FORTUNE -- For years Northern Trust watched other banks load up on risk. Lending standards disappeared, conservative balance sheets became a liability, and exotic investments were in vogue. Northern's approach was old school.
Today, Chicago's oldest and largest remaining independent bank is one of the industry's rare success stories. Last year it earned $864 million, and it was one of only two banks in the S&P 500 index not to cut its dividend. That helped Northern (NTRS, Fortune 500) jump two spots in Fortune's 2010 World's Most Admired Companies survey to No. 1 in its category for the first time.
The linchpin to Northern's success is its touch with rich clients. Unlike rival U.S. Trust, which was acquired by Bank of America (BAC, Fortune 500), Northern hasn't become part of a financial supermarket. Nearly half its $3.8 billion in revenue comes from wealthy clients (those with more than $1 million to invest), a percentage more than double that of many of its competitors. The rest comes from services for institutional investors, such as valuing derivatives.
During the height of the credit crisis, CEO Rick Waddell remembers walking through the Chicago headquarters as clients stood in long lines there and elsewhere to deposit a total of $90 million a day that they had moved out of other firms. "The marching orders I've given everybody: Take care of our clients, because they pay the bills around here," says Waddell, a 35- year veteran who started right out of Dartmouth.
That directive has worked out well for Northern, as wealthy families burned by Bernie Madoff and Wall Street banks look for stable firms. In the first quarter, new referrals, a key metric in the industry, jumped 30% -- the most since the early 1990s. Says Barclays Capital (BCS) analyst Jason Goldberg: "The fact that these guys have been around 120 years bears more credence today than it did three years ago."
Ironically, Northern faces a tougher market in the aftermath of the downturn. In the first quarter it booked a $20 million charge from money market fees it waived because of 0% interest rates. And its conservative investment book full of Treasuries earns little return. But with a burnished reputation and wealth rates growing again, the bank looks to expand in places like Washington, D.C., and China. As Waddell likes to say, "Then it's the matter of 'Who do you trust?'"