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Operator
Good morning, everyone and welcome to the National Bank Holdings Corporation 2016 fourth-quarter earnings call. My name is Mike and I will be your conference operator for today.
(Operator Instructions)
As a reminder, this conference is being recorded for replay purposes. I would like to remind you that this conference call will contain forward-looking statements, including statements regarding the company's loans and loan growth, deposits, strategic capital, potential income streams, gross margins, taxes and non-interest expense. Actual results could differ materially from those discussed today.
These forward-looking statements are subject to risks, uncertainties, and other factors which are disclosed in more detail in the company's most recent filings with the US Securities and Exchange Commission. These statements speak only as of the date of this call and National Bank Holdings Corporation undertakes obligation to update or revise the statements.
It is now my pleasure to turn the call over and introduce National Bank Holdings Corporation's Chairman, President, and CEO, Mr. Tim Laney.
- President and CEO
Thank you Mike, good morning and thank you for joining National Bank Holdings fourth-quarter earnings call. I have with me our Chief Financial Officer, Brian Lilly; and Rick Newfield, our Chief Risk Management Officer. I am pleased to report that we closed out 2016 with record earnings and record loan production of over $1 billion, resulting in 18% growth in our originated loan portfolio.
Equally important, we did so while adhering to in-house policies, which prudently limit the amount of loan exposure that we'll take within any one particular sector. Two sectors that we're frequently asked about are multi-family and agriculture. At year-end, our multi-family loan exposure was 1% of outstanding loans, and we have a 5% cap on that sector.
Agriculture exposure stood at 5% of loans outstanding, and -- that was at year end, and the maximum exposure cap on ag is 10%. Further, the highest exposure limit we have in the bank is 15% and the only sector with that limit is government lending, which is virtually all investment grade, and we are currently at 11.6% in that sector. As our bankers have continued to expand relationships with our clients, we realized an 8.5% annualized growth in low-cost deposits during the quarter. We are very encouraged by the prospects we see for deposit growth during 2017.
On the non-interest income front, we were flat quarter-over-quarter and Brian is going to speak to the growth opportunity we see in this area in 2017. Finally -- I think very important to note, that my teammates produced these results while working to produce and deliver a 14% reduction in non-interest expense compared to the prior year.
On that note, I'll now turn the call over to Rick and Rick's going to take a deeper dive into our loan portfolio.
- Chief Risk Management Officer
Thanks Tim and good morning, everyone. Let me start by discussing overall credit metrics and transfer the fourth quarter in for the full year. For the entire non 310-30 loan portfolio, inclusive of energy loans, our asset party metrics showed stable to improving trends during the year. Criticized loans and classified loans decreased from year-end 2015 to year-end 2016 with significant reductions in criticized loans. Non-accrual loans did increase year-over-year, however the ratio is relatively flat at 1.13% versus 1.08% at year-end 2015.
Energy loans still impact this ratio. Excluding energy, non-accruals are .69% of non 310-30 loans. Full year net charge-offs of $21.5 million were driven by energy loan charge-offs of $19.1 million. Excluding energy losses, net charge-offs for the year were 10 basis points, favorable to the 12 basis points incurred in 2015.
We managed our energy loan portfolio aggressively in 2016. Total energy loan balances are down 39% from $147 million at December 31, 2015 to $90 million at December 31, 2016. The criticized ratio for energy loans has improved from 37.7% at December 31, 2015 to 14% at December 31, 2016. $77.6 million or 86% of our energy loans are past rated.
Three non-accrual loans with balances of $12.6 million remain on the books. A subset of five problem loans identified in 2015. There were no new adversely rated energy loans in 2016 and two energy loans rated special mention were upgraded to pass in the fourth quarter. The asset quality of our energy portfolio is stronger as of December 31, 2016 than the prior year end, and we are well-positioned to put energy related problems behind us.
It's also noteworthy that we continue to maintain strong reserves against the energy portfolio at just under 4% of total energy loan balances and 28% of energy non-accrual balances. Let me cover the fourth quarter of 2016 specifically. For five quarters straight, commencing in the third-quarter 2015, we saw decreases in classified and non-accrual loans within our loan portfolio excluding energy. During the fourth quarter, we moved four C&I loans from special mention to substandard ratings and also moved two existing substandard accruing loans to non-accrual.
This is consistent with our practice to proactively identify problem loans and move them quickly through our workout process. As executed by our special assets team, the same special assets team and special assets leader that have cleared nearly $2 billion of acquired problem loans from our balance sheet with strong economic results. It is important to note that criticized loans, which does include classified loans, decreased significantly quarter-over-quarter, by nearly $22 million.
This reduction in pipeline for potential classified loans is an important trend and a positive leading indicator for risk migration in 2017. Also noteworthy is the net charge-offs for the quarter were only $129,000 or two basis points annualized. The low charge-offs resulted in provision expense of $1.3 million in the fourth quarter, driven by loan growth and down from $5.3 million in the third quarter. 30 day past dues remain well contained at only eight basis points with immaterial past dues of 90 days or greater.
As Tim said, we delivered another strong quarter of loan originations at $275 million, an increase of 15% over fourth-quarter 2015 and bringing the full-year total in 2016 to $1.037 billion. Commercial loans represent 55% of the fourth-quarter originations. Non-owner occupied commercial real estate was 11% across all property types or sectors and consumer, principally single-family residential loans was 34%.
Metrics relative to granularity and quality remain consistent with prior quarters. Our outlook for asset quality is favorable as begin 2017. As Tim mentioned, we maintain discipline relative to our self-imposed concentration limits across industry sector and real estate property type or sector.
Non-owner occupied commercial real estate across all property types or sectors is only 18% of our total loan portfolio and only 103% of our Company's risk-based capital and no individual property type or sector exceeds 4.5% of total loans. With respect to commercial industrial, we are well diversified across all industry sectors, with most industry concentrations at 5% of less of total loans and all concentration levels are well below our self-imposed limits.
With energy loan problems remaining contained a three residual problem loans and the overall credit quality of our loan portfolio remaining very good, I see provision expense in 2017 covering that loan growth at about 1% of net increases in balances and covering net charge-offs in the10 or 20 basis point range. The outlook for resolution of classified and non-accrual loans is favorable for the next couple quarters as we work to exit or otherwise resolve those loans quickly, as is been our practice. I will now turn the call over to Brian.
- CFO
Thank you, Rick, good morning, everyone. As you saw in yesterday's release, we delivered a record $0.36 earnings per share with a return of tangible assets of 95 basis point. We continue to realize solid trends in loans and deposits, fee income, credit quality and expense control. We also realize a favorable tax benefit totaling $2.1 million or $0.08 per share. With the early adoption of accounting standard ASU 2016-09, improvements to employee share-based payment.
Prior to this adoption, the realized tax benefit from vesting of share-based compensation awards, would have been recorded directly to capital. For the fourth quarter and going forward, the tax benefit from vested shares will be accounted for as a reduction in tax expense in the appropriate quarter.
We covered a lot in the release last night, so I will focus on the highlights as well as presenting our financial guidance for 2017. I will start with the economic assumptions inherent in the 2017 guidance.
Our markets have outperformed the national averages and we see nothing to disrupt this trend. With regard to interest rates, the current consensus is for three 25 basis point rate hikes in 2017. Given our asset sense of the balance sheet, we would benefit nicely.
Reflecting -- conservatism in our forecasting, we've only included one 25 basis point move in June. As both Tim and Rick mentioned, it is exciting to deliver on our goal of $1 billion loan originations for 2016. The quarters originations of $275 million, took the full year originations to $1.037 billion. Resulting fourth-quarter annualized total loan growth of 5.4% was muted by a record high level of payments and payoffs totaling $232 million, lead by some payoffs of non-owner occupied commercial real estate loans.
Even with the larger payments, the key loan category of commercial and industrial loans grew 11.9% annualized. In 2017 we are looking to build on the additional investments and momentum of our commercial banking teams, move past $1 billion in total fundings. We are beginning 2017 with strong commercial client pipelines and project to deliver full-year total loan growth of about 20%, while maintaining our discipline with the credit policy regarding industry concentrations and creditor exposure size, among others.
Turning to deposits, we had a good late-quarter average deposit annualized growth of 5.4%. This growth was led by 8.5% annualized growth at low-cost transaction deposits from both our business and consumer clients. Just as noteworthy is the fact that we have consolidated 12 of our banking centers or 12% over the last 18 months, while year-over-year fourth-quarter average transaction deposits increased 1.6%. Growing transaction with deposits while taking out the expense of 12% of our banking centers, is a real tribute to our associates.
Looking to 2017, we recently reached agreements to sell four banking centers and to consolidate one more. The banking centers to be sold have approximately $100 million in total deposits, with half in time deposits and are expected to be completed in the second quarter.
Even with the sale of $100 million deposits, we have planned that our relationship banking model will deliver total deposit growth for the year led by mid-single digit transaction deposit growth, while keeping time deposits flat after the reduction for the banking center sales.
In terms of earning assets, we are forecasting that we have reached an inflection point and will begin growing earning assets. Ending 2017 in a range of $4.4 billion to $4.6 billion. This growth will be driven by total loan growth and some investment portfolio reinvestment as we do see better return opportunities today.
Fully taxable equivalent net interest income totaled $36.8 million with the net interest margin of 3.46%. Both came in at the high-end of our guidance range that we provided last quarter, due to delivering our growth plans and higher levels of 310-30 accretion income.
For 2017 we are forecasting fully taxable equivalent net interest income to reach an inflection point. As interest income from loan growth will more than offset the decreasing high-yield 310-30 accretion income.
For the first quarter, we are carrying forward our prior quarterly guidance of fully taxable equivalent net interest income in the range of $35 million to $37 million and a net interest margin in the range of 3.35% to 3.45%. For the full year of 2017, we are forecasting fully taxable equivalent net-interest income to grow slightly over 2016 and the net interest margin to expand towards the high end of the 3.35% to 3.45% range as the year unfolds. Owing in part to the assumed 25 basis points fed hike in June.
As further guidance detail, we are forecasting the year-over-year net interest income increase even though we are projecting a decrease in the high-yielding 310-30 accretion income from 2016 actual of $33.3 million, to a forecast in 2017 range of $20 million to $22 million, with the normal trends of quarterly decreases. As usual, these estimates can be higher for accelerated accretion income and lower for changes in the estimated future cash flows and timing thereof, resulting from our quarterly remeasurement process.
Rick did a thorough job addressing credit quality. Taking our guidance for loan growth, net charge-offs and allowance levels, the 2017 provision for loan losses is expected to be in the range of $10 million to $13 million. Non-interest income totaled $10 million and was flat with the third quarter after considering the large OREO income we recorded last quarter. We also realized a net increase of $986,000 as swap related income due to the higher yield curve, which was offset by $902,000 recorded last quarter from gains of the FDIC pre acquisition charge-off loans.
Looking to 2017, we are expecting continued growth of our bank card fees, treasury management, and service charges, with the decreases in overdraft fees moderating. In combination we are forecasting these fees to collectively grow mid-single digits in 2017.
Now as you know, non-interest income showed several gains in 2016 totaling over $5 million, including pickups on the final resolution of OREO income, collection of FDIC pre acquisition charge-off loans and a large gain on the sale of a building. We are not forecasting much from these sources in 2017, but we are on pace to realize a second-quarter estimated gain of $3 million on the previously mentioned banking center sales.
In 2016, non-interest income totaled $40 million and we are forecasting 2017's total non-interest income at a similar level as we cover the larger gains in last year's result with the gain of banking centers and growth from our fee income sources. Given seasonality we have forecasted the first -- quarter in the range of $8.5 million to $9 million.
We continue good trends in the non-interest expenses as they totaled $34.4 million in the fourth quarter, increasing $1.1 million over the third, as we realize lower gains of the sale of OREO. For the year, expenses totalled $136 million. We are very pleased to have delivered better than our guidance at the beginning of 2016 of low $140's million and better than 2015 by $22 million or 13.9%.
As we put our plans together for 2017, we saw opportunities to invest in revenue-generating the areas of commercial banking, small business banking, and certain marketing activities. As such, some carryover benefits from 2016's expense savings and 2017's planned actions are being reinvested, such that we have planned total 2017's expenses to be flat with 2016's of a $136 million.
Included in this amount is a net zero impact from OREO and problem loan expenses as we plan OREO gains equal to work out expenses of $2.7 million. With a clear potential upside to the OREO gains to be realized this year. With that said, we will continue work to identify additional opportunities to manage expenses lower, creating better operating leverage.
Regarding the tax rate, we are repeating prior guidance with the forecasted 2017 fully taxable equivalent tax rate in the range of 29% to 31%.
Capital ratios remain strong with $60 million in excess capital at year end using a 9% leverage ratio. After an incredibly successful buyback program these past few years, whereby we bought in 51% of shares outstanding at a weighted average price of just $20.03 per share. We are [pausing] today.
As I mentioned, our 2017 forecast calls for our earning assets to begin growing, thereby requiring capital and we will continue to look for opportunities to profitably deploy excess capital to support growth. One final comment would be that we have forecasted average fully diluted shares to be in the range of $27.5 million to $28 million for 2017. You will note that the dilution calculation of stock compensation shares increased and was primarily driven by the share price appreciation during the fourth quarter.
Tim, that concludes my comments.
- President and CEO
Thank you, Brian. Brian covered an incredible amount of ground, so the only additional guidance I will provide is that we do intend to consider another dividend increase as our earnings continue to strengthen. I'll simply close by thanking my teammates and our Board of Directors for their focus on healthy growth and their commitment to always putting our clients first. Again, thank you for joining today, and Mike, let's open up the line for Q&A.
Operator
(Operator Instructions)
Gary Tenner, DA Davidson
- Analyst
Just a couple questions because Brian you did cover a lot of ground here. Curious with your guidance based on the one rate hike in June. Can you give us just a sense leverage wise, let's say if there was at least one more in September, what's the kind of incremental benefit or impact margin from that?
- CFO
Gary, I think the way we look at that is, is what we disclosed as the -- on our rate [shocks], think about 100 basis point move in the yield curve a parallel shift in that. That would be worth $5 million to 6 million to us on an annual basis. And so as you think about the timing of when you are hitting that, you're going to impact 2017 but then of course there will be carryover benefit in 2018 and so that's how we look at it.
- Analyst
Okay and then just to ask about the deposits again, it looked like on the interest-bearing deposit side, the rates there or the yield on that, kind of bottomed, I think fourth-quarter 2015, first-quarter 2016. You've had a couple quarters where they've crept up a bit. Is any of that in anticipation of the branch sales or is it just competitive pricing pressure in your markets?
- CFO
It's just primarily -- we've been pretty stable in our yields, our rates, that we are paying on a deposits. It's just [make] shifting. We did see CDs, I guess over the past couple years, tick up a little bit.
It was late last year we were putting on incremental CDs with 15 year -- 15 month average in a rate paid about 50, 55, 60 [fifths]. That has crept up to 70 fifths now and so you will see time deposits move just a little bit there. But we feel pretty good about where those are and certainly the benefit going forward is continuing that mix towards those low-cost transaction deposits.
- President and CEO
I agree, Brian. Gary, I would add that -- the one thing we have done, is of course we consciously over the last several years, let the single CD users fall away and we have looked at programs where we reward our clients that have more extensive relationships with slightly better pricing on some of their CDs. There is a relationship element there, but I think Brian really hit the more salient points.
- Analyst
Okay, great and one last quick question. Brian your outlook for 20% longer. Was that total loan growth or just the non-310-30 loan growth?
- CFO
It's a total. We're putting all the pieces together there. Thankfully -- the good and bad news is the 310-30 was great while we had it, but it is becoming less of an impact.
- President and CEO
It is time for it to go away.
- Analyst
Thanks, guys.
Operator
Matt Olney, Stephens
- Analyst
I want to go back to Gary's question on the loan growth, the 20% net loan growth outlook, implied a pretty good acceleration from what we saw in 2016. Can you kind of speak to the acceleration, kind of the difference what you expect to see in 2017 that you did not see in 2016?
- President and CEO
I would encourage Rick and Brian to jump in here as well, but I don't think of it as an unusual acceleration as much as I do just a continuation of the trend and this move toward, as we talked about running on all cylinders. And we just -- I'll just remind you it wasn't that many years ago that we were talking about $25 million, $50 million in a quarter. Now we're talking about $250 million, $275 million, $300 million in a quarter. We have built our commercial banking team.
We have -- developed better and better relationship managers. You will actually see that we've made -- we have even stepped up and made an investment where there were some opportunities to bring on banking teams. For example, down in Texas with a new leader there. We've just brought on frankly, a new leader here in Colorado that we are super excited about.
It's really as much as anything, Matt, about that continued trend and increasing momentum and then finally, perhaps the most important point beyond the quality of our people is the point Brian made earlier, which is we're in solid markets and we see no indication that they are going to be backing off this year. I hope that helps.
- Analyst
That does help and can you also weave in the topic of paydowns into the response? I think energy paydowns were a thorn in the side during 2016. Is the guidance assuming similar amount of paydowns or less? Any kind of context there would be helpful.
- Chief Risk Management Officer
This is Rick. Let me give you little color on that. I would not read too much into the last couple quarters in terms of the payoffs, paydowns. [Revolver] utilization ticked down a couple percent, 2%, 3% during that period. And then the other factor and I think Brian alluded to this, we had some non-owner occupied commercial real estate paydowns.
That's clients taking their properties to permanent market. To your point on energy, we certainly did have a downdraft but as I said, not only well position from asset quality standpoint but our clients that have maintained good balance sheets over the last couple years, may see some opportunity in 2017.
- CFO
Maybe to give you a little bit more on that Matt, if you think about we delivered 11% total. The energy did cost us upwards of 3 percentage points on that growth. Then when you look at the other pieces of the 310-30 and some of the purchase loans -- because they were larger portfolio, they contributed more to that decrease too. When you start to adjust for those, you start to get closer to that 20%. We delivered this year, plus the optimism we have for the number associates and experience that we brought on in the commercial team and you get to that 20%.
- Analyst
That's all helpful. Then as far as the securities book. It sounds like you are now considering growing this book, which is definitely an inflection versus the last few years. Can you talk more about why now? Is it more the size the book is, that you feel more comfortable or is it more about a lot more opportunities in the market right now?
- CFO
Just to be clear, you will see the investment book continue to come down, through the year. What I -- we have not bought a security in 4, 3 years, but where rates are moving, and we see some opportunity even in our duration, with some of our deposit growth plans to work in the investment portfolio; so I am not broadcasting that we are going to grow the portfolio.
We are actually going to continue to shrink the investment securities as we'll put that to work in the loan portfolio but we will add a little bit as we go forward. In fact, we added some here in January where rates were. Not significant amounts, but just giving you that heads up.
- Chief Risk Management Officer
But the net net will be a continued reduction.
- Analyst
I appreciate the clarification. That is all for me. Thanks, guys.
Operator
Tim O'Brien, Sandler O'Neill.
- Analyst
First question I have is, you ended the year with $90.3 million in energy [claims]. Tim, can you talk a little bit about your outlook for getting back into that market or maybe you didn't really leave it, but just give some color on what you want to accomplish in the energy sector here in 2017?
- President and CEO
Sure Tim, I'll began and I'll turn to Rick. As a practical matter, we did meaningfully down size our energy team. We have maintained (inaudible) of what we consider to be and what has proven to be very strong energy businesses.
At this point I would tell you the attitude is to support those clients and their growth and at this point, to cautiously consider any additional growth, but let me turn it to Rick for your thoughts, Rick.
- Chief Risk Management Officer
Tim, I think you hit the tone dead on. The only thing I would add maybe, to a comment I made earlier, is that these clients have been on the sidelines in terms of growing activity, during the expiration of production space.
Our seeing potential to do some things in 2017, they are remaining cautious but they've got the liquidity and the balance sheet and the availability to do some things in 2017, but I'd echo what Tim said. We continue to be cautious and selective in what we do.
- Analyst
So not active in the market for new clients there?
- Chief Risk Management Officer
Certainly in conversations but I would say relative to where we all might have been three or four years ago, now.
- Analyst
Then another question -- thanks, that's great color. Another question is, maybe for Brian. With the December rate hike, did you guys have a good chunk of loans reprice the day after or reset to a higher prime rate the day after and if you did, you could quantify what the dollar amount was? I'd love to know.
- CFO
The answer is clearly yes. We've been -- as you have been hearing, for a couple years now, over 50%, 60% of our production on the commercial side is in variable-rate, resetting the three-month LIBOR that we've been checking. Not a lot of prime, so you don't pick up the full 25 [Bps] LIBOR [prime], moves a little bit differently, although directionally the same.
You will see a benefit in our results. I guess I'd go back to the rate shock that I provided earlier, that $5 million to $6 million for a 100 basis point. When you get down to the granularity of just a quarter, as you know, it moves interest income, then there is a question as to what happens on the deposit side.
Early indications are is that the market and the industry is holding on the deposit side, so we're going to see interest income, the benefit of the interest income here in the first quarter, which could be wider than the guidance I gave for the shock. If you look at averaging the year, it is in the guidance that provided for the net interest margin and the income.
- Analyst
Fourth quarter was a good quarter for you. You saw some pretty good increases in some of those three month LIBOR rate loans, right? Is that fair to say? I think we saw it at other banks.
- CFO
We saw some movement there. Sure. You saw it, in our kind of a non -- if you looked at our margin analysis, our non 310-30 yield quarter picked up and that's directly attributed to that.
- Analyst
Brian, do you happen to have a dollar amount, aggregate number of loans that priced up in the quarter, LIBOR based loans that priced up in the quarter?
- CFO
No, I don't have that at my fingertips. Certainly we have that in our [alco] packages.
- Analyst
It's a great starting point to know that for conversations.
- CFO
Okay.
- Analyst
Going forward, but, people can work off of that and better understand what your potential is for building your margin, I guess. Another question that I have for you is, no branching plans or [general] plans for 2017, probably, right? It sounds like you are going to do a little bit of consolidation?
- President and CEO
Tim, thank you for that question because it gives us the opportunity to talk about something we're very excited about. While -- we'll continue to look at consolidation of brick and mortar, one investment we are making this year that is already been launched is, and forgive me because, I'll just simply say more detail is forthcoming.
We have an opportunity to meaningful expand our ATM distribution system here in the front rage of Colorado. In conjunction with that, I would say while we are reducing our investment in brick and mortar, we are continuing to look at ways of efficiently enhancing our mobile capabilities and mobile access for both our commercial and individual clients.
As it relates to distribution, the real focus is on the ATM network, the payback analysis we've done on that front is very exciting. We have the benefit of serving existing clients and then the non [onus] -- benefits are quite attractive as well.
Again, I don't think there's anything I could say to anyone on this line that would help you understand the importance of continuing to improve mobile access. I think we all get that.
Great question, Tim. Short answer, continued look at consolidating brick and mortar, expansion on the mobile and ATM front.
- Analyst
That's great color. How will you inform investors and also inform clients of this expansion and how they can take advantage of it I guess? In coming months or what is the timing for that, Tim?
- President and CEO
I suspect we will be more than ready to discuss this at the end of the first-quarter earnings call, and, of course, we will be marketing and communicating the accessibility to our clients over the course of the year as the distribution network unfolds.
- Analyst
Brian, I would love a follow-up, if you can on the LIBOR number.
- CFO
Sure. We'll get it. Look I've got things rolling through my head but what works true is the purchase loans impact, what I would say. I want to make sure I have the right number for you.
(Operator Instructions)
Operator
[Kelly Mata], KBW.
- Analyst
I'm on for Chris McGratty. Most of my questions have been already asked and answered, but I guess just on the margin, I was wondering if you are breakdown of the mix of variable versus fixed loans that you have, as well as what it's maybe been for originations for this quarter?
- CFO
Your first question is similar to what Tim was just asking on the portfolio mix so maybe I'll get back to Chris on that too. On the mix we've been running and we did again this past quarter that 50% to 60% variable on our originations. That's, well you can imagine we've been say that for a couple years, so Tim, on the originated portfolio is getting pretty darn close -- in fact it is that on the originated, I just have to factor in the purchase portfolio in that kind of thinking.
- President and CEO
Kelly, we will continue to focus on delivering variable rates to our clients when and where possible, and it is important to note particularly in a rising rate environment that we do work to provide clients fundamental interest rate swaps for protection. We think it protects our clients and the bank. It is just a real win win but that's where we stand today and, again, we are always challenging ourselves to build an even larger variable portfolio.
- Analyst
On that point, I saw the swap fees, were a bit higher this quarter. Kind of going off of that, what is your outlook for those fees in the coming year what's the expectation for rising rates?
- President and CEO
I think the way look at that -- I'm glad you brought that up. We did pick up the $900,000 plus and that's from the rate curve moving up, but if you look at it for the year, it pretty well is flat. We took some hits in the first and second quarter that got offset by a flat third quarter and then we picked it up.
When we plan on a go-forward basis, we just assume that the current rate curve -- I guess the longer end of that [is continued] where it is so we didn't make any increases or decreases from that particular movement of the yield curve. But we do have plans, our normal business with our clients that will continue to realize -- they will continue to want to lock in interest rates, will want a variable, so we just enter into swap agreements with them, which will generate income for us.
- CFO
I would simply add that if we continue to see a rising interest rate market, I will be surprised if we don't over achieve our internal plan. I mean it would just -- having lived to enough of these cycles, clients get very interested in net interest rate protection in this environment. Again, it is a great question and I would say more to come, but let's see what happens in the market in the coming months.
- Analyst
Thank you.
Operator
I am showing we have no further questions at this time. I will now turn the call back to Mr. Laney for his closing remarks.
- President and CEO
All right. Thank you, Mike, and I will simply thank everyone again for joining us today, and we look forward to continued conversations. Have a good day and a good weekend.
Operator
And this concludes today's conference call. If you would like to listen to the telephone replay of this call, it will be available beginning in approximately two hours and will run through February 10, 2017 by dialing 855-859-2056 or 404-537-3406 and referencing the conference ID of 92242698.
The earnings release and on-line replay of this call will also be available on the company's website on the investor relations page. Thank you very much and have a great day. You may now disconnect.