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US Bancorp (NYSE:USB)
Q4 2019 Earnings Call
Jan 15, 2020, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to US Bancorp's Fourth Quarter 2019 Earnings Conference Call. Following a review of the results by Andy Cecere, Chairman, President and Chief Executive Officer and Terry Dolan, US Bancorp's Vice Chairman and Chief Financial Officer, there will be a formal question-and-answer session. [Operator Instructions] This call will be recorded and available for replay, beginning today at approximately 12 O'clock PM Eastern through Wednesday, January 22nd at 12 Midnight Eastern.

I will now turn the conference call over to Jen Thompson, Director of Investor Relations for US Bancorp.

Jennifer Thompson -- Director of Investor Relations

Thank you, James and good morning to everyone who has joined our call. Andy Cecere and Terry Dolan are here with me today to review US Bancorp's fourth quarter results and to answer your questions. Andy and Terry will be referencing a slide presentation during their prepared remarks. A copy of the slide presentation as well as our earnings release and supplemental analyst schedules are available on our website at usbank.com.

I would like to remind you that any forward-looking statements made during today's call are subject to risks and uncertainties. Factors that could materially change our current forward looking assumptions are described on page two of today's presentation, in our press release and in our Form 10-K and subsequent reports on file with the SEC.

I'll now turn the call over to Mr. Andy.

Andrew Cecere -- Chairman, President and Chief Executive Officer

Thanks, Jen and good morning everyone and thank you for joining our call. Following our prepared remarks, Terry and I will take your questions.

I'll begin on slide three. We reported earnings per share of $0.90, which included $0.18 per share of notable items which Terry will discuss in more detail in a few moments. Excluding these notable items, we reported earnings per share of $1.08 for the quarter. Loan growth was driven by new client wins and deepening relationships across all our loan portfolios and we delivered a very strong deposit growth. We continue to see strong account and volume growth across our key businesses. Credit quality was stable and our book value per share increased 6.7% from a year ago. In November, we received approval from the Federal Reserve for an incremental share repurchase plan, authorizing repurchases up to $2.5 million of common stock in addition to our existing authorization of $3 billion. In the fourth quarter, we returned $2.9 billion of our earnings to shareholders through dividends and share buybacks.

As indicated on slide four, digital uptake trends remained strong. We are significantly ramping up the launch of our DIY digital experiences that will continue to drive more and more customer interactions both on and off the mobile app as well as higher additional transactional volume.

Slide five provides key performance metrics. On a core basis, we delivered an 18.1% return on tangible common equity in the fourth quarter. For the full year, our core return on tangible common equity was 18.8%.

Now I will turn it over to Terry who will provide detail on the quarter as well as forward-looking guidance.

Terrance R. Dolan -- Vice Chairman and Chief Financial Officer

Thanks, Andy. If you turn to slide six, I'll start with the balance sheet review followed by a discussion of fourth quarter earnings trends. Average loans grew 0.8% on a linked quarter basis and increased 3.9% year-over-year. Linked quarter growth was driven by strength in residential mortgages, commercial real estate, and credit card loans. In C&I, paydown activity muted overall growth in the fourth quarter, primarily reflecting the rate environment and robust capital market conditions. New commercial business activity is healthy, however paydown activity is likely to continue to be a headwind near term albeit a diminishing headwind assuming that the interest rate environment is stable.

Turning to slide seven. Deposits increased 1.9% on a linked quarter basis and grew 6.6% year-over-year. Notably, average savings deposits grew by 11.1%, driven by across-the-board growth in wealth management, investment services, consumer banking, and commercial banking.

Turning to slide eight. Credit quality was stable in the fourth quarter. On a dollar basis, non-performing assets declined approximately 15% on both a linked quarter and a year-over-year basis. The ratio of non-performing assets to loans plus other real estate owned also improved linked quarter and year-over-year. The new accounting standard related to credit losses, commonly known as CECL became effective January 1st and has no impact on our 2019 results. We estimate that the adoption of CECL will result in a $1.5 billion cumulative effect adjustment to our allowance for loan losses compared with December 31st 2019, which is in line with our previous guidance.

Slide nine highlights fourth quarter earnings results. We reported earnings per share of $0.90, which included several notable items, which reduced earnings by $0.18 per share. Excluding these notable items, we reported earnings of $1.08 per share.

Slide 10 lists the notable items that affected earnings results for the fourth quarter of 2018 and 2019. Fourth quarter 2019 notable items included restructuring charges including severance and certain asset impairments and an increased derivative liability related to Visa shares previously sold by the company. As a reminder, we recognized several notable items during the fourth quarter of 2018, including a gain on the sale of our ATM servicing business and the sale of a majority of the company's covered loans as well as charges related to severance, asset impairments and an accrual for certain legal matters. Along with a favorable impact deferred tax assets and liabilities related to changes in estimates from tax reform, the net impact of notable items in 2018 was an increase of $0.03 per share. My remarks through the remainder of the call will be referencing results excluding notable items incurred in the fourth quarters of 2019 and 2018.

Turning to slide 11. Net interest income on a fully taxable equivalent basis declined by 3% year-over-year, in line with our expectations as the impact of loan growth and higher yields on reinvestment of securities was more than offset by the impact of our flatter yield curve and deposit funding mix. Our net interest margin declined by 10 basis points versus the third quarter. About 4 basis points of the decline was due to higher premium amortization expense in the investment securities portfolio. The remainder of the pressure can be attributed to the yield curve compression and earning asset mix, partly offset by lower deposit costs. We expect the net interest margin to be stable in the first quarter compared with the fourth quarter.

Slide 12 highlights trends in non-interest income. On a year-over-year basis, we saw a good growth in merchants acquiring revenue driven by account and volume improvement. As expected, credit and debit card revenue declined 1% year-over-year due to two [Phonetic] processing days in the fourth quarter of 2019. We look for credit and debit card revenue to return to a mid-single digit growth pace in 2020. Corporate payment products revenue declined 3.1%, driven by lower commercial business sales volumes. However, in the past few weeks, sales volume growth has returned to a mid single-digit growth rate. Trust and investment management growth reflected business growth and favorable market conditions. Deposit service charges were impacted by the sale of the company's ATM servicing business in the fourth quarter of 2018. The decline in treasury management fees from a year ago reflected the impact of changes in earnings credits, a residual effect of the rising rate environment in 2018. Notably, treasury management fees increased on a linked quarter basis, reflective of their recent interest rate declines in the third and fourth quarters of 2019. Mortgage banking revenue increased 42.7% year-over-year on strong origination and sales revenue growth. Compared with the fourth quarter of 2018, mortgage production volume increased by 92.3% and mortgage application volume increased by 83.8%. Refinancing activity represented approximately [Technical Issues] in the fourth quarter of 2019 compared to about 40% in the linked quarter. Refinancings represented 52% of applications in the fourth quarter. As of November, our digital mortgage app was being utilized by about 86% of all mortgage applications.

Turning to slide 13. The 3.1% year-over-year increase in non-interest expense reflected increased personnel expense, higher technology and communication expense, and higher net occupancy and equipment expense, reflecting actions to support business growth.

Slide 14 highlights our capital position. At December 31st, our common equity Tier 1 capital ratio estimated using the Basel III standardized approach was 9.1%.

I will now provide some forward-looking guidance. For the first quarter of 2020, we expect fully taxable equivalent net interest income to decline at a low single-digit pace year-over-year, but to be relatively flat linked quarter normalized for day count. We expect mid-single digit growth in fee revenue year-over-year. We expect low single-digit growth in non-interest expenses on a year-over-year basis. Credit quality in the first quarter is expected to remain stable compared to the fourth quarter and we expect our taxable equivalent tax rate to be approximately 20% on a full year basis.

I'll hand it back to Andy for closing comments.

Andrew Cecere -- Chairman, President and Chief Executive Officer

Thanks, Terry. We are operating in a dynamic environment and this quarter's results reflected the challenging interest rate environment facing the entire industry as well as the impact of actions we took to better position our company for the future. However, as our core financial metrics indicate, we ended the year on a solid note and we are in a strong position as we head into 2020. We view the interest rate environment as a manageable headwind and we are confident in our ability to prudently grow our balance sheet and gain market share in our fee businesses. Fee growth was negatively impacted by several headwinds in 2019. As Terry discussed, we expect the return to normalized growth in credit and debit card revenue this year. In a more stable interest rate environment, as a refi driven market shifts to purchase driven market, the investments we made in our mortgage business over the past several years will become increasingly evident in the form of market share gains.

We are proud of our strong and consistent financial track record, but we are always looking for ways to improve. That means we are changing the way we think, the way we work and the way we do business. As we move into 2020 and beyond, we will continue to increase workflow agility and speed to market for our products and services while at the same time optimizing our core operation to fund investment for the future. Our ability to leverage the combined dollar of our rapidly improving digital capabilities and our complete payment ecosystem will lead to higher staff customer satisfaction, stronger revenue growth and efficiencies and ultimately, improved returns.

In summary, we remain focused on managing this company for the long-term while delivering at a pathway to the future. I'd like to thank our employees for all we accomplished this year, supported by their hard work and commitment to creating value for all our customers.

We will now open-up the call for Q&A.

Questions and Answers:

Operator

[Operator Instructions] And your first question comes from the line of John Pancari from Evercore. Go ahead please. Your line is open.

John Pancari -- Evercore Partners Inc. -- Analyst

Good morning.

Andrew Cecere -- Chairman, President and Chief Executive Officer

Good morning, John.

John Pancari -- Evercore Partners Inc. -- Analyst

Just want to talk a little bit about the operating leverage expectation. I mean we got your comments around the quarter, but for full year '20, I know you had previously indicated that it could be a challenge to attain positive operating leverage for the full year given the rate backdrop, etc. Wanted to get your updated thoughts on that if you see that there is a chance you can get -- you could see positive operating leverage and what type of magnitude will that -- could you see?

Terrance R. Dolan -- Vice Chairman and Chief Financial Officer

Yeah. John, thanks. And as a reminder, we had a goal of achieving positive operating leverage in 2019. We did that on a core basis for the full year. When we think about 2020, our objective is to target positive operating leverage and we expect our expense growth to continue to remain in those low-single digits. So I think we have a number of levers that we continue to look at and pull in terms of optimization, continue with our physical assets, optimization of the branch system, our back office activities and a number of different things. So that's our goal, that's our objective at this particular point in time. Now that said, as you said in your question, 2020 is more difficult year, simply because of the revenue outlook. And I think part of being able to achieve it is going to be really based upon what happens with respect to interest rates etc. So that's kind of how we're thinking about it.

John Pancari -- Evercore Partners Inc. -- Analyst

Okay, great. Thanks. And then in terms of your -- some of the headwinds that had impacted your fee progression, I know there was the accounting change that impacted as well as there is couple of other items. Can you just talk about where do you expect underlying momentum to build in the fee businesses as you look at 2020?

Terrance R. Dolan -- Vice Chairman and Chief Financial Officer

Yeah. So when we end up looking at fee income, I think there's a number of different things that we end up looking at. I think the credit card revenue is stronger, again mid single digits as we think about next year and that particular line item was impacted by both an accounting item in 2018 as well as pretty slow first quarter in which we had talked about. I think merchant acquiring continues to accelerate and get strong and we expect mid-single digits there and then the CPS revenue. While we saw a decline in the fourth quarter because of a little slower commercial spending, that has come back in the first several weeks of the year and so our expectation in that category is kind of mid single-digits as well. Deposit service charges has been a drag this year because of the sale of the ATM business in 2018. Also that kind of normalizes at least flat in 2020. I think treasury management revenue is another area that we would expect, it's kind of hit an inflection point. So while it's down on a year-over-year basis, it is up on a linked quarter basis and we would expect that to be better than 2020. So I think there's a number of different things. I think the offset to that is -- and if you think about mortgage, when you talk about mortgage, market has been particularly strong in the last couple of quarters, but in 2019 it was also quite a bit of a drag in the first several quarters. So again, dependent on what happens with interest rates, but in the current environment, I think that continues to be a positive story. So I mean, I think there's a number of different areas.

John Pancari -- Evercore Partners Inc. -- Analyst

Okay Terry, that's helpful. Thank you.

Operator

And your next question comes from the line of Erika Najarian from Bank of America. Go ahead please. Your line is open.

Erika Najarian -- Bank of America Merrill Lynch -- Analyst

Yes, good morning.

Andrew Cecere -- Chairman, President and Chief Executive Officer

Hey Erika, how are you doing this morning?

Erika Najarian -- Bank of America Merrill Lynch -- Analyst

Good. Thank you. I heard you loud and clear on your expense growth, and I'm wondering though if the increased severance charges that we've seen could lead to a different geography in terms of expense growth and I guess I'm just looking back at your headcount, which seems to have risen sort of along, coincident with the Consent Order. And I'm wondering part of the initial statement upfront Andy, in terms of continuing to transform the business is trying to take some of the compensation growth that you experienced over the last three years and really putting that back in technology. Is that sort of how we should expect the geography could change underneath that low single digit expense growth that you're expecting for '20?

Andrew Cecere -- Chairman, President and Chief Executive Officer

I think that's not an unfair description, Erika. It's not just technology, but it's people and technology, but it's optimizing the way we're doing business to continue to invest in the future and our expense growth was higher during the Consent Order periods, but as you know, it's been in the low single digits in the last couple of years and mutually [Phonetic] notable items 2.4% year-over-year in 2019 and that includes optimization and expense takeout while at the same time investing in technology and people for the future and I would expect that to continue into 2020.

Erika Najarian -- Bank of America Merrill Lynch -- Analyst

And I guess I'm wondering if this -- our takeaway from that is because that seems like it's behind you. And again, it feels like the severance charges are setting up for further optimization and rationalization that you're accelerating the amount of dollars that you're putting into the future so to speak whether it's headcount related to that or technology itself?

Andrew Cecere -- Chairman, President and Chief Executive Officer

Yeah, I think that's a fair comment, Erika. Again, I think the shift is optimizing what I would call the back office and the branch network which are being impacted by customer behaviors as we transition to more of a digital environment, but at the same time we're reinvesting that in technology spend to support that digital transformation and so maybe a little bit of a shift from compensation to technology type of cost, but our expectation when we think about 2020 is to continue to make the investments in the business that we have been making over the last couple of years.

Erika Najarian -- Bank of America Merrill Lynch -- Analyst

Thank you. And just one more if I could squeeze it in. Deposit costs were down 15 basis points quarter-over-quarter. And I'm wondering underneath the 1Q NII outlook, will you expect for deposit cost trends for the first quarter and also if the curve outlook continues to be stable from here, could net interest margin for the rest of the year stabilize or potentially increase from 1Q levels?

Terrance R. Dolan -- Vice Chairman and Chief Financial Officer

Yeah. Well, certainly if the rate environment continues where it is today, our expectation is that 2020 net interest margin would be pretty flat to the fourth quarter with some possible positive bias dependent upon what happens on the long end of the curve, but that's kind of our thought process. And the reason for that is the premium amortization we've experienced in the third and fourth quarter is stabilizing at this particular point in time. When we think about deposit cost, deposit pricing, we have been pretty responsive on the institutional deposits in terms of bringing those repricing those down as rates have come down and I think from here on out, deposit pricing will be a function of both competition and what happens on the short end of the curve.

Erika Najarian -- Bank of America Merrill Lynch -- Analyst

Got it. Thank you.

Operator

[Operator Instructions] And our next question comes from the line of Scott Siefers from Piper Sandler. Go ahead please. Your line is open.

Andrew Cecere -- Chairman, President and Chief Executive Officer

Good morning Scott.

R. Scott Siefers -- Piper Sandler -- Analyst

Good morning guys. Hi. Thanks for taking the question. Just curious if you might be able to offer any just top level comments on the overall kind of pace of loan growth and overall demand. If you look at the HA data, it's definitely been held up or supported by the consumer side, but it's been a little surprising to see the slowdown of growth on the commercial side however. So I'm just curious given the breadth of you guys franchise and different types of customers you look at, what you're seeing at a very top level?

Andrew Cecere -- Chairman, President and Chief Executive Officer

Yeah. At a very high level again I think economically, we feel pretty optimistic in terms of what the outlook there is. If you end up looking at the components of loan growth, I think we saw pretty strong and good growth with respect to consumer lending. The area that was a little bit softer in the fourth quarter was really our C&I, our corporate sort of lending and that's principally while we saw production and the pipeline continuing to be reasonably strong, we saw a pretty significant paydowns that were taking place in that space, driven by capital markets activities and that's a function of the long end of the curve coming down in the third and probably fourth quarter. With that stabilizing, while we would expect some of the paydowns to continue into the first quarter, I think that will moderate.

R. Scott Siefers -- Piper Sandler -- Analyst

Okay, perfect. Thank you. And then just any additional updates on ramification from the LCR rules. I think you guys have been talking about $11 billion to $15 billion of liquidity free-up. Any updated thoughts on how you're thinking about that dynamic?

Terrance R. Dolan -- Vice Chairman and Chief Financial Officer

Yeah. That's in the ballpark in terms of the amount of how -- what the impact is with respect to LCR. We're continuing to look at different alternatives and part of it is thinking about extending duration a little bit, possibly investing a little bit more in agency mortgage-backed securities, which would provide a little bit better yield, but I think it will be on the margin and it won't be anything dramatic.

R. Scott Siefers -- Piper Sandler -- Analyst

Okay. All right. That's perfect. Thank you very much.

Operator

And there are no further questions in queue at this time. I'd like to turn the call back over to Jennifer Thompson for closing remarks. It looks like we did get one question. We do have a question from the line of Vivek Juneja from JPMorgan Chase. Go ahead please. Your line is open.

Vivek Juneja -- JPMorgan Chase -- Analyst

Thank you. Hi, Andy. Hi, Terry. Just wanted to clarify on credit debit card fees. What was the impact from two fewer processing days? What does that do and is there a reversal in 2020?

Terrance R. Dolan -- Vice Chairman and Chief Financial Officer

Yeah. Good question. There was an impact of two days that ended up really taking our fee income from kind of that low to middle single digits to the negative 1% in the fourth quarter. There is one extra day in 2020 relative to 2019, but let me just kind of dissect it a little bit because I think that is may be helpful. When you end up looking at the growth rate for 2019, it was really impacted by three different things. One is that there was an accounting change that occurred in the first quarter of 2018 that because of the lapping effect ended up depressing growth rates in 2019. In addition, if you remember the consumer spend level in the first quarter was significantly lower and it's kind of at an unusually low level and of course as the concerns around the economy stabilize, that consumer spend has come up. That has been in the mid-single digits in the second, third and kind of fourth quarter in terms of sales volumes. And then as you know getting back to the processing days, quarterly results can be lumpy, but when we think about 2020 in terms of on a full year basis, we really think that mid-single digits is a good target for us and a good estimate for us. Our sales volumes over the last several quarters have been kind of in that range and when you think about it on a day-adjusted basis, it's been pretty consistent from quarter-to-quarter. So in 2020, there is one more day and that will help a little bit, but mid single digits for 2020 I think is a good estimate. Again, quarterly results will be a little bit lumpy, but when we think about the year, that's kind of how we're thinking about it.

Vivek Juneja -- JPMorgan Chase -- Analyst

And then when I look back over the prior couple of years, you would have had -- this line item was growing at sort of more like 9% to 9.5% when you look at ' 17 to '18. Has there been -- going to the mid-single digits, has there been any reduction in pricing, a shift in the kind of contracts or is this higher rewards expense. What Terry is driving that slowdown from that high single-digit level to the mid-single digit run rate?

Terrance R. Dolan -- Vice Chairman and Chief Financial Officer

Yeah. The growth rates in 2017-2018 were influenced in some respect because of some portfolios that we were acquiring during that sort of time-frame, more so than other factors. And so when we think about pricing, there hasn't been a lot of compression with respect to pricing. We feel pretty good about that.

Andrew Cecere -- Chairman, President and Chief Executive Officer

And rewards has been relatively flat, but actually that isn't a factors, so that mid-single digit numbers are good way to think about in the next 12 months.

Vivek Juneja -- JPMorgan Chase -- Analyst

Okay. And as you think about from -- in terms of other fee revenues Andy, you said -- and Terry, treasury management should be good. Corporate card fees, when I look at that, that was also a little bit softer this quarter and it's actually down year-on-year. Any color on that, because I know the, yeah, I will just let you answer that.

Andrew Cecere -- Chairman, President and Chief Executive Officer

Yes. Vivek, the impact of that is because we saw in the last half of the fourth quarter, corporate spend activity slowed. That had been running in the mid-single digits little bit higher in the first few quarters. Fourth quarter saw a slowdown to almost flat and as Terry mentioned in his prepared remarks, we did see a pickup in the first two weeks of January back to the mid-single digits. So that was attributable to that slowdown, but it seems to have come back.

Terrance R. Dolan -- Vice Chairman and Chief Financial Officer

And I think that one of the reasons for that is, if you think about where the yield curve, how rates were moving, there was concerns about recession, people were uncertain with respect to economic data and then you had the hangover of tariffs. I think the sentiment on a corporate side appears to be looking better. We're going to be signing a trade agreement with China today I believe in terms of Phase 1 and the US, Mexico, Canada agreement is well on its way. So I think that some of that uncertainty that might have been impacting discretionary spend in the commercial side of the equation has been alleviated. So we feel pretty good.

Andrew Cecere -- Chairman, President and Chief Executive Officer

And I want to confirm one last thing. CECL day two. Could you talk a little bit about what do you see that doing to your provision expense Andy, Terry?

Terrance R. Dolan -- Vice Chairman and Chief Financial Officer

Yeah. We've talked about certainly day one and day two as part of Investor Day. The provision will increase. We think that in terms of loan growth, providing basically that kind of that 2% level versus 1.5% is kind of how we're thinking about, but there is going to be more volatility related to CECL. And I think one of the things we'll end up looking at is just what is the stability in the overall portfolio and what our net charge-off is doing on a quarter-to-quarter basis.

Vivek Juneja -- JPMorgan Chase -- Analyst

All right, thank you.

Operator

And we do have another question from the line of Ken Usdin with Jefferies. Go ahead please. Your line is open.

Amanda Larsen -- Jefferies & Co. -- Analyst

Hi, everyone. This is Amanda Larsen on for Ken.

Andrew Cecere -- Chairman, President and Chief Executive Officer

Hey Amanda, how are you doing?

Amanda Larsen -- Jefferies & Co. -- Analyst

Great. Thanks. I think it's understood that 2020 will likely be an aberration versus the long-term trends that you set out at Investor Day related to revenue growth headwind, but that you will still strive to achieve positive operating leverage in '20, but I'm wondering how negative could negative operating leverage be in '20 before you do take actions related to slowing the pace of investment spend or creating more sales?

Andrew Cecere -- Chairman, President and Chief Executive Officer

So as Terry mentioned, again earlier we expect and target positive operating leverage for 2020. We have a number of levers that we continue to pull to optimize the current organization structure to continue to invest in the future. So Amanda, the way we think about it is a balance of optimizing today and investing in the future while always targeting that positive operating leverage and that's how we're managing the company.

Amanda Larsen -- Jefferies & Co. -- Analyst

Okay, great. Then, can you guys talk about the capability add of Sage Pay and how you see US Bank's position evolving in the e-commerce payment arena over the medium term? Thanks.

Andrew Cecere -- Chairman, President and Chief Executive Officer

Yeah. We're very excited about Sage Pay. It is a leader in the e-commerce space within the UK and Ireland, and we also have the opportunity to be able to extend that into the rest of Europe. We have a pretty big footprint across Europe, so pretty excited about that as we think about next year. We ended up rolling out sort of similar e-commerce capabilities over the course of the last 12 to 18 months here domestically and so we believe that that gives us more capabilities in terms of being able to take advantage of e-commerce in the future.

Amanda Larsen -- Jefferies & Co. -- Analyst

Awesome. Thanks.

Andrew Cecere -- Chairman, President and Chief Executive Officer

Thanks Amanda.

Terrance R. Dolan -- Vice Chairman and Chief Financial Officer

Thank you.

Operator

Your next question comes from the line of John McDonald with Autonomous. Go ahead, please, your line is open.

John McDonald -- Autonomous Research -- Analyst

Hey guys. Sorry, I jumped on a little bit late. Did you give an update on the Charlotte expansion, Andy, and how that's going and whether you're targeting new areas for this year to expand on the retail side?

Andrew Cecere -- Chairman, President and Chief Executive Officer

Good morning, John. Charlotte is going well. We opened the branch about three months ago. We've had new customer acquisition growth in current customers. Employees are fired up. We are targeting a number of new branches to be opening up this year and still targeting that number of 10. We're learning a lot from that investment. We continue to track that and measure our activity and I would expect us to continue to expand in new markets, but our first focus is expanding to our target number in Charlotte.

John McDonald -- Autonomous Research -- Analyst

Got you, OK. Then Terry, just a couple clean-up things on NII. I think you mentioned the amortization kind of stabilizes early this year. Is that right? Then the roll-off rates, like where the tenure is today, are those kind of breakeven or slightly accretable where you're putting new money to work in the bond portfolio today relative to what's rolling off?

Terrance R. Dolan -- Vice Chairman and Chief Financial Officer

Yeah. So addressing kind of your second question first. The reinvestment with respect to securities is still about 15 basis points or so accretive. So we would expect that based upon where rates are today. The premium amortization does stabilize in the first quarter. So when we think about net interest margin for the year, we think it's going to be relatively flat, maybe a little bit of positive bias relative to the fourth quarter of 2019.

John McDonald -- Autonomous Research -- Analyst

Okay. So the down NII for the year is just the tough comps of where you started last year? I guess from a sequential standpoint, though, sales relatively stable?

Terrance R. Dolan -- Vice Chairman and Chief Financial Officer

Yes.

John McDonald -- Autonomous Research -- Analyst

Okay. Thank you.

Terrance R. Dolan -- Vice Chairman and Chief Financial Officer

Thanks John.

Operator

And with that, there are no further questions in queue. I'd like to turn the call back over to Jennifer Thompson for closing remarks.

Jennifer Thompson -- Director of Investor Relations

Thank you everyone for listening to our earnings call. Please contact the Investor Relations department if you have any follow-up questions.

Operator

[Operator Closing Remarks]

Duration: 33 minutes

Call participants:

Jennifer Thompson -- Director of Investor Relations

Andrew Cecere -- Chairman, President and Chief Executive Officer

Terrance R. Dolan -- Vice Chairman and Chief Financial Officer

John Pancari -- Evercore Partners Inc. -- Analyst

Erika Najarian -- Bank of America Merrill Lynch -- Analyst

R. Scott Siefers -- Piper Sandler -- Analyst

Vivek Juneja -- JPMorgan Chase -- Analyst

Amanda Larsen -- Jefferies & Co. -- Analyst

John McDonald -- Autonomous Research -- Analyst

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