Good morning. I'm Mike O'Grady, and it is my pleasure to welcome you to Northern Trust's 2026 Annual Meeting of Stockholders, which I hereby call to order. Thank you for joining us virtually this morning. We greatly appreciate your participation. Before we begin, a few housekeeping matters. In accordance with the corporation's bylaws, I will act as chairman of the meeting. The agenda and rules of conduct for this meeting are available in the web portal through which you access the meeting. Please note that only validated stockholders may submit questions through the web portal. Questions about items on the agenda should be submitted at or before the time they are considered at the meeting. Following adjournment of the formal meeting, a Q&A session will be provided to address appropriate general questions regarding the corporation.
Joining me for today's meeting are the following: Nikki Gersch, our corporate secretary, who will act as secretary of the meeting. The members of our board of directors and management group. Diane Kunz and Kelly Schmidt, who are representatives of KPMG LLP, our independent registered public accounting firm. During the Q&A period later this morning, these representatives of KPMG will be available to respond to appropriate questions. The record date for this meeting was February 23, 2026. Nikki has informed me that notice of the meeting and proxy materials were mailed on or about March 11, 2026 to stockholders of record on the record date. Jennifer Childe has been appointed as Inspector of Election for this meeting.
She has inspected the proxies and reported that a majority of the total shares of common stock outstanding on the record date and entitled to vote are represented by proxies at this meeting. Accordingly, a quorum is present, and the meeting is duly constituted. The polls are now open for voting. All stockholders entitled to vote at this meeting have the ability to do so through the web portal. If you are a stockholder entitled to vote and have not yet done so, or if you want to change your previously cast vote, please do so via the web portal. Please remember that if you have already voted by proxy, it is not necessary to vote again.
After voting has been completed on all matters on the agenda, we will close the polls, and the Inspector of Election will provide her preliminary report.
I now turn to the four items of business on the agenda, all of which are described in detail in the proxy statement. The first item of business is the election of 13 directors. The board of directors recommends a vote for all of the director nominees. I would now like to introduce our current directors, each of whom is participating in the meeting this morning and, along with me, is a nominee for election. Susan Crown, Chandra Dhandapani, Dean Harrison, Jay Henderson, Marcy Klevorn, Bobby Mehta, Bob Moritz, Rick Petrino, Martin Slark, David H.B. Smith Jr., Don Thompson, and Charles Tribbett. Biographical information with respect to each of the nominees can be found in our proxy statement. I also would like to introduce Lord Charles Powell, who serves as an advisory director to the board.
Lord Powell is a non-party member of the House of Lords and former private secretary and advisor on foreign affairs and defense to British Prime Ministers Margaret Thatcher and John Major. Lord Powel l has served as an Advisory Director since 2015. I would like to thank our directors for their service and commitment to the success of Northern Trust. Finally, I would like to thank the officers who currently serve with me on Northern Trust's management group, each of whom is participating in the meeting this morning. I could not ask for a more dedicated leadership team and am grateful for their tireless efforts day in and day out to create long-term value for our stakeholders.
Turning back to today's agenda, the second item of business is approval by an advisory vote of the named executive officer compensation disclosed in the proxy statement. This item is commonly referred to as a say-on-pay proposal. The board of directors recommends a vote for this proposal. The third item of business is the approval of the Northern Trust Corporation 2026 employee stock purchase plan. The board of directors recommends a vote for this proposal. The fourth item of business is the ratification of the appointment of KPMG LLP as the corporation's independent registered public accounting firm for 2026. The corporation's audit committee made the appointment, and the board of directors recommends ratification of the appointment.
Please submit any questions or comments regarding any of the proposals through the web portal if you have not already done so. We will now proceed to vote on the items of business on this morning's agenda. Any stockholder who has not yet voted or wishes to change his or her vote may do so through the web portal.
If you have already voted, you do not need to vote at this meeting. Since there is no further business on the agenda, the voting portion of our meeting is over. The polls are now closed. I have requested a report on the voting results from the Inspector of Election, who has informed me that all nominees have been duly elected and all proposals have passed. This concludes the formal portion of the meeting. Now I will provide a brief report on the company's business. Please refer to our safe harbor statement regarding forward-looking statements on page two of the accompanying presentation. Despite another year of heightened macro and geopolitical uncertainty, Northern Trust delivered strong performance in 2025, demonstrating the resilience of our business model, the effectiveness of our One Northern Trust strategy, and the dedication of our employees.
For more than 135 years, our strength has been grounded in stability, disciplined execution, and a client-centric culture. These attributes continue to differentiate Northern Trust and position us well for the future. We enter 2026 with momentum, clarity of purpose, and confidence in our ability to execute across cycles. Our vision is to be the most trusted global financial partner for discerning individuals, families, and institutions by delivering human-led, AI-enhanced wealth solutions through the integration of innovation and integrity. Our One Northern Trust strategy underpins this vision and provides a roadmap for delivering consistently strong performance and long-term value for all stakeholders. More than a guiding philosophy, our strategy is a disciplined framework built on three integrated pillars, which work in concert to ensure we remain agile, accountable, and responsive to our clients and to a rapidly evolving landscape.
Our first pillar is optimized growth. We compete effectively in attractive sectors of the financial services industry through our three businesses, Wealth Management, Asset Servicing, and Asset Management. Our approach to growth is deliberately selective. We focus on clearly defined client segments, differentiated capabilities, and scalable solutions in markets where we see long-term leadership potential. In 2025, our disciplined strategy delivered improved organic growth for the second consecutive year, strengthened client relationships, and expanded market share across key areas. Our second pillar is strength and resiliency and risk management. Northern Trust's reputation for strength and stability is rooted in our exceptional risk management and robust controls. These are core to our culture and essential to preserving client trust.
Over the past few years, we've made significant investments to enhance cybersecurity and risk management and to drive modernization, innovation, and operational efficiency.
We believe these efforts not only future-proof our company, but also improve reliability, speed, and quality for our clients. Looking ahead, we remain dedicated to integrating these advancements into our daily operations and continuing to strengthen them to meet the evolving risk, regulatory, and client expectations of a rapidly changing environment. Our third pillar, drive financial performance, reflects how productivity, pricing, and expense discipline are translating into stronger financial outcomes. In 2025, we undertook a comprehensive transformation to enhance and scale our operations. By standardizing critical processes, increasing spans of control, and reducing organizational layers, we're improving efficiency while strengthening accountability. AI is playing an increasingly important role in this transformation. All employees now have access to AI tools, including our proprietary NT Byron platform, which is being used across sales, marketing analytics, programming, and fraud prevention, among other areas.
Tasks that once required countless manual hours, such as document ingestion and reconciliation, are now being managed seamlessly and efficiently through digitization and process optimization. These advancements have not only accelerated workflows but also improved accuracy and scalability, empowering our teams to focus on higher-value activities. These efforts are also delivering meaningful efficiency gains, contributing to total productivity savings that represented more than 4% of our expense base last year, excluding notables. Over the past two years, successful execution of our One Northern Trust strategy has reduced our expense-to-trust-fee ratio, enhanced pre-tax margins, generated positive operating leverage, and delivered double-digit EPS growth, all excluding notables. Turning to the underlying performance of our three business units. Within Wealth Management, we aspire to be the premier private bank for high-net-worth individuals and families in the U.S.
In 2025, we strengthened the franchise through targeted initiatives to enhance client-facing capabilities, accelerate client acquisition, and expand investment solutions. Our global family office business generated record new business in 2025, with strong domestic and international momentum. Building on this success, we launched Family Office Solutions to serve ultra-high-net-worth families seeking institutional-quality capabilities without the complexity of managing their own office. Family Office Solutions exceeded expectations in its first year and is now being scaled across domestic markets. As a reflection of the value proposition we provide to clients, we were awarded Best Private Bank in the U.S. for the 13th time in the past 17 years by the Financial Times.
As we turn the page to 2026, our Wealth Management business is well-positioned for its next phase of growth, supported by continued investment in talent, alternative investments, and digital and AI-enabled capabilities to enhance the client experience.
Turning to our Asset Servicing business, where we are focused on being the leading specialized Asset Servicer for institutional investors around the world. In 2025, we continued to focus on profitable, scalable growth through leveraging core product areas rather than bespoke solutions, and expanding our penetration with upmarket asset owner clients. We secured more than 100 new mandates last year from pensions, sovereigns, endowments, and other leading institutions, reflecting our ability to win complex multiproduct opportunities by combining scale, technology, and deep domain expertise. Central to this momentum is our industry-leading cloud-based front-office solutions platform, which now supports more than $1 trillion in client assets and continues to differentiate Northern Trust as a trusted partner for clients navigating increasingly complex portfolios and operating models.
Global capital markets also delivered strong results in 2025, highlighted by healthy FX trading and brokerage activity, which helped drive a 350 basis points increase in the Asset Servicing pre-tax margin. Asset Servicing enters 2026 with solid tailwinds and a clear path to accelerate profitable growth. Finally, turning to our Asset Management business, or NTAM, where our ambition is to be the most revered integrated asset manager. NTAM delivers investment solutions globally for clients in our other businesses and is one of the top 20 largest asset managers in the world. Capabilities span active and index strategies across equities, fixed income, cash management, multi-asset, and alternatives. Product launches doubled year-over-year in 2025, including 11 new ETFs, with some featuring first-of-their-kind distributing ladder structures. Overall, these launches broadened our offerings and increased our separately managed accounts fixed income suite.
Liquidity remained strong for the third consecutive year, with assets approaching nearly $340 billion. Both our alternatives and tax-advantaged equity capabilities delivered record organic growth, further reinforcing our leadership in the industry. Looking forward, our focus remains on delivering differentiated, in-demand investment solutions at scale in close collaboration with our Wealth Management and institutional partners. Turning to our 2025 financial performance. Reported revenue of $8.1 billion was down 2% compared to the prior year, as 2024 revenue included a gain of $866 million on the monetization of a portion of our Visa shares, among other unusual items. Excluding notable items in both periods, revenue increased by 7%, fueled by 6% trust fee growth and record net interest income of $2.4 billion, which was up 11%. These results benefited from favorable underlying markets, improved organic growth, and favorable currency movements.
Expenses were up 2% in 2025, or up 5% excluding notables. Our pre-tax operating margin was 28.9%, down from 2024's elevated levels, but reflecting solid improvement over 2022 and 2023 results. Similarly, reported earnings per share were $8.74, down 11% year-over-year, but up 17% excluding notables. Importantly, excluding notable items in both periods, we generated positive trust fee and total operating leverage for the second consecutive year, both of which remain critical financial objectives for us. Our return on average common equity was 14.4%, squarely within our target range. Our capital levels remain very strong, well above regulatory requirements. Reflecting our commitment to creating shareholder value, we returned a record $1.9 billion to shareholders, reflecting a payout ratio of 112%. This included a record $1.3 billion of share repurchases, which reduced shares outstanding by 5%.
Based on confidence in our strategy, operating model, and execution momentum, earlier this year, we raised two of our three medium-term financial targets, reinforcing our conviction in the durability of our financial model through the cycle. We increased our pre-tax margin target to 33% and raised our return on equity target to the mid-teens. Our expense-to-trust-fee ratio target remains unchanged at 105%-110%. Giving back to the communities where we live and work has been central to Northern Trust since our founding. In 2025, we supported nearly 2,000 charitable organizations and mobilized employees around the globe to support causes close to their hearts through more than 120,000 hrs of volunteerism. In closing, 2025 was a year of purposeful transformation and strong execution.
We delivered improved organic growth, strengthened financial performance, and reinforced our foundation of risk management and operational excellence. While our strategic imperatives will continue to evolve, our principles of service, expertise, and integrity remain constant and support our mission to be our clients' most trusted financial partner. My appreciation goes out to our clients for their enduring trust and partnership, our shareholders, whose confidence empowers our continued growth, and our employees, whose commitment and expertise drive our ongoing success. As we look ahead, our priorities are clear and our outlook is bright. We'll now have a brief Q&A period. As a reminder, representatives from KPMG also are available to answer appropriate questions. Please follow the instructions provided in the web portal to submit questions and remain mindful of the related guidelines provided in the rules of conduct.
At this time, we have two questions. The first one is, when are you going to offer a stock buyback for small shareholders?
Thank you, Jennifer. Share repurchases are one of several tools that can be used to manage capital and return excess capital to shareholders. When utilized, buybacks are normally executed in the open market, subject to market conditions, capital needs, and regulatory requirements. Northern Trust does not offer common stock share repurchases targeted to specific shareholders. Rather, as a public company, shareholders of all sizes can participate in market transactions of Northern Trust stock. As I mentioned earlier, in 2025, we declared cash dividends totaling $600 million to common stockholders and repurchased over 11 million shares of common stock. Through the combination of both the dividends and share repurchases, the corporation returned $1.9 billion in capital to common stockholders in 2025, reflecting our commitment to delivering shareholder value.
The second question is, can you please display the shareholder list during the annual meeting next year for investors that have a control number?
Thanks for the question, and we'll take that under consideration. As you know, Delaware law provides that the list shall be open to examination of any stockholder for any purpose germane to the meeting for a period of 10 days ending on the day before the meeting date. We do that by making it available during ordinary business hours at the principal place of business for the company.
We have a third question. Northern Trust receives an official score of 100 on the Human Rights Campaign Foundation Corporate Equality Index. While participation in activist rating systems is itself concerning to shareholders, this score also indicates alignment with controversial medical interventions, including hormone regimens and gender transition surgery. What risk calculus does Northern Trust employ in determining its charitable partnerships as well as its policy posture on these issues?
Certainly, this is a topic that's received a fair amount of attention, and as I mentioned in my presentation, Northern Trust looks to invest in the communities where we work and live. As a part of that, we certainly do diligence on the organizations that we're aligned with and that we contribute to ensure that they align with our corporate standards and policies, and values. Okay. Seeing no further questions, we will now bring this meeting to a close. Thank you for attending the 2026 annual meeting of stockholders. This now concludes the meeting. Thank you for joining, and have a pleasant day.