, got it. Thank you. Thanks, Ken. I'll take our next question from Alex Blostein from Goldman Sachs. Please go ahead. Great. Hi, Alex. Thanks. Hey, guys. Good morning, everybody. Couple of questions around the rate dynamics. I guess, as we think about your deposit betas, and I appreciate nobody has a crystal ball. As you think about the current cycle versus the prior cycle, has the nature of the deposit base changed much for us to sort of contemplate as we think about deposit betas over the next several quarters, right? Or do you think the experience you guys saw in the last cycle is a pretty good one, as a sort of benchmark for deposit betas this time around? Yeah. It's, you know, we talk about it a lot, and I've thrown out to our team, is it similar to last time? It's just hard to tell. What I can give you some facts that it's less to the deposit beta, but more to just the overall asset sensitivity of the securities portfolio on the balance sheet. The duration has come down from last quarter was 2.7, and now it's at 2.6. Ironically, though, if you look at the duration of the overall asset side of the balance sheet cumulatively, it's much higher than what it was in the prior cycle. I can actually tell you this, as it sits right now, it's about 1.16. If you go back to the last tightening cycle, 2015, it was 0.7. That's meaningfully different. We have to see how the deposits Specifically, right, but that at least gives you a sense of what the exposure of the overall balance sheet is like. Mark, I don't know if you have anything to add. The other thing that we've heard as well from our team to keep in mind, Alex, is the trajectory of the rates. I think last time the rate hike started much slower. Right ... than what it appears it might happen this time. You might go through those, rising betas in a quicker way because of that. We'll have to see how that plays out as well. Got it. Thanks for that. My follow-up is around, I guess, expenses again. You know, Jason, I appreciate you guys giving us the different pieces, and that's helpful and, obviously acknowledging that you guys don't give, you know, flat out guidance, in terms of expense growth. I do like the way you talk about expenses to fees as a ratio, and that got to some of the clients' points as well. If you guys are at around 104 by our math in terms of expense to fees in, you know, in 2021, you talked about inflationary pressures, but also you're getting money market fees back likely in 2022, which I would have thought would come in at a really high kind of incremental margin. When you blend it all together, you know, net-net, we're staying kind of in this 103%-105% range for 2022 and, you know, beyond, as we kind of think about that ratio as a guidepost sort of thing between the revenues and expenses. Alex, it's Mike. I think your framework is correct, or at least I would say aligned with the way that we're looking at it as well. Of course, we don't know what the market levels are gonna be and how quickly the fee waivers come back. Obviously we're managing through the expense side of that. To your point of kind of being in a range of, I'll call it efficiency there, you know, we're in that range. Particularly in an inflationary environment, that can be challenging to try to get that ratio to go down. As Jason alluded to, you know, earlier, where you really see, you know, the other side of the coin, if you will, is on interest rates and therefore NII, that then drops down to operating leverage. In the same way, we're saying, okay, stay in that expense to trust fee ratio as far as, you know, efficiency, but then look to pick up through NII so that you have positive operating leverage and that your pre-tax margin is in that range that you want to get the right returns. Yeah, that makes sense. That's consistent with kind of how we're thinking. Okay, awesome. Thank you. Yep. Thanks, Alex. We'll go ahead and take our next question from Brennan Hawken from UBS. Please go ahead. Hey, Brennan. Hey, thanks for taking my questions. I just wanted to follow up, circle back a little bit on capital, and pull together a couple of the comments that you made on that, Jason. It seemed like what you said was that in the current quarter, there was some AOCI consumption of capital, and while you had $1.5 billion or so base of loan growth, the outlook for the loan growth is slowing and not really there. Number one, does that mean that your further consumption of capital on the loan growth side may slow? Of course, there could be a handoff to AOCI. Number two, when you talked about the $7 billion versus the $900 million, it seemed like that suggested a pretty high risk weight density in the loan book. Can you talk about the risk weight that you have in that loan book and what kind of loans are driving that growth? Thanks. Sure. Well, let me start with the end, but don't let me forget the first part of it. The loans that we have are. You can see it in our reporting. The first cut is it's weighted more heavily toward wealth management, obviously. Within that, it's a blend of personal, commercial real estate, corporate, commercial. The risk rates on those don't vary dramatically from a risk weight allocation perspective. At a really high level, you look at what our outstandings are, and it's not gonna vary within those categories significantly. Now, there are also some off-balance sheet commitments that aren't reflected there. That gives you a general sense. We've talked a bit, and I could now, if you'd like, if it's helpful, to give you more of a breakdown of the loans and what they look like by category. The growth has actually been relatively consistent. If you think about the increase, just for example, if you're trying to do the math there, if I look at increase in loans from Q3 to Q4, commercial has been about it was up about $1.5 billion, commercial about $650 million, and personal loans about $350 million, commercial real estate $250 million, and then some other stuff with the remainder. You can tell it's relatively consistent to our overall volumes in the $40 billion portfolio. If I come back to your first- Yep. Go ahead. Thank you. That's what I was just gonna remind you about the first part. That's all. You're on. Thanks, Jason. I am notoriously bad at multi-part questions. You gotta remind me. We just don't see the same outlook on loan growth. I think you couple that with, you know, again, we generated $1.5 billion in capital, and if we do get what we walked through earlier, if we get multiple rate hikes and we start to have an improvement from a net interest margin perspective, waivers start to go away, then the math becomes different, and we can think about different ways to return that capital generated to shareholders. We obviously, you know, we go through the same framework that we always have. We think about the dividend first to make sure that it's something we're comfortable with and it's within the range we've talked about. We start to look at the outlook for the size of the balance sheet to stay within a range that we feel is appropriate given all the dynamics we've talked about historically. Excellent. That was very thorough and helpful. You touched on the size of the balance sheet there. Maybe I'd like to ask for the follow-up. When you think about deposit runoff, 'cause, you know, you typically, with the business model, you tend to see deposit growth when the Fed is expanding its balance sheet and runoff when it's shrinking. Last cycle, the runoff for Northern, for you guys was less than it was for some of the other custody bank peers. When you think about what's driven the deposit growth or different types of businesses that have driven the deposit growth the past two years, does it look similar to how it looked last cycle? Has the composition of deposit growth shifted, which might suggest we should think about deposit runoff in a different way? You know, I look at it a little bit differently. One is I think we have to look at just what's happened with the asset values. If you go back to the end of 2019 pre-health crisis, and you look at what's happened with the S&P 500 from then to now, the S&P is up something like 48%. If you look at our deposits on average, we went from averaging $85 billion-$90 billion, up to $135 billion-$150 billion. It's a very similar increase. Then the second thing to look at is what's operational versus non-operational. Did all of the growth come in non-operational deposits? The answer is absolutely not. A lot more of our growth has come in operational deposits. Then the third dynamic, which you got at, is there is just this overwhelming dynamic of the Fed having put trillions of dollars of liquidity into the market, and whatever our little tiny $150 billion balance sheet looks like, it's still gonna be impacted by what the Fed does. You put all those things together, and you just, I don't think there's reason to believe at this point, from what we see just from that data, that there's some massive unwinding coming. Now, it could come, but those data points tell you that, you know, not necessarily. All right. That's helpful. Thanks, Jason. Sure. We'll go ahead and take the next question from Brian Bedell from Deutsche Bank. Please go ahead. Great. Hey, Brian. Thanks. Good morning, guys. Good morning. Jason, thanks for all that color on the expense areas and great granularity to my question. I want to follow up on just a couple more areas, and that's just the Northern Trust Open. I think you know, obviously you're not doing that this year, but I think you alluded to in the past of potentially doing a marketing campaign in its place. Then, maybe just any commentary around the travel, you know, potentially higher travel expenses if we're all back to office and COVID hopefully recedes. Yeah. Maybe I'll touch on travel and business promo, and then maybe Mike can talk about golf tournament. We're seeing business promo pick up again. It was up in Q4. But no one's cringing at that. I mean, it means that we're in front of clients more. You know, is it gonna get back to the levels we saw before? Boy, that's highly unlikely. Already partially in the run rate in Q4 in other expenses, and we do expect that to continue to come. That's not adding $10 million a quarter in expenses, but it is adding to the expense run rate. Mike, you wanna touch on golf? Sure. The golf tournament has been a very successful marketing effort and client entertainment effort for us, you know, particularly around branding. As much as we've you know, ended that relationship at this point, I've you know, we still need to continue to invest in the brand. Some of the proceeds that are the funds that are deployed for that, you know, brand building through the golf tournament are being redeployed in other areas. At this point, Brian, it's not going to be at the same levels as what we were spending on the golf tournament. Okay. That's helpful. Then maybe just on expenses overall. I mean, there's actually a pretty good playbook over the last 10 years in terms of your expense history with a pretty reliable middle single-digit type of expense growth in each year which kind of I think ties- I think we lost you, Brian. Yeah. Maybe- If you re-queue. Maybe Brian. Yeah. Maybe you could re-queue, and we could take that. Otherwise, we've got, I think, one more. Allie, do you wanna. Alex, can you hear us? You're next in queue. I can hear you guys. I don't know if I'm speaking live. We can hear you, so go for it. Oh, great. Sorry. Thanks for taking the follow-up, VR. Loud and clear on the deposit trajectory in terms of the sizing of the balance sheet. I'm curious how that could play out with money market funds because that industry has obviously seen tremendous amount of inflows as well. If you go to the last cycle, it's really not that clear. There was a huge amount of decline in money market fund balances as the Fed started to unwind their policies in QE. How are you guys thinking about the sustainability of all the market share gains you've seen in the money market fund space? 'Cause that'll obviously inform the amount of money market fee waivers that's gonna come back. You know, $80-ish million, kind of what you're waiving today per quarter. All of it is presumably gonna come back with the first hike, but that obviously assumes the balances stay in the same place. Yeah. You know, I think the similar math that we went through earlier on the deposits, I mean, we were at something like $215 billion in AUM pre-crisis, and then we ended 2020 at $272 billion. We ended 2021 at $333 billion. I can tell you as we sit, you know, day before yesterday, we're at $324 billion. Came down a little, but we have gained market share by any measure that we look at. That's not. We don't think it's accidental. We did a lot of things related to cutoff times, and the investment performance has been exceptional in those funds. We think we've earned, you know, higher market share there. I think it's tough to tell. There's not just what happens as clients unwind, but there's also the prospect of regulation in the 2a-7 fund industry. As you know, in Europe, there's much more of a demand for large institutional clients to use balance sheets as opposed to funds. We'll see what happens here if there's a shift. It's one of the reasons why, you know, we've done other things to try to launch new products to help our clients on liquidity to be able to provide other services and, you know, to be a third-party repo provider and to launch new funds that are more appealing with better cutoff times. We'll see what comes there. The best defense we can have in the short run is having a good liquid balance sheet and have availability to bring on deposits if our clients want to, which is one of the reasons we always leave room to try and to bring more onto the balance sheet. That's why our leverage ratios have tended to be strong. Got it. All right, awesome. Thanks for the follow-up. Mm-hmm. We'll go ahead and move back to Brian Bedell. Please go ahead. Oh, great. Thanks. Sorry about that bad connection. Can you hear me now? You're good. You're good, Brian. Oh, okay, great. Thank you. Sorry about that. Yeah, just the follow-up was also on expenses. I don't know if you heard me start the question. It was really about, you know, your expense growth on an annual basis. It's been pretty reliable over the last decade annually in that mid-single digit area, almost exactly 5% over on an annualized basis, which I know you try to target to match organic growth or the organic revenue growth. However, in the last tightening cycle, in 2017, 2018, it was more elevated naturally in that 8%-9% area, given obviously the leverage from rates. I just wanted to get a sense of is that... If we think about sort of a trajectory, is that a reliable type of, you know, indicator versus the sort of average over the last 10 years? Couple thoughts, and then Mike may jump in as well. One. In this cycle, things are driven less by what is the Fed doing to control growth. It's what is the Fed doing to control inflation. Inflation is correlated to our cost base. We're gonna feel that, and that's gonna be different. You know, walking through the expenses earlier, you know, just in the comp line, having a 5% growth there, and then equipment and software having a growth at or above the 9% we had year-over-year, you know, you can tell we're in a mode where we're feeling expense growth over time. It's just got upward pressure on it. Now, the good thing is that the growth in the business is good and the benefit coming from rates, which is, it's not distinct, it's correlated to the inflation. When inflation exists, we are getting a benefit partially coming from the fact that the Fed is fighting that inflation with higher rates. Luckily, we have good leverage in that. You know, we walked through earlier on this call the impact to NII and the impact to fees. It's good, but I don't think that historical 5% is necessarily something we'd look at and say, "Is that the right target given the environment we're in today?" Mike? Right. Just to add. Yeah, just to add on that, Brian, is the reality is to serve our clients, but equally important to compete and win in the marketplace, you know, we need the best people, and we need, you know, digital capabilities. You know, as Jason is saying, if you're in an inflationary environment, you know, that's something you have to deal with because you need that expertise. You know, you need the people to develop the technology as well. You need the people who service those clients, and the, you know, the price or cost of that is different. And the same thing with developing, you know, the technological capabilities to be able to compete as well. Hard to pick a number on that, but as far as the dynamics that you're going through, I think it's a combination of what Jason said there and then just what's happening in the competitive marketplace. Right. Yeah, no, I was thinking the growth would be closer to that 2017, 2018 level of the 8%-9% rather than the historical 5%, given everything that you've been saying. Does that make sense? Yep. Okay, great. That's super helpful. Thank you. Thanks, Brian. We'll go ahead and move on to our next question from Gerard Cassidy from RBC. Please go ahead. Hi, Gerard. Good afternoon. Hi, how are you, Jason and Mike? Jason, you brought up a good point about the appreciation in the markets, correlating with the Fed's balance sheet growing so dramatically. In your slides, you gave us that the total revenue for the full year, the trust investment and other services fees were up 9%. I think you also showed us that the S&P on a Q4 to Q4 was up 25% or thereabouts. How much of the 9% growth would you attribute to the markets going higher versus your customers bringing in new business? I can get you pretty close on that. Yeah. Yeah, go ahead. Sure. Gerard, this is Mark. You're looking at the 9% full-year trust fee growth. Correct. See if we can get there directionally for you because we did have obviously the significant waiver drag as well. Waivers, if you did the math, I think we're about a 6-7 point drag. That kind of brings you up to about a 16% growth without the waivers. You know, more than half of that was markets with the rest of it being organic. You know, fairly close. I mean, call it 9% or 10% or so of that 16 would have been from markets. Then there's other, some other impacts like, you know, currencies and things like that. The markets, that would give you a good proxy for the markets. No, that's very helpful. Then Jason, following up, you mentioned a couple of times about you don't expect your loan growth in 2022, which was up, I think, 20% in 2021 to be that strong. Can you maybe give us some color on where you're expecting to kind of pull it back or just not to be as aggressive in 2022 versus 2021? Yeah, it's not a pullback. It's more we felt a couple of years ago, our bankers felt they made a good observation, which was, I think we were seen as a reluctant lender with our clients. Our clients were doing things. They took pride in having large assets for us to manage and advise, but they didn't, they thought we might not wanna be a lender to them. We wanted to deliberately go back and explain to those clients that if they wanted to buy a third home, if they were gonna buy another business, if they were involved in private equity and needed, you know, warehouse lines, we're there for them to do that, and we're excellent at doing the underwriting, and we're competitive on the pricing. We didn't wanna go out and do new types of lending with new types of clients. We wanted to do the same types of lending with the clients we knew. We've gotten through a lot of that. We will. From here, I think our lending opportunities will be more what does the market provide? To go back to those clients and explain to them how much we wanna be supportive of them. A lot of that has played through. The second dynamic, and I've talked about it before, is in this type of volatile environment, some of our ultra high net worth clients, they will do very large loans. That's driven some of the growth as well. It's just unpredictable whether that will stay on the books for a long time. I know, Jason, you know, you don't wanna give a forecast on loan growth, but could it revert back to, like, pre-2019 levels in terms of that kind of growth, as we look forward? That's 2019. I think that's less. Yeah. I think that's less easy to predict. I do think at this point, the message is out that we're there for our clients. You know, the answer is probably somewhere in between. The spikiness, which could go up and could go down, is just something that our portfolio size-wise isn't as granular on a percentage basis. I just always try to remind people of that as they are doing calculations quarter-over-quarter and year-over-year. Great. Appreciate all the color. Thank you. Yeah. Thanks, Gerard. With that does conclude our question and answer session, and I would like to turn it back over to our presenters for any additional or closing remarks. Thank you. Thanks for joining us, and we'll talk to you in April for our first quarter earnings. With that does conclude today's call. Thank you for your participation. You may now disconnect.