Core Viewpoint - Northern Trust has benefited from buoyant financial markets, leading to solid fee income growth and margin expansion, resulting in a year-to-date return of approximately 25% for its shares [1]. Group 1: Financial Performance - The strong performance in financial markets has acted as a tailwind for Northern Trust, supporting its fee income growth [1]. - The company has experienced margin expansion, which is a positive indicator of its financial health [1]. Group 2: Investment Perspective - The company is viewed favorably for its ability to sustainably post high-quality earnings, appealing to long-term, buy-and-hold investors [1].

Financial Data and Key Metrics Changes - Earnings per share (EPS) for the third quarter was $0.94, excluding merger-related charges, representing a 68% increase year-over-year [3][4] - Net income, excluding merger and restructuring expenses, was $90 million for the quarter [4][11] - The efficiency ratio improved by 10 percentage points year-over-year to 55% due to expense synergies from the Premier acquisition [4][12] - Net interest margin increased to 3.53%, up 58 basis points year-over-year [15][12] - Total assets reached $27.5 billion, a 49% increase year-over-year [12] Business Line Data and Key Metrics Changes - Fee income grew by 52% year-over-year, driven by organic growth across various businesses, particularly wealth management [3][12] - Total portfolio loans increased by 52% year-over-year, including $5.9 billion from the Premier acquisition and $594 million from organic growth [12][14] - Non-interest income for the quarter was $44.9 million, a 51.5% increase year-over-year [16] Market Data and Key Metrics Changes - Total deposits grew organically by more than $570 million year-over-year, reaching $21.3 billion [7][14] - Commercial real estate payoffs totaled $235 million in the third quarter, impacting loan growth [7][13] - The commercial loan pipeline stood at approximately $1.5 billion, with over 40% tied to new markets [7][8] Company Strategy and Development Direction - The company is focused on operational excellence to support long-term profitable growth and enhance shareholder value [3][4] - Plans to optimize the financial center network include closing 27 financial centers and opening new locations in Tennessee and Ohio [9][10] - The strategy emphasizes organic growth through loan production offices (LPOs) and expanding into new markets [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about mid-single-digit loan growth for 2025 despite headwinds from commercial real estate payoffs [8][20] - The company anticipates a rebound in net interest margin during the fourth quarter due to improved funding costs and loan growth [20] - Management highlighted strong customer satisfaction scores and successful integration of the Premier acquisition [6][3] Other Important Information - The company raised $230 million in Series B preferred stock to redeem Series A preferred stock and support general corporate purposes [18][19] - The effective tax rate is expected to be around 19.5% for the year [22] Q&A Session Summary Question: Loan growth and commercial real estate paydowns - Management noted strong loan production with $2.3 billion in new production this year, and expects mid-single-digit loan growth for the remainder of the year despite paydowns [25][27] Question: Margin expectations - Management confirmed expectations for 3 to 5 basis points of quarterly margin expansion, with no significant disruptions anticipated for 2026 [28][29] Question: Impact of branch closures on expenses - Management indicated that branch closures will provide a tailwind to expenses, allowing for potential reinvestment in technology and personnel [38][40] Question: Healthcare team growth potential - The healthcare team has closed about $250 million in loans and could potentially achieve $300 million to $500 million in loans annually [49] Question: Deposit competition - Management stated that deposit competition remains similar to previous quarters, with expectations for relief on deposit pricing due to commercial real estate payoffs [74] Question: Capital management and buyback plans - Management is focused on capital build and indicated that buybacks are less likely in the near term [61][66]

Financial Data and Key Metrics Changes - Total income increased compared to the previous quarter, with commercial net interest income (NII) supported by the repricing of customer deposits and continued volume growth, which almost fully compensated for the impact of the lower ECB deposit facility rate and a stronger euro [1][2] - Fee income grew significantly by 12% year on year, with expectations for continued growth [1][2] - Total risk costs were €299 million this quarter, or 17 basis points of average customer lending, which is below the through-the-cycle average [12] Business Line Data and Key Metrics Changes - Net core lending rose by €15.4 billion, driven by record growth in retail lending, which increased by over €11 billion [2][3] - Wholesale Banking also saw growth in net core lending, primarily driven by working capital solutions and short-term trade finance [3] - Fee growth in wholesale banking reached a quarterly record of $360 million, driven by strong fee income in lending, daily banking, and trade finance [7] Market Data and Key Metrics Changes - The retail banking business recorded strong commercial momentum, with core deposits increasing by more than €6 billion this quarter [3] - The demand for long-term corporate loans remained subdued due to ongoing economic uncertainty, particularly in Germany [3][22] Company Strategy and Development Direction - The company aims to allocate more capital towards the more profitable retail banking business, with a target of 55% retail and 45% wholesale by 2027 [5][6] - The strategy includes diversifying services offered to existing customers and targeting specific customer segments such as Gen Z and affluent clients [46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in generating continued commercial growth despite geopolitical and macroeconomic turmoil, with expectations for commercial NII to grow in the second half of the year [16] - The company expects to deliver a healthy return on equity of around 12.5% in 2025, supported by improved profitability outlook [17] Other Important Information - The interim dividend for 2025 is set at $0.35 per share, continuing the company's track record of providing attractive returns to shareholders [15] - The company is investing in digitalization and operational efficiencies to manage costs effectively, with a focus on enhancing customer acquisition and tech platform scaling [11] Q&A Session Summary Question: FX sensitivity and revenue/cost mix disclosure - Management acknowledged the impact of an 8% reduction in the U.S. dollar against the euro, which had a €37 million negative impact on NII and an overall impact of around $60 million to $70 million on total revenue [25][26] Question: Corporate loan demand and future outlook - Management noted that while there was some growth in the wholesale bank, long-term loan demand remains muted, and it is too early to predict changes in this trend [22][23] Question: Commercial NII trends and guidance - Management confirmed that the underlying trends in commercial NII are satisfactory, with expectations for a 2.5% to 5% quarter-on-quarter improvement in Q4 [30][38] Question: Deposit strategy and M&A focus - Management indicated that there were no major deposit campaigns in Q2, and the focus is on diversifying services and targeting specific customer segments rather than pursuing M&A aggressively [43][46] Question: Liability margin guidance - Management stated that the liability margin is expected to stabilize around 100 basis points, with the end of the German campaign contributing to this stability [109][111] Question: ROE guidance and factors influencing it - Management explained that the improved ROE outlook is driven by a combination of higher fee intensity and operating within the lower end of cost guidance [119]

Financial Data and Key Metrics Changes - The company reported net income of $133 million or $0.22 per diluted share, compared to $106 million and $0.18 in the previous quarter, reflecting solid momentum in net interest income and non-interest income [4] - Adjusted net income was $134 million or $0.23 per share, up from $106 million on both reported and adjusted basis a quarter ago [4] - Profitability ratios, including return on average assets and return on tangible shareholders' equity, continue to trend higher and are on track to meet full year guidance [5] Business Line Data and Key Metrics Changes - Core deposit growth was $600 million, driven by growth in commercial non-interest bearing deposits and promotional CD offerings [14] - Non-interest income has grown at a 12% annual rate since 2017, more than double the pace of peers, with a significant improvement in the composition of that income [9][20] - C&I loan growth was particularly strong, with over $700 million growth, primarily from fund finance and healthcare verticals [50] Market Data and Key Metrics Changes - The company has added over 105,000 new deposit accounts, contributing to approximately 8% core deposit growth [6] - The geographic footprint combined with specialty verticals like healthcare and fund finance has provided flexibility and scale [8] - The CRE concentration ratio has declined to 349% from 474% at the end of 2023, surpassing year-end targets ahead of schedule [17] Company Strategy and Development Direction - The company is focused on deposit growth and funding transformation, with a deliberate investment in talent, technology, and targeted market penetration [6][10] - The strategic imperatives aim to transform Valley into a more diversified, efficient, and valuable institution, with a focus on capital markets, treasury management, and tax credit advisory offerings [10] - The company recognizes a disconnect between the quality of its franchise and the valuation of its shares, believing that continued execution of its strategy will close that gap over time [11] Management's Comments on Operating Environment and Future Outlook - Management anticipates continued net interest margin expansion driven by asset repricing and stable deposit pricing [27][28] - The outlook for loan growth is approximately 3% for the year, with net interest income growth estimates refined to a range of 8% to 10% [13] - Management expressed confidence in the credit outlook, expecting further normalization and a decline in provision and charge-offs throughout the year [22] Other Important Information - The company has grown cumulative tangible book value with dividends over 105% during the CEO's tenure, approximately 15% greater than the peer median [11] - The company remains extremely well capitalized relative to its risk profile, with ample flexibility to support strategic objectives [23] Q&A Session Summary Question: Can you speak to the ability to maintain deposit pricing given competitive nature and growth outlook? - Management anticipates margin will increase as the year progresses, driven by asset repricing and stability on the deposit side [27][28] Question: Can you provide comments about new non-accrual formation in the quarter? - The increase in delinquencies was driven by three credits, with two already cleared and the remaining expected to be resolved soon [51][52] Question: How is the competitive landscape in the technology and software sector affecting the company? - The company has built infrastructure to leverage its position in the technology sector, particularly through the acquisition of a team with strong market connections [39][40] Question: What are the expectations for loan growth in 2026? - While specific guidance for 2026 has not been provided, management anticipates low single-digit growth in CRE and overall loan growth could be closer to 5% [77]