Good day everyone and welcome to the Northern Trust Corporation’s Fourth Quarter 2015 Earnings Conference Call. Today’s call is being recorded. At this time, I’d like to turn the call over to the Director of Investor Relations, Bev Fleming for opening remarks and introductions. Please go ahead Bev.

Thank you, Zack, good morning everyone and welcome to Northern Trust Corporation’s Fourth Quarter 2015 earnings conference call. Joining me on our call this morning are Biff Bowman, our Chief Financial Officer; Jane Karpinski, our Controller; and Kelly Mullen from our Investor Relations team. For those of you who did not receive our fourth quarter earnings press release and financial trends report by e-mail this morning, they are both available on our Web site at northerntrust.com. Also on our web site, you will find our quarterly earnings review presentation, which we will use to guide today’s conference call. This January 20th call is being webcast live on northerntrust.com. The only authorized rebroadcast of this call is a replay that will be available on our Web site through February 18th. 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 conference call may include forward looking statements, which are Northern Trust’s current estimates and expectations of future events or future results. Actual results of course could differ materially from those expressed or implied by these statements because the realization of those results is subject to many risks and uncertainties that are difficult to predict. I urge you to read our 2014 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.

Good morning everyone. Let me join Bev in welcoming you to Northern Trust's Fourth Quarter 2015 Earnings Conference Call. Today I was review our results for the quarter and the year after which Bev and I would be happy to answer your questions. Starting on page two of our quarterly earnings review presentation this morning we reported fourth quarter net income of $239 million. Earnings per share were $0.99 and our return on common equity was 11.1%. A number of environmental factors impact our businesses as well as our client. Let me review how some of those factors unfolded during the quarter. Equity markets were lower year over year but higher sequentially. In US market the S&P 500 was down 1% year-over-year and up 6.5% sequentially. In international markets the MSCI EAFE index was down about 3% year-over-year and up 4.4% sequentially with the year-over-year decline being driven by the impact of a stronger US dollar. Recall too that some of our fees are based on lagged market values and the third quarter 2015 markets were generally lower. In bond markets the Barclays US Aggregate Index was lower both year over year and sequentially. Currency volatility as measured by the G7 index was 11% higher than the fourth quarter of last year. In the sequential comparison currency volatility was 4% lower. Foreign exchange market volumes as measured by two of the Interbank brokers were down over 20% year over year and down about 13% sequentially. You'll recall that currency volatility and client activity influenced our foreign exchange trading income. Currency rates influenced the translation of non-US currencies to the US dollar and therefore impact client assets and certain revenues and expenses. The dollar was stronger year over year which tempered custody asset growth and related fee growth but benefited expense…

Thank you, [Operator Instructions] we'll take our first question from Adam Beatty with Bank of America, please go ahead.

Thank you and good morning, just wanted to get some color on AUM particularly on the wealth management side, maybe you could provide some details around what you're seeing in terms of equity and fixed income and also maybe a comment on trend within the quarter whether December was significantly worse or pretty much run rate, thank you.

Thank you, when we look at our wealth management AUM what we have continued to see is movement from equity and other higher yielding products into lower basis point products, over the cycle that's been true for the whole year. I think that trend continued at about the same pace in the fourth quarter, so as clients look at their portfolios the movement from equity into passive solutions and or lower basis point yielding products continued throughout the quarter.

Great thank you, and just to follow up on the money market fee waivers, short rates came up significantly kind of mid-quarter, I was wondering either what the run rate looked like at the end of the quarter or you know whether you would expect continuing diminishing of the waivers, thanks.

We saw the gross yields in many of our funds improved with the short rate movement. I would position that as it was later in the quarter, not the midpoint in the quarter but tenders [ph] that occur more in December and then throughout December. So we certainly saw the waivers abate meaningfully throughout the month of December and the run rate of waivers the demunition that you talked about really occurred the week or two before the Fed announcement and then post that we began to see the growth yields in the funds move up meaningfully. So the waiver rate was very back loaded in the quarter.

That's helpful, much appreciate.

And we'll take our next question from Luke Montgomery with Bernstein Research, please go ahead.

Hey good morning, a quick question on the NIM expansion. Looks like the yield on Fed deposits seems to have benefited from the Fed hike, so similarly to the money market question, am I right to think that if you run rate that through the full quarter the dynamic would be a tailwind for Q1? And then also it seems like the biggest driver this quarter was this spike in the GSE book, the yields there. You cited that the premium amortization so maybe you could remind me if that's a one off benefit that goes away next quarter and what the NIM was excluding that benefit.

Yes, so, if you, let me address the Fed first, your analysis is correct, we benefited obviously from just a brief two weeks of that and you can project the forward benefit of that going forward in your models. In terms of the securities portfolio improvement if you will in the spread that was driven by the premium amortization that you described was a meaningful component of that during the period. It has some seasonality but it's more impacted by factors such as movement in the housing market and or rates in any given period, so we do typically see a slowdown in housing activity in the fourth quarter we generally have better amortization in that period if you will but as we mentioned in the script in the first part of the prepared remarks, it was slightly larger than last year and more than slightly it was about 13 million difference at quarter over quarter.

Okay, great, thanks. And then a question on what you’re seeing in credit quality, it looks like market pricing recession here, you release reserves for the fourth quarter in a row and net charge offset are near historical lows, I wondered if underneath that you're seeing any signs of stress at all and I think maybe that's getting in a leading way period in loan balances tick down for the first time in over two years, I know you called out at the loan sales, but I'm wondering if you’re getting a little tighter about extending credit, giving your outlook on the environment or is that just reading too much into it

You might be reading a little too much into it, some of that it was the $550 million of loans and leases that ran off during the period. So, that's a portion of it, in terms of our own credit quality, it's important to remember this our mix in our credit portfolio as we have slowed or we have negative growth if you will in residential real estate, the growth is largely coming from areas that are investment accounts secured or large C&I type loans where the credit quality remains a very robust and very strong right now. So, the mix in our portfolio has driven improvement in the overall credit quality. I think we've referenced the 9% sequential improvement in non-performing assets and I think on a year-over-year basis the non-performing assets were closer to a 19% better. So, we have experienced strength in our own credit portfolio.

Okay, thanks very much.

And we'll go next to Marty Mosby with Vining Sparks. Please go ahead.

I wanted to ask you a question, again if you look at the rate sensitive pieces that were favorable this quarter, you back out the 13 million from the prepayment fees, out of 8 million net impact on NII about 7 million on waved fees, taking that that's about a total of 15 million, but yet only really a month out of a quarter, you can move that up to be about $45 million in total once you get through the full run rate, just want to make sure I was looking at that right.

If you have that, you also have to look at volume and consider volume in there but your math is accurate.

Okay and then the other question was when you look at the balance sheet inflows of deposits especially non-interest bearing deposits were really still very strong, so your cash position continued to expand and securities came down little bit, you've been trying to do the other which is put more securities on utilizing. Given what you're seeing in deposit characteristics, do you feel comfortable you can still expand securities faster, so that you can bring some of that cash position down going forward through 2016?

Yes, the growth in those deposits can often be lumpy, we get significantly high deposits and from hedge fund and/or endowments or other large institutional type deposits and we have particularly near period ends we will typically place that at the Fed. Over a long period of time the migration and looking at our ability to move some of those into the securities portfolio remains something than our asset liability committee is focused on and we do believe, we can do that in any given short time period we may have the need to put those with the Fed, so that it helps with LCR as well.

Thanks.

And we'll go next to Glenn Schorr with Evercore ISI. Please go ahead.

So, I want to be careful and not overly focus on one quarter because the full year revenue expense relationship was good and as you pointed out the expense to trustee relationship continued to improve, but if you look at the course specifically, I think some people are worried that there is a little bit of reversal trend. Some of the expense items you pointed out are higher and the ratio gave back a little bit. So I'm just looking for a higher level comments of, how much of that is just one quarter and the fourth quarter specifically, and I know the market is breaking down but as a general comment should we continue to look for that relationship to improve? Because it feels like some of the expenses are elevating.

Thanks. Let me -- we still think that the expense-to-fees ratio it's an important parameter of our progress towards sustainably improving profitability and returns and we remain committed to improving that ratio, but as you noted in the short-term and on a quarterly progress there can be a variety of factors. I would say Glenn as you pointed out on annualized basis, we've improved that since 2011 every year and we were like I said remain committed to that improvement. Also there is a numerator and denominator in the equation, it’s in that ratio as you know in a difficult macro environment certainly makes the space that which we can improved that challenging, particularly if you look across a very short timeframe like a quarter. Look, we're focused on the areas that we can drive that and that’s new business on the top-line and fee growth on the top-line and the success continues there very strong new business results for the firm. On the expense side, on the denominator if you will or actually in the numerator, on the expense side, we've got several initiatives that we continue to work on, our location strategy, procurement optimization, technology optimization, those are still in force and still moving at pace. You see some of that investment in our equipment software line, in the depreciation we hope has long-term benefit for us. So a little longer answer, but it's the question I know that matters there and we are committed to continuing to drive that ratio down. And as fee growth slows, we have to recalibrate our business to address that on the expense side.

Yeah understood and appreciate the one quarter versus one year. The only related follow up I have is, when you look at the expense items that you lined up between employee related stuff outside services equipment, on a gross dollar basis are those the best estimates we have for starting point for the year? Is there any seasonal component that we should be thinking about?

We have some seasonal components in the first quarter around other expense which is business promotion around the Northern Trust Open and there is some modest compensation, first quarter impacts from when we set our compensation awards. The Northern Trust Open beginning the business promotion being probably the most seasonal of those expenses. The rest are relatively balanced and that is a good launch point.

And we'll go to next to Brennan Hawken with UBS. Please go ahead.

I guess just following up on Glenn's question there on the expense front. Can you -- if you continue to see these difficult market conditions, downward pressure in the equity markets and the like, can you talk about how you think about your expense flexibility, how you're approaching your budgeting process this year and obviously you've got some pressure from regulatory -- on the regulatory front as you've laid out in some of those line items, so how do you balance all of that?

Sure. Parts of our business as you know are on the expense side are actually also tied to market level, so we have a natural movement either up or down based on market level, so there is a component in our expense base that moves relative to those market, so it's not all fixed cost if you will into our expense base. As we think about the year going forward, we certainly run multiple iterations of macro factors impacting our business, such as markets up X or down X, rates hikes coming or not coming and we run multiple iterations. We try very hard to run our business without macro factors being major inputs to the success of the firm's business going forward, which means we are not overly reliant on either rates or markets in any given period. And so that's how we build our process and we hope that not being overly reliant allows us to be flexible in our ability to react to large macro events, particularly in your question on the expense side.

And then I guess that -- is it paraphrasing it correctly, Biff, here to say that you feel good about your front expense flexibility and you feel like you've embedded some in your budgeting process, am I taking too much of a lead [ph]?

I would phrase it this way, I would say that part of our expense base is variable based on market levels. Part is we have access to maneuver that in this environment and part is quite frankly investment that needs to continue to support the growth on the new business side, so its parts of all three of your question are true in that. We don’t have complete flexibility on the expense side, it's not at 100% variable expense base.

Thanks for the color there. And then one question just maybe if it's possible for you to give us a little more color on the change of methodology for the provision and how much of that credit improvisation we should assume is one-time. Does this mean that there would be less credits running through that line on a go forward basis due to the change in methodology? And I think you mentioned there was a regulatory issue driving it or feedback from regulators, if you can give a little more color there, that'd be great?

Yeah, I'll start with the last thing, I mean it was not the regulators driving in, it was our use of the models and methodologies we use in CCAR to help guide us to help build this model to drive our loan loss reserve policy. So it was not something regular drove us to do. I will give you a little bit of color. So at December 31 that was the first time that we applied the new methodology and it produced the $18.5 million release that you talked about. Your characterization of, we’ve now set that baseline and that’s establish and in any given quarter based on the credit quality and the factors that we look at from the model perspective. We will see provision or release based on that modeled approach going forward. But it certainly was one quarter where we employed the methodology and got the number two at least a level that allows us to move forward based on how the actual credit quality and other factors are moving in the future, so we rebased if you will.

Got it. Thanks a lot.

And we’ll go next to Ken Usdin with Jefferies. Please go ahead.

Can I ask a question just about the interchange between NII and fees? Specifically, I see you had another outstanding growth quarter for the size of the balance sheet. And I’m wondering, can you talk us through the inflows that you’re continuing to see into deposits. Is that new client money, is it flight to safety or is it money coming out of your existing clients and maybe showing up in NII, but not so much showing up in fees. Just trying to get to interplay between money flows across the franchise and is it a net positive or is it more of a hedge against the total revenue?

I would describe that it has primarily driven by growth in our organic business underlying. So these clients may come to us and become a global fund services client and use our firm for fee based services. And then place an additional billion dollar deposit with us after that relationship has strengthen overtime. So it adds if you will to the deposit base and I would say that they’re linked. There are some deposits that are probably a flight to safety, but I would not say that’s the majority of what we seen in our growth, most are existing clients in other fee based lines in the firm. And in fact, what I would add is generally, we have not taken on large deposits that we talked about, if they don’t have broader relationships, just because the return dynamic is less attractive.

And then my follow-up, if you could just split the businesses for a second and just talk about then any changes and either the pipelines or client activity that you’re see given the sentiment change that we’ve witness now for going on a couple of months in the marketplace and if you can disaggregate that into CNS [ph] to CNIS component and wealth management?

I’ll start with CNIS, the pipeline remains very strong and when I say that it’s really globally strong strength in Asia, particularly in Australia and other parts of Asia. In Europe very strong demand and pipeline there. And then in the U.S., a balance pipeline, but between our global fund services business, servicing asset managers and institutional investors as we would call them, think pensions and foundations, endowments, et cetera. Very balance set of existing wins and pipelines in both of those businesses. On the wealth side, we talked about our investment in certain markets in Texas and Houston specifically in New York. I can say that both of those experienced meaningful outsized growth versus the rest of the wealth management franchise. So that investment in their pipeline in those regions is very important. We made a key hire that we announced in New York just this week or the 11th, we announce. So I would say both pipelines are very, very solid and we feel good about the pipeline.

And we’ll go next to Brian Bedell with Deutsche Bank. Please go ahead.

Biff could you comment a little bit more about the passive investing I think we’re seeing maybe across consider [ph] it wealth management franchise. How are some of the recommendations to clients changing and I guess are you recommending passive strategies, overactive and then on the new target dates funds are those going to be invested in passive products, no-interest passive products or active. And I guess just the risk posture of the wealth management client basis and how you’re recommending allocations in this market?

So we have a very robust IPC committee and investment policy committee made up professionals from our asset management expertise and Katie Nixon on the wealth management side, looks that I diversified investment portfolio for our wealth clients, which does make tactical asset allocations during any given period, but it is largely well diversified portfolio across all array of investments. So when you ask the question about passive versus active, it's really a question around diversified versus commitments to large components. So, when you can get large-cap exposure through active or passive, but it's about being diversified across that portfolio mix that's important. That's a very independent committee that helps to make that decision for our clients and they do make some tactical decisions if they are concerned about region or an asset class, but they generally stick to what I would say is a very well diversified global portfolio mix for the clients.

Is that shifting more toward passive only because in a legacy basis, it may have been more active or not necessarily?

So, it may not but as the price point difference between the passive and actives, and then the performance comparison has changed for those clients to get S&P 500 exposure or large-cap exposure the cost point for them could be quite different and they continue to evaluate that cost point. So they do evaluate that and there has been some migration from say active equity to passive equity, we've focused first and formal on the diversification of the portfolio and then whether that's delivered actively or passively is something that we talk with our clients in our policy.

Okay and then maybe just shifting to the balance sheet, there was pretty strong growth in the short-term borrowing in the fourth quarter, is that at the startup [ph] or is that in line with the commentary that you give around deposit growth and then maybe if you can talk about how you're thinking about deposit data moving into the new year with the higher short-term rates in December and then also on the loan book, if you can remind us what portion of your loans are floating rate what kind of lags to I think it's LIBOR for those part that we'll see, just trying to get a sense of that, how that might move in one [multiple speakers]?

Try to give all three of those

Brian, let me just take couple of the factual questions that you asked here. In terms of the loan portfolio about 70% floating, the reminder fixed. So that's one of the things that you're interesting about and then in terms of pricing, I mean it depends on the loan category you're talking about. So, clearly for example our commercial loans would be generally LIBOR based, our private client loans also LIBOR based, although a few could be time and then of course the real estate portfolios would be based off of treasury. So, it depends on the category, you're referring to

And then just on the commentary on your sense on the deposit [indiscernible]?

Yes, we're watching the market like many. Like others, we did not pass the 25 basis points on to the clients on that but we continue to watch the market and I think we'll have a much better idea how that unfold over time.

Okay, fair enough. Thank you.

And we'll go next to Alex Blostein with Goldman Sachs. Please go ahead.

Thanks. Good afternoon, guys. Couple of quick questions. I guess, just sticking with NII and the balance sheet discussion. I guess, seasonally we shouldn't expect that there was an elevated level of activity towards quarter ends, so like quantify, [indiscernible] balance is a decent starting point for next year and then again the organic growth that we've seen in a past, is the reasonable way to think about it?

Yes.

Okay, easy enough. And my other question was around the securities lending business and you mentioned the drop off in collateral balances happened towards the end of the quarter, again just want to understand whether or not it was something episodic or what drove the decline. And I guess, as a follow up to that given the fact that we've seen obviously pick up in market volatility in a more challenging backdrop quarter-to-date, just wondering if you’ve seen any change in demand spreads or something that could help the securities lending business as we look out into 2016? Thanks.

So, talking about the balances and the difference between the average balance sheet in the end. That was a borrower or a demand driven phenomenon and I'm -- I will presume that was -- those institutions looking at their own balance sheets at year-end as they did what they needed to, to make their balance sheets and ratios look appropriate at year-end. It benefited us in the sense that if you look at our standardized ratio we had a 40 basis point improvement, much of that was reduction from a standardized approach as I said, much of that was a risk weighted approach -- risk weighted asset improvement driven by lower securities lending balances at quarter end. In terms of we're not seeing so far into 2016, more of the same trend that you saw late in Q4 for us, nothing than I'd called out at this point.

And we'll go next to Betsy Graseck with Morgan Stanley. Please go ahead.

So that was just a one off on client event for the securities lending book?

It was not a one off client, it was just demand in general, I'm guessing that our clients were working on their own balance sheets at quarter end and it was really a quarter end phenomenon.

Okay. And then just a follow up question on the reserve methodology changes, just want to make sure I understand what drove the decision to do this and is it as indicated that the kind of reset the bars so from here changes in credit outlook Q-on-Q-on-Q is going to drive changes in reserving or in net charge-offs. Any legacy reserve benefit or reserve release has been coming through this quarter with reserve methodology change?

I’ll take the second part and answer it. Beth, that is accurate, it is -- the new methodology and approach has been approved and utilized in this quarter and is I think put in at the run-rate and then quarter-on-quarter credit quality will become variable. In terms of the, why now. We've worked to build out the model over the course of the year and we wanted to leverage the work we had done with CCAR to use a much more quantitatively oriented model to do this and we also work with our accountants and others to make sure that the reserve is as quantified as possible. This allowed us to get to that level of a much more quantified approach and that was the trigger.

And do you think that there is any impact in the volatility of provisioning going forward where there is model change? Is there anything on that net nature that we should be thinking about?

No, it will just depend on overall the credit quality of the portfolio, so I'm hesitant to say yes or no. If the credit trends continue then it should be well reserved and if there's something in the portfolio then it will move. I think it is reasonable unless there is meaningful improvement or degradation in the portfolio that large releases are unlikely to happen.

And we'll go next to Mike Mayo with CLSA. Please go ahead.

Well, Biff I guess your timing for $500 million of government bonds was pretty good, you probably had a gain on those purchases in the fourth quarter. So I'm not sure if we'll gains on those down the road, but my question relates to the funding of some of the purchases, I know you were asked before, I missed the answer. The short-term borrowings were up 1.7 billion. Now, I'm just trying to understand the balance sheet dynamics, just a little bit more, I mean earning assets grew at an annualized pace of 20% and you have short-term borrowings up quite a bit and why just, a lot of questions have touched on this, but I just want to make sure I have the right answer.

So part of that was federal home loan bank borrowing that we took advantage of which was an attractive, a very attractive borrowing rate, so that was a meaningful portion of the increase in short-term borrowings if you will that you described there. And in terms of the timing of the purchase, again, Mike we have an asset liability committee that has a view on where we should take investment decisions and we thought maybe right after the rate hike it maybe opportunistic and I don’t know if that's right in the long-term, but it was -- it's an attractive trade through today.

And the federal home loan bank borrowing rate, could you elaborate on that, what is that? If you're allowed to disclose the rate or -- I mean how often does this come up? Is this something you never seen before or you see it every so often?

We've had access to that borrowing in the past, I don’t know if we can disclose the borrowing rates, I'm unsure. I will say that it is very low, very low effective borrowing rate.

So a part of the quarter was simply advantageous situation, where you took advantage of a very low borrowing rate at a good time when you thought it might make sense to load up on some more government security, so is that correct?

No -- yeah -- not completely that, I think part of it was we liked -- the federal home loan borrowings is attractive from an LCR perspective as well, so that borrowing allowed us to also strengthen some liquidity measures and then we were able to take advantage of some of that borrowing and create some yield.

Last follow up, so you had 8% growth in NII’s linked quarter which is pretty impressive, should we consider that to be sticky? Should we consider the potential for our growth in NII like that again in upcoming quarters?

I think that there was obviously the amortization benefits in there that has seasonality and deals with macro factors like rates and/or housing starts, so that tailwind is unlikely to maintain itself during the entire course of the year. It tends to be worse in the second and third quarters, so --.

So should we see that come down a little bit from the first quarter level?

I'm hesitant to say one way or the other, I don’t know what the premium amortization in mortgage backed securities will do in the period, so --.

And we'll go next to Jeffrey Elliot with Autonomous. Please go ahead.

I wanted to come back to the securities lending collateral move because I kind of heard at one point you were saying this was a quarter end phenomenon and then I also thought I heard you say something about the behavior that you'd seen at the end of the fourth quarter how it continued into the first. So I guess could you clarify the drop in like lending collateral is that a kind of something that happened around December 31st, it probably comes back, is not going to impact the P&L or has there been some sort of change in customer behavior that maybe last a bit longer?

So the collateral levels and the loan levels were quarter end phenomena, my comment was about -- the question was around spread, has we seen any dramatic changes in the spread and or demand in the first part of this year and I would say the demand and the collateral levels are closer to the averages we've talked about in the previous period. Not a decline and then movement from the quarter end.

That's clear and then just to follow up, again on the institutional side, the AUM you know I guess if you take out the cycle ending it's not as if it’s declined a lot but given equity markets are up quite a lot, we might have expected a bit more growth. So you know the reasons why that business isn't grow that -- AUM balance isn’t growing as strongly as you might have expected given what equity markets did in the fourth quarter customers kind of going elsewhere.

Yes, so one meaningful factor in that would be our sovereign wealth fund exposure that I mentioned in my prepared remarks but we, we do report in P&I magazine, a year ago I think we reported sovereign wealth balances of 70 billion in that. At year end those had migrated down just too sovereign wealth funds of 50 billion, approximately 50 billion. So we're seeing some of the pressures, if you will, on those regional economies and the need for some of those large sovereign wealth funds to use those funds, if you will, in their local environment. So that phenomenon has helped drive down the AUM, what I will say is about 95% of those are passive management mandates and generally have very low basis point fees, so while the AUM decline is meaningful the fee impact is more muted.

And we'll go next to Brian Kleinhanzl with KBW, please go ahead.

Yes, thanks, so quick question on the deposit betas, I know you said it’s too early to get a sense of what deposits are doing in the quarter, but can you have any balancing or managing the balance sheet for lower for longer, why if deposit betas are low shouldn't we expect the securities portfolio to increase?

Well if that is correct we may see that happen, but we're still observing the market and I think it's digesting the first round of these and remember we have a variety of large clients where the deposit betas may be more bespoke, more uniquely crafted in the contract so it's not a direct corollary that that is going to happen. And then the other thing is just from a liquidity standpoint, maintaining our liquidity.

And then just a follow up on the seasonality and the expenses, so not in 2016 but in 2017 when you changed your title sponsorship, will that seasonality move from the first quarter into the third or fourth quarter and kind of what is the magnitude of that impact on a dollar basis?

Yes, it will move to the third quarter in 2017, and we don't disclose the magnitude of that, but you'll be able to see in the expense run rate after the third quarter 2017.

And we'll take our last question from Gerard Cassidy with RBC, please go ahead.

Thank you, good afternoon Biff. Question for you and this isn’t really directed at your loan portfolio because I don't think you have anything to really worry about with this fall in the price of oil but you can give some color, what are you guys looking into how this decline in the price of oil may affect maybe some of your wealth management customers or are there any counter-party risks that you're trying to figure out that you may have that would be impacted by the decline in the price of oil.

Sure, so let me start at a high level and I just briefly -- if you look at the decline in the price of oil many of the sovereign wealth funds that we serve are in oil producing nations and so that decline does have an impact on our business. They have lower asset levels and we certainly have seen flows out of those sovereign wealth funds as they address their issues. So that's on the institutional side, I know you also asked on the wealth side. And certainly in certain regions, we've talked about Houston is that, there can be secondary or tertiary impacts from low oil prices, so there are people providing services to companies and others that have been impacted, generally our clients given the wealth nature of our clients our liquid well invested and well diversified away from those single asset wealth creation in vehicles and we generally see modest impact to them from this type of environment, our direct exposure as you rightly said is largely too large multinational diversified firms with strong investment grade credits and so from an overall credit quality at this point while we certainly monitor it and look at it from a risk perspective, it has not had a significant impact on the overall credit quality of the deferral [ph].

Great and then the second question obviously you guys have focused on driving your return on equity higher within your range of 10% to 15%. We all know the industry is -- had to carry a considerable more amount of equity which is permanently reduced return on the equity. If you shift over to your ROA, that obviously is not impacted by equity and those ROA numbers are still quite a bit below where you used to be prior to the crises, is it primarily just that net interest margin and spread that's affecting the ROA would you say or is there other factors as well?

So, it is the two items that you described. I would say, it can be a bit of the earning asset mix, it can be some of the impacts of netted low net interest income, margins, et cetera that are driving that fundamentally. I will say that our business is much more liability driven and so the focus is really on turning those liabilities are fees essentially those liabilities are client placing deposits with us that we then turn into asset and so our focus is on return of equity and it just so happens that the ability to turn those liabilities into higher earning assets has been muted in the last several years under these low environments, but I think the combination of those has probably driven the ROA down, what we focus really on the ROE as a primary profitably measure.

Correct, which is the one to -- I agree with you. Great, thank you for your input.

And there are no further questions at this time.

We thank you all for joining us today. We look forward to speaking with you when we report first quarter earnings in the middle of April which will occur on the same day as our annual meeting. Thank you very much.

Thank you.