Executive Vice President, Chief Financial Officer at Northern Trust
Thank you Mike. Let me join Mark and Mike in welcoming you to our first quarter 2022 earnings call. Let's dive into the financial results of the quarter starting on Page 2. This morning, we reported first quarter net income of $389.3 million. Earnings per share were $1.77 and our return on average common equity was 14.2%. Results for the quarter included $18.5 million and reclassification of certain fees that were previously recorded in other operating income or as a reduction to other operating expense that are now included in trust, investment and other servicing fees. Of that amount, $6.9 million relates to fees previously recorded in other operating income, with $3.5 million now included in asset servicing trust fees within the other category and $3.4 million in wealth management trust fees.
Additionally, $11.6 million that was previously recorded as a reduction to other operating expense is now included in asset servicing investment management fees. Prior-period adjustments have not been reclassified and these reclassifications resulted in no impact pre-tax or net income. Let's move to Page 3 and review the financial highlights of the quarter. Year-over-year, revenue was up 9% and expenses increased 8%. Net income was up 4%. In the sequential comparison, both revenue and expenses were up 3%, while net income was down 4%. The provision for credit losses was $2 million in the current quarter. Return on average common equity was 14.2% for the quarter, up from 13.7% a year ago and down from 14.5% in the prior quarter.
Let's look at the results in greater detail, starting with revenue on Page 4. Trust, investment and other servicing fees, representing the largest component of our revenue, totaled $1.2 billion and were up 10% from last year and up 5% sequentially. Foreign exchange trading income was $81 million in the quarter, up 3% year-over-year and up 5% sequentially. Both the year-over-year and sequential growth were driven by higher client volumes and market volatility. The remaining components of non-interest income totaled $88 million in the quarter down 12% from one year ago and down 25% sequentially.
Within this, security commissions and trading income was up 4% from the prior year and up 1% sequentially. Other operating income totaled $41 million and was down 25% from one year ago and down 43% sequentially. The increase -- the decrease compared to the prior year was primarily driven by the previously referenced $6.9 million accounting reclassification. The sequential decrease was primarily due to gains from property sales in the prior quarter, the aforementioned accounting reclassification and lower distributions from investments and community development projects. Net interest income, which I'll discuss in more detail later was $388 million and was up 12% from one year ago and up 5% sequentially.
Let's look at the components of our trust and investment piece on Page 5. Our newly named asset servicing business these totaled $662 million and were up 7% year-over-year and up 6% sequentially. Custody & Fund Administration fees were $453 million and up 2% year-over-year and down 1% sequentially. The year-over-year growth was primarily driven by favorable markets and new business, partially offset by unfavorable currency translation and lower transaction volumes.The sequential decline was driven by lower transaction based fees and unfavorable currency translation, partially offset by favorable market to new business.
Assets under custody and administration for asset servicing clients were $14.5 trillion at quarter end, up 5% year-over-year and down 4% sequentially. The year-over-year growth which was primarily driven by favorable markets and new business, partially offset by unfavorable currency translation. The sequential decline which was primarily attributable to unfavorable markets and currency translation. Investment management fees and asset servicing of $147 million were up 27% year-over-year and up 30% sequentially. The year-over-year performance was primarily driven by new business, the previously mentioned $11.6 million accounting reclassification and favorable markets.
Sequentially, the increase was primarily due to lower money market mutual fund fee waivers and the accounting reclassification. Fee waivers and asset servicing totaled $28 million in the first quarter, compared to $51 million in the prior quarter and $28 million in the prior-year quarter. Assets under management for asset servicing clients were $1.1 trillion, flat year-over-year and down 8% sequentially. The sequential decline was driven by market declines and client flows. Securities lending fees were $19 million up 3% year-over-year and flat sequentially. Average collateral levels were flat year-over-year and down 4% sequentially. Other trust fees were $44 million up 9% compared to the prior year and 24% sequentially. Both the prior-year and sequential increases were due to the previously referenced $3.5 million in accounting reclassification. The sequential performance was also driven by higher seasonal benefit payment services fees.
Moving to our wealth management business; trust, investment and other servicing fees were $506 million and were up 14% compared to the prior year and up 4% from the prior quarter. Fee waivers in wealth management totaled $23 million in the quarter compared to $30 million in the prior quarter and $22 million in the prior-year quarter. Within the regions, the year-over-year growth was driven by favorable markets and new business. For the sequential performance, the growth within the regions was primarily driven by favorable markets, lower fee waivers and new business.
Within Global Family Office, the year-over-year performance is driven by new business and favorable markets. The sequential increase is mainly related to new business and lower fee waivers. For both the regions and Global Family Office, the previously referenced $3.4 million in accounting reclassification also contributed to the year-over-year and sequential increases. Assets under management for wealth management clients were $396 billion at quarter end, up 11% year-over-year and down 5% on a sequential basis. The year-over-year growth was driven by client flows and favorable markets while the sequential decline was driven by client flows and lower markets.
Moving to Page 6. Net interest income was $388 million in the quarter and was up 12% from the prior year. Earning assets averaged $150 billion in the quarter up 7% versus the prior year. Average deposits were $139 billion and were up 10% versus the prior year while loan balances averaged $40 billion and were up 16% compared to the prior year. The net interest margin was 1.05% in the quarter and increased 5 basis points from a year ago, driven primarily by volumes and mix as well as higher interest rates.
On a sequential quarter basis, net interest income grew 5%. Average earning assets grew 1% and average deposits grew 2%, while average loan balances were down 1%. The net interest margin increased 6 basis points sequentially, driven by primarily higher average interest rates. Turning to Page 7, the expenses were $1.2 billion in the first quarter and were 8% higher than the prior year and up 3% from the prior quarter. The current quarter's expenses included the impact of the $11.6 million accounting reclassification which increased other operating expense. The prior quarter included a $9.5 million charge related to severance and a pension settlement.
Excluding these impacts, expenses were up 7% versus the prior year and up 3% sequentially. Excluding severance charges in the prior quarter compensation expense was up 9% compared to the prior year and was up 12% sequentially. The year-over-year growth was primarily driven by higher incentives and salaries. The sequential increase was primarily due to higher equity-based incentives as well as higher salaries. The current quarter's equity incentives included $49 million in expense associated with retirement eligible staff, compared to $32 million in the prior year.
Employee benefits expense was up 1% compared to the prior year and was flat with the prior quarter, excluding last quarter's $3.4 million pension settlement charge. Outside services expense was $213 million and was up 9% from a year ago and down 5% from the prior quarter. Revenue and business volume expenses accounted for just over one half of the year-over-year growth. The remaining year-over-year growth reflected higher technical services and consulting expenses. The sequential decline was primarily driven by lower technical services, consulting, legal and third party adviser cost.
Equipment and software expense of $194 million was up 10% from one year ago and down 1% sequentially. The year-over-year growth was primarily driven by higher software support, rental and amortization costs. Occupancy expense of $51 million was up 1% from a year ago and down 1% sequentially. Other operating expense of $80 million was up 11% from one year ago and up 1% sequentially. The year-over-year increase was driven by the accounting reclassification, partially offset by lower miscellaneous expenses. The sequential performance was impacted by the accounting reclassification, partially offset by lower business promotion expense.
Turning to Page 8. Our capital ratios remain strong with our common equity tier ratio of 11.4% under the standardized approach down from the prior quarter's 11.9%. Our Tier 1 leverage ratio was 6.5% down from 6.9% in the prior quarter. An increase in net unrealized losses on the available for sale securities portfolio was a primary factor in this quarter's decline in capital ratios. During the quarter, we purchased 295,000 shares of common stock totaling $34 million and we declared cash dividends of $0.70 per share totaling $147.8 million to common stockholders.
The current environment continues to demonstrate the importance of a strong capital base and liquid balance sheet profile to support our clients' needs and we continue to provide our clients with the exceptional service and solution expertise they've come to expect from us. Our focus remains on balancing a variety of factors in the months ahead. With the prospect of continued higher interest rates benefiting our net interest income and inflationary pressures impacting our expense base. As our trust fees are impacted by both quarter lag and month lag markets, the negative markets in the first quarter will be more impactful for us in the second quarter. We continue to be relentlessly focused on strengthening our competitive positioning within each of our businesses, investing in our workforce and technology, all while delivering attractive returns.
Thank you again for participating in Northern Trust's first quarter earnings conference call today. Mike, Mark, Lauren and I are happy to answer your questions.
Jennifer, will you please open the line?