While some headlines proclaimed that first-quarter results of T. Rowe Price (NASDAQ:TROW) proved disappointing, there's not much trouble to be found in its report. In fact, the picture looks sort of terrific.

Assets under management at T. Rowe climbed 4.5% from the prior quarter, reaching a record $349.9 billion. The firm reported an 18% increase in revenue, boosted by a 22% climb in average assets under management and a 17% rise in investment advisory fees. An additional $5.6 billion came from net market appreciation and income. Investors forked over $9.6 billion in new cash flows, showing strong demand for both separate account products and mutual funds. Net cash inflows were distributed among product lines, including retirement accounts, which usually represent "stickier" assets.

Performance measurements relating to investment advisory results were also strong. Management's outlook for the financial markets remains positive, although CEO James Kennedy noted increased market volatility and cautioned that corporate earnings growth may moderate over the year.

Upsetting some of the Wall Street crowd is that T. Rowe missed consensus profit estimates by two pennies per share, with higher expenses taking the blame. Operating expenses increased 15.4% to $289.5 million, with compensation rising 15% from the same period a year ago and comprising 64% of total costs. That's what can happen when head count grows by 7% to service more institutional and retail accounts.

One wants to be wary of escalating expenses, but the fact that net operating income rose to $218.9 million from $178.5 million from the same period a year ago supports the notion that these additional costs may have been prudent ones. So far, the firm's capital expenditures don't result in financial weakness and instead seem to wisely position it for growth against larger rivals like Legg Mason (NYSE:LM).

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Fool contributor S.J. Caplan does not own shares of any company mentioned in this article. The Fool has a disclosure policy.