Executives: Mark Bette - Northern Trust Corporation S. Biff Bowman - Northern Trust Corp. Analysts: Alexander Blostein - Goldman Sachs & Co. Glenn Schorr - Evercore ISI Brennan Hawken - UBS Securities LLC Brian Bedell - Deutsche Bank Securities, Inc. Ken Usdin - Jefferies LLC James Mitchell - The Buckingham Research Group, Inc.

Marty Mosby - Vining Sparks IBG LP Elizabeth Lynn Graseck - Morgan Stanley & Co.

LLC
Operator: Good day, everyone, and welcome to the Northern Trust Corporation First Quarter 2017 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to the Director of Investor Relations, Mark Bette, for opening remarks and introductions. Please go ahead, sir.

Mark Bette - Northern

Trust Corporation: Thank you, Don. Good morning, everyone, and welcome to Northern Trust Corporation's first quarter 2017 earnings conference call. Joining me on our call this morning are Biff Bowman, our Chief Financial Officer; Jane Karpinski, our Controller; and Kelly Moen from our Investor Relations team. For those of you who did not receive our first quarter earnings press release and financial trends report via e-mail this morning, they 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 April 25 call is being webcast live on northerntrust.com. The only authorized rebroadcast of this call is the replay that will be available on our website through May 23. Northern Trust disclaims any continuing accuracy of the information provided in this call after today. Now, for our Safe Harbor statement. What we say during today's call may include forward-looking statements, which are Northern Trust's current estimates and expectation of future events or future results.

Actual results, of course, could differ materially from those expressed or implied by this statement because the realization of those results is subject to many risks and uncertainties that are difficult to predict. I urge you to read our 2016 Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission for detailed information about factors that could affect actual results. 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 Biff Bowman. S. Biff Bowman - Northern Trust Corp.: Good morning, everyone. Let me join Mark in welcoming you to Northern Trust first quarter 2017 earnings conference call. Starting on page 2 of our quarterly earnings review presentation this morning, we reported first quarter net income of $276 million.

Earnings per share were $1.09 and our return on common equity was 11.6%. As discussed on our third quarter call, this quarter includes the impact of the first dividend associated with last year's preferred stock issuance. This initial dividend payment of $14.9 million covers eight months. Going forward, these fixed rate dividends are expected to be paid every other quarter in the amount of $11.5 million, with the next payment scheduled for the third quarter of this year. This is in addition to the quarterly dividend of $5.9 million from our previously issued preferred stock.

Our assets under custody and administration, assets under custody and assets under management increased 13%, 14% and 11%, respectively, compared to the prior year, reflecting favorable markets and our continued success in winning new business. A number environmental factors impact our businesses as well as our clients. Before going through our results in detail, let me review how some of these factors unfolded during the first quarter. Equity markets performed well during the quarter. In U.S.

markets, the S&P 500 ended the quarter up 14.7% year-over-year and up 5.5% sequentially. In international markets, the MSCI EAFE Index was up 14.7% year-over-year and up 4% sequentially. Recall that some of our fees are based on lagged market values and fourth quarter markets were also up compared to the prior year as well as sequentially. In bond markets, the Barclays U.S. Aggregate Index was down 2.7% compared to the last year and flat sequentially.

Currency volatility as measured by the G7 Index was 4.7% lower than the first quarter of last year and 1.4% lower sequentially. Foreign exchange market volumes were also lower during the first quarter. As measured by two of the interbank brokers, volumes were down 10% to 20% year-over-year and down 3% sequentially. You'll recall that currency volatility and client activity influence our foreign exchange trading income. Currency rates influence the translation of non-U.S.

currencies to the U.S. dollar and therefore impact client assets and certain revenues and expenses. Dollar strength compared to one year ago tempered custody asset growth and related fee growth, while benefiting expense growth. The British pound and the euro ended the quarter 13% and 6% lower than one year ago, respectively. On a sequential basis as compared to the U.S.

dollar, the British pound and euro both strengthened by 1%. U.S. short-term interest rates were higher during the quarter, most evident in the three-month LIBOR, which averaged 107 basis points during the quarter compared to 92 basis points in the prior quarter and 62 basis points one year ago. Let's move to page 3 and review the financial highlights of the first quarter. Year-over-year, revenue increased 8% with non-interest income up 6% and net interest income up 15%.

Expenses increased 8% producing two-tenths of a percent points of positive operating leverage. The provision for credits losses was a credit of $1 million. Net income was 13% higher year-over-year. In the sequential comparison, revenue was up 4% with non-interest income up 2% and net interest income up 10%. Expenses were up 2% compared to the prior quarter.

Net income was 4% higher sequentially. Return on average common equity was at 11.6% for the quarter, equal to what we reported one year ago and down from the 11.9% reported in the prior quarter. Assets under custody/administration of $8.9 trillion increased 13% compared to one year ago and 4% on a sequential basis. Assets under custody of $7.1 trillion increased 14% compared to one year ago and 6% on a sequential basis. In the year-over-year comparison, solid new business and favorable market impacts were partially offset by the currency translation impact of a stronger dollar.

For the sequential comparison, the growth was primarily driven by new business and favorable markets, but also had a slight benefit from the currency exchange rates. Assets under management were $1 trillion, up 11% year-over-year and up 6% on a sequential basis. Favorable market impacts were the primary driver of both the year-over-year and sequential comparisons. Let's look at the results in greater detail, starting with the revenue on page 4. First quarter revenue on a fully taxable equivalent basis was $1.3 billion, up 8% from last year and up 4% sequentially.

Trust, investment and other servicing fees represent the largest component of our revenue and were $808 million in the first quarter, up 8% year-over-year and up 2% from the prior quarter. Fee waivers were essentially zero in the first quarter compared to $7.7 million one year ago. Foreign exchange trading income was $48 million in the first quarter, down 21% year-over-year and down 17% sequentially. Both comparisons were impacted by lower currency volatility as well as lower volumes. Other non-interest income was $75 million in the first quarter, up 1% from last year and up 15% sequentially.

Other operating income in the prior quarter included charges of $8.1 million related to the decision to exit a portion of a non-strategic loan and lease portfolio. The prior year's results included a benefit of $2.3 million related to this portfolio. Excluding these items, this line item was up 5% from last year and 3% sequentially. Net interest income, which I will discuss in more detail later, was $362 million in the first quarter, increasing 15% year-over-year and 10% sequentially. Let's look at the components of our trust and investment fees on page 5.

For our Corporate & Institutional Services business, fees totaled $463 million in the first quarter, up 7% year-over-year and 1% on a sequential basis. Custody and fund administration fees, the largest component of C&IS fees, were $308 million, up 7% compared to the prior year and up 1% sequentially. Both the year-over-year and sequential comparisons benefited from new business and favorable equity markets, with the year-over-year growth partially offset by the unfavorable impact of currency exchange rates. Assets under custody for C&IS clients were $6.5 trillion at quarter end, up 15% year-over-year and 6% sequentially. These results primarily reflect new business and favorable markets.

Currency exchange rates muted the year-over-year growth, while adding a slight benefit on a sequential basis. Recall that lagged market values factor into the quarter's fees, with both quarter-lag and month-lag markets impacting our C&IS custody and fund administration fees. Investment management fees in C&IS of $94 million in the first quarter were up 5% year-over-year and down 1% sequentially. The year-over-year growth was driven by favorable markets, lower money market mutual fund fee waivers and new business. Money market fee waivers one year ago within C&IS totaled $1.7 million, while the current year was essentially zero.

For the sequential comparison, recall that almost two-thirds of our investment management fees in C&IS are build on a one-quarter lag and C&IS AUM was down 1% sequentially in the fourth quarter. Assets under management for C&IS clients were $741 billion, up 11% year-over-year and 7% sequentially. Favorable market impacts were the primary driver of both the year-over-year and sequential comparisons. Securities lending fees were $24 million in the first quarter, 5% higher than one year ago and down 6% sequentially. The year-over-year increase was driven by higher volumes, partially offset by lower spreads.

The sequential decline was driven by lower spreads, partially offset by higher volumes. Securities lending collateral was $124 billion at quarter end and averaged $123 billion across the quarter. Average collateral levels increased 7% year-over-year and 4% sequentially. The growth in volumes was driven in part by increased demand for U.S. Treasuries.

Other fees in C&IS were $38 million in the first quarter, up 8% for year-over-year, reflecting higher fees from investment risk and analytical services, benefit payments and other ancillary services. In the sequential comparison, other fees were up 11%, primarily reflecting the normal seasonal pattern in our benefit payment business. Moving to our Wealth Management business, trust, investment and other servicing fees were $345 million in the first quarter, up 10% year-over-year and 2% sequentially. Within Wealth Management, the Global Family Office business had strong performance with fees increasing 17% year-over-year and 4% sequentially. The year-over-year growth was driven by new business as well as lower money market mutual fund fee waivers, while the sequential growth was primarily related to new business.

Performance within the regions also benefited from lower money market fee waivers compared to last year as well as favorable markets and new business. Money market mutual fund fee waivers in Wealth Management were essentially zero in the current quarter, which was equal to the prior quarter and down $6 million year-over-year. Assets under management for Wealth Management clients were $260 billion at quarter end, up 13% year-over-year and 5% sequentially. Moving to page 6, net interest income was $362 million in the first quarter, up 15% year-over-year. Earning assets averaged $109 billion in the first quarter, up 4% versus last year, driven primarily by a higher level of deposits.

Non-U.S. office interest-bearing deposits, which averaged $52 billion and were up 6% year-over-year. Loan balances averaged $34 billion in the first quarter and were down 1% compared to one year ago. The net interest margin was 1.35% in the first quarter and was up 14 basis points from a year ago. The improvement in the net interest margin compared to the prior year primarily reflects a higher yield on earning assets due to the higher short-term interest rates.

On a sequential quarter basis net interest income was up 10%, as the net interest margin increased 15 basis points sequentially, driven by lower premium amortization and higher short-term interest rates. Premium amortization was $1 million in the first quarter compared to $6 million one year ago and $10 million in the fourth quarter. Turning to page 7, expenses were $894 million in the first quarter, up 8% year-over-year and up 2% sequentially. Compensation expense of $426 million increased 12% year-over-year and increased 9% sequentially. The year-over-year growth was attributable to higher performance-based compensation, base pay adjustments, which were effective October 1 of last year, and staff growth, partially offset by favorable translation impact of changes in currency rates.

The sequential growth was attributable to higher performance-based compensation and staff growth. Staff levels increased approximately 6% year-over-year. The growth in staff was all attributable to lower cost locations, which include India, Manila, Limerick and Tempe, Arizona. The higher level of performance-based compensation was driven by long-term equity-based compensation increasing $30 million compared to one year ago and $36 million compared to the prior period. Both comparisons are primarily attributable to a change in the vesting provisions associated with retirement-eligible employees, which allows their restricted and performance stock units to continue to vest upon retirement.

This change impacted restricted and performance stock units related expense beginning with the 2017 grants. The change requires the immediate expensing of restricted stock unit grants to retirement-eligible employees. Performance stock unit expense attributable to retirement-eligible employees is recognized from the date of the grant through the end of a requisite service period, which ends on June 30, 2017. Stock option-based compensation expense already included a continue-to-vest provision, which results in the immediate expense recognition of stock option grants made to retirement-eligible employees. The current quarter's results included $30 million in retirement-eligible related expensing compared to $5 million one year ago.

The performance stock unit expense attributable to 2017 grants to retirement-eligible employees will approximate $8 million in the second quarter. Another way to look at this change in the equity-based compensation I have outlined for you can be summed up in this way. Approximately 50% of the expense associated with this year's grants will have been recognized by the end of the second quarter, leaving the remaining 50% to be expensed over the normal three- to four-year vesting periods. Under the prior plan provisions, we estimate that approximately 15% to 20% would have been expensed by the end of the second quarter, with the remaining 80% to 85% being expensed across the three- to four-year vesting period. Therefore, this change is largely an expense timing issue.

Staying with the compensation category, you will recall that last year we deferred the salary-based pay increases to October 1. For the current year, we have returned to our traditional date of April 1, and this will result in approximately $8 million of additional compensation expense in our run rate for the second quarter. Employee benefit expense of $78 million was up 10% year-over-year, primarily reflecting higher medical costs and payroll taxes. On a sequential quarter basis, benefit expense was up 1%. Recall that the prior quarter's results included a $4 million impact relating to non-U.S.

pension settlements. Excluding this item, benefit expense increased sequentially driven by higher payroll tax, partially offset by lower medical costs. Outside service expense of $153 million was up 2% compared to the prior year, driven primarily by higher market data costs within technical services and higher sub-custody costs, partially offset by lower consulting spend. On a sequential basis, outside service expense was down 5%, primarily driven by lower consulting and legal expense. Equipment and software expense of $127 million was up 11% from one year ago and up 5% sequentially.

Both the year-over-year and sequential growth were driven by increased software amortization as well as software support and rental costs, continuing the implementation of our technology strategy as we invest to support clients and improve employee efficiency. Occupancy expense of $45 million was up 11% from one year ago and down 3% sequentially. The growth from last year was mainly relating to a credit in last year's results relating to a lease adjustment in Europe. The sequential decline related to an early termination penalty recorded during the prior quarter. Other operating expense of $65 million declined 13% year-over-year, primarily related to lower business promotion and advertising expense, partially offset by higher FDIC insurance costs.

Regarding the decline in business promotion and advertising, recall that we announced during 2016, we would become the title sponsor of the lead FedEx playoff event during the third quarter. The event to be named to Northern Trust will be held in New York area in August. We had expense associated with the Northern Trust Open in our first quarter expenses for the past several years, thus the reason for the year-over-year decline. Moving ahead, that expense will now be carried in the third quarter, when the new tournament will be held. Sequentially, other operating expenses declined 16%, primarily relating to lower business promotion and advertising as well as lower staff-related expenses.

Turning to page 8, a key focus has been on sustainably enhancing profitability and returns. This slide reflects the progress we have made in recent years to improve the expense to fees ratio, pre-tax margin, and ultimately, our return on equity. The ratio of expenses to trust and investment fees is a particularly important measure of our progress as it addresses what we can most directly control. Reducing this measure from where it was previously as high as 131% in 2011 to the levels we see today is a key contributor to the improvement in our return on equity. This metric remains an important barometer of our progress and we remain committed to lowering it on a sustainable basis going forward through continuing to win new business to drive fee growth and driving productivity within our expense base through our ongoing initiatives focused on location strategy, procurement and technology.

Turning to page 9, our capital ratios remain strong, with common equity Tier 1 ratios of 12.9% and 12.2%, respectively, calculated on a transition basis for both advanced and standardized. On a fully phased-in basis, our common equity Tier 1 capital ratio under the advanced approach would be approximately 12.8% and under the standardized approach would be approximately 12.1%. All of these ratios are well above the fully phased-in requirement of 7%, which includes the capital conservation buffer. The supplementary leverage ratio at the corporation was 6.9% and at the bank was 6.1%, both of which exceed the 3% requirement, which will be applicable to Northern Trust in 2018. With respect to the liquidity coverage ratio, Northern Trust is above the 100% minimum requirement that became effective on January 1, 2017.

As Northern Trust progresses through fully phased-in Basel III implementation, there could be additional enhancements to our models and further guidance from the regulators on the implementation of the final rule, which could change the calculation of our regulatory ratios under the final Basel III rules. In the first quarter, we repurchased 812,000 shares of common stock at a cost of $70 million. On April 5, we submitted our 2017 capital plan to the Federal Reserve. In closing, despite remaining geopolitical uncertainty across the globe, the first quarter of 2017 was characterized by strong global equity markets, rising rates in the U.S., and low currency volatility as measured by the VIX and other measures, such as the JPMorgan G7 Currency Volatility Index. Northern Trust delivered solid financial results in the quarter, growing earnings per share 6% and delivering a return on equity of 11.6%.

This was accomplished while implementing a change in vesting with – for our restricted and performance share units that require the accelerated or immediate expensing for grants to retirement-eligible employees. We generated both positive fee and total operating leverage in our commitment to improve the profitability of our firm and continue to maintain strong capital ratios. Our assets under custody and administration, assets under custody, and assets under management were up 13%, 14%, and 11%, respectively, compared to the prior year. Our Wealth Management business grew trust fees 10% year-over-year, driven by solid new business coupled with favorable markets. This was done while maintaining a very attractive pre-tax margin of 37%.

The success in the business was well diversified across our regions and our Global Family Office, which continues to demonstrate double-digit growth. Our C&IS business also continued its strong growth trajectory. Trust fees were 7% year-over-year, largely driven by organic factors as markets and currency impact essentially offset each other. The quarter also included the announcement of our definitive agreement to acquire the Fund Service Units of UBS in Luxembourg and Switzerland. This acquisition will significantly enhance our client capabilities in these two very important Global Fund marketplaces.

On the regulatory front, there are two areas to highlight for you. First, as a result of changes to capital plan rules announced on January 30, 2017, we became a large and non-complex firm subject to SR 15-19 rather than a large and complex firm subject to SR 15-18, effective with the 2017 capital plan cycle. With this change, our capital plan submissions are no longer subject to objection by the Federal Reserve Board on qualitative grounds in the CCAR process. In lieu of the qualitative assessment, we will be subject to a targeted horizontal review of specific areas of capital planning conducted as a part of the Federal Reserve Board's normal supervisory process. Second, as noted in the Federal Reserve and FDIC joint press release, the agencies did not find the resolution plan submitted by Northern Trust at the end of 2015 to be not credible or that it would not facilitate an orderly trend resolution.

Although the agency did not identify any deficiencies, there were three shortcomings noted. We are working diligently to address the shortcomings in connection with our 2017 resolution plan submission, which is due by December 31, 2017. We remain committed to advancing our resolution planning capabilities. Before I conclude, as is customary for our first quarter earnings call, we will need to end today's call to allow sufficient time for all of us to get to our annual meeting, which begins

at 10:30 Central Time this morning. Please accept our apologies in the event that we have to close off the question-and-answer period earlier than our normal practice.

Thank you again for participating in Northern Trust first quarter earnings conference call today. Mark and I would be happy to answer your questions. Don, please open the line.

Operator: Thank you. And we'll take our first question from Alex Blostein with Goldman Sachs.

S. Biff Bowman - Northern Trust Corp.: Hi, Alex. Alexander Blostein - Goldman Sachs & Co.: Hey, guys. Good morning. So just first question around NIR, obviously very strong growth in the quarter and I was hoping to get a little more clarity around the jumping off point as we're thinking about 2Q.

So, given the kind of relief on premium am, is 1.35% NIM still a good kind of run rate to think about and obviously whatever happens with the rates will be on top of that? Or was there any sort of catch-up that we need to think about that helped the NIM this quarter?
S. Biff Bowman - Northern Trust Corp.: Yeah. In the quarter, if we look at the NIM expansion sequentially, first, let me give some color to that, the NIM expansion was roughly driven up by about 10 or 11 basis points of what I would say were market factors, and 3 [basis points] was sort of a premium amortization benefit in the quarter. So, it was largely driven by rates. In terms of – I know you're asking jumping off point to go forward.

There's a couple of factors that I think that are important to consider in that. One is, whatever view you have on future rate increases, but the second is around deposit betas. And if I look at our deposit betas and if you look at our cost of funding, you can see that, generally, the betas remained low in the first quarter on our wealth deposits or our retail-based deposits that was very low betas. And on the institutional side, we have seen those betas move up to some degree, but they still remain relatively low. How those move with subsequent hikes will impact the NIM's ability going forward.

And then lastly, I would say, is the duration of our portfolio remained short. So the ability to reprice assets with any ramp in LIBOR will benefit us relatively quickly as those assets roll off and reprice into new assets. Mark Bette - Northern

Trust Corporation: And then I'll just add to that. The premium amortization, we do usually see the fourth quarter and the first quarter as being more favorable than the second and the third quarter from a housing market activity standpoint. So, based on history, we have seen that track higher in the second quarter versus the first quarter.

Alexander Blostein - Goldman Sachs & Co.: Got it. That's helpful. And then just around the size of the balance sheet, down a little bit sequentially, not terribly. And I was just wondering whether or not it's some sort of a seasonal dynamic. I think we saw something like that in the first quarter last year as well.

Or is this just a reflection of higher interest rates and there's a little bit more kind of rate chasing?
S. Biff Bowman - Northern Trust Corp.: As you rightly pointed out, it's largely flat sequentially. There was some rundown, very modest rundown in non-interest bearing deposits in the U.S. that was partially offset by growth in some foreign office time deposit growth that we've seen. But in general, if you look at our non-interest bearing deposits in particular, they've held around the $25.5 billion to $26 billion range fairly consistently.

How that reacts to ever increasing rates will be important to watch and it is possible that some of that could start to move into interest bearing. I would say, generally, the flattish balance sheet that we've seen reflects growth particularly in Europe where we've seen actually the foreign office time balance grow, I think, about 6% year-over-year.

Operator: We will go next to Glenn Schorr with Evercore ISI. S. Biff Bowman - Northern Trust Corp.: Hi, Glenn.

Glenn Schorr -

Evercore ISI: Hi. Thanks very much. Hello. You mentioned all the good double-digit growth across the board. In such an environment, do you think the expense to trust fee ratio would be better? How much of it do you think was impacted by some of this quarter's extracurricular expenses related to comp and all that? And do you have a pro forma number on what it would have been?
S.

Biff Bowman - Northern Trust Corp.: Yeah. So, the first item I think that's important to think about in there is the compensation item that we walked you through into the script. That is just a change in vesting and an acceleration, if you will, of the expense into the first quarter. If you were to back that out, our expense growth rate which would have also been offset by the Northern Trust Open not being in this quarter. If you net those two out, the expense to fee ratio probably would have come down to around the 1.08, 1.09 levels, there's other moving parts in there, so it was better.

I would like to think that the growth rate, excluding the two items I mentioned, would have been about 6.3% expense growth rate versus the 8% as reported, which would have produced 1.75 points of operating leverage in the quarter. And that's probably a better way to think about that. There are other puts and takes in the quarter, but I think if you think about 1.75 to 2 points of operating leverage is probably a better way to think about what was truly in the quarter. Glenn Schorr -

Evercore ISI: Perfect. Exactly what I'm looking for.

And then just a follow-up question to the NIM discussion. Why – I get the lower deposit betas on the retail Wealth Management side? Why do you think institutional betas are low now and should we expect to have a significant ramp on future hikes, I mean, don't clients want that?
S. Biff Bowman - Northern Trust Corp.: Yeah. I won't speculate on why they haven't moved at this point. That's a behavior of our clients that we've seen.

In the case for, I think, the custody banks in general, there's still meaningful portions of that that are operational in nature and I think viewed as such by our clients. And so I think they have a certain level of stickiness to them. Those that are probably truly excess, I think we do feel that as rates continue to move up, we will see that concern, if you will, around rate advancement moving forward. So I mean, they'll be interested in those rates on excess deposits. I don't know where that trigger point is.

We're already experiencing clients who are seeing this now as we get closer to the 1% environment really make decisions between balance sheet and off balance sheet opportunities for what I will deem to be their excess cash. But meaningful portions of that, for us, really are operationally driven. Glenn Schorr -

Evercore ISI: I understand. Thank you very much.

Operator: We'll take our next question from Brennan Hawken with UBS.

S. Biff Bowman - Northern Trust Corp.: Hi, Brennan. Brennan Hawken - UBS

Securities LLC: Hi. Good morning. Hey.

How are you doing? Biff, just wanted to walk through a little bit of this comp color that you gave on the script, which is definitely appreciated. So it seems like what you're saying is, most of what happened here was the 2017 grants, right, and so you're changing – you're accelerating the expense. Half of the expense is going to be done for 2017 here versus previous 15% to 20%. So does that mean that we take about 30% of that $30 million dollar uplift? So really, if we think about how much this might impact next year, we still have the same uplift, because you'll be still expensing. You will just have a lesser amortization from 2017.

And so net, instead of going up $30 million next year, it'd be more like $9 million higher? Is that right or am I missing something?
S. Biff Bowman - Northern Trust Corp.: So your thinking is right. The way you described it is absolutely right. We pulled forward the expensing to be about 50% this year. Assuming we do another grant in 2018 under the same terms, which is something we will decide at that point in time, but assuming we do, you will have the acceleration of the grants in 2018, plus some residual from grants in 2015 in previous years in there.

So you're right to assume, this year would have the highest percentage. It will be on a declining basis in each of those years, but it will still be – there will be some seasonal expense associated with this change in vesting. What I want to be clear on the call is, this change in vesting fundamentally isn't changing the overall expense amount associated with LTI other than in the past for retirement-eligible employees if they left, they could have had some forfeitures. That was a relatively small number relative to the size of the overall grant. So the total isn't different.

It's just that it's going to be seasonal and accelerated into the first quarter over the next four years, while we have a four-year vesting on our restricted stock. And the reason we did this, Brennan, just so everyone understands is it was for competitive positioning with our employees. We were in a minority of large financial institutions that did not continue to vest equity upon retirement. We do not continue to vest upon leaving for other reasons, but we do upon retirement now. Brennan Hawken - UBS

Securities LLC: Okay.

Thanks for walking through that. I think I get it at this point. So the next question that I would have would be on the AUC and AUM front. You said that on a sequential quarter basis, FX was a small uplift, so that's I think nice to see that switch to a tailwind, but – and that new business was positive, too. Is it possible to give us some specificity around how much came from FX on a sequential quarter basis, how much came from FX tailwind versus new business? Just so we can understand some of those components?
Mark Bette - Northern

Trust Corporation: On a sequential basis, Brennan?
Brennan Hawken - UBS

Securities LLC: Please.

Mark Bette - Northern

Trust Corporation: So the currency impact would have been less than 1% on a sequential basis for the AUC. And really the market and the client flows were the main driver, a little bit more on the market than the client flows, but not by a whole lot. S. Biff Bowman - Northern Trust Corp.: And, Brennan, on a year-over-year basis, of the 8% growth in fees, a little more than half was organic if we look at it that way, so if we strip out all of the things. So very healthy organic growth rates in AUC on a year-over-year.

Operator: We'll go to Brian Bedell for our next question with Deutsche Bank. Brian Bedell - Deutsche Bank Securities, Inc.: Great. Thank you very much. S. Biff Bowman - Northern Trust Corp.: Hey, Brian.

Brian Bedell - Deutsche Bank Securities, Inc.: Hi. Maybe just – one more on the balance sheet, if you can talk a little bit about the loan repricing dynamic. You actually had a very good quarter there. Should we – in terms of how those loans are repriced and moving through core, should we expect a similar type of repricing dynamic in the second quarter based on the March hike? And then if you can just comment on your view on deposit beta within the Wealth Management unit, if you think that will be a little more elastic?
S. Biff Bowman - Northern Trust Corp.: Let me take the second part of your question first, which is around the deposit betas.

I would highlight for you that we are very much a follower in our liability pricing on that front. Our clients in the Wealth side generally – excuse me, our competition in that isn't always traditional regional banks, for instance, for our Wealth Management clients. So our ability to sort of lag the market a little bit as we think about our deposit beta pricing there has historically held true. That being said, we do need to remain competitive. Our clients have choices and they're savvy investors, so they look at that.

But the reality is that we're not funding an asset book, a loan book, as aggressively as some of the regional banks need to fund their balance sheet. So, we're very much aware of the markets, but not generally leading in terms of deposit beta there. So if the market continues to have relatively low betas, I believe that we will follow suit. I don't – what we do have interestingly from our Wealth clients is, the opportunity to think about moving their assets from balance sheet to our funds. And as you know, we have a large cash fund complex, so we have the ability to capture those assets as they move between balance sheet and off-balance sheet opportunities.

Do you want to talk about the loan side? Sure. Mark Bette - Northern

Trust Corporation: Yeah. On the loan side, Brian, about 75% of our loan balances reprice within one year and much of that would be linked to one month LIBOR. The one thing I would say about the – when you look at the sequential growth and the loan yield, we saw about a 22 basis points sequential increase. There was a small amount of that that was relating to client overdraft that get recorded within loan balances.

When we look at the core loan yield, we saw about an 18 basis points sequential increase when you strip out the impact from the overdrafts. So, hopefully that helps. But the loans do generally reprice 75% within one year. And like I said, the best measure to look at it would probably be one month LIBOR there. Brian Bedell - Deutsche Bank Securities, Inc.: And so in that repricing dynamic then, looking back, I guess, you had more leverage to essentially the December 2015 Fed hike within that one year pricing dynamic in the first quarter than the recent December hike?
S.

Biff Bowman - Northern Trust Corp.: Yeah. So, we did – we have a bit more leverage to the first hike, yes. Brian Bedell - Deutsche Bank Securities, Inc.: Got it. And then just lastly on expenses, on the expense to trust fee ratio, how should we think about? If we do get several more hikes over the next year and you generate, obviously, a lot more NIR, how should we think about your management of that expense to trust fee ratio, because obviously you'd have a much bigger denominator on the NIR side that would allow you theoretically to invest more in the business? Should we think of that as sort of stabilizing or even increasing the expense to trust fee ratio if that happen?
S. Biff Bowman - Northern Trust Corp.: No.

So we remain focused on improving that expense to fee ratio in periods of time when we get strong net interest income revenue or if we're constrained by the interest rate environment. In fact, I would state that in periods of time when we get the net interest income benefit that we're seeing now, we still need to remain vigilant on the controllable expenses and the fee growth, and continue to create fee leverage. What is partially true is if we've got strong net interest income revenue flowing through, that may allow us to invest some of that in our businesses, but we're still committed to improving that expense to fee ratio regardless of the benefits that we see coming through the net interest line on a regular basis. If the net interest income were to constrict in some ways, then it's even more important to drive more leverage through the expense to fees in that environment. But by any measure, we're going to continue to try to improve that expense to fee ratio even with market rate tailwinds.

Brian Bedell - Deutsche Bank Securities, Inc.: Okay, great. That's great color. Thank you.

Operator: We'll go next to Ken Usdin with Jefferies. S.

Biff Bowman - Northern Trust Corp.: Hi. Ken. Ken Usdin -

Jefferies LLC: Hi, thanks. Hey, Biff, how are you doing? Just one more level set on the expense side then. So, just understanding the starting point and the incremental vesting, can you just help us understand the natural new first to second quarter seasonality and the netting of what comes down versus what goes up in terms of the high point versus starting to get the merit in, in the second quarter? I've assumed that's a net down, but can you help us understand the type of magnitude of what comes out of that comp and benefit side?
S.

Biff Bowman - Northern Trust Corp.: Sure. So, in the first quarter, you would have seen traditionally somewhere with the new – with the new vesting, you will see approximately 35% to 40% vesting of our LTI in Q1 with another, let's call it, 12% to 15% in Q2. That gets us somewhere to that 50% we would say we'd see in the first two quarters. That will then start to ramp down in Qs three and four in terms of an overall vesting. So, Ken, if in the past we had $100 million worth of LTI, if you look at the previous year in our SEC filings of LTI, we would have historically expensed 25%, 25%, 25%, 25% over four years.

Now, you will see roughly $50 million in the first two quarters and then $50 million delivered over the next three – 50% or $50 million of $100 million over the next remaining quarters over four years. So that dynamic will take place so that the rate of expensing will go down meaningfully then over the third quarter of 2017 through the end of the vesting life of the equity grant. In terms of the salary in the second quarter, as we said in the script, that our merit raise will take effect April 1, that will be an $8 million increase, but you will see the compensation associated with LTI come down meaningfully in the second quarter versus the $30 million that we quoted earlier on the call. Mark Bette - Northern

Trust Corporation: And, Ken, so we had $30 million in retirement-eligible expense in the first quarter. And we did mention in the script because of the performance shares, they are expensed over the service period for retirement eligible.

So not all of the performance share expense retirement-eligible hit in the first quarter, and we did mention that there would be $8 million of that that would hit the second quarter. So, you have $30 million of retirement-eligible expense this quarter, $8 million in the second quarter and that in addition to that color, we mentioned the $8 million for the base pay adjustments will be a sequential increase as well. Ken Usdin -

Jefferies LLC: Yeah. And then also, do we have typically lower payroll, just payroll in the second as well? Not merits, but just FICA and whatnot. Mark Bette - Northern

Trust Corporation: Right, yeah, usually ...

S. Biff Bowman - Northern Trust Corp.: Yeah, it starts to run down. Mark Bette - Northern

Trust Corporation: Right. S. Biff Bowman - Northern Trust Corp.: Yes.

It does start to run down during the course of the year. Ken Usdin -

Jefferies LLC: Okay. So that's still a net decline, and then it declines in the second half and then we see how big next year's grant is. But if we presume the grants are about the same size, then this is more just about timing and reallocation across more into the first half than the second?
S. Biff Bowman - Northern Trust Corp.: Yes.

Ken Usdin -

Jefferies LLC: Okay. And then – so just for the follow-up, it looks so – in a really good revenue quarter, and you exited out in response to Glenn's question, 6% year-over-year just absolute expense growth with some help from FX translation is still a sizeable expense growth number. I know you're still adding staff, I know you had the resolution plan stuff. But can you just talk about just that from an absolute growth perspective still being a pretty high rate of growth? And is there anything underneath the surface that we can see on the – looking forward to show that we're either getting towards a peak or eclipse of some of that spend?
S. Biff Bowman - Northern Trust Corp.: Yeah.

So let me walk through a couple of line items I think to help explain that what I'd call core expense growth rate. One of the meaningful lines that you see is the depreciation and amortization or the equipment software line was up 11% year-over-year. Some of that was a reflection of the capital investments that we've made to try to create some of the efficiencies that we help drive that run rate down that you described. And we've always said that that is the one of the line items that would outgrow our fees while we utilize that capital spend. We saw that come through in this quarter and particularly it ramped up.

Part of that was driven by – we've had some substantial capital projects that we effectively turned on for depreciation reasons. They were sitting in work in process and we turned on those in the fourth quarter – early first quarter work in process that was turned on. So that increased the depreciation rate. That's one of those. We don't anticipate is that you would see that kind of sequential ramp going forward in that line item.

So in equipment software, if you look at our location expense, if you will, or a rent expense, that had noise in it. We had a $3 million, $3.5 million decline year-over-year. And so while it looks like a double-digit increase, really it's getting closer to our run rate. And that's up about $1 million really if you strip out the year-over-year comparator. So, we continue to try to drive on those expenses.

We do need some expense growth to fuel 8% fee growth. So it's a story of trying to create the maximum amount of leverage that we can, Ken, but there is a certain amount of expense growth to fuel 8% growth in our top line as we did this quarter. And so we're trying to maximize that delta or that operating leverage versus fees and continue to try to drive net expense to fee ratio down further. Mark Bette - Northern

Trust Corporation: And, Ken, you had commented on the current fee favorability on expenses and that was just under 1.5 points, but on the flipside, the trust fee growth was about 1.5 points less than what it would have been because of currency, so a drag on both side. Revenue was down a little bit more than a percentage because of that.

So, the currency kind of net out, but adjusting for those, we would have had higher expense, but we also would have the higher fee growth and the higher revenue growth. Ken Usdin -

Jefferies LLC: Thanks a lot. Understood. Mark Bette - Northern

Trust Corporation: Okay.

Operator: We will go now to Jim Mitchell with Buckingham Research.

S. Biff Bowman - Northern Trust Corp.: Hey. Good morning, Jim. James Mitchell - The Buckingham Research Group, Inc.: Hey. I'm just scratching my head a little bit on foreign deposit rates, why they went up about from 11 basis points to 17 bps.

Is that sort of hedging activity? Why would foreign deposit rates be increased – rates paid be increasing?
Mark Bette - Northern

Trust Corporation: So, this is Mark, within the non-U.S. dollar deposits – I'm sorry, the non-U.S. office deposits, there is a significant amount of those. In fact, most of those are U.S. dollar-based.

So even though they're non-U.S. office deposits, and there is a mix of about – two-thirds of it, I believe, is the mix that's U.S. dollar. So, we did see higher rates in the U.S. So that's part of function of the deposit beta, but there is a mix there where the other non-U.S.

currencies would not have seen the movements that U.S. did. James Mitchell - The Buckingham Research Group, Inc.: Right. Okay. That makes sense.

S. Biff Bowman - Northern Trust Corp.: Correct. James Mitchell - The Buckingham Research Group, Inc.: And just maybe on just the deposit behavior, understanding uncertainty, but what have you seen over the last month since the March rate hike? Have you seen betas or flows change dramatically since the March hike?
S. Biff Bowman - Northern Trust Corp.: We have not seen them since the March hike, the behaviors meaningfully change. James Mitchell - The Buckingham Research Group, Inc.: Okay.

That's helpful. All right. Thank you very much.

Operator: We will take our next question from Marty Mosby with Vining Sparks. S.

Biff Bowman - Northern Trust Corp.: Hi, Marty. Marty Mosby - Vining Sparks

IBG LP: Hey. Biff, I wanted to ask you about capital a little bit. You're going into the CCAR now. Last year, you were looking at the growth as a reason to deploy less capital, because you were really still wanting to kind of have that flexibility, especially with the balance sheet growth you were seeing last year.

As we've now kind of moved forward here, things have stabilized a little bit more. Do you feel like you could go back to what you were kind of deploying earlier in a sense of how much earnings you give back each year?
S. Biff Bowman - Northern Trust Corp.: So I would say that we're entering – or we entered the capital planning cycle from a position of strength. So as you rightly point out, our risk-weighted asset growth has slowed meaningfully. And that's a result of discipline inside the firm and looking at quite frankly loan-by-loan what the return on equity is for use of the balance sheet, particularly when we think about credit.

And what that's created is that those uses of balance sheet capital aren't returning the types of returns we talked to you about, the 10% to 15%, that we're judicious with the use of that capital. That then leaves us with decisions to make about how we then utilize that capital and maximize for our shareholders, and that's either internal usage. You saw us with the acquisition that we entered into an agreement with UBS. There's inorganic uses that we could do. And then there's obviously the return of that capital through the dividends and share buybacks that we would have asked for in our capital plan.

And I would just say that we certainly entered that cycle from a position of strength. As we said on previous calls, last year's total payout ratio as calculated by the Street was not a new trend. It was just simply meant to be what our 2016 ask was. And our 2017 ask will be appropriate for where we see our capital needs going forward. So I think that's all the color I can give on that right now, but based on our CET1 ratio, we're in a position of very strong capital.

Marty Mosby - Vining Sparks

IBG LP: Good answer to a sensitive question. Now, I got an even more sensitive question to ask you. It's been a subject that we've talked about a lot, which is eventually when we get to some normalization of rates. We're not there yet. But restructuring the balance sheet to protect against what Northern Trust experienced in the last downturn.

Are you still thinking about at least rebalancing down the road as we think that rates are kind of getting to a point where there's as much chance that they go down as up? So just wanted to see if you were still thinking in that direction. S. Biff Bowman - Northern Trust Corp.: Well, we meet every month and consider from our ALCO committee the directions and the nature of the balance sheet and the structure of the balance sheet, and have active dialogues with input from our Chief Investment Officer, our Chief Economic Research, Carl Tannenbaum and others. And we have a view on the construct of the balance sheet. That has generally been guided, as you know, and kind of observed, by a conservative shorter duration construct to the portfolio.

We will weigh all the macro factors and come up with an asset allocation and an ALCO policy that we think does our best to generate returns for our shareholders, while protecting the strength of the balance sheet. And we've all worked here long enough to know that the strength of the balance sheet here is one of our most important items to protect. Marty Mosby - Vining Sparks

IBG LP: It is and conservative in the past was meant to avoid any mark-to-market adjustments. But when you have the strength in capital and the balance sheet you have, and we saw how much of the pain that came from short and – rates going down as far as they did, there is a little bit of riskiness left in that position that we had and Northern Trust had as they went into the last cycle. And maybe rethinking that as you go through the next cycle could be productive.

So thanks.

Operator: We'll take our last questions from Betsy Graseck with Morgan Stanley. Elizabeth Lynn Graseck - Morgan Stanley & Co. LLC: Hi, good morning. Hi.

Two quick questions. One just – one more on expenses, and it just has to do with the outing in the third quarter that you moved. We talked a lot about getting the expenses right between 1Q and 2Q. Could you just remind us roughly what the dollar spend is incremental that we should make sure we have in our 3Q numbers for the golf outing?
S. Biff Bowman - Northern Trust Corp.: Yeah.

So one way to look at that would be, if you look at the other operating expense in the quarter, it's a reasonable proxy for what it would cost, but I want to add a little bit of color here. The tournament in the third quarter is taking place in New York. It is a FedEx Cup event. It is the first round of the FedEx Cup event. And we can't, even for disclosure reasons, not only for ourselves but because of our contracts with the PGA Tour and others, give exact dollar amounts.

But you might imagine that a tournament in New York that's a FedEx Cup event would come at a premium and the entertainment around it would come at a premium. So if you look at that variance and put whatever multiplier you are used to putting on for something in New York versus other parts of the world, I would probably go ahead and do that. Sorry, we can't give the exact numbers on the cost. Elizabeth Lynn Graseck - Morgan Stanley & Co. LLC: Okay.

Mark Bette - Northern

Trust Corporation: And in our 10-Q, you break out the other operating expense. You'll see the business promotion line is down about $11 million on a year-over-year basis. And we would say that very much the key driver on that was the Northern Trust Open. Elizabeth Lynn Graseck - Morgan Stanley & Co. LLC: Got it.

Mark Bette - Northern

Trust Corporation: So that gives you some idea. Not specifically, but some idea. S. Biff Bowman - Northern Trust Corp.: Put whatever premium you think you should put on that for a tournament that is generally higher TV viewership in the New York marketplace. So we'll leave it at that.

Elizabeth Lynn Graseck - Morgan Stanley & Co. LLC: Got it. Okay. Last question is on the Luxembourg acquisition you mentioned during the prepared remarks. I just wanted to understand how you plan to leverage that.

I know that you went up quite significantly in ranking with the acquisition in Luxembourg, but I would expect that you could leverage that position into your existing customer set a little bit more. Maybe you can give us some color around that. S. Biff Bowman - Northern Trust Corp.: Yeah. That's absolutely the strategic intent.

We were subscale in Luxembourg, which is one of the two or three largest fund markets in the world. We'll be able to – for our large global clients who have fund complexes in the Lux marketplace, this will give us an opportunity to more holistically service their needs. We've been able to service a lot of these large asset managers in the UK or in Ireland. And now, we'll have the capability to service their Luxembourg funds as well. It also gives us access to the Swiss marketplace, which I believe will be one of the two, I think, the largest fund administrator in Switzerland when we move in there.

So, we're really excited about the strategic fit and opportunities to leverage existing relationships where we really didn't have a scalable service in Luxembourg and now we will. Elizabeth Lynn Graseck - Morgan Stanley & Co. LLC: Okay. Thank you. S.

Biff Bowman - Northern Trust Corp.: Thank you.

Operator: That concludes today's question-and-answer session and brings to an end today's conference. Thank you for your participation. You may now disconnect. S.

Biff Bowman - Northern Trust Corp.: Thank you.