Good day, and welcome to the Northern Trust Corporation first quarter 2023 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jennifer Childe, Director of Investor Relations. Please go ahead. Thank you, Cynthia. Good morning, everyone, and welcome to Northern Trust Corporation's first quarter 2023 earnings conference call. Joining me on our call this morning are Michael O'Grady, our Chairman and CEO, Jason Tyler, our Chief Financial Officer, Lauren Allnutt, our Controller, and Grace Higgins from our Investor Relations team. Our first quarter earnings press release and financial trends report are both available on our website at northerntrust.com. On our website, you will find our quarterly earnings review presentation, which we will use to guide today's conference call. This April 25th 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 25th. 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 12 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. Thank you, Jennifer. Let me join in welcoming you to our first quarter 2023 earnings call. The recent disruption in the banking sector reminds us of the importance of resiliency to be able to meet the needs of clients in all operating environments. During the past six weeks, much like over the past 130 years, our strong balance sheet and conservative approach to risk management have enabled us to provide the support, liquidity, and exceptional service our clients have come to expect from us. Northern Trust continues to be viewed as a source of strength and stability, as symbolized by our anchor. During the quarter, we continued to assist our clients manage their liquidity, including deposits, money market funds, and short-term treasuries through the transition from a period of quantitative easing and low interest rates to one of rapid tightening and higher rates. Overall, we saw client liquidity increase during the quarter as a decline in deposits was more than offset by increases in higher-yielding money market funds. Our results for the first quarter reflect sequential improvement in revenue and expense growth. The sequential growth in trust fees outpaced a slight decrease in net interest income, which still experienced healthy year-over-year growth. Expense growth moderated from recent quarters, which was attributable to both our renewed spending discipline and certain timing differences. Within our wealth management business, assets under management grew mid-single digits sequentially, while our trust fees increased modestly. The turmoil in the banking space contributed to a flurry of new business activity later in the quarter. We saw solid new account openings, particularly at the upper end of the wealth market. We took in almost $1 billion in inflows from the $50 million and over segment alone. Discussions are continuing with a solid pipeline of prospective clients. In asset management, we had a strong start to the year with a sequential increase in new business, including large inflows into our institutional money market platform. New product launches focused on alternatives and extending securities lending capabilities in our collective fund space, with three new funds launched. Within asset servicing, we saw continued momentum with particularly good traction in Europe. For example, during the quarter, we transitioned in Artemis Investment Management, a large U.K.-based investment manager for whom we are providing a full suite of services, including custody, fund administration, investment operations outsourcing, and risk and analytics services for both their U.K. and Luxembourg funds. In closing, we are well-positioned to continue to serve our clients and navigate the ongoing economic uncertainty from a position of strength. I'll now turn the call over to Jason. Thank you, Mike, and let me join Jennifer and Mike in welcoming you to our first quarter 2023 earnings call. Let's dive into the financial results of the quarter starting on page 4. This morning, we reported first quarter net income of $334.6 million, earnings per share of $1.51, and our return on average common equity was 12.4%. On a year-over-year basis, currency movements unfavorably impacted our revenue growth by approximately 100 basis points and favorably impacted our expense growth by approximately 130 basis points. On a sequential basis, currency movements favorably impacted our revenue growth by approximately 70 basis points and unfavorably impacted our expense growth by approximately 90 basis points. Our first quarter results were also impacted by two notable items. One, we recognized a $6.9 million pre-tax gain on the securities repositioning we announced last quarter and executed in January. Two, we reported $9.8 million of pre-tax charges associated with various early lease terminations, actions taken to further optimize our global real estate footprint. Notable items from previous periods are listed on the slide. Excluding the notable items in all periods, revenue was flat on a sequential quarter basis and up 1% over the prior year. Expenses were flat on a sequential quarter basis and up 6% over the prior year, reflecting an expense-to-trust fee ratio of 120%. Pre-tax income was down 2% sequentially and down 13% over the prior year. Trust, investment, and other servicing fees, representing the largest component of our revenue, totaled $1 billion and were down 9% from last year, but up 2% sequentially. Excluding notable items, we had year-over-year and sequential declines in all other non-interest income, which is primarily driven by lower foreign exchange trading income. We saw significantly reduced volumes in the first two months of the quarter with a modest pickup in March. Net interest income on an FTE basis, which I'll also discuss in more detail in a few moments, was $544 million, up 40% from a year ago, down 1% sequentially. Our provision for credit losses was $15 million for the first quarter, reflecting growth in the size and duration of the commercial real estate loan portfolio. Given the increased attention being placed on commercial real estate loans, we want to provide some detail we felt would be of interest. Commercial real estate loans comprise 12% of our total portfolio, and commercial office loans comprise 2% of total loans. Approximately 95% of commercial real estate loans are personally guaranteed, and approximately 70% have a loan-to-value ratio of less than or equal to 70%. Turning to our asset servicing results on page 5. Assets under custody and administration for asset servicing clients were $13 trillion at quarter end, down 9% year-over-year, but up 4% sequentially. Asset servicing fees totaled $603 million, which were also down 9% year-over-year, but up 3% sequentially. Custody and fund administration fees, the largest component of fees in the business, were $414 million, down 9% year-over-year, up 2% sequentially. Custody and fund administration fees decreased from prior year quarter, primarily due to unfavorable markets and unfavorable currency translation. They increased sequentially due to favorable markets, favorable currency translation, and solid new business activity, particularly later in the quarter. Transactional activity, which comprises approximately 15% of our custody and fund administration fees, was generally weaker due to lower volumes and lower one-time fees. Assets under management for asset servicing clients were $962 billion, down 12% year-over-year, up 7% sequentially. Investment management fees within asset servicing were $126 million, down 14% year-over-year, up 2% sequentially. Investment management fees decreased from the prior year quarter, primarily due to asset outflows in unfavorable markets, partially offset by lower money market fund fee waivers. Investment management fees increased sequentially due to favorable markets and favorable currency translation. Moving to our wealth management business on page 6. Assets under management for our wealth management clients were $368 billion at quarter end, down 7% year-over-year, but up 5% on a sequential basis. Trust investment, and other servicing fees were $461 million, down 9% compared to the prior year, but up 1% sequentially. Within both the regions and GFO, the year-over-year declines were primarily driven by unfavorable market impacts and product-level asset outflows, partially offset by the elimination of money market fund fee waivers. Sequentially, the increase within the regions in GFO was primarily driven by favorable markets, partially offset by product-level asset outflows. The upturn we saw in our AUM occurred later in the quarter, was not fully reflected in our trust fees. Importantly, we continued to see modest organic growth in our core advisory fees. Moving to page 7 in our balance sheet and NII trends. Given the attention being placed on balance sheet trends, we also thought you might be interested in some additional data points this quarter. We think about client liquidity in three categories: deposits, money market funds, and short-term treasuries. With that background, we can provide some color and data on what we saw throughout the quarter and through the first few weeks of April. Most importantly, client liquidity was up meaningfully for the quarter in both asset servicing and wealth management, and it's continued to rise during the first three weeks of April. While we saw a decline in deposits for the quarter, it was more than offset by increases in money market funds as clients continued to migrate into higher-yielding products. Relative to the fourth quarter, our money market funds were up $15 billion or 7%. As mentioned, average deposits were $112 billion, down 4% sequentially, with wealth management deposits down 7% and institutional down 3%. Approximately three quarters of our average deposits are institutional. Within this segment, approximately 68% are considered operational, the stickiest, as clients use these funds to run their ongoing operations. Across the organization, we experienced a $2 billion decline in non-interest-bearing deposits as clients shifted to higher-yielding alternatives. This reduced the mix of non-interest-bearing deposits to 18%. We actively manage our assets and liabilities considering a wide range of possible stress scenarios, including interest rate risks and how they may affect liquidity and capital. Let's shift to the asset side of the balance sheet to see how investments are allocated. Average cash held at the Fed and other central banks was up 12% to $37 billion. We had $67 billion of immediately available liquidity, reflecting approximately 50% of average earning assets. Loan balances averaged $42 billion, we're down 1% sequentially. Our loan portfolio is well diversified across geographies, operating segments, and loan types. Approximately 75% of the portfolio is floating, the overall duration is less than one year. Securities were down 3% sequentially, reflecting the impact of both our repositioning early in the quarter and the natural runoff, which we've chosen to reinvest at the short end of the curve. Our $49 billion investment portfolio consists largely of highly liquid U.S. Treasury, agency, and sovereign wealth fund bonds, and it's split 50/50 between available for sale and held to maturity. In the aggregate, the securities portfolio has a duration of 2.3 years. The total balance sheet duration is 1.1 year. Net interest income was $544 million for the quarter, up 40% from the prior year and down 1% sequentially. NII reflected the impact of several dynamics, many occurring late in the quarter. As mentioned, we saw continued improvement in deposits from our balance sheet to money market funds and treasuries. Deposit costs increased with our interest-bearing deposit beta during the quarter at 85% and our cumulative beta for the cycle as of March 31st of 65%. Finally, we had the impact from two fewer days in the quarter. Net interest margin was 1.62% in the quarter, up 57 basis points from a year ago and roughly flat with the prior quarter. The sequential results reflect the impact of higher short-term market rates offset by higher funding costs. The prior year increase is primarily due to higher average interest rates. For the second quarter, our NII will continue to be driven by client demand, which is less predictable than it was 90 days ago. Our average client deposits thus far in the quarter are approximately $110 billion. Subsequent to tax season, we've observed an incremental typical decline of a few billion dollars. Turning to page 8. As reported, non-interest expenses were $1.3 billion in the first quarter, 7% higher than the prior year, but 3% lower sequentially. Excluding charges in both periods, as noted on the slide, expenses in the first quarter were up 6% year-over-year, but flat sequentially. Overall, we're focused on reducing the rate of expense growth and controlling those costs that are most under our control. I'll hit on just a few highlights. Compensation and technology expense continue to be the areas of highest spend. Compensation expense, excluding charges, was up 6% compared to the prior year and up 7% sequentially. The year-over-year growth largely reflects the annualization of last year's headcount expansion and inflationary wage pressure, partially offset by lower incentives. The sequential increase is due to our annual payment of retirement-eligible equity incentives in the first quarter. Equipment and software, largely reflecting our technology spend, was up 20% year-over-year, but up 1% sequentially. More than 50% of our spend is comprised of business-driven investment, followed by spending on core infrastructure and modernization, and to a lesser extent, spending on information security, risk, and regulatory areas. Turning to page 9. Our capital ratios improved in the quarter and continue to be well above our required regulatory minimum. Our Common Equity Tier 1 ratio under the standardized approach was up 50 basis points from the prior quarter to 11.3%, despite resuming common stock repurchases. This reflects a 430 basis point buffer above our regulatory requirements. As a reminder, as a Category II institution under the Federal Reserve's framework, we already include unrealized losses on our available for sale securities in this calculation. Thus, mark-to-market losses occur immediately in our capital and capital ratios. Our Tier 1 leverage ratio was 7.3%, up 20 basis points from the prior quarter. Higher net income, improved accumulated other comprehensive income, the securities repositioning, and lower loan balances were the primary factors in this quarter's increase in capital ratios. We returned $259 million to common shareholders in the quarter through cash dividends of $159 million. After pausing meaningful share buybacks for the prior five quarters, we repurchased over $100 million of common stock. With that, Cynthia, please open the line for questions. Thank you. If you would like to ask a 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 the signal to reach our equipment. Again, press star one to ask a question. We will take our first question from Betsy Graseck with Morgan Stanley. Please go ahead. Hi, good morning. Really great quarter. Thanks for all the detail and the incremental information here. I did just want to understand how you're thinking about managing the balance sheet in an environment where, you know, deposits. Are under pressure, even though it might be modest. I think you indicated that average deposits quarter- to- date is around 110, and that's, you know, down around 3% from last quarter, I believe. Just wanted to understand how you're thinking about that. Thanks. Sure. The, the most important thing, and you referenced it, is that it's an uncertain environment. Although we have over $50 billion in what we refer to as economic liquidity, which is the cash we have on hand at the Fed here and central banks around the world, and also the short-term securities we have, so that provides a ton of liquidity, but the environment's just uncertain. In some ways, we want to just maintain as much liquidity as possible and not be greedy. On the other side, the balance sheet is always available for clients, particularly from a liquidity perspective. That means we want to leave plenty of room for clients that either want to deposit with us or also might need lending from us. These uncertain times just call for maximum patience for us and maximum flexibility so that we can be available for whatever our clients want. Just as a follow-up to that, could you help us understand how you're thinking about the loan book, going forward? To the extent there is demand, it seems like you've got a decent amount of capacity there. Thanks. Yeah, you're right. There's if you think about this, you know, effectively, the securities book at $50 billion acts as the ultimate fulfillment of and completion mechanism in the balance sheet. We couldn't do all of that with loans, but we certainly have capacity to do a lot more. It's always going to start from our perspective with maintaining prudent credit quality and approach, and then working. The best thing we can do is work with existing clients on existing types of loans. That's why a couple of years ago, you heard us talk about an initiative to do more lending. We did that. That was very largely with existing clients. From here forward, we're not looking to have any initiatives to dramatically increase the loan book. From our perspective, it's re-responding to clients as they need in different categories. But the turmoil that we're looking at, it does provide opportunities. If you look internally at the opportunity set we have, there's a lot of opportunity. So we have to be thoughtful about how to grow and with what clients or prospects we want to grow. This is a period where there are opportunities out there. Thank you. Sure. Thanks, Betsy. We will take our next question from Alex Blostein with Goldman Sachs. Please go ahead. Morning, Alex. Hi, guys. Good morning. Good morning, thank you for the question. I was hoping we could start with opportunities you guys are seeing in the wealth channel on the back of the dislocation in the banking space. Mike, you mentioned obviously a flurry of activity towards the end of the quarter. Maybe help us frame what that means in terms of maybe revenues. I guess zooming out a little bit, does what has been happening and I guess continues to happen in the banking world, does that increase your kind of organic growth prospects, and to what extent in the wealth channel? Sure, Alex. As I did mention, there has been a lot of activity. As we've talked about before, when there's more money in motion, we do have the opportunity to grow a little bit faster. So we did see that pick up in the first quarter after, you know, the back half of last year, where we talked about the fact that there was less activity as a result of the interest rate environment. That said, you know, this is something where the nature of the clients, that we serve and that we work with and that we look to bring on board are pretty meaningful. So it's a, you know, longer-term process and I would say, you know, business building process than what I would call a sales process to do that. I mentioned some of the momentum that we saw in the upper part of the market above $50 million, and the fact that we have a lot of prospects in that area as well. We see this more as, I would say, a longer-running opportunity rather than a, you know, one-quarter, two-quarter opportunity. That's how we're approaching it. Got it. Great. My follow-up just around deposits and to Betsy's comment, thanks again for the extra detail. 110 average so far in April, and it sounds like maybe down a little bit more on the back of the tax season where things are standing now. What's the mix, I guess, between interest-bearing and non-interest-bearing balances the way you guys see it right now in April? When it comes to the wealth deposits in particular, sounds like they were down a little bit more than institutional in the quarter. I guess as you think about it rolling forward, what's the approach to the rate you guys are paying on wealth deposits from here, since it seems like a lot of it is ultimately still sorting into money market funds? Sure. Let me give you a couple of incremental data points to work with. One, you're right, we. It's typical, obviously, as you know well, Alex, for us to see a drop after the peak of tax season. It has come down a few in the range of $4 billion-$5 billion since relative to that average. That said, we from a mix perspective, not seeing anything dramatically different early on. We talked about the fact that the non-interest-bearing mix is higher than even it was last time rates were up. As rates flatten out, probably less incremental shift from that mix. Within wealth in particular, Mike mentioned the growth there, and you're exactly right in calling out a lot of it going to cash. I mentioned that there's a lift overall in client liquidity. Of the lift that we've seen in cash, in cash, about $5 billion of that was in the wealth channel alone over the quarter. That more than offsets the deposit decline that we saw in that channel. You just get a sense that the flows in that business are positive and give us a sense that there's good activity there. Gotcha. Sorry. Just what's the rate on the wealth deposit that you guys are paying right now? It's highly dependent. It varies by size, by region, by type. It's impossible to give a specific number on it. You know, what might be instructive as you're thinking about it is more of an overall average cost across the book, which is, call it 200-250 basis points. Alex, I would just add that there's no question with everything that's happened here, that the, I'll say, the market for deposits is more competitive. There's more, you know, price competition with lots of banks looking to, you know, retain or gain deposits and pricing aggressively to do that. Of course, we have to likewise price to make them attractive for our clients. You know, at a certain point, if it's just gonna get priced away, you know, on price as opposed to relationships, then you're gonna see some go away. Just more broadly on deposits, it's just, I think, important to understand the nature of our client base, which you know well, but just, you know, asset owners, asset managers, you know, wealth clients that have different characteristics than a lot of other institutions. Certainly on the operational side, you know, these are deposits that they have, you know, as a part of, you know, running their operations. Very sticky in the sense that it's, you know, based on transaction flows, rather than necessarily rate per se. On the other hand, you know, these are institutions that are evaluated based on their performance. When rates go up as fast as they have here, you know, they have to make sure they're earning returns overall. They're looking to be efficient. With our wealth clients as well, you know, we're working with them to make sure that they get attractive returns overall. A lot of dynamics at play, and I think it's, you know, important to understand the characteristics of our client base, relative to others. Yep, for sure. Thank you guys for all the detail. Appreciate it. Sure. Thanks, Alex. We will take our next question from Steven Chubak with Wolfe Research. Please go ahead. Hi, good morning. Good morning, Steve and Jason. Morning. I wanted to start off with a question on the non-comps. Looking at the component pieces, you guys made some good progress there. A good amount of the beat was really in outside services. I know that that has a heavy variable or activity link component. Should we expect that to normalize as activity levels pick up consistent with what you saw at the end of March? Just trying to think about what's a reasonable jumping-off point for us to be modeling for next quarter. Yep, absolutely. You're right in that line item can move around a lot. Let me give you a short term and then maybe a longer-term dynamic. In the short run, that line item was impacted by, call it two things. One, some timing. We know that there's some of that improvement will likely come back online in second quarter. Secondly, we've taken expense actions in that category. We've worked really hard you know, to work down consulting, to work down other tech services, subcustody, you know, negotiating hard on third-party advisory fees. Some of it definitely is related to the expense measures that we talked about, broadly related to the productivity office, but there's also some timing there too. As you think about second quarter, this is an area where you'll see a meaningful increase, call it $20 million, just quarter-over-quarter going to next year. About $5 million of that is just a movement from on-premise processing that would show up in equipment and software moving up into outside services. But there's also just business growth and timing related there as well. We're obviously not gonna see $20 million lifts consistently, but that's one we're likely to see one going into second quarter. Got it. Just for my follow-up on NII, I know you had alluded to this in some of your commentary, and I'll also echo I appreciate the additional detail on the deposit side. There's been some debate previously as to whether NII or NIM had peaked at this juncture, whether it could eclipse levels seen last cycle. I was hoping you could give some perspective just on the NII trajectory If it's peaked at this juncture if or if there's room for growth. Given the balance sheet repositioning you alluded to in terms of shortening the duration on the asset side, how we should think about the NII trajectory in a Fed easing cycle in particular would be really helpful. Sure. On the first, yeah, the reality is, even this quarter, you could see there's a new factor introduced into NII, which is just client preference. You can see just how often, even this morning on this call, we don't talk about just deposits in isolation. We talk about them in conjunction with money market funds. Part of that is that just culturally, we have an incredibly strong focus just on providing advice to clients across whatever is appropriate for them. There are advantages to being in deposits. There are advantages to being in money market funds. There are advantages to being in short-term treasuries. We think about that. We tracked inside the company. That's what we were looking at very, very closely on a very periodic, on a very frequent periodic basis. I think that's important for people to understand. We're not nudging clients in one direction or the other, just talking to them about the advantages of each. The reality is from here, NII is gonna be based on more than on interest rates. It's gonna be based on volumes. Volumes, last quarter, we were talking about the impact of QT, and we were talking about taxes. Now, this new factor that's been introduced is what is client preference between those three pillars of client liquidity. We could see that going in either direction. For us, that's totally fine as long as we're continuing to grow client liquidity. It's hard to model in the short run, but if we think about the traditional factors, you know, Fed rate increases, the institutional business, which is, you know, call it 70% to 80% of our deposits, we're at about 100% beta there. That's kind of flattened out. In the wealth channel, the betas are meaningfully lower. They're, you know, call it 30% - 40%. Still with Fed action, because that's all impacted in U.S. dollars, there's benefit from that lift still. You've got to introduce the other factors, what happens with QT and then what happens with client preference across the pillars. From a NIM perspective, just the last comment I'll make is that you saw our leverage ratio is strong, and it's in the, you know, mid-7s, and it gives us an opportunity if we want to take advantage if there's a positive carry to do more leveraging and still maintain great liquidity for our clients. That's helpful to NII, but it's obviously it brings down NIM. Really helpful perspective, Jason. Thanks for taking my questions. You bet. Thank you, Steven. We will take our next question from Mike Mayo with Wells Fargo Securities. Please go ahead. Morning, Mike. Hi. Well you mentioned taking tougher actions on expenses. I think that showed quarter-over-quarter. You mentioned benefits from the industry dislocation, but your expense-to-fee ratio is still, you know, still above your 105%-110% range, quite a bit above. When do you think you'll get there? Should we look at the quarter-over-quarter progression, or should we think about year-over-year? Because quarter-over-quarter looks better than year-over-year. Yeah, Mike, I would say that our perspective is the same in the sense of we're looking, I'll call it sequentially and quarter-over-quarter and looking to make improvement in that. Getting there both on the, you know, the numerator and the denominator. Holding tight and trying to reduce where we can on the expense side, and then growing the fee side as we go through there. As you've seen, you know, if you look at it sequentially there, you know, we kind of bottomed out with the fees in the fourth quarter, and now they're up, you know, very, very slightly. Depending on markets, but then more importantly, how we drive organic growth underneath that. You know, we're looking to increase fees as we go forward on a sequential basis, while at the same time having the discipline on the expense side to keep bringing that expense-to-trust fee ratio down. We will take our next question from Glenn Schorr with Evercore. Please go ahead. Good morning, Glenn. Morning. Question on the other borrowing side. I think most of that is wholesale funding, and I know it's not a huge number, but it's also grown to be not nothing. It's up 43%, and the rate paid on that is up 450 basis points. I'm just looking for, is that a temporary filling of the gap down in deposits? How do you, how do you think about that line item, you know, intermediate term, say? I know you gotta do what you gotta do in the short term. Yeah. No, part of it is the higher borrowing, but part of it is the interest is doing more in the... I think part of the reason that the cost of that is elevated is us doing more FICC repo for clients and just providing more liquidity options for them. The way the accounting works for that with the, the netting, it just makes it look like a higher cost than what it is. We're gonna talk about whether maybe even to break that out separately and provide more detail in the future on it because it's becoming, to your exact point, it's just becoming a little bit larger, but that's the reason you see that movement in the short run. Yeah, that'd be helpful. it's because then it's actually a distraction for you. Yeah. Okay. Then maybe big picture, you talked about capturing client liquidity, and you talk about more holistically than you have in the past as money trends to money markets and treasuries. How much of it is it advised versus clients just self-selecting in? And are there things that you could that you're tracking to see what you're actually capturing? In other words, is it actually your dollars from deposits going into your money market funds as opposed to, you know, pluses and minuses coming from different directions? Yeah, sure. A couple thoughts. One, it's we're much more accurate in being able to track the money market fund than we are treasuries. Let me just give an example or two to illustrate why that's the case. We could, and we actually did, have small number of very large institutional clients that might have said a quarter ago, "We'd just like to park some money on the balance sheet." We'd work with them on what rate that is, then they might say, you know, for a variety of reasons, we want to go to short-term treasuries. If they do that, they might use. If it's a financial services fund, it could be a hedge fund, it could be an asset manager. If they have a prime broker, they're more likely to use their prime broker to manage that. Is that really us? It's certainly not us losing a lot of net interest income because the pricing on the deposit is gonna be really tight, but difficult for us to track and really confirm where that's going. The other end of the spectrum is in wealth management, financial advisors are literally calling their clients and saying, "Rates are higher. You're sitting on, you know, $750,000 in cash. Let's talk about what you'd like to do with that. Would you like to move that into a money market fund? Would you like to move it into a CD? Would you like to start building out and ladder a treasury portfolio?" We can track that much more accurately. Different components, but in general, the statistics that we gave are biased toward the information that we can track and that we know stayed in-house. And so if there's an information bias, it's toward us ensuring that the numbers we're telling you are reflective of what stayed here. Okay. Appreciate that. Thank you. Sure. We will take our next question from Brian Bedell with Deutsche Bank. Please go ahead. Morning, Brian. Thanks. Morning, folks. Good morning. Maybe just staying on the, for my first question, just to stay on the deposit trends, the question would be, you know, as you think about that deposit pricing strategy in the wealth channel specifically, how do you view raising those deposit rates versus the alternatives? I guess at what, at what point would you be inclined to just let the deposits go into the money funds or into the ladders or rather you would raise rates incrementally, you know, to sort of keep those wealth deposits on the balance sheet? Sure. In each of the businesses, there are pricing groups that set an overall rate. There are also leaders within the regions and then down to relationship managers that have the ability to work at individual client levels to do what's right. We're always thinking about what is our overall pricing relative to peers by geographical region within wealth management even. There are times when there are very large clients that might come with $50 million, $100 million, $250 million, and that's obviously not gonna be priced off of a rate sheet. We're gonna talk about that. The overall bias when we're having conversations with clients, again, when we're talking about what to do and if they're gonna keep a deposit, you're looking at us versus competition, it's just keep it on our platform. Even though we've thrown out the beta in that 30%-40% range, and that may seem light, it's we're looking at where the market is and making sure that the balance sheet, again, is available and making sure that we're not cannibalizing the whole base of deposits in order to pick up some volume. Obviously, and we've talked about it from the beginning, our strategic bias in wealth for deposits is keep the business on our platform. Right. Yeah, that's great color. Then maybe just going back to maybe an early comment that you made, Mike, on the, you know, the picking up of business given the banking stress that we've seen in March. I think you mentioned $1 billion of inflows on the wealth platform, but that it was a longer-term dynamic. Maybe if you could just sort of describe what you're seeing internally, in terms of, I guess, you know, thinking about, I guess, maybe the panic environment where clients were moving assets quickly going to a strong provider like Northern. Are we sort of past that phase? What is that next phase of getting those clients, because of the dislocation, I guess, what's the sort of the either the sales pitch, as we move to the next couple quarters in that dynamic? Brian, I would start by saying that the way you characterized the first phase, kind of the panic phase is, although we did have, you know, call it like a strong week of inflows, around that time period, it really wasn't, you know, a panic environment where, you know, people were pushing deposits over the counter, so to speak. I think there were different dynamics at play relative to other time periods. That's why I say what we're seeing is more kind of the longer play out in this of, I'll say, clients and prospects thinking about who their long-term financial partner is, and ensuring that it's somebody that they're comfortable is going to be there, and has the strength and stability. That's why I say it's less of a, you know, a blip and more of a long-term, you know, I'll call it trend, is the way that we would see it. For us, without a doubt, it is playing off of our brand. It's playing off of, you know, the 130 history of being around, and being a strong partner. You know, that, as you know, has been consistent for a long time. You know, in certain environments, it plays better than others. We think this is an environment going forward where it plays very well. Great color. Thank you. Sure. We will take our next question from Ken Usdin with Jefferies. Please go ahead. Hey, Ken. Hey, everyone. thanks. coming back on the expense question, I know you talked about the moving, you know, expense-to-trust fee ratio is positive from here. You know, the 6% adjusted cost growth rate is the best we've seen in like 6-7 quarters. I'm just wondering, just philosophically, are you thinking about managing more towards, you know, absolute levels of costs? Is there a way to help us think about, like, how you're thinking? I know it's tough to generate operating leverage in this type of environment, you know, just given what's happened and what you've walked through. What's the right way to just think about absolute cost growth and how you're managing that on its own in this environment? Sure. It's good to take a step back on this because it is how we've been talking about it internally recently. One way to frame this, Ken, is if you think X charges, I'm gonna... Because that's just the way we're not ignoring the charges, but the way we talk about them internally, X charges, we had 9% expense growth last year. We don't. That's not acceptable for us. We've got to bend that curve aggressively. We know we're carrying part of that forward with what we know about the impact of hiring and merit increase and off-cycle adjustments given the labor environment last year. That said, we're targeting getting 2 points out of last year's growth rate for the full year 2023. In general, all the expense areas are going to be addressed collectively to get to that 7% or better ex-expense growth rate. So you look at a couple that are notable because they've got big movements to them. One, you look at comp, and that looked good for first quarter. You look in the second quarter, we know there's about $40 million coming out because of the seasonality of the retirement-eligible grants and some other dynamics there. We also know we've got $20 million in merit coming online in second quarter. The incentive accrual is also in that line, so and that varies with profitability. Then from there, everything else is gonna be driven by what happens in business from hiring and other actions and expense measures and things like that. We talked about outside services and how that's got a big step up next quarter. The last one I'll highlight, equipment and software. Even though we've got that move from equipment and software into outside services, we've got clear visibility on some incremental depreciation coming online, maybe not in second quarter, but in third. You could see a $5 million step-up in that line item in second quarter. We know we've got $10 million in depreciation coming in third quarter. Those are the big pieces at a super high level, and then as well, a couple of the big moves underneath it. That's super helpful. Within that 7% or better, is there an embedded impact on what current FX currency translation does there? No. Not from here. I mean, we, you know, we know we had a lift in this quarter, just an elevation of lift on both revenue expense. It hurt on the expense side, but not really modeling significant change from here. Okay. If I could ask one more kind of bring it all together question. You talked about a lot of the balance sheet changes happening towards the end of the quarter. You talked about where deposits are. We can see where the betas went to. Do you have a way to help us understand just what the range of expectations of what you think NII can do in 2Q versus 1Q to help us put that all together? We've been given a lot of information. I was, you know, I would hope to give you a really good answer on this one, but I think we got to leave it with where the deposit levels are, where the balances have been, where the deposit levels are, it look from there on. There's just so many factors moving around, and particularly just client preference. We're being so emphatic in saying we're not gonna try to nudge in any direction, just provide good advice there. It's hard to bind it. I have to say the big factors that we see from here with volumes being down so far, I'm hard pressed to see how we match the 544 of second quarter. I'm gonna say down, but not, but not do too much more than that to give an anticipation, just given the volatility in the market about client preference and where deposits are going. Okay. That, that's fair. Totally understood. Thanks, Jason. Sure. Thank you, Ken. We will take our next question from Jim Mitchell with Seaport Global. Please go ahead. Hey, Jim. Good morning. Hey, just maybe on the, on the buyback, any thoughts on with your leverage ratios improving, but you did also talk about maybe using some leverage. How do we think about your thoughts on the buyback from here was a nice uptick from what you've been doing the last five quarters? Yeah, it was good, there's no reason we can't continue to be in the market. There are a couple things working in our favor. One, if we've got good return on equity in this, you know, even it's something like we picked up 35- 40 basis points from that income, you give up, maybe half of that in dividends. We also know that we're getting a lift from over time, the AOCI is gonna pull to par, and that gives a lift. I think it's also noteworthy, the balance sheet repositioning we did, that was accretive to CET1 because it helped reduce RWA. Those things helped. If you think about those dynamics of what is return on equity, where are we from a dividend payout ratio perspective, and then the pulling to par of AOCI, in general, it gives us some room to buy back stock while at the same time increasing CET1 to be at levels that are more consistent with, if you look at our long-term history, we're still a little bit lower than where we were. And you know we're always looking at where peers and where's the competition and AOCI. That's a, that's a factor you should imagine we're thinking about intra-quarter. Okay. That's fair. Then maybe, just maybe a bigger picture. We've talked a lot about NII on the fee side. You had good flows at the end of the quarter into money market funds, which is one of your higher fee rate products. You're talking about perhaps increased flows in the wealth side. You had a move in the markets. How do we think about total fee income? Any puts and takes to think about as we go forward into the next quarter and beyond? Yeah. We've talked about the, you know, we give good sense of where we are at the end of the quarter relative to the averages. It gives us a, the launch point, frankly, is positive relative to where we are. You're right that the money market funds in general, that's an attractive fee business for us. All those things playing in our favor. We also know markets have a really big impact. Also, as much as we talk about organic growth in the business, what happens with markets in the short run is often the bigger driver. The last thing I'll mention is that in asset servicing in particular, that pipeline in the short run of one not funded, one not onboarded is still above historical levels. The short run, it looks positive. We just, we have less visibility out late in the year. The asset servicing side still is also attractive relative to history. We gave you even more information, I think, on the, on the wealth management side of the business. Okay. Yep. Thanks. Sure. We will take our next question from Brennan Hawken with UBS. Please go ahead. Morning, Brennan. Morning. Good morning, Jason. Thanks for taking my questions. Just wanna try and make sure I understand something on expenses. You had spoken to getting below 7% expense growth, and I believe that was on a number that was X one-timers. You know, do I understand that right? What is that base on 2022 if we back out the one-timers, just so I can kind of fully level set and understand how we'd be really thinking about that? Yeah. It's. Think about it as 4,893. To be very, very specific. That certainly is. Thank you, Jason. Appreciate that. Sure. One more just clarifying. You had chatted about how there's some noise in that other, you know, financing line that we most usually think about as wholesale. With deposits coming down, would think that you'd be probably building out the wholesale at least in the near term, you know, given the quarter-to-date decline in the balances. Is that operating assumption, you know, fair? If we were to strip out some of that FICC financing line, you know, what is that core cost to your wholesale, just so we can model it appropriately when we're thinking about true it up for some of the quarter-to-date trends you flagged. Thanks. Yeah. In general, it's gonna depend on where we go in the market and what sources of wholesale funding that we use. It's FHLB, and sometimes we're doing, you know, other sources. In general, it's been in the mid fours this past quarter. Going forward, I think it's just, you know, it's obviously gonna be impacted by rates and what happens with the Fed. I think the fact that we've gotten two questions this time mean, you know, means, you know, we'll probably in the future try and give you guys a little bit more information on the impact of FICC repo and how that's impacting the borrowing costs. There's also impact on the asset side to be fair as well. We'll provide some more information on it. Great. Thanks. That'd be really helpful. I'd love to just do. This is a little bit of a ticky-tacky, but I'd love to just do one more on expenses, if you don't mind. You spoke to $20 million pickup quarter-to-quarter, it seemed like on non-comp, but $5 million of that was just like one going from one bucket to another. Does that mean it's like $15 million quarter-over-quarter, or does that mean that $20 million is the total step up we should think about for non-comp, and then underneath the surface of that, there's $5 million moving from one bucket to another? Just if you could clarify that'd be helpful. Yep. I'm gonna. There's a couple areas where I mentioned 5s and 10s. Let me I'm gonna be a little bit repetitive, forgive me, but it'll make sure that I was 100% clear on them 'cause there's a couple different areas that you might have been referencing. On comp, no movements between buckets. We're thinking take first quarter, reduce it by $40 million for the retirement eligible and some other factors that play into the incentive line, and then add $20 for merit increase. That gives you a decent starting point to say, "Okay, what's gonna happen with the business going forward?" Second dynamic that I mentioned does have movement between line items. It's movement between outside services and equipment and software. There's about a $5 million move that's going to happen second quarter from equipment and software into outside services. Outside services should be about $20 million higher than first quarter. That $20 million includes the $5 million from equipment and software. On equipment and software, still think that that line item is going to be up a few million dollars in second quarter. Thanks for walking through that. You bet. We will take our next question from Gerard Cassidy with RBC. Please go ahead. Good morning, Gerard. Good morning, everyone. This is Thomas Leddy calling on behalf of Gerard. Circling back a bit on the fee side and following up a bit on Alex's question earlier, can you give us some color on the competitive landscape you saw this quarter and any organic growth opportunities you see as we look further into 2023, on the institutional side? You guys gave some good color on the wealth side, but just on the institutional side, any additional color there? Yeah, Tom, the additional color I'd give you there is that, you know, certainly highly competitive, but there are, you know, quite a few opportunities that are out there. Active market. I would say a lot of what's driving it is with the impact on the markets last year, you know, equity markets being down, you know, 19%, 20%, that put a lot of pressure on asset managers. And as a result, having them look at their operating models, how they can become more efficient, and looking to either, you know, outsource activities and/or consolidate providers. That, that has increased again, the level of opportunities in the marketplace and can cut both ways. I mean, situations where, you know, I'd say we're advantaged, but, other situations where I'll say we're more on the defensive because, you know, it's an existing client or, you know, one of two, being an existing client. Very active at this point and obviously trying to win more than our share. Thank you. That's helpful. Just lastly, high level, can you detail for us what you know, an ideal environment would look like for you guys in terms of an interest rate and, you know, global markets perspective? Yeah, i t's interesting. I think Gerard actually might have asked that exact question a few weeks ago, which seems like quarters ago. My thought on that is that first of all, the trajectory, the slope of the curve matters a ton. Having a somewhat steeper yield curve matters a lot. Secondly, you want rates to be above very low. When rates are, you know, when Fed funds rates are below 50 basis points or below, it's just hard for us to get good return on equity. We start to play in the fee waiver land, which just is not, it's not that we lose money in money market funds, but that whole business, the economics of it change a lot. Lastly, the pace with which you get to any environment matters a lot. That's why a lot of banks have struggled this time. It's not the yield curve, it's the pace of change. You literally 12 months ago to today and Fed moving this aggressively in a relatively short period of time, it just creates it's very tough to deal with pace. Those are the three dynamics that are forefront of mind from our lens. Great. Thank you. That's helpful. Thank you guys for taking the question. Oh, you bet. We will take our next question from Vivek Juneja with JP Morgan. Please go ahead. Thank you. Hi, Jason. Hi, Mike. A couple of questions. One is the headcount cuts, the severance that you took in the fourth quarter. Have we seen that flow through yet, in terms of the numbers? We have actually gotten a pretty good head start on those, but very little impact already in the numbers. It happened later in the quarter and just the areas of the business where they happened, we just haven't seen them play through very much yet. Some impact, but light. Should we, in those numbers that you gave us, should there be some benefit from that coming through, Jason, in Q2 or not? Or 3Q or any color on that? Yeah. All along, I think we've said we think the meaningful impact should be visible by third quarter. Okay. Again, remember that remember also that we've said this is about getting jobs into the right places. In many instances, this is about transitioning jobs from lower cost from higher cost locations to lower cost locations. We'll see some benefit, but it's not the impact of taking the roles that we're exiting times the average cost. There's some exit in some instances. I think just super instructive to focus on what we mentioned earlier. We're thinking about our target is to try and get that overall expense growth rate into the right level. We're thinking about all of these different expense categories in aggregate to get there. Okay. Shifting gears, completely different one. You talked about the reverse repo. I want to separate from that. Your other borrowings went up from about $3.5 billion a year ago, $8 billion last quarter to now over $11 billion. It doesn't seem like you're making much of a spread on that. Any color on how we should think about that and what's driving that increase? Yeah. That's also where the FICC repo activity is gonna be reflected. I see. Not just in the repo line, but in on top of that in the other borrowings line too, is it? I think in the other borrowings, Vivek, you also have some of the Federal Home Loan Bank borrowings, which during this time period, we termed some of those out, which previously was more, you know, all overnight. Just in this time period, with the uncertainty, wanted to add additional liquidity to the balance sheet. Yeah. There was about $3.5 billion in that increased FHLB line item. And are you- From the-y eah, that's sequentially, not year-over-year. Right. You're done with that, Mike, or are you still looking to do more there? No. We, you know, we'll as opportunities come up for us, we're still contemplating it, not necessarily done. I mean, as you know, the spread's not, you know, it's not extremely high there. There's a combination of liquidity management, but also the spread that's available. You know, walk, you know, moving that from, you know, from 7.6 - 11.4 is a big move. There's also, there's also one other dynamic in that, in that line item, which is that there was some euro investment leveraging that had been up in the non-U.S. office interest-bearing line that has been reclassed into other borrowing. You know, that's a little over $1 billion, and so it's just another dynamic to the increase that you, that you see there. You know, back to we've got capacity for leveraging, and we'll continue to think about where to use it. Great. Thank you. Sure. That will conclude today's question-and-answer session. Ms. Childe, I will turn the conference back to you for any additional or closing remarks. Thank you, Cynthia. Thanks everyone for joining us this morning. We look forward to speaking with you again soon. This concludes today's call. Thank you for your participation. You may now disconnect.