Northern Trust Corp (NTRS) Q4 2020 Earnings Call Transcript

Northern Trust Corp (NASDAQ: NTRS) Q4 2020 earnings call dated Jan. 21, 2021.

 

Corporate Participants:

Mark Bette — Senior Vice President, Director of Investor Relations

Michael G. O’Grady — Chairman, President and Chief Executive Officer

Jason J. Tyler — Executive Vice President and Chief Financial Officer

Analysts:

Glenn Schorr — Evercore ISI — Analyst

Alex Blostein — Goldman Sachs — Analyst

Brennan Hawken — UBS — Analyst

Steven Chubak — Wolfe Research — Analyst

Mike Mayo — Wells Fargo — Analyst

Betsy Graseck — Morgan Stanley — Analyst

Mike Carrier — Bank of America — Analyst

Brian Bedell — Deutsche Bank — Analyst

Jim Mitchell — Seaport Global Securities — Analyst

Brian Kleinhanzl — KBW — Analyst

Vivek Juneja — JPMorgan — Analyst

Gerard — — Analyst

Presentation:

 

Operator

Good day and welcome to the Northern Trust Fourth Quarter 2020 Earnings Conference Call. Today’s conference is being recorded.

At this time, I would like to turn the conference over to Mark Bette, Director of Investor Relations. Please go ahead.

Mark Bette — Senior Vice President, Director of Investor Relations

Thank you. Madison. Good morning everyone and welcome to Northern Trust Corporation’s fourth quarter 2020 earnings conference call. Joining me on our call this morning are Mike O’Grady, our Chairman and CEO; Jason Tyler, our Chief Financial Officer; Lauren Allnutt, our Controller; and Kelly Lernihan from our Investor Relations team.

Our fourth quarter earnings press release and financial trends report are both available on our website at northerntrust.com. Also on our website, you will find our quarterly earnings review presentation which we will use to guide today’s conference call. This January 21st 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 February 18. 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 2019 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 Mike O’Grady.

Michael G. O’Grady — Chairman, President and Chief Executive Officer

Thank you, Mark. Let me join and welcome you to our fourth quarter 2020 earnings call. Amidst the ongoing public health crisis, I hope you and your families are healthy and well. In Northern Trust, we continue to operate in what we call resiliency mode, which means we’re focused on providing our clients continuity of service, while over 90% of our employees worldwide are working remotely. The challenging the transition across each of our businesses has been effective. Throughout 2020, despite the environment, we’ve executed on initiatives to continue to drive organic growth within each of our businesses. One of our key strategic imperatives.

Within Wealth Management, we are steadfast in our commitment to serving the world’s most affluent families and family offices in a holistic and integrated manner across the array of financial needs, including planning, investments, fiduciary, banking and other capabilities. During the turbulent year, our goals based approach allowed our clients to adhere to their investment strategies and avoid selling into the downturn and realize the recovery within — within risk assets. We’ve adjusted our sales approach to execute our growth strategy during the pandemic through our digital marketing efforts, including Navigate the Now campaign. Through the launch of the Northern Trust Institute, we will continue to leverage our 130 years of experience and depth of subject matter expertise for our clients’ needs.

Our Asset Management business has seen considerable market share gains during 2020 within our liquidity products. Our Northern Institutional Government Select Fund was named the Top Performing Government Institutional Fund of 2020. Beyond our liquidity funds, our Quant Active equity mutual funds in factor based ETFs performed well relative to their peers. We also continue to see growth in ESG mandates with assets under management of over $125 billion at year end, up 30% from the prior year.

Our asset servicing business which did see a deferral and implementation activity earlier in the year, finished 2020 with strong growth. Recent notable public wins, highlight our success globally and across products and include Pershing Square Capital Management, Emerald Technology Ventures, Sands Capital Management, Strategic Global Advisors, First Sentier Investors and Westwood Holdings Group. We continue to invest and expand our asset servicing solutions in areas such as our front office solutions as well as outsourced trading and foreign exchange execution. As we move forward in the current and persistent low interest rate environment, we’ve accelerated our focus on driving greater efficiencies as well as continuing to grow organically in a scalable and profitable manner.

Finally, I want to express my sincere appreciation for our staff, whose commitment, expertise and professionalism throughout these extraordinary times has been exceptional.

Now let me turn the call to Jason to review our financial results for the quarter.

Jason J. Tyler — Executive Vice President and Chief Financial Officer

Thank you, Mike. Let me join Mark and Mike in welcoming you to our fourth quarter 2020 earnings call. Let’s dive into the financial statements through the quarter starting on Page 2. This morning, we reported fourth quarter net income of $240.9 million. Earnings per share were $1.12 and our return on average common equity was 8.8%. The quarter’s results included the following three items. First, a $55 million severance charge in connection with the reduction in force. This charge relates to actions we’re taking to eliminate approximately 500 positions globally, representing about 2.5% of our staff. This is in line with our ongoing efforts around productivity and efficiency and expected to result in annual run rate savings of approximately $50 million on a net basis.

Second, we recognized an $11.9 million occupancy related expense relating to an early lease exit arising from our workplace real estate strategy. And lastly, we recognized $26.8 million in tax expense related to the reversal of tax benefits previously recognized through earnings. As you can see on the bottom of Page 2, equity markets performed well during the quarter. We call that a significant portion of our trust fees are based on a quarter lag or month lag asset levels and both the S&P 500 and EAFE Local had strong sequential performance based on those calculations. It’s worth noting that on a year-over-year basis, the EAFE Local index remains negative, which creates an unfavorable impact for our global fees compared to the prior year. As shown on this page average one month and three-month LIBOR rate stabilized during the quarter, with only modest declines.

Let’s move to Page 3 and review the financial highlights for the fourth quarter. Year-over-year revenue was down 2% with non-interest income up 5% and net interest income down 20%. Expenses increased 7%. The provision for credit losses reflected a release of $2.5 million in the quarter compared to a release of $1 million in the prior-year. Net income was down 35%. In the sequential comparison revenue grew 3% with non-interest income and net interest income, both up 3%. Increase — expenses increased 5% and net income declined 18%. Return on average common equity was 8.8% for the quarter down from 14.8% a year ago and 10.5% in the prior quarter. Assets under custody and administration of $14.5 trillion grew 21% from a year ago and increased 11% on a sequential basis. Assets under custody of $11.3 trillion grew 22% from a year ago and increased 11% on a sequential basis. Assets under management were $1.4 trillion, up 14% from a year ago and up 7% on a sequential basis.

If we go to the results in greater detail, starting with revenue on Page 4. Fourth quarter revenue on a fully taxable equivalent basis was $1.5 billion, down 2% compared to last year and up 3% sequentially. Trust, investment and other servicing fees representing the largest component of our revenue totaled $1 billion and were up 3% from last year and 2% sequentially. Foreign exchange trading income was $69 million for the quarter, up 6% year-over-year and up 11% sequentially. The increase compared to a year ago is driven by higher volumes and higher volatility, while the sequential growth was primarily driven by higher volumes. Remaining components of non-interest income totaled $93 million in the quarter, up 32% compared to one year ago and up 2% sequentially. Within that, securities commissions and trading income increased 16% compared to a year ago and up 24% sequentially. Both the year-over-year and sequential growth were primarily driven by strong performance within our core brokerage business.

Other operating income increased 52% compared to the prior year and was down 7% sequentially. The increase compared to last year was primarily driven by $20.8 million charge in the prior year related to a decision to sell substantially all of the lease portfolio, partially offset by higher expense relating to Visa swap agreements. The sequential decline was primarily associated with lower income in the supplemental compensation plans which also resulted in a related decrease within other operating expense.

Net interest income, which I’ll discuss in more detail later was $345 million in the fourth quarter, down 20% from one year ago and up 3% sequentially.

Let’s look at the components of our trust and investment fees on Page 5. For our Corporate & Institutional Services business fees totaled $596 million in the fourth quarter and were up 5% year-over-year and up 2% sequentially. Custody and fund administration fees were $420 million and up 6% year-over-year and up 6% on a sequential basis. The year-over-year performance was primarily driven by new business and favorable currency translation, partially offset by unfavorable non-US markets. The sequential increase was primarily driven by new business, higher transaction volumes, favorable currency translation as well as favorable markets. Assets under custody and administration for C&IS clients were $13.7 trillion at quarter end, up 21% year-over-year and up 11% sequentially. Both the year-over-year and sequential increases were attributable to new business, favorable markets and favorable currency translation.

Investment Management fees in C&IS of $125 million in the fourth quarter were up 8% year-over-year and down 9% sequentially. Year-over-year growth was primarily driven by new business and favorable markets, partially offset by money market fee waivers. The sequential decline was primarily driven by higher money market fee waivers. Assets under management for C&IS clients were $1.1 billion, up 15% year-over-year and 6% sequentially. The growth from the prior year was driven by favorable — favorable markets, client flows and favorable currency translation. The sequential growth was driven by favorable markets and currency translation, partially offset by net outflows. Securities lending fees were $18 million in the quarter, down 22% year-over-year and down 11% sequentially. Both the year-over-year and sequential declines were driven by lower spreads. Average collateral levels were up 6% year-over-year and up 4% sequentially.

Moving to our Wealth Management business. Trust, Investment and other servicing fees were $304 — were $430 million in the fourth quarter and were up 1% compared to the prior year and up 3% sequentially. Both the year-over-year and sequential performance were primarily driven by favorable markets, partially offset by money market fund fee waivers. Assets under management for our Wealth Management clients were $348 billion at quarter end, up 11% year-over-year and up 9% sequentially. Both the year-over-year and sequential growth were driven by favorable markets and net flows.

Moving to Page 6. Net interest income was $345 million in the fourth quarter and was down 20% from the prior year. Earning assets averaged $131 billion in the quarter, up 22% versus the prior year. Average deposits were $115 billion and were up 29% versus the prior year. The net interest margin was 1.05% in the quarter and was down 54 basis points from the year ago. The net interest margin decreased primarily to lower interest rates as well as mix shift within the balance sheet. On a sequential quarter basis, net interest income was up 3%. Average earning assets increased 1% on a sequential basis, while average deposits were up 2%. The net interest margin increased 2 basis points sequentially, primarily due to balance sheet mix and lower costs, partially offset by lower asset yields. Net interest income also benefited in the quarter from approximately $5 million in non-recurring benefits relating to the FTE adjustment and interest recovery on non-accrual loans.

Turning to Page 7. Expenses were $1.2 billion in the fourth quarter and were 7% higher than the prior year and 5% higher sequentially. The current quarter included a $55 million severance charge related to a reduction in force and $11.9 million increase associated with an early lease exit arising from our workplace real estate strategy. Expense during the prior quarter included a $43.4 million charge related to a corporate action processing error. Excluding these items in each period, expenses were up 1% year-over-year and up 3% sequentially. Compensation expense totaled $525 million in the quarter and included $52.5 million in severance related charges. Excluding the charge, compensation was up 2% from both the year ago and sequentially. The year-over-year growth was primarily driven by higher salary expense due to staff growth, base pay adjustments and unfavorable currency translation, partially offset by lower incentives. The sequential growth was driven by salaries and higher incentive.

Employee benefits expense of $102 million is up 10% from one year ago and up 5% sequentially. The year-over-year increase was primarily related to higher pension expense. The sequential increase was driven primarily by higher medical costs. Outside services expense was $208 million in the quarter and included $2.5 million related to severance charges. Excluding the charge outside services expense was flat compared to the prior year and up 11% sequentially. The sequential increase was primarily due to higher technical services, legal and consulting services and third party advisory fees.

Equipment and software expense of $176 million was up 7% from one year ago and up 3% sequentially. The year-over-year growth reflected higher depreciation and amortization as well as higher software support costs, partially offset by lower software disposition costs. The sequential increase was driven by increases in software disposition, software support and amortization costs. Occupancy expense of $67 million for the quarter included the previously mentioned $11.9 million occupancy charge. Excluding this item, the category was down 4% compared to the prior year and up 7% sequentially. The year-over-year decline was driven by lower rent as well as lower building depreciation and real estate taxes. The sequential increase was primarily driven by higher building operation costs and real estate taxes.

Other operating expense of $72 million was down 18% from one year ago and down 43% sequentially. Excluding the prior quarter’s $43.4 million charge, costs were down 14% sequentially. The year-over-year comparison was primarily driven by lower expense related to business promotional activities. The sequential comparison was impacted by higher costs associated with the Northern Trust sponsored Golf Tournament in the prior quarter and lower costs associated with supplemental compensation plans.

Turning to the full year. Our results in 2020 are summarized on Page 8. Net income was $1.2 billion, down 19% compared to 2019 and earnings per share were $5.46, down 18% from the prior year. On the right margin of this page, we outline the non-recurring impact that we called out for both years. We achieved a return on equity for the year of 11.2% compared to 14.9% in 20.9 — in 2019.

Full year revenue and expense trends are outlined on Page 9. Trust, Investment and other servicing fees grew 4% in 2020. The growth during the year was primarily driven by new business and favorable markets, partially offset by the impact of money market fee waivers. Foreign exchange trading income grew 16% driven by increases in market volatility and higher client volumes. Net interest income declined 14%. Average earning assets during the period increased by 16%, while the net interest margin declined 41 basis points due to lower interest rates. The net result was flat overall revenue in 2020 compared to 2019. On a reported basis, expenses were up 5% from the prior year. Adjusting for the expense items noted in both the year, expenses were up 3% from 2019.

Turning to page 10. Our capital ratios remain strong with our common equity Tier 1 ratio of 12.8% under the standardized approach and 13.4% under the advanced approach. Our Tier 1 leverage ratio was 7.6% under both the standardized and advanced approaches. During the fourth quarter, we declared cash dividends of $0.70 per share, totaling $147 million to common stockholders. Now looking back at 2020 showed the importance of a strong capital base and liquidity profile to support our clients’ needs. We continue to provide our clients with the exceptional service and solution expertise, they come to expect. As we begin the new year, our competitive positioning in Wealth Management, Asset Management and Asset Servicing continues to resonate well in the marketplace.

Thank you again for participating in Northern Trust’s fourth quarter earnings conference call today. Mark, Mike, Lauren and I would be happy to answer any of your questions. Madison, please open the line.

Questions and Answers:

 

Operator

Absolutely. Thank you. [Operator Instructions] We’ll go ahead and take our first question from Glenn Schorr with Evercore.

Michael G. O’Grady — Chairman, President and Chief Executive Officer

Hi, Glenn.

Glenn Schorr — Evercore ISI — Analyst

Hello there. So I appreciate you know that the 4% trust fee growth in 2020, some of that’s market, some of that new business. And in the press release you referred to the growth agenda. I wonder if we could just revisit what reasonable expectations and reasonable markets, whatever that means, could be for Trust fee growth over the coming years and where are your investments are made under this — are being made under this growth agenda. I appreciate that.

Michael G. O’Grady — Chairman, President and Chief Executive Officer

Sure, Glenn. So let me start on the growth side and separate the business to two reported segments and maybe touch on Asset Management as well. In C&IS the quarter and frankly the year reflected good growth, and you see 6% sequential growth from a Trust fee perspective in C&IS. A point of that 6% comes from more macro factors in between currency markets but 5 points of that 6% come from good growth in the business. And that said, I’d provide a little caution there by splitting that 5% in half in saying about 2.5% coming from what you would think of is very traditional Trust fee growth, it’s more ongoing in nature and then about 2.5% coming from items that are more one-time in nature. And so that could be true-ups on pricing and transaction related volumes that we wouldn’t necessarily consider predictive of what’s going forward. But certainly, we view the fourth quarter for C&IS as on-boarding significant new business. There are a couple of very significant pieces of new business on-boarded there and the pipeline in the short run, still feels good.

When you shift to Wealth Management and think about the growth there, the business did — it’s an outstanding job I think of engaging with clients over the course of the year. The growth there and this is fine, this is the nature of that financial model. It came more from growth in equity markets over the course of the year. It was a very odd year for on-boarding new clients in Wealth and so we’ll see what that looks like going forward. But couldn’t feel stronger about how the Group did from client interaction over the course of the year.

And then a difficult one to predict is Asset Management. We obviously had extraordinary growth into the money market mutual funds and it’s anybody’s guess how long that stays on and whether or not we see a shift back to more risk on transactions or not and what the growth looks like there. But I also have to say the business is working on other elements as well to try and bring organic growth into the business.

You asked about where we’re investing as well, and there are several areas. Each of the businesses has their own view of where they are investing and you see some of those coming to fruition in different areas at one constant theme across the company is digital. And you’ll see in every aspect of the business, how we’re trying to ensure we’re connecting better with clients in our digital engagement and you see that show up in the income statement in a couple of different line items and outside services and equipment and software for example.

Glenn Schorr — Evercore ISI — Analyst

I appreciate all of that. My one tiny follow-up is, if you could just give a little more color on the Wealth Management fees only up 1%. I know we have some lag pricing coming and the fourth quarter was up huge, but just curious what might be holding back on the fees, even without adding new accounts, markets are good. Just curious to have more color. Thanks.

Jason J. Tyler — Executive Vice President and Chief Financial Officer

Sure. Well you hit on a key item which is, there is a lag that takes place there. And then secondly, a little harder for you to see, but we did have positive flows in the fourth quarter in the Wealth business which was good. And I do think, even if you’d said we were going to go through this environment of not being able to be in front of clients a lot and it’s just — it’s very, very difficult to test the growth in the Wealth business based on what we went through this year in terms of how we’re interacting with clients. I would say that the overall trends of clients using us for deposits and also the flows we saw particularly in fourth quarter, I think everyone got more attuned with doing normal business more electronically and more virtually is a relatively positive sign.

Glenn Schorr — Evercore ISI — Analyst

Okay. I appreciate all that. Thanks so much.

Michael G. O’Grady — Chairman, President and Chief Executive Officer

Thanks, Glenn.

Operator

All right. We’ll go ahead and take our next question from Alex Blostein with Goldman Sachs. Please go ahead.

Jason J. Tyler — Executive Vice President and Chief Financial Officer

Hey Alex.

Alex Blostein — Goldman Sachs — Analyst

Hey, Jason. Good morning. So maybe building on Glenn’s question also a little bit, in the past you guys have talked about fee growth kind of aligning with expense growth. You’ve announced a couple of obviously expense cutting initiatives that should help 2021 maybe even trickle down into 2022. The markets are see big helper. So help us understand maybe how that relationship should progress through 2021? And maybe you can talk to that both sort of including the tailwinds from markets and excluding that, meaning that if these are up including the benefit of the market, how much of that will naturally trickle down into higher expenses? And are you still kind of targeting organic expense growth to mimic organic fee growth excluding the market? So a couple of things in there, but I can clarify if it’s not 100%, but maybe you can start there.

Jason J. Tyler — Executive Vice President and Chief Financial Officer

I’m going to take the theme as operating leverage and organic growth and you tell me if I hit on too little. So first of all as I’d think back on the year-end as we’ve been talking about it internally, one of the things that jumps out is we did have — it was a positive year in terms of fee operating leverage. And if you look at the last few years, you go back to 2017, ’18, ’19. ’20, we — it was relatively close to zero, which actually isn’t bad, because over time, we’ll get market lift. But in 2017, we had adjusted operating — fee operating leverage, it was positive about 0.7, 2018 was plus 1.6, 2019 was negative 0.5, 2020 was actually positive 1.6 and then if you unwrap the quarters within 2020, third quarter plus 2 points and fourth quarter was plus 4 points, which is — was one of the best quarters, maybe the best quarter we’ve had since we started tracking this number this closely over the last five years or so. But I can appreciate that from your perspective, people are always trying to — how do we match that to what we would expect on the income statement.

And so let me do just — flip to the supplement, flip to the press release table and go to the detail the year-over-year detail, which is this Page 1 of the supplement. And let’s just — I think it might be helpful for people to circle a couple — this is how I think about the quarter and the overall run rate in hindsight. If you take Trust fees of $1,026 million last year, take out let’s exclude sec lending, so take out $17.6 million, take out waivers of $23.5 million and we had market lift zero on C&IS is probably $10 million to $15 million in Wealth and so you get to about a $1,020 million number. And then you compare that to 2019 and for the quarter take out sec lending again and you get something like $970 million. And so, the growth is more like $970 million to $1,020 million. That’s 500 basis points of growth and that gets more to how we look at it.

And then you compare that to the expenses, do the same type of analysis and take the $1,151 million. Take out the $55 million in severance we talked about, take out the $12 million in real estate and you get to $1,084 million. And then compare that to the $1,072 million, it’s more like a point. And so those are the line items, I think to look at and to kind of do an analysis to — at least you’re getting closer to how we think about it, and by the way I didn’t even add in how we move from the reported to the organic numbers on the expense side. There is things like third party advisory fees and other stuff that we would take out, but that’s how we track internally. Those are the first numbers, we’re looking at. So hopefully that’s helpful in getting it the spirit of what you’re asking.

Alex Blostein — Goldman Sachs — Analyst

Yes, no. It definitely helps. I was thinking that maybe you can talk a little bit more kind of prospectively as you think about 2021 and I know you guys are not in the business of giving explicit guidance, but obviously there is some cost initiatives that are at play and I’m just kind of trying to think about like given normal market conditions, given your sort of views on the pipeline in the organic growth into ’21, what is the outlook for expense growth, maybe a little more explicitly?

Michael G. O’Grady — Chairman, President and Chief Executive Officer

Yes, Alex, it’s Mike. Why don’t I jump in here as well. Just to build on what Jason said. To your point I — we do look at that relationship between organic fee growth and then our expense growth. And when we see that the environment is making it more challenging on the organic fee growth side, absolutely need to focus more on the expense to make sure that we have that positive relationship. And as Jason went through, we were able to achieve that in 2020 and now again very unusual year, I would say on both sides of that relationship, but that’s what we’re looking at going into the next year.

Now if we have the opportunity to grow faster organically and profitably, I — then we’ll look to do that, but not knowing that we don’t want to go in with higher expense expectations and then have another year where it’s very unpredictable as to your ability to on-board that new business. So, that absolutely the relationship holds, and it’s just in different environments, you have to act differently.

Alex Blostein — Goldman Sachs — Analyst

Got it. Okay, great. That was helpful. Thank you both.

Operator

All right. We’ll go ahead and take our next question from Brennan Hawken with UBS. Please go ahead.

Brennan Hawken — UBS — Analyst

Hey, good morning. Thank you for taking my questions. Just wanted to revisit the outlook on the fee waivers and the NII, I know there is a bit of uncertainty and it’s always subject to what’s happening to rates, particularly on the short end. But I believe Jason you had updated the guide to the upper end of around 35. I think the range was 25 to 35, and you had said tacking to the upper end of that on the waivers front and so I just was curious whether or not we should just assume that that holds since you didn’t update it. And then you also have in the past said that — I think you said that you expected NII to be generally stable from 4Q levels, of course, depending on what happens with the loan growth. So is that still true, and how are you thinking about loan growth from here? Thanks.

Jason J. Tyler — Executive Vice President and Chief Financial Officer

So let me take those. I think three questions. So, on waivers, the $35 million run rate is pretty good. And I think from here it’s less about what we can see internally from repricing and it’s more what you guys can see externally from what’s happened in the short end of the yield curve. So, overnight repo and what does the short end of the curve look like and AUM. And so I think for the run rate on an annual basis right now is 140 to — it’s 140 to 150. And that we expect to hold and the book is effectively a 100%. It’s a 98%, 99%, 100% repriced at this point. And so from here, it’s those factors that I mentioned. And I think the key is to be careful and ensure you realize that disparity between C&IS and Wealth and where the waivers are hitting. Because the Wealth waivers — because the Wealth fee rates are tend to be higher. They got into waiver land first. But the AUM isn’t as high. And so, now that rates have come all the way down and the duration isn’t protective anymore, the waivers are actually going to be heavier in C&IS. And the relationships not linear, it’s they are step functions in the middle because you’ve got some very large funds that that kick in at certain levels right around where we’re investing right now, but those are the key things I’d want you to keep in mind as you try and model out waivers.

On NII, we did mention, there’s probably $5 million of the $345 million that was more one-time in nature. And so from there, I think actually very similar theme to what I talked about on waivers. From this point forward it’s pretty predictable that things that — we communicated things we can see which we’re running off $1 billion to $2 billion a quarter at about 100 basis point delta. And so that gets you $3 million, $4 million, $5 million of drag about a 1.5 maybe on a sequential basis and that has been offset over the last couple of quarters by deposit levels hanging in higher than what we thought off than we thought, and also loans hanging in higher than we thought.

You will also notice in this quarter, there is a little bit of a shift from the money from Central Bank Deposits end of the securities portfolio, nothing dramatic there but that was also somewhat protective and that will stay going forward. And so from here, the key things or what do you think is going to happen with loan volume — what do you think is going to happen with deposits and what do you think is going to — and then also, we’re obviously losing two days coming from fourth quarter to first, which is probably $3 million, $4 million a day.

And then you asked about loan growth. And it’s been a positive surprise that the loans have held in there. It’s something we’ve talked about internally. We’ve been working on to make sure — making sure that we’re talking to clients about our appetite and what our whole [Phonetic] levels and interest levels are and again clients tend to come to us for liquidity and there is some correlation between the deposits and the loans for sure. And so that’s been a positive, but it’s held in and it’s been one of the offsets to that continued drag of a point or so a quarter.

Brennan Hawken — UBS — Analyst

Okay, great. That’s all helpful color, I appreciate that, Jason. So when we think about organic growth, you walked through — in response to another question, you walked through some of the rates and some the — how the profile has worked, which is helpful. Is the back half of the year more like what we should expect, kind of like a 2% to 4% organic. Does that seem like something that you guys can hold in this weird environment that we all started dealing with quite longer I guess. Is that the way we should think about it from here? And I just kind of as a tack-on for that, I think you guys said there was a non-recurring servicing fee in Wealth, so if it’s possible to quantify that, that would be great too. Thanks for my multipart questions here.

Jason J. Tyler — Executive Vice President and Chief Financial Officer

Sure, so the non-recurring servicing fee in Wealth, it was a couple million…

Michael G. O’Grady — Chairman, President and Chief Executive Officer

Couple of million dollars and just has to do with some — it’s typical business for us. The state settlement type work and other items is a couple of, I think real estate related items, but think a couple of million dollars. On organic growth broadly, I think you can go back to separating it. C&IS would say the part of what we experienced in the fourth quarter, part of it was a catch-up of some of the new business we had that was in the one not funded category. And so certainly shouldn’t expect 6% sequential continued increases there. But that said the pipe — and we had said earlier in the year that we felt like the pipeline had been delayed, but not cut off. And so this fourth quarter was not super surprising to us and that we were able to get on-boarded a lot of the new business that we — that had been delayed. And so that’s good.

The other piece of good news is the near-term pipeline their view is it still seems decent. And that said, the longer term pipeline, they are paranoid about. And so that’s just something to watch. On the Wealth side, it’s more of a continued story underneath the numbers that you see there. GFO continues to have — to expect the business to do pretty well and the East region continues to do pretty well, not necessarily quarter-to-quarter but over longer periods of time. And then you see the other regions that are more mature not doing and not having the same migrational benefits that the East region does because that includes Florida and the development of wealth on the East Coast, not as robust. And so it will be interesting to see whether or not the experience we had in 2020 if not being, it will be in front of clients as much how much impact that had in suppressing organic growth.

Brennan Hawken — UBS — Analyst

That’s helpful, thanks. And you found some paranoid salespeople. That’s remarkable, usually that happens.

Jason J. Tyler — Executive Vice President and Chief Financial Officer

Well, that’s a very optimistic group, but they are always making sure that we’re not baking in too much on the back end.

Operator

All right. We can go ahead and take our next question from Steven Chubak with Wolfe Research. Please go ahead.

Steven Chubak — Wolfe Research — Analyst

Hi, good morning.

Jason J. Tyler — Executive Vice President and Chief Financial Officer

Good morning.

Steven Chubak — Wolfe Research — Analyst

Yes, I just wanted to dig in a little bit to some of the organic growth commentary that you see on the Wealth side. Can you say of the positive trends in 4Q by putting a look at that the organic growth in the Wealth business is much more [Indecipherable] since the start of COVID. And then, maybe it’s a little bit tough to reconcile given some of your Wealth peers with admittedly greater focus on less active cohort, you’re seeing some acceleration over the past few months across the wirehouse independent channels. I think the idiosyncratic factors that drive some divergence, added growth trends, but [Indecipherable] some insight in terms of what we should be looking for as the economic recovery continues in the vaccine deployment. Just to better anticipate the timing of organic growth getting back to a more normalized run rate.

Jason J. Tyler — Executive Vice President and Chief Financial Officer

Yes, I think it’s hard to predict. I think it will — a lot of it will depend on how things open up again and I think it’s also important to keep in mind and I don’t know specifically the peers, you’re talking about at all. We deal — we’re targeting a client base that’s really at the upper end and imagine unplugging, getting the comfort level of confidence level to unplug potentially generations of connectivity with the family office from a custody perspective, from an investment management perspective and putting that back in place, again. And so again, the business had is lower, but positive flows for the quarter for the year. And so we’re all looking and monitoring and seeing what it looks like, but not surprising that in this environment, some of the organic growth, maybe not looked as strong as what it has been historically. Mike, I don’t know if you want to add any perspective from your line.

Michael G. O’Grady — Chairman, President and Chief Executive Officer

I think it’s a fair and appropriate question, Steven. And when you think about fee growth for Wealth Management, as you know, there is a number of drivers in that overall fee number. And so if you break it down a little bit, for us, there is an advisory component to it and then there is the investment management fee component to it as well. So, right there you can have different dynamics within that. So, Jason, saying, we’ve been building the business. But you could have, and that will drive the advisory fee. But on the investment product side, if you will, where they are utilizing Northern Trust product and others because we’re open architecture that will have a dynamic as to what’s happening to the overall Wealth Management fees.

And again, our approach with our clients as Jason as pointed out is to give them a holistic approach to this in outcome. So through different environments that’s going to have a different impact on what the outcomes is — outcomes are for that mix. And then beyond that, I would say that’s just the fee component, again these are holistic relationships that involve banking as well and so there’s always going to be shifts there between what they put into funds versus what may go on the balance sheet and situations where their borrowing more, credit is a bigger component. And those are important as well. We focus a lot on fees for the right reason. But overall, the relationships are much broader and we’re looking to drive those fee lines — revenue lines as well.

Steven Chubak — Wolfe Research — Analyst

Thanks for that color. And just for my follow-up I wanted ask on capital management. Now that you’ve had some of your Trust bank peers actually outlined some pretty explicit capital targets even in somewhere in the zone of a 10% to 11% to Q1 or 5.5% to 6% Tier 1 leverage target. I know you’ve never want to deviate from the past by not being part of [Indecipherable] and you still have stronger capital ratios are, as we think about the SUV framework potentially with payout restriction getting lifted, hopefully in the not-so-distant future, how you guys are thinking about the pace of buybacks in capital return when some of those restrictions are ultimately [Indecipherable]?

Michael G. O’Grady — Chairman, President and Chief Executive Officer

From a capital perspective in aggregate, you’re right at 12.8% CET1 and 7.6% on Tier 1 leverage, we feel strong in terms of –and by any measure in terms of our capital level. And we certainly, if you think about our overall payout ratio for last year was — it was and particularly the last three quarters lower than what we would have anticipated, but coming into the year and having the ability to get back to stock repurchase, I’m a broken record on this, but the framework of what are our conversations with the Board. Secondly what do we think about on an absolute basis and how do we want to ensure we’re competing externally, not just being a strong capital levels, but how does that resonate with very large family office clients or sovereign wealth funds that look very, very heavily at whether or not they’re dealing with financial institutions that are strong, what does the capital levels look like on a relative basis, so we can say, we’re not just strong but we’re strong relative to our peers.

And then lastly regulators, very big influence in terms of what they’re looking for and so that — those — all of that is the Mosaic that plays in along with looking at what our return alternatives are as we think about investing in the business. We talked about what we’re doing in terms of digital. We’ve talked about what we’re doing in terms of building different more technologically deep operating models for our C&IS business. We’ve done things within the asset management business to ensure that we can have the product set and the technology to be a strong provider of liquidity products that took investment two, three, four years ago. And you couple all of that with looking at what — how we think about the stock on a relative basis from a valuation perspective. And so it’s not one where we say we’re going to go down to 12% or we’re going to go down to 7% in Tier 1 leverage, it really truly is a conversation we’re looking at all of the factors I just mentioned and determining what’s best from a capital perspective.

Steven Chubak — Wolfe Research — Analyst

Thanks for taking my questions.

Michael G. O’Grady — Chairman, President and Chief Executive Officer

Thank you.

Operator

All right. [Operator Instructions] We’ll go ahead and take our next question from Mike Mayo with Wells Fargo Securities. Please go ahead.

Mike Mayo — Wells Fargo — Analyst

Hi. Look you need spend money to make money, I get it and your core fee growth is about 500 basis points better than Trust Bank peers, but on the other hand, expenses were up across the board. And so I guess the first question is was there any extra one-time or elevated expenses in the fourth quarter as you on-boarded additional business? And specifically in the punch line, do you expect to have fee growth in 2021 faster than expense growth especially with pricing on a lot of your products?

Jason J. Tyler — Executive Vice President and Chief Financial Officer

On the expense side, there were some one-time items that the severance charge $55 million occupancy, but specifically related to the new business coming on. The timing of that matters and it’s clearly as you bring on very, very large clients. Some of the clients if it’s a just a custody mandate that may not require us bringing on additional people, if its investment outsourcing investment operations outsourcing then that’s going to take people and it will take people upfront in advance, so they can get on-boarded and trained in advance of us bringing the assets on and billing. And so that can certainly happen. That’s the dynamic that — that’s why we tend to not think about an absolute expense growth level, because we can have the foresight in looking at what the new business wins are and what the expense needs are to handle that intra-year unless it’s coming at the beginning — the very beginning or the very end of the year. And so as we look into 2020 and as was Mike was hinting at earlier — into 2021 is what Mike was hinting at earlier we are expense — experience is going to be driven in very large part based on what we’re on boarding not just the size of it, but the nature of it. I think that’s something that’s very important for people externally to realize.

Mike Mayo — Wells Fargo — Analyst

So I know you don’t always answer this question but for 2021 do you expect fee growth to be faster than expense growth?

Jason J. Tyler — Executive Vice President and Chief Financial Officer

And that’s always — that’s the goal. That’s why it’s been a lot of time even this morning talking about that, that if we have regardless of where fee growth is, that’s how we’re testing where the expense growth is now. There are often items on the expense lines that are not related to what the — to bringing on new business. And so last year we had — we brought on $30 million in additional pension expense. That has — that has to do with what’s expected return on assets, what’s discount rate, those are not related, but we actually highlighted those items last year, we talked about real estate commitments, we talked about pension and we talked about base pay adjustment that we’d committed to last year and this year as we come into this year we’re — it’s probably noteworthy that we’re not seeing any of those items. Pension is a $1 million drag year-over-year and I think you can take the occupancy that we had in fourth quarter, strip out the $12 million and you get to a decent run rate.

And you should see between comp and then, you should start to see the rep charges that we’ve talked about start to bed in to those two line items. And then the other thing we should expect before we hit the new business, the equipment and software, that’s been a faster growth item, and that’s likely going to continue as we make sure where we want to be from a digital perspective outside services and so from there, Mike, it comes down to — from those items, it really comes down to what new business comes on board.

Mike Mayo — Wells Fargo — Analyst

Okay. And can I have a follow-up question. And this is related to the question from a couple of questions ago. If you think of the food chain and you can correct this framework that I am going to give you, but from the low end to the high end, the low-end would be and they gets Robin Hood or some of these smaller FinTechs with the small amount of [Indecipherable] retail engagement lots of revenues and some reports say that New York Stock Exchange volume has gone from 10% to 20% retail trading. So that will be the bottom end and then you get online broker, you get mass affluent, you get private banking and you get the family office and as you go from left to right, you go from more revenues today, more activity during the pandemic, and more erratic, more lumpy and when we get to your business, it’s a lot more stable at annuity like, but maybe not as elevated revenues as it is today. So as you think about the base business, is it moving more down market and do you need to move down market with it or do you some of the activity down market over the past six or nine months is kind of one-off?

Jason J. Tyler — Executive Vice President and Chief Financial Officer

Actually it’s a conversation we have a lot internal and Mike why don’t you start.

Michael G. O’Grady — Chairman, President and Chief Executive Officer

So I’ll start, Mike. First of all, I’d say, I would agree with your framework at a very high level as you think of that kind of low to high and the characteristics as you move up that spectrum. And you’re absolutely right. We are focused on the upper end of that spectrum and one point that it highlights is I’ll say both the importance of retention, but also the benefits of retention. So I’m not going to speak to turnover what may happen on the lower end, because again, that’s not where our business is focused, but I can tell you on the higher end you have time periods like 2020 where that model of holistic advice and high level of service results in very high levels of retention. So a excellent year in retention at that level, but if you said was there a lot of trading activity with the answer is no. In fact, as you heard some of my opening comments there that’s exactly what we — I would say councelled our client against because we’re goals driven. And so instead of trading out and then trying to get back in, it resulted in our clients actually doing well through that because they stuck to their goals driven framework.

And then to your point of, then how do we think about the growth opportunity going forward. There is still a significant opportunity for us to grow at the upper end of that. So you put GFO at the top as Jason pointed out, that part of the business has been growing at a high rate for us and again we think we are differentiated at that end. And then absolutely, I’ll call below that with ultra high net worth likewise seen very good growth, continued growth there and still plenty of opportunities, because as much as just kind of leave that lower end aside for the time being, even in the environment that we’re in, there is a tremendous amount of wealth that’s being created. That means that there are opportunities for us, whether that’s family business is being sold or companies going public and the executives been in a position of having wealth that needs to be managed in a way that we do it. So we still feel very good about that part and it’s not to say that we don’t service clients that are below that ultra high net worth end of the market. And frankly, that’s where a lot of the digitalization efforts that we have underway in Wealth will allow us to serve that part of the market, but in a much more efficient way. And so that will enable that growth in that part of the market to be more profitable, more scalable.

Mike Mayo — Wells Fargo — Analyst

Thank you. Thank you.

Michael G. O’Grady — Chairman, President and Chief Executive Officer

Sure.

Operator

All right. We’ll go ahead and take our next question from Betsy Graseck with Morgan Stanley. Please go ahead.

Jason J. Tyler — Executive Vice President and Chief Financial Officer

Hi Betsy.

Betsy Graseck — Morgan Stanley — Analyst

Hi. Good morning. A bit of a follow-up there. In the past you’ve mentioned that you’re open to acquisitions particularly in Wealth and intermediary distribution. And I just wanted to understand level of appetite at this stage given some of the organic opportunities you have. And then maybe layering on to that capabilities, when you talk about Wealth creation and I’m kind of sitting here thinking about well cryptos go out of wealth creation and maybe there is a fleet there that you could add. So maybe just speak to that. Thanks.

Michael G. O’Grady — Chairman, President and Chief Executive Officer

Sure, I’ll take that Betsy it’s Mike. So to your point, historically our acquisitions have focused on capabilities and that’s been across the businesses. So, Asset Management, Wealth Management and Asset Servicing, we’ve done a number of capability type acquisitions, which then we’re able to leverage that capability in our business model and grow and there’s a number of examples of that. For that type of acquisition, you’re right. We continue to look at areas where those types of additions will enable us to further grow with client bases and importantly in segments that are growing faster. So I’m not — I won’t address any one of them in particular. But to your point I — that can be very, very small either acquisitions or investments, for example in C&IS where we have a capability that’s in an area that has innovative new technology.

And then I would say more broadly than that as far as just appetite, absolutely to the extent we find something that fits strategically and is attractive financially, we’re open and interested in doing that. We’ve done more as you know over time in C&IS on the Asset Servicing side and I would say we’d be more interested or likely to do it in Asset Management or Wealth Management.

Betsy Graseck — Morgan Stanley — Analyst

And just on the crypto side, I mean there has been some loose competitors adding crypto capabilities and talking about potentially adding is that on your radar screen or true out there?

Michael G. O’Grady — Chairman, President and Chief Executive Officer

Definitely from a capability perspective you’ve seen some of the things that we’ve announced in order to have the capability to serve our clients. So to the extent that digital assets continue to grow and in the sense of used by not just I’ll call it personal or retail clients but also moves more to institutional clients. Those are institutions we need to have the capabilities to serve them. And so, yes, both, I would say on our own, but more importantly partnering with others to be able to meet those needs.

Betsy Graseck — Morgan Stanley — Analyst

And just to take a regulatory requirement change at all to do that, I know OTT recently proved stable coin for banks, which is a part of the announcement you need but I’m just trying from a regulatory perspective, is there anything you need from that end to execute on that?

Michael G. O’Grady — Chairman, President and Chief Executive Officer

Well, I would just say, without getting into the specifics around digital assets in the regulatory framework on that, but it is a component. And so from our perspective, I’ll call it, there is a technical or technological aspect of it. There is a service aspect of it. In other words, how does it fit with other things we’re doing for those clients and then to your point, there is a regulatory aspect. And then I would also say there is a financial aspect to it. So how can you be compensated for the ability to provide for example custody for those types of assets.

Betsy Graseck — Morgan Stanley — Analyst

Right. Yeah. Okay, back to real-world deposits wasn’t real world but the bread and butter here, could you talk a little bit about how you’re thinking about managing deposit inflows. We’ve heard from some folks that bringing on whether it’s operating or non-operating deposits and others have been signaling that they only want the operating deposits and discourage non-operating. Can you tell us what your strategy is there as we think about the balance sheet growth over the next year?

Michael G. O’Grady — Chairman, President and Chief Executive Officer

Okay. Come back to the capital levels and at 12.8% and maybe more importantly at 7.6%. We’ve got room to bring on deposits and we want our balance sheet to be there for our clients. And so when we get — reach out to the clients saying, we want to move and sometimes it’s very significant, sometimes it’s not millions of dollars or hundreds, sometimes it’s billions of dollars and for existing long-term clients, we want to have capacity to help them and we have. In terms of how we deal with it, it’s often times they’ll let us know that it’s episodic. It’s them moving money they might be liquidating position going somewhere else. And so there is no formula for and so we’re not going to take two year duration on reinvesting those deposits. And that said, there is a component where we do know it’s more stable.

And so if you look at the balance sheet back to the press release tables is actually you can look at a handful of line items and see how of the deposits that have come in really roughly half have gone to Central Banks and stayed short and about half have gone and been reinvested more on the securities portfolio in one way or another, not out, if it’s an institutional deposit and it seems from the nature of your question, you understand the different regulatory treatments of the deposits as they come in and so we have to hold liquidity and capital for those, but in many instances, it’s been, it’s enabled us to take the securities portfolio from $50 billion to $60 billion over the last year.

Betsy Graseck — Morgan Stanley — Analyst

All right. Okay. All right thanks. I appreciate the color on that.

Michael G. O’Grady — Chairman, President and Chief Executive Officer

Yes, thanks, Betsy.

Operator

Okay, we’ll go ahead and take our next question from Mike Carrier with Bank of America. Please go ahead.

Michael G. O’Grady — Chairman, President and Chief Executive Officer

Hi Mike.

Mike Carrier — Bank of America — Analyst

Good morning, guys. Just a few clean-ups here. I think the core tax rate in the quarter was a bit elevated. I think you guys mentioned in the release somewhere like the mix. But any change, just how you’re thinking about the outlook there?

Michael G. O’Grady — Chairman, President and Chief Executive Officer

No, in general, we’ve been able to move some of the cash, if I understand the question. Some of the cash down into the securities portfolio…

Jason J. Tyler — Executive Vice President and Chief Financial Officer

On the tax rate to 28% in the quarter versus 24%.

Michael G. O’Grady — Chairman, President and Chief Executive Officer

Thank you. Yes. So the tax rate that was printed was higher obviously you take that you go back down to 20% to 28%. The difference between 28% to 24% more episodic. It’s not something that we think is longer term. We think 24% is still the right number in the long run. That said, fourth quarter can be even within that 24%, fourth quarter can be a tick higher than the 24%. Usually you’ll have first quarter that’s a little bit lower and then second, third, fourth quarter for different reasons a tick higher but 24% over the course of the year is still good — is still a good number in the long run.

Mike Carrier — Bank of America — Analyst

Okay. Makes sense. And then in the release you guys mentioned some non-recurring fees just in Wealth Management during the quarter. If you could just explain those or maybe the magnitude since you highlighted it.

Michael G. O’Grady — Chairman, President and Chief Executive Officer

Yes. Mark why don’t you…

Mark Bette — Senior Vice President, Director of Investor Relations

Mike, it’s Mark. It’s a couple of million was basically the number and it’s for the types of services that might not be a recurring thing, a state services, real estate services that kind of thing. So, and those were a little bit more elevated this quarter that helped some of the sequential growth.

Mike Carrier — Bank of America — Analyst

Got it, okay. Makes sense. Thanks a lot.

Michael G. O’Grady — Chairman, President and Chief Executive Officer

Sure.

Operator

All right. We’ll take our next question from Brian Bedell with Deutsche Bank. Please go ahead.

Michael G. O’Grady — Chairman, President and Chief Executive Officer

Brian.

Brian Bedell — Deutsche Bank — Analyst

Hi. Good morning folks. Just maybe in net interest revenue. Just if you could comment on the trend into 1Q given we did see a big spike in deposit, I know that’s typical of calendar year-end. Maybe just to talk about deposit balances on an average basis whether they’re trending higher into 1Q. And then also on the loan strategies. First of all, have the loans fully repriced now given the resets were probably I know there are some that lagged. And then just your desire to extend more loans in that trend into 1Q for net interest revenue do you think that can offset the day count and keep flat in 1Q versus 4Q?

Jason J. Tyler — Executive Vice President and Chief Financial Officer

Loans you’re 85% repriced at this point. As I work my way back up and let me know if I missed part of the question, but walking from fourth quarter to first quarter the loan balances and deposit balances have stayed elevated relative to where they were a year ago, for sure. And, but don’t really want to caution people will look at fourth quarter at the fourth quarter end of period that is a particularly large spike that we had at the end of fourth quarter. And we did see that spike come down very quickly. And so what’s a better predictor is looking at the average from fourth quarter and the average from fourth quarter to the average so far coming into fourth — into first quarter it seems the deposits are staying elevated at about that level, but just caution you from looking at how that $171 billion balance sheet at quarter end.

Brian Bedell — Deutsche Bank — Analyst

And given those trends do you think you could keep NII flat in 1Q and an offset the day count, I know it’s about $3 million per day headwind $3 million to $4 million per day headwind on just the day count?

Jason J. Tyler — Executive Vice President and Chief Financial Officer

And that’s why I feel we probably we’ve given I think what we know at this point and the drivers from what we just went through, are going to be more how to large families and how to large institutions handle liquidity and what happens with rates, and I think that’s — I mean, you guys can monitor guess at that pretty — it’s close to what we can. It’s just hard for — we wanted to be as transparent as possible on this, but there is just uncertainty that comes from what our clients are doing with their liquidity and it happened late in the quarter. And so at this point I feel like we’ve — the description of how much of the securities portfolio is rolling up, what the impact of that is probably gives you at the starting point that we have from this point.

Brian Bedell — Deutsche Bank — Analyst

Okay, fair enough. And then just one on expenses, you’ve talked a lot about it. Thanks for all the detail on the — on the plan to — continue to generate positive operating leverage. If I look at the expense trust fee ratio back out, the money market fee waivers, it looks like a 103% which is an improvement from 106% to 107% last year. If you had to guess, if you just think you’re normal through your sort of expected organic growth over the long term. And you say, 8% equity market returns on an annual basis. And given your expense management plans, on a calendar year basis, what do you think you might be able to get to parity between expenses and trust, even under those scenarios?

Jason J. Tyler — Executive Vice President and Chief Financial Officer

Couple of things, one, is not necessarily. I’ve got a specific goal to get to 100%. And on it, we want to get there. Want to get going past it, and there is no magic between 101% versus 99%. Secondly, there are so many factors that go into what you just said and what type of business is coming in from a trust fee perspective, how much of its driven by markets? Are we growing from an investment operations outsourcing versus custody versus wealth? And so that’s what we’ve tried to give you a good launch point on expenses, and then give very firm dynamics of what the key drivers are, but that’s probably where we should leave what our predictions are over the course of the longer periods of time.

Brian Bedell — Deutsche Bank — Analyst

Okay, fair enough. Thank you.

Jason J. Tyler — Executive Vice President and Chief Financial Officer

Thanks, Brian.

Operator

We take our next question from Jim Mitchell with Seaport Global Securities.

Michael G. O’Grady — Chairman, President and Chief Executive Officer

Hey, Jim.

Jim Mitchell — Seaport Global Securities — Analyst

Hey, good morning. Hey. So maybe if you could just give us a sense — we’ve talked, we all kind of know what the downside risks are in NII. And it doesn’t — and I think if we just exclude the idea of the Fed raising rates, maybe you could just speak to what other drivers could be more positive, I guess for NII going forward? Is it kind of a steepening in the middle of the curve. Is it mortgage rates and the impact on premium NM or is it loan growth? Just trying to think through, how we should think about upside risks to NII over the next 12 months.

Jason J. Tyler — Executive Vice President and Chief Financial Officer

Yeah. So I — you’ve hit on — I think two of those three examples are the big ones. And if you get right now — if you look at the yield curve, it’s interesting, there’s not been any movement out for the kind of overnight through two years. And so it hasn’t helped us. But if you look out farther a kind of 5% [Phonetic] to 10% [Phonetic]. That’s where you seen in the left, but we’re not buying a lot in between there, in that in that space. And so if we have some of that steepness start to come not even overnight, but if it starts to hit, two, three, four years, that starts to change things. And then secondly, loan growth. You think about the difference that we have in yield and loans versus even the securities portfolio, let alone Central Bank Deposits really, really large. So those are really the two — the two big items.

Jim Mitchell — Seaport Global Securities — Analyst

Yeah. That make sense. Very helpful. Thanks.

Operator

And we’ll take our next question from Brian Kleinhanzl with KBW.

Brian Kleinhanzl — KBW — Analyst

Great, thanks. First on expenses. I guess in the quarter, is there still any trailing impact from COVID that would have impacted the numbers this quarter?

Jason J. Tyler — Executive Vice President and Chief Financial Officer

It’s slowed down a lot. We had some — we had some items early and by the way it goes both ways. I mean — please remember travel is, and I tried to highlight it in the opening comments by pausing more, but the business promotion expenses being down, that’s COVID-related. And it’s — and that’s material, and that will start to revert hopefully as things open back up again. And then — there are also other savings, even cleaning — millions of square feet of office space that we’ve been able to save. And so there is — that said, the flip side to it is that we continue to make investments on the resiliency environment that Mike hinted too in his opening comments. And so that means getting fresh equipment in the hands of existing partners. That means, making sure that the technology package that new partners have enables them to work in a work from home basis that’s more consistent. And so that said, I don’t think those investments at this point — those investments at this point are tens of millions of dollars. The one area that you might connect to this is that, we want to make sure that our technology, because it being in a resiliency mode, we’re continuing this journey of ensuring we’re doing a lot from a technology perspective and we do link that somewhat to being in this resiliency period of time.

Brian Kleinhanzl — KBW — Analyst

And then a separate question on the loan growth, I mean a lot of the peers being down loans in the quarter, just deleveraging in general. You’re seeing your loans hold, and I guess what’s the driver of the loan growth there? Can you kind of expect loan growth to continue to improve as you look out the 2021? Thanks.

Jason J. Tyler — Executive Vice President and Chief Financial Officer

Well, couple of things, I mentioned earlier that we have been spending more — some of it is deliberate and conversations we’re having with clients letting them know that we’re — our balance sheet is here for them and part of it is a nature likely of our clients starting to see the light at the end of the tunnel and starting to make more investments in different ways. But, so it’s hard to — it’s very difficult to predict whether or not that increase is going to continue to develop over time or accelerate. I would say, it hasn’t declined.

And even at the end of the — even coming after — looking at where numbers were at year-end, where they have been just in the first two or three weeks of the year. I think the risk of decline and kids. Hard to say this too confidently, but the risk of decline is low. We feel better about it stabilizing and hoping that, it continues to increase somewhat, but we’ve had very stable loans for a long period of time and it’s hard to see an environment where it goes up by several billions of dollars. We’re talking about $1 billion or $2 billion has significant impact on our — on our overall loan volumes.

Operator

All right. We’ll go ahead and take our next question from Vivek Juneja with JPMorgan.

Vivek Juneja — JPMorgan — Analyst

Hello, can you hear me?

Jason J. Tyler — Executive Vice President and Chief Financial Officer

Yeah, we can hear you?

Vivek Juneja — JPMorgan — Analyst

Yes, thanks. Okay. Thanks, Mike, Jason and Mark. First one, just a little clarification on a couple of the items you mentioned for the quarter. The fee waivers, Jason, you said $35 million, you’re almost repriced at the moment, but what was that in 4Q compared to the $35 million, was that fully — was that the $35 million number for the fourth quarter also? Or is that currently and what was it for — what’s the change?

And another question that you had on the — on the items you mentioned, true-ups, 2.5%, the growth from true-ups, that’s about $10 million. Never really seen $10 million positive, generally, you all tend to have it on the negative side. What kind of true-up was this, that was positive — that, was it a contract terminated early that you got paid by the client or can you give some color on that?

Jason J. Tyler — Executive Vice President and Chief Financial Officer

Sure. Well, fee waivers in third — in fourth quarter were $23.5 million. But Mark maybe better for you to explain the true-ups in second half.

Mark Bette — Senior Vice President, Director of Investor Relations

Yeah, I think you’re referring to the comment that Jason made about some of the non-recurring type of organic growth. So I wouldn’t, not necessarily, a true-up or an adjustment per se, but transaction volumes were higher during the quarter. And then we also have certain types of services that we might be doing for clients that are build based on the period that we’re doing on that. And so those are the kinds of, I would say, non-recurring fees once they come online.

There was also — there was also some true-up that might happen from a quarter-to-quarter, but not — just don’t want you to think that there is a one $10 million item like that. It was more of kind of a — an aggregation of the types of fees that we see that might be a little more episodic than just the kind of recurring fees that we see each quarter.

Vivek Juneja — JPMorgan — Analyst

And Mike, I have a bigger picture question for you. The new business that you’re seeing, and Mike just the $13.5 trillion that you have in your CIS, the strong growth there you’ve seen there. What client types you’re seeing that $13.5 trillion, how would you break that down firstly in terms of mutual funds versus pension versus insurance etc. And where are you seeing more, and hedge funds obviously — where have you seen more of that growth, the strong growth you’ve seen recently.

Michael G. O’Grady — Chairman, President and Chief Executive Officer

So, Vivek, it’s Mike. So to start off by just answering your question, yes, it is across all of those groups. If you broke down the $13 trillion, as far as growth, I — it’s interesting, because as you look across the globe, at least for us, in 2020, we had stronger growth, asset growth on the asset owner side in North America. And that just relates to having a large business there in the US also in Canada, and having nice growth during the year. But if you look at EMEA and the APAC region, the growth was more from asset managers. So for example in APAC, specifically Australia, strong growth with asset managers there, which for us is that, I would say a nice positive, because that business started off years ago primarily focused on asset owners with the strategy over time similar to what we’ve done in other geographies to then build out the asset manager services. And so that’s gone well. And as I mentioned, in EMEA, the growth with asset managers, primarily being driven by in Luxembourg and Ireland where again we’ve made investments to grow those businesses over time.

Vivek Juneja — JPMorgan — Analyst

And what percentage of your assets on the custody, would you say, both [ 01:19:49] North America versus EMEA versus APAC, and any sort of — any sort of, any…

Mark Bette — Senior Vice President, Director of Investor Relations

Yeah, I mean, this is Mark. So the geography breakdown will have in our 10-K. I don’t have that right in front of me. And it’s hard to even looking at the assets just because of the — the assets aren’t going to be necessarily equally driving the fees. So large custody mandate might have lower fees than a smaller fund mandate. So if we looked at the fees themselves, so you’re looking at across the regions, almost 40% to 45%, EMEA and similar in Americas and then APAC growing quite a bit. And then when you look at it, asset owners versus asset managers. When you look at the asset servicing fee that to, about 60%, 40% or so at this point, asset managers. So the assets — so it’s not always a easy comparison just looking at the assets, because that doesn’t necessarily translate through to the P&L.

Vivek Juneja — JPMorgan — Analyst

Okay. Thank you.

Operator

And we will go to our next question. Caller, you may go ahead.

Jason J. Tyler — Executive Vice President and Chief Financial Officer

Hi, Gerard.

Mark Bette — Senior Vice President, Director of Investor Relations

Hi, Gerard.

Gerard — — Analyst

Hi, everyone. Thank you. Mike, can you share the — maybe Jason, obviously this year has been, this past year and precedent and we all know that — with the Federal Reserve taking its balance sheet to just about $7 trillion, and many of your kind of growth, and corporate customers building up their liquidity, which led to that incredible deposit growth, you and your peers have seen in this past year. Can you lay on a scenario where the deposits start to come down. I know, they’re not going to come down anyway. But if you look at over the next two years, when do you start to see that change, and maybe deposit start to run off the balance sheet?

Michael G. O’Grady — Chairman, President and Chief Executive Officer

So, Gerard, to your point, difficult to predict something like that at a very high macro level. And Jason indicated this earlier, where we do see the assets begin to move and it would be true both on the balance sheet, but also within the funds within the money market funds is where our clients, which I think is good proxy for a certain part of the market want to deploy those funds in other ways. And so to the extent and I think you’re already seeing that in this day, the increasing values in other markets. Right. So equities obviously has done quite well. Well, that’s — what more buyers and sellers as they say. And some of that’s coming from liquidity where they’re earning anywhere from zero to negative depending on the jurisdiction. And they’re saying, why, I need to move into riskier assets. And so that’s gradually what’s happened — happening, absent what the Central banks will do. And so, to your point, at this point, the central banks have kind of said they’re going to stay where they are for an extended time period. So that would indicate, you would expect these trends to continue and then once they begin to shift, yeah, similar to the rise in liquidity, you would expect to see a decrease in liquidity and that would then flow backwards, or call it through the system.

Gerard — — Analyst

Very good. And then second on, there has been talk on your call today as well as some of your peers about all the different types of wealth managers and asset managers in the system. Can you guys talk about pricing pressure? Do you find that this pricing pressure in different client categories or no, is there, you really don’t see it, because of — offerings that you don’t as well as your reputation has been on the high quality, wealth managers in the country.

Michael G. O’Grady — Chairman, President and Chief Executive Officer

There is pricing or fee pressure across all of our businesses. And that has been consistent for some time period. Now, does it ebb and flow at different time periods given other dynamics within one of our businesses, for example, or even within one of the — the services, yes. But if you just start with your — with the concept of fee pressure, is there and it’s our expectation that that will continue.

Now, on the other side of it, to your point is, what is our competitive positioning. And we, very much are focused on providing a differentiated service across each of our businesses. And in doing so, our intent is to be able to offset the market fee pressure. And now whether you can offset all of it or not, again, it depends on many factors, but we are looking to have a differentiated offering in the marketplace and not be commoditized as much as possible.

Gerard — — Analyst

In the fee pressures both on the institutional business as well as the personnel or is it more on the customer institutional buildings as we go through.

Michael G. O’Grady — Chairman, President and Chief Executive Officer

Yeah, it’s across the board.

Gerard — — Analyst

Okay.

Michael G. O’Grady — Chairman, President and Chief Executive Officer

And again, depending on the service or the product, you can have more or less, but I would say it’s across the board.

Gerard — — Analyst

Great. Always appreciate your intent. Thank you.

Michael G. O’Grady — Chairman, President and Chief Executive Officer

Sure.

Operator

All right. We can go ahead and take our next question from Brian Bedell, Deutsche Bank. Please go ahead, Brian.

Brian Bedell — Deutsche Bank — Analyst

Great, thanks very much. Hey, thanks very much for the follow-up. Just one last one on the balance sheet on the lending strategy, Jason, you mentioned balance sheet is there for the clients. Is there — is there a change in thinking on that — on the lending side, are you seeing more demand from your Wealth clients in particular in terms of their desire to either borrow more to fund projects or to benefit from the lower rates for other cash needs and are you more willing in the past to extend those loans? And then how do you think, in terms of the size of the balance sheet, how are you thinking about share repurchase given that you are now allowed to buy back up to your quarterly average net income for the first quarter?

Michael G. O’Grady — Chairman, President and Chief Executive Officer

On the loan question, most importantly, there has not been a change in our risk appetite or risk strategy. I’d say, if anything, it’s just been a change in an intensification of our communication strategy with our clients about what we’re about being here for them and being willing to be supportive as they — as they have liquidity needs. And the credit portfolios held in extremely well, obviously in the new — look at charge-offs or de minimis over the course of 2020. And non-performings crept up a tiny bit in fourth quarter, but still very, very low levels, less than 40 basis points. I think of the portfolio and our watch list actually declined for the period. So everything there looks good. It’s been, but that said, the bankers are intensifying their communication with clients about our lending capacity and willingness. And so that’s really the driver, and then as we think about the capacity of the balance sheet, the size of it, certainly not something that we’re actively looking to change in any way. We obviously take the fact that we now have the ability to go back into share repurchase seriously, it’s something we’ve already started engaging with our board on, so that we can at the appropriate time be back in the market, within the framework that I described earlier, but it’s not something where we’d say we’re trying to increase or decrease the size of the balance sheet of the capital level.

It’s not going to be monumental change from — would want — the fact that we were out of the market is not going to drive monumental change in how we think about the capital levels.

Brian Bedell — Deutsche Bank — Analyst

All right. Okay. Great. Thank you.

Operator

[Operator Closing Remarks]