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, ma'am. Thank you, Jenny, and good morning, everyone. Welcome to Northern Trust Corporation's second quarter 2023 earnings conference call. Joining me on our call this morning is 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 second quarter earnings press release and financial trends report are both available on our website at northerntrust.com. Also on our website, you will find our quarterly earnings review presentation, which we will use to guide today's conference call. This July 19th 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 August 19th. 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 and welcome you to our second quarter 2023 earnings call. Our results for the second quarter reflect solid sequential performance. Trust fees and assets under custody and management increased sequentially, which included positive organic growth in each business. Net interest income was down modestly on a linked quarter basis, reflecting higher funding costs associated with the highly competitive deposit backdrop. Expenses, excluding unusual items, were well controlled, reflecting the rigor of our cost discipline, as well as the impact of various productivity initiatives. We reported $64 million in charges in the second quarter associated with these steps. Our wealth management business modestly grew assets under custody and management and trust fees on a sequential basis. We continue to see strength in the higher wealth tiers and within our global family office segment, where we captured several marquee wins. Our industry leadership position also stood out in the quarter. We held our third annual Northern Trust Wealth Planning Symposium, bringing together legal and financial experts to share innovative strategies and insights to shape the future of wealth management. Sessions averaged more than 1,000 participants and included attendees from North and South America, Europe, Asia, Africa, and the Middle East. We also released the second Family Office Trends Report, co-authored with the Wharton School. Notably, we received a utility patent for our cloud-based, goals-driven wealth management technology during the quarter, and were named Best Digital Innovator of the Year and Best Private Bank for Digital Wealth Planning by the Financial Times Group. In asset management, we saw strong flows into our institutional money market platform and have recaptured share. We also won a number of key mandates across products, including outsourced investment solutions, Tax-Advantaged Equity, and quant active. Our new product launches in the quarter focused on alternatives. Within asset servicing, we continue to have good momentum in core custody and fund administration, particularly with asset managers in Europe. Our pipeline remains robust. In the U.K., we were reappointed by Brightwell for middle-office services. Brightwell is the primary service provider to the BT Pension Scheme, which has more than $50 billion in assets under management. Among asset owners, we clinched several key multimillion-dollar takeaway wins in North America, where our front-office solutions, which provides a comprehensive view across public and private assets, was cited as a key differentiator. As a testament to our capabilities, we were recently awarded three prestigious industry awards, including Best Global Custodian for Asset Owners by. In the second quarter, we launched A-Suite, our content, community, and collaboration hub for global asset owners. Within the first few weeks of launch, we've seen significant client engagement. Going forward, we expect this new communications channel to create relationships with key target audiences and further showcase our expertise in the market. In closing, our balance sheet continues to be very strong, with ample capital and liquidity. Our new business momentum is gathering steam, and our pipeline remains robust. While there's still more work to be done, we're making solid progress slowing the trajectory of our expense growth. Rationalizing our cost base remains a top priority, and the governance and control mechanisms we're putting in place today should drive sustainable improvements for both the near term and for years to come. We head into the second half of the year well-positioned to support our clients and generate value for all of our stakeholders. I'll now turn the call over to Jason. Thank you, Mike, and let me join Jennifer and Mike in welcoming you to our second quarter 2023 earnings call. Let's dive into the financial results of the quarter, starting on page four. This morning, we reported second quarter net income of $332 million, earnings per share of $1.56, and our return on average common equity was 12.4%. Currency movements had an immaterial impact on our revenue and expense growth in both periods. Our second quarter results were impacted by two notable items. We recognized a $38.7 million pre-tax severance charge, impacting both our compensation and outside services line items. We recorded a $25.6 million pre-tax charge associated with the write-off of an investment in a client capability. Notable items from previous periods are listed on the slide. Excluding notable items in all periods, revenue is up 1% on a sequential quarter basis and down 1% over the prior year. Expenses were down 1% on a sequential quarter basis and up 5% over the prior year. This reflects an expense-to-trust fee ratio of 116%, down from 120% in the first quarter and 122% in the fourth quarter of last year. Pre-tax income was up 13% sequentially, but down 9% over the prior year. Trust, investment, and other servicing fees, representing the largest component of our revenue, totaled $1.1 billion, which reflected a 3% sequential increase, but a 4% decrease as compared to last year. All other non-interest income was flat sequentially, but down 10% over the prior year. Net interest income on an FTE basis, which I'll discuss in more detail in a few moments, is $525 million, down 4% sequentially, but up 12% from a year ago. We had a $15 million credit reserve release in the second quarter due to improved credit quality on a small number of larger loans, which was offset in part by expectations for higher future economic stress in the commercial real estate market. Turning to our asset servicing results on page five. Assets under custody and administration for asset servicing clients were $13.5 trillion at quarter end, up 2% sequentially and up 5% year-over-year. Asset servicing fees totaled $621 million, which were up 3% sequentially, but down 3% year-over-year. Custody and fund administration fees, the largest component of fees in the business, were $427 million, up 3% sequentially, down 1% year-over-year. Custody and fund administration fees increased on a linked quarter basis for the 2nd consecutive quarter due to solid new business activity, higher transaction activity, and favorable markets. They decreased from the prior year quarter, primarily due to unfavorable markets. Assets under management for asset servicing clients were $990 billion, up 3% sequentially and up 4% year-over-year. Investment management fees within asset servicing were $134 million, up 6% sequentially, down 10% year-over-year. Investment management fees increased sequentially, primarily due to asset inflows and favorable markets. They decreased from the prior year quarter, primarily due to asset outflows and unfavorable markets. Moving to our wealth management business on page six. Assets under management for our wealth management clients were $376 billion at quarter end, up 2% sequentially and up 7% year-over-year. Trust, investment, and other servicing fees were $475 million, up 3% sequentially, but down 5% compared to the prior year. Sequentially, the increase in fees in the regions was driven primarily by favorable markets. Sequentially, the increase in GFO fees was driven by net inflows. Relative to the prior year, the decrease in fees in the regions was primarily due to unfavorable markets and product-related asset outflows. Within GFO, the decrease in fees was due largely to unfavorable markets. Moving to page seven, and our balance sheet and NII trends. Our average balance sheet decreased 1% on a linked-quarter basis, primarily due to lower client deposits, partially offset by higher leveraging activity. Earning assets averaged $134 billion in the quarter, down 1% sequentially and down 4% versus the prior year. Money market assets primarily absorbed the decrease. Client liquidity continued to grow during the second quarter. While we saw a decline in average deposits, it was more than offset by increases in other categories. Relative to the first quarter, our money market funds were up $8 billion or 6%, and our CDs were up 29%. Average deposits were $106 billion, down $6.6 billion or 6% sequentially, but remain consistent with late April levels. We experienced a $2.6 billion sequential decline in non-interest-bearing deposits, mostly within the institutional channel, as clients continued to shift to higher-yielding alternatives. This reduced the mix of non-interest-bearing deposits to 17%. At quarter end, operational deposits comprised approximately two-thirds of institutional deposits. These tend to be the stickiest deposits as clients use them to operate their businesses. Approximately three-quarters of our average deposits are institutional, with the remainder related to wealth clients, including GFO. Shifting to the asset side of the balance sheet, average securities were down 2% sequentially, reflecting the natural runoff, which we've seen to reinvest at the short end of the curve. Our $50 billion investment portfolio consists largely of highly liquid U.S. Treasury, agency, and sovereign wealth fund bonds, and is split approximately evenly between available for sale and held to maturity. The duration of the securities portfolio continued to edge down in the second quarter to 2.1 years. The total balance sheet duration is now less than a year. Loan balances averaged $42 billion and were up 1% sequentially. Our loan portfolio is well diversified across geographies, operating segments, and loan types. Approximately 75% of the portfolio is floating, and the overall duration is less than one year. Our liquidity remains strong, with cash held at the Fed and other central banks up 9% to $43 billion. More than 45% of our overall balance sheet is comprised of cash, money market assets, and available-for-sale securities. This translates to $73 billion of immediately available liquidity, or more than 60% of the total deposit base. Net interest income on an FTE basis was $525 million for the quarter, down 4% sequentially, up 12% from the prior year. NII reflected the impact of several dynamics. We saw continued client migration out of deposits and into higher-yielding alternatives. Non-interest-bearing deposits as a percentage of total deposits slid to 17%, Deposit costs increased, with our interest-bearing deposit beta during the quarter reaching 88% and our cumulative beta for the cycle at 68%. The net interest margin on an FTE basis was 1.57% for the quarter, down 5 basis points sequentially, up 22 basis points from a year ago. The sequential decline reflects the impact of higher funding costs, partially offset by higher short-term market rates. Our NII in the third quarter will continue to be driven by client behavior, which has been less predictable given the speed and velocity of this cycle's rate hikes. Our average client deposits thus far in the quarter are approximately $106 billion. Deposit outflows are expected to continue, in part due to seasonality, as August is typically our low point in the year as European activity slows materially. The pace of the outflows is expected to moderate. Turning to page 8. As reported, non-interest expenses were $1.3 billion in the second quarter, 4% higher sequentially, 9% higher than the prior year. Excluding charges in both periods, as noted on the slide, expenses in the second quarter were down 1% sequentially, up 5% year-over-year. I'll hit on just a few highlights. Compensation and technology expense continue to be the areas of highest spend. Compensation expense, excluding severance charges, was down 5% sequentially, but up 4% compared to the prior year. It was down sequentially due to the payment of our annual retirement-eligible incentives in the first quarter. This is partially offset by the impact of this year's base pay adjustments, which are granted in the second quarter. The year-over-year growth in compensation expense largely reflects the impact from inflationary wage pressures and last year's employee expansion, partially offset by lower incentives. Excluding charges, non-compensation expense was up 3% sequentially. Primary driver of the increase was growth in the outside services line, which was up 9% sequentially. The increase is largely due to timing, as we reported a sequential decline in outside services of 9% in the first quarter due to delays in technical services projects. With our heightened focus on expense control, we expect our operating expenses to grow more modestly and our expense-to-trust fee ratio to show further improvement. Turning to page nine. Our capital ratios remained strong in the quarter and continue to be well above our required regulatory minimums. Our Common Equity Tier 1 ratio under the standardized approach was flat to the prior quarter at 11.3%, despite continued common stock repurchases. This reflects a 430 basis point buffer above regulatory requirements. Our Tier 1 leverage ratio is 7.4%, up slightly from the prior quarter. We returned $257 million to common shareholders in the quarter through cash dividends of $158 million and common stock repurchases of $99 million. With that, Jenny, 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're using a speakerphone, please make sure the mute function is turned off to allow your signal to reach our equipment. Again, star one to ask a question, and please ask one question per turn, and we'll pause for just a moment. I do have a question from Steven Chubak, Wolfe Research. Please go ahead. Hi, good morning. This is actually Sharon Leung filling in for Steven. Just a question on deposit betas. They came in a little bit better than expected this quarter. Can you help us understand how to think about the incremental betas from here? Sure. Betas have continued to increase, and from here, I think we still have to separate the institutional client base from the wealth client base. We noted that we're cumulatively across the platform within this quarter in the high 80% range. The institutional channel is likely going to be at 100% at this point. The wealth channel still provides some benefit. The betas there are a lot lower, but at this point, we're seeing about 100% in the institutional channel and still much less than that in wealth. Both of those trends seem to be continuing as we've seen early signs in the quarter. Great. As a follow-up, you noted you're at about 17% non-interest-bearing deposits today. I think you had troughed closer to about 15% in the 2004-2006 cycle. Can you help us think through, where that potentially goes from here, and once that starts to normalize, where you see NII exiting the year? Sure. Like you, we've looked back a lot at where it's troughed, and the data we have showed it a little higher than the 15 you mentioned. I think it's 16%, but I don't think about that as a floor. There's nothing structural in the base to consider that a floor. That said, it has been moderating significantly, and we haven't seen much movement at this point. Obviously, there's a step down this quarter of another percentage point, but it seems to be leveling off at this point. Great. Thank you. Thank you. Next question comes from Alex Blostein, from Goldman Sachs. Please go ahead. Morning, Alex. Hi, good morning. Hello, everybody. A couple of questions around expense trends. I guess one, a little bit more near term. You guys announced some action, obviously, over the course of the quarter. There's a severance charge, maybe help us quantify what it means in terms of savings and your just updated views on the overall sort of firm-wide expense growth for the year, I guess, excluding the charges occurred in the second quarter. I think last time you talked about bringing that down to below 7%, maybe an update there would be helpful. You know, bigger picture question, you guys are running at a kind of high 20-ish%, you know, pre-tax margin. That used to be north of 30%. As you kind of think about the fee environment getting a little bit better with the market, but NII has clearly peaked, as we talked about before, is there an opportunity to get back to that 30% plus? How do you see sort of achieving that, if that's the goal, and what's the time frame around that? Sure. Let me tackle the expense, the compensation-related, first. You know, first, I'm sure people are curious, where is the base from here? Let me just provide some background on kind of first quarter to second quarter, second quarter to third quarter. I think from here, we'd say flat to down from second quarter, ex the severance charge in the compensation line. If I go back to last quarter, we explained that the significant movements for second quarter would be the $40 million seasonal decline in equity awards, and then the $20 million increase in the base pay coming online. That would have put comp at about $575 for the quarter, and obviously, ex the charge, we ended up about $8 million better than that, including currency. two factors led to that. First, we pulled a lot of levers in the quarter to flatten compensation, including accelerating and close to completing the actions that we launched in fourth quarter of last year. In January, we communicated that the projected reduction by late 2023 would be about 300 roles and about $5 million-$7 million in quarterly comp benefit, net of reinvestments. We got a portion of that work done in the first quarter, and we mostly finished it in second quarter, and that was a big part of the reason it put us ahead of schedule. Second, as we saw the timing of that first program accelerating and coming to completion, we launched a new effort during the second quarter, specifically related to what you referenced, Alex, in the severance charge that we announced this morning. We've already gotten some benefit of that within the quarter, and that's reflected in the results. Overall, this new program, to your question, should impact about an incremental 600 roles. Many of that will be backfilled based on a lens of skills or geography, but same goal. We should be able to get $5 million-$7 million a quarter in run rate savings, and a portion of that got embedded in the second quarter. We've got to remember that we did pull the lever hard this quarter, so there's some hiring that's in the queue, but we also pushed a fair amount back. That's why with various puts and starts, it's good to think about a flat to down from the comp levels you see in second quarter, ex charges going into third quarter. That's a hopefully helpful background there. To get to your questions on for the rest of the year, where do we see expenses? At a high level, we've taken about a point out of the curve for the year based on the trajectory that we're on. If you take out to your point, if you take out the notable items this year, each quarter has been under six. We think we've taken that point out of the curve at this point, and that should continue through the rest of the year. To margins, you're right, that we've been in the 30%s and now in the 20%s. Our target has us, one of our key performance indicators is for us to be in the 30%s, no way have we lost sight on that. That is where we're trying to get. That gets impacted largely by what's gonna happen. In our minds, we can control the expense side. Obviously, we're doing a lot of work there. We're also getting good benefit because we saw good organic growth in the quarter. Both levers are working in the right way. We have definitely not changed our target of being in the 30%s from a margin perspective. Got it. Thanks. Super comprehensive. Just a quick follow-up around deposits. Good news, you guys were kind of in line with what you updated us on around $105. Sounds like deposits are fairly stable. I think you said $106 right now with a kind of similar non-interest bearing mix as we saw over the course of the quarter. Can you help just frame, you know, the seasonal deposit outflows and any other kind of client conversations you're hearing that could give us a sense where deposits could ultimately trough in the cycle? Sounds like there's a little bit more to go, just curious to hear what the endpoint might be. Yeah, it, and you heard right. It's held in quite well so far in July. June, you see the end of the quarter, there's a spike there. In general, June and July have been at about this level and have been holding in well. Our client activity is good. We've taken action here to make sure we're talking to clients aggressively and telling them we want to continue providing good liquidity services for them, whether it's lending or holding on to their deposits. We've got, we talked last quarter about the fact that we think about liquidity broadly. It's about client liquidity. It was good to see money market funds up this quarter. That adds to margins really well, too, and even as we think about what clients are holding in brokerage, and so, all of the client liquidity seems to be holding in well. On the seasonality dynamic, August is a low point, but it doesn't go down dramatically. We've looked back several years, and so we're feeling that deposits at these levels seem to be holding in okay. I can even give a little bit of thought, you know, from our perspective at this point, based on our outlook, I think it's prudent to think about another decline, even though deposits are holding in pretty well. We see the competition, we think it's prudent to think about another NII decline of about 5% for the quarter. June and July volumes have held in at about $100 billion-$110 billion, but we just have to be conscious of the competitive environment and what the summer tends to hold in terms of volume pressure. Understood. Great. Thanks so much. You bet. Thanks, Alex. Our next question is going to come from Brian Bedell, from Deutsche Bank. Great. Good morning, Brian. Good morning, folks. Good morning. Good morning. hope all is well. maybe just to go back to expenses. I appreciate the color you gave, Jason. normally start to talk about the seasonal lift that you typically get in the second half in things like equipment and software and outside services. I wonder if you'd want to comment on any projection there? Sure. Well, it's good to call it out. I think in equipment and software in particular, we were better than what we thought we were going to be, but that was really two factors led to that. One, we did have some delays in projects coming from width into being depreciated. Those will come online, so that's more timing. Secondly, we've been working very aggressively as part of the productivity office to just negotiate on and then try and push inflation down, and we had some good results there, bringing costs down. From here, we think third quarter, up $5 million-$10 million in that line item. Fourth quarter, we can even tell, because some of it's baked, an additional $5 million-$10 million lift from that perspective. Outside services, not no update to make there. Okay, great. Mike, you started off the kind, the call talking about some of the new business wins in asset servicing and wealth management. I guess, how should we think about that contributing to organic revenue growth? Maybe just broadly, if we're in a, say, a flat, flattish market situation, would you expect this to have a positive impact in the next, you know, couple quarters and going to 2024 on revenue? Brian, the answer is yes. To your point, you know, we only consider it organic growth once it's transitioned and in, and yet we know the pipeline of business or mandates that we've won that have not transitioned in yet. In each of the businesses, it's a little bit different. You know, there's more of a, I'll call it forward pipeline with asset servicing, but the pipeline looks very good based on recent activity that I mentioned there. Within wealth management, there's not as much of a, you know, forward pipeline, if you will. Similarly there, I would say, you know, very steady activity. As much as anything with wealth management, you know, keeping in mind that you know, this, I'll say company, but also that business has been, you know, built on doing what's right for the client. Sometimes, that results in different financial implications for the company, but over time, is best for the company and the shareholders. My point being, you know, the discussion around deposits and money market funds and, you know, treasuries and managing things like that, they all have different implications for us. The client activity has been very good, and we're, I would say, optimistic about how some of the shifts with rates will have implications on where those funds get redeployed. Again, positive on the wealth management front, in a steady fashion. Asset management, as Jason mentioned, we've seen strong flows into the money market platform there, but that also in some other areas as well. Likewise, I like to see those get redeployed in other ways over time. Yeah, good across the board. F air to say the revenue growth on the fee side is definitely better than the NII side for the organic growth equation now, at least now? Yep. No, that's right, Brian, I view it as you're kind of implying there on the fee side, it tends to kind of grind up more gradually, you know, subject to the markets, NII can be more volatile. The only other area I would just highlight is, you know, around our capital markets activity, you know, FX and brokerage and trading there, which has been relatively subdued during this time period, with lower volatilities, lower activity, which that can also change, and that has different implications, too, just meaning those can be more profitable. All right. Great. Great, thanks. Thanks for all the color. Sure. Mike Mayo from Wells Fargo, please go ahead. Hey, good morning. Thanks for taking my question. I guess the first question is on fee growth, kind of more broadly. You know, you've sort of indicated that you're at the 5% expense growth rate. Does that go down? Where do you see fees growing to get up to that expense level so that you could grow fees faster than expenses? Well, I mean, in the short run, I don't think we're still absorbing an inflationary environment from an expense perspective, and so would like to be able to do better even than what we're doing right now, in the long run, from an expense growth perspective. On the revenue side, as you know, the lift, the financial model enables us to have lift from two different areas. One is the market lift, and that's tended to provide low single-digit growth rates, but it's a very strong component of the financial model. Secondly, the organic growth, and if we can have low single-digit growth in wealth management organically and then mid-single-digit growth in asset servicing, that provides a good model for us to get well above the expense rates that we think we can lead to in the long run and provide good operating leverage. Okay. If I could follow up on wealth, you know, you've improved growth there as well. Are there any differences in the competitive dynamic among the top end and the low end? Are you having more success? You said you're having more success in the global family office. I guess, can you talk about the funnel of new clients, sort of in the middle tier, and what you're doing to grow that? Yeah, it's interesting. It's actually not just the family office, but the very top end of wealth advisory, and those clients can be similar size. They just happen to not have a family office and are leaning more toward us for wealth advice, as opposed to the broader set of more operational and reporting services that the global family office provides. We are doing better at the top end, looking at the new business that came on board and at the pipeline, the accounts above $20 million, just that was where there was more velocity. That's been consistent for a while in that business. I, there is something to that dynamic, where we seem to be doing better at the top end. That's where a disproportionate percentage of the growth has come from. Okay, thank you. You bet. Our next question is going to come from Brennan Hawken from UBS. Please go ahead. Morning, Brennan. Morning. Hey, how you doing? Just a quick clarification point. Jason, you referenced a point of expense benefit. Is it right to interpret that as coming off of your prior 7% or better expectation, or was that meant in a different way? It is correct to interpret that as saying we don't see 7% at this point. We've said 7% or better. At this point, we should be doing 6% or better. We've done that first half, and we see path to that the second half as well. Perfect. Thank you for clarifying that. Thank you. Sure. You guys had a write-off of a client capability. I don't remember seeing that in the past, and it was just a little confusing to me. Maybe if you could help me understand it. You know, when did you build that capability, and what happened that caused you to write it off? Yeah, I can give you some thoughts on it. It's just from a timing perspective, it's been in the works for many quarters. One of the pillars of the Productivity Office is to look at what we refer to as internal investments, to ensure that they're on track to meet our hurdle rates for returns and margins. The, the charge was a project to build out a new client capability in asset servicing, specifically in the asset owners channel. After working and eventually discussing with different stakeholders, we didn't reach commercial agreement on terms that would meet our hurdles, we halted the project. I think it's importantly, you know, I'd presume you'd ask, are there others like this in inventory? Absolutely not. We don't. This is a large project endeavor that we've been working on and didn't reach resolution that got to our hurdle rates, and so stopped the project. Okay. Did something happen in the, you know, sort of like revenue opportunity that diminished it versus where you planned? I'm sure you guys went through the process before you know, broke ground, so to speak, at least metaphorically. Was it that it was, well, really pricey? You know, it turned out to be more expensive to build. Was it the expense side that hurt the outlook versus plan, or was it the revenue opportunity? Yeah, it well, it was more costly to build than we thought, and the revenue dynamics were not, at that point, gonna get to our hurdle rate. This, it really is reflective of us taking an extremely disciplined approach on items like this, where we're not gonna devote resources to areas where we're not gonna achieve our hurdle rate. You know, well, before we talked about this, even internally, one of the pillars that we talked about for the productivity office was looking at our internal investments, and this fits squarely in one of those areas. We define that as areas where we're allocating resources, whether it's capital or expense dollars, and we're not at our hurdle rate. This is one where we were disciplined in saying, "We're gonna stop now, halt it, and not invest more into this. Yeah, thanks for explaining that, Jason. It's actually a lot more encouraging than I interpreted it on paper. Thanks for the color. No. Yeah. No, thanks for asking. It's probably, if it's helpful to you to clarify, it's helpful to others. Thank you. The next question comes from Robert Wildhack, Autonomous Research. Go ahead, please. Morning, Rob. Morning, guys. Morning. Just a bigger picture question on expenses. You know, where do you want or what's your target, I guess, for that expense to trust ratio over the long run? What are the sort of necessary ingredients to get there? Yeah, if we can be in the $110-$110 range, then that's $105-$110. Then we feel like we're in good shape to do well, and we're grinding to get down there. We got down there before. We've been well above it. We got down into that range, in fact, even slightly below it for a quarter or two. Now all the factors we've talked about, higher inflation, markets coming down, and the effects of NII going up, not helping that metric, we're outside that range. It is an important part of our financial model to be in that range. It's the first thing I look at is where are we? It's good to see us getting back toward the number that we, the range that we've articulated. It's another one of the key performance indicators that we talk about internally. Got it. Thanks. Just one follow-up on the positive organic growth commentary this morning. If you saw a big acceleration in organic growth or a sustained period of strong organic growth, you know, multiple quarters, even several years, how do you think that would impact expense growth, if at all? Yeah. Rob, your two questions relate to each other, you know, which is the primary way that we can drive that ratio to the range that Jason talked about is through organic growth on the fee side and then controlling organic expenses. All right? To your point, if you have higher organic growth, that is going to require more resources. To the extent that you don't achieve that, then you have to make sure that you're, you know, reducing the organic growth on the expense side to get there. But those are the two areas that we control the most. You say, okay, beyond that, as Jason mentioned, on the fee side, it's gonna have the impact of markets and sometimes currency. On the expense side, you're gonna have the impact from inflation, and to some extent, you know, currency. You try to focus on what you can control the most, which are those two items, organic growth on fees and organic growth on expenses, to ultimately drive it to the target range. Okay. Thank you both. Sure. Betsy Graseck from Morgan Stanley is next. Please go ahead. Morning, Betsy. Hi, good morning. This is actually Cornell Schmitz filling in for Betsy. How are you? Good. How are you? Just one question, a little bit nuanced on the credit portfolio. Seems like a little bit of an outlier. I know it's small, but on the reserve release, it seems like an outlier that there's improved outlook on your CRE book. Can you just explain what's going on there and where you see this line item, from here? Yeah. Actually, just to clarify, there was the release. The release is a result of some improvements in a small number of borrowers in that book, but that more than offset an actually worsening outlook that we have overall for CRE. It's not dramatic, but our outlook on that portion of the book actually would have caused an increase in the reserve. Got it. Okay, that makes more sense. I guess one other question on the investment portfolio. You mentioned the duration still sub one year, and you're mostly in cash. At what point, just given the context of potential future rate hikes, where do you see, like, this duration heading, in the coming months, and how are you planning to makeshift this book in that context to. Sure. To protect NII? Yeah. Yep, absolutely. The duration of the securities book is at 2.1, the duration of the balance sheet is just under one. You're absolutely right to call out that this is an interesting time in the what we think of as the evolution of the yield curve. We've been allowing the maturity of securities to become more liquid. As we reinvest them, that's brought down duration. At this point with the yield curve, we are talking about where to go from here. That's not indicating it's going to go up. At this point, we are thinking about where is the yield curve, where is it going. How does that influence what we want to do as the large securities book continues to mature and provide opportunity for reinvestment. Okay, I guess one follow-up on that same topic: How should we think about earning asset growth in the context of deposit outflows? Potentially, should those flow out on a one-to-one basis, or will you maintain certain balance sheet size, or? Yeah, our as the deposits come down, the securities can act as a, obviously, a funding mechanism for it. That doesn't move very quickly, the deposit size is always going to influence the earning asset size. What we have to then think about, the constraining factor at that point becomes: What does leverage look like? We've got a lot of room from a leverage perspective, that's what sometimes will lead us to think about discretionary leveraging, just to make sure that we're not missing opportunities to pick up some NII, even if it's a very thin NIM, based on where the size of the balance sheet is, because it doesn't flex super quickly. Got it. Okay, that's helpful. All right. Sure. That was it from me. Thanks a lot. Thank you. Sure. Our next question is going to come from Mike Brown from KBW. Please go ahead. Morning, Mike. Thank you. Good morning. Maybe just actually following up on that question there? We noticed that the complexion of your balance sheet has been shifting on the funding side. Naturally, that makes sense, your deposits, they declined by 6%, we saw that the higher cost Fed fund purchased balance actually jumped meaningfully quarter-over-quarter, has been growing this year. I guess, why not just let the balance sheet decline more? Like, what's kind of going on there in terms of the mix, and how could that progress from here, should if the deposits continue to trend down as you talked about, will that balance the Fed funds purchase balance continue to grow as an offset to fund the assets? Yeah. Part of it is that in this, the deposits have just been so volatile. So you don't want to commit to significant movement in, in shrinking the balance sheet. We want to be there for our clients. We've got plenty of capital, we've got plenty of room from a leverage perspective. So just not anxious to quickly do any significant moves. To that extent, as deposits come down, you have the opportunity to then say, "Well, maybe we want to use some discretionary leveraging again." We printed a 7.4 Tier 1 leverage, which is, you know, it leaves you a lot of room. If we hadn't done leveraging, that incremental leveraging would be even higher in the sevens. At a point, you just have to say it is prudent to make sure you're taking advantage of the opportunities that exist. Okay, great. Thanks for the color there. I guess maybe just following up on that point there on the capital side, you guys increased the share buyback, or you bought back about $100 million or so of stock this quarter. Any expectation on how that could progress from here? What should we think about in terms of your capital return? Sure. Well, all right, yeah, the overall theme of what you saw in this quarter makes sense in the near term, where you'd see us in the market for a share repurchase. The thing that worked against us, the AOCI actually worked slightly against us this quarter. Usually, in a neutral rate environment, the pull to par will give us some lift there, but it did in this quarter. That's fine, but even so, the $100 million we did is about what, it's kind of the that's the model we're thinking about in the short run. Big caveat is that the FDIC special assessment coming online, presumably in third quarter, that would be a similar dollar amount as what we did from a repurchase perspective this quarter. You could see us saying, "Hold off for a quarter, get that payment done, and then get back to your game plan. Okay. Thank you for the color. Sure. Next question comes from Gerard Cassidy from RBC. Please go ahead. Morning, Gerard. Hi, Jason. How are you? Very well. Jason, can you share with us, I think you gave us, you know, the cumulative beta through the cycle of 68%, and then the incremental beta, of course, is higher. I think you touched on it this quarter, maybe 100%. The question is this: How is the beta behaving relative to past tightening cycles? I don't know if 2016-2018 is a cycle that really is that comparable. Maybe you have to go back a little further. Second, how quickly, if the Fed does start cutting rates, excuse me, cutting Fed fund rates in 2024, sometime, how quickly can you guys reduce your deposit costs? Sure. Well, on the first, just to make sure I said it right earlier, the 100% going forward would be for the institutional side of the business, not for the overall deposit base. Okay. And- Got it. Yeah. Yep, to the question of, you know, how does, you know, how does that compare historically, this is higher than it has been historically. I just there's different dynamics that you and I could talk about, I think, that are driving that. The, there's very strong competition for deposits right now, and for various reasons. We want to make sure that we're there for our clients, and, you know, we still, we've got the ability to do that, so we want to make sure that we're holding on to our fair share and providing that liquidity capability for clients. If you think about reductions, the reductions can come quickly, the way we price, the way our agreements work, we get fast movement on the way down. We should be able to get deposit costs down quickly as rates come down. Very good. Then, as a follow-up, you also touched on the volatility of deposits. Is it more, Based on your guys' experience at Northern, are you finding that this period's volatility is even greater than past periods? Is it because of quantitative tightening or Fed actions that is causing greater volatility in your guys' estimate? Well, it is more volatile, not just over the long run. We went from $90 to $138 down to, you know, $106. Even within the quarters, a lot of volatility. I think that's driven by some of the macro factors, and what we saw in early March spooked a lot of depositors, obviously. Then another trend of debt ceiling, and then leading to another trend of deposit competition. All of those things are having, or driving significant different preferences that clients have, not just between which bank to go to, but whether to use banks versus money market funds versus treasuries. I think all of those factors are what's leading to the heightened volatility we're seeing. Got it. Okay. Thank you. Sure. Next question comes from Vivek Juneja from JP Morgan. Please go ahead. Hi. Morning. Thanks. Morning. A couple of questions. I'll start with non-interest-bearing deposits, the big outflow you saw in the second quarter, which segment did that come more out of? Where, what are you seeing in that trend? Sorry if I'm repeating a question. There've been overlapping calls that's made it, I hope I'm not doing that. The significant movements are almost always going to come, well, not almost always, in this case, came from asset servicing. Okay. The stabilization, where are you seeing more of that, which segment? The asset servicing segment is actually overall been relatively stable. We'll see big, chunky movements in and out, but the overall level has been about the same. The wealth segment is more granular. The GFO client base is much chunkier, but you just think about the amount of clients in the, in the wealth segment, it just makes it more granular. Okay. On the wealth management segment, the low single-digit expense growth, is that because that's where you've done a lot of the headcount cutting that you all talked about? What are the implications for service there? Service has been great. We didn't provide detail in the expense allocation between the business units. Just in general, you'll note that the headcount is down, but no impact to service levels whatsoever. The low single-digit growth I referenced was related to organic growth within wealth management. Okay. All right. Thanks. The next question comes from Mike Mayo from Wells Fargo. Hi, just a quick follow-up. You mentioned that equipment and software, you had some projects being delayed. Does that mean that non-comp expense will see some upward pressure in the second half of the year? Yes, in certain categories, it will. In equipment and software, we'll see in that line item in particular, we'll see upward pressure, $5 million-$10 million, third and fourth quarter. Okay. Not, I didn't reference other line items. We mentioned outside services, relatively flat. That's really the only forward-looking information we provided, except for the comp number, which you referenced. Great. Thank you. You're welcome. Brian Bedell from Deutsche Bank, please go ahead. Oh, great. Thanks for taking my follow-up. Just wanted to clarify on the FDIC special assessment, is that included in that expense guide of 6% or better? I don't know if you're able to frame the size of the special assessment yet? It's not included in the 6%. and we haven't talked publicly about what the number is. Okay, fair enough. Thank you. Sure. Okay. Thank you very much for joining us today. We look forward to speaking with you again soon.