<PAGE>
To Our Stockholders
- --------------------------------------------------------------------------------
1996 was a good year, but not a record year.
Net profits totaled $70,232,000, a decline of 14.6% from the record $82,241,000
set in 1995.
For the twenty-fifth consecutive year the Company met its goal of a 15% return
on average stockholders' equity.
Likewise, for the twenty-fifth straight year total assets on December 31 reached
a record high - $6,912,057,000 - an increase of 13% over the 1995 high of
$6,110,542,000.
The primary reason for the decline in net profits was management's decision to
increase the provision for loan losses which resulted in the allowance for loan
losses being strengthened by $37,072,000, or 55%. This exceptional addition to
reserves is in recognition of the increase in delinquent consumer credits and
the national trend toward higher charge-offs in credit card and other consumer
lending portfolios.
The Company's net profits before taxes and before the provision for loan losses
increased 26.4% from $232,858,000 to $294,412,000.
During 1996 we were pleased to welcome the employees of the Bank of Boulder in
Boulder, Colorado. We are now serving the fast growing front range area north of
Denver from 13 locations. During the year we also opened two new branches in the
Kansas City market and one in Bellevue, Nebraska.
We want to thank the more than 4,500 employees who have worked hard to help the
Company grow during 1996.
F. Phillips Giltner Bruce R. Lauritzen
<PAGE>
First National of Nebraska and Subsidiaries
Performance Trends
- --------------------------------------------------------------------------------
BAR GRAPHS DEPICTING:
<TABLE>
<CAPTION>
Assets 1996: $6,912,057,000 Earnings 1996: $70,232,000 Capital & Loan Loss Allowance
1996: $592,778,000
<S> <C> <C> <C> <C> <C>
YEAR $ MILLIONS YEAR $ MILLIONS YEAR $ MILLIONS
- ------------------------------- ------------------------ -----------------------------
1972 298 1972 1.959 1972 20
1973 366 1973 2.213 1973 22
1974 360 1974 2.405 1974 20
1975 351 1975 2.597 1975 18
1976 372 1976 3.155 1976 20
1977 439 1977 3.614 1977 23
1978 503 1978 3.976 1978 27
1979 583 1979 4.473 1979 31
1980 625 1980 5.075 1980 35
1981 666 1981 5.743 1981 41
1982 715 1982 6.575 1982 46
1983 844 1983 7.000 1983 49
1984 873 1984 8.700 1984 59
1985 1,081 1985 10.076 1985 69
1986 1,118 1986 11.637 1986 80
1987 1,314 1987 15.133 1987 95
1988 1,726 1988 23.253 1988 121
1989 2,076 1989 28.123 1989 147
1990 2,548 1990 33.217 1990 186
1991 3,033 1991 40.017 1991 225
1992 3,574 1992 52.126 1992 272
1993 4,272 1993 70.082 1993 345
1994 5,262 1994 77.133 1994 415
1995 6,111 1995 82.241 1995 498
1996 6,912 1996 70.232 1996 593
Loans 1996: $5,107,041,000 Deposits 1996: $5,836,169,000 Return On Average Equity 15.4%
YEAR $ MILLIONS YEAR $ MILLIONS YEAR %
- ------------------------------- ---------------------------- ----------------------------
1972 152 1972 251 1972 13.5
1973 183 1973 296 1973 16.5
1974 172 1974 299 1974 17.4
1975 175 1975 280 1975 18.5
1976 202 1976 302 1976 19.5
1977 215 1977 336 1977 19.2
1978 265 1978 369 1978 18.2
1979 327 1979 411 1979 17.9
1980 297 1980 428 1980 17.7
1981 377 1981 411 1981 17.4
1982 426 1982 432 1982 17.1
1983 528 1983 557 1983 16.3
1984 645 1984 608 1984 18.6
1985 738 1985 741 1985 18.0
1986 813 1986 799 1986 18.0
1987 988 1987 970 1987 19.8
1988 1,321 1988 1,308 1988 25.7
1989 1,581 1989 1,642 1989 24.3
1990 1,890 1990 2,097 1990 23.2
1991 2,224 1991 2,575 1991 23.3
1992 2,602 1992 3,070 1992 24.7
1993 3,184 1993 3,652 1993 26.8
1994 3,945 1994 4,383 1994 24.1
1995 4,451 1995 5,090 1995 20.8
1996 5,107 1996 5,836 1996 15.4
</TABLE>
2
<PAGE>
First National of Nebraska and Subsidiaries
Financial Highlights
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------
(Amounts in Thousands Except Per Share Data)
<S> <C> <C> <C> <C> <C>
Total assets $ 6,912,057 $ 6,110,542 $ 5,261,907 $ 4,271,853 $ 3,573,556
Net income $ 70,232 $ 82,241 $ 77,133 $ 70,082 $ 52,126
Stockholders' equity $ 487,966 $ 429,831 $ 359,216 $ 295,355 $ 231,083
Allowance for
loan losses $ 104,812 $ 67,740 $ 55,265 $ 49,589 $ 41,298
=========================================================================================================================
=========================================================================================================================
Per share data:
Net income $ 202.53 $ 237.17 $ 222.43 $ 202.10 $ 150.32
Dividends (1) $ 37.22 $ 33.73 $ 38.07 $ 16.86 $ 30.42
Stockholders' equity $ 1,407.19 $ 1,239.54 $ 1,035.90 $ 851.74 $ 666.39
==========================================================================================================================
(1) On a historical basis, the dividend of $10.92 per share paid in December 1992 would have been paid in January 1993.
==========================================================================================================================
Profit ratios:
Return on average
equity 15.4% 20.8% 24.1% 26.8% 24.7%
Return on average
assets 1.1% 1.5% 1.7% 1.9% 1.7%
==========================================================================================================================
Banking Locations
</TABLE>
<TABLE>
<CAPTION>
MAP DEPICTING:
Nebraska South Dakota Kansas Colorado
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Omaha Yankton Kansas City Fort Collins
North Platte Greeley
Columbus Loveland
Kearney Windsor
Fremont Boulder
Beatrice
David City
Chadron
Alliance
Scottsbluff
Gering
Norfolk
</TABLE>
3
<PAGE>
First National of Nebraska and Subsidiaries
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
December 31,
Assets 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
(Amounts in Thousands)
<S> <C> <C>
Cash and due from banks $ 397,886 $ 309,405
Federal funds sold and other short-term investments 277,028 309,231
- --------------------------------------------------------------------------------------------------------------------------
Total cash and cash equivalents 674,914 618,636
Securities available-for-sale (amortized cost $255,653,000) 256,919 --
Securities held-to-maturity (fair value $650,897,000 and $854,473,000) 649,799 846,737
Loans 5,107,041 4,451,120
Less: Allowance for loan losses 104,812 67,740
Unearned income 11,494 11,693
- --------------------------------------------------------------------------------------------------------------------------
Net loans 4,990,735 4,371,687
Premises and equipment, net 111,700 99,550
Other assets 227,990 173,932
- --------------------------------------------------------------------------------------------------------------------------
Total assets $6,912,057 $6,110,542
==========================================================================================================================
Liabilities and Stockholders' Equity
- --------------------------------------------------------------------------------------------------------------------------
Deposits:
Noninterest-bearing $ 721,448 $ 631,837
Interest-bearing 5,114,721 4,458,043
- --------------------------------------------------------------------------------------------------------------------------
Total deposits 5,836,169 5,089,880
Federal funds purchased and securities sold under repurchase agreements 146,015 133,488
Commercial paper and commercial paper based borrowings 273,298 289,827
Other liabilities 64,733 58,300
Long-term debt and other interest-bearing obligations 7,260 8,437
Capital notes 96,616 100,779
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities 6,424,091 5,680,711
Contingencies and commitments
Stockholders' equity:
Common stock, par value $5 a share; 346,767 shares authorized,
issued, and outstanding 1,734 1,734
Additional paid-in capital 2,604 2,604
Retained earnings 482,819 425,493
Net unrealized appreciation on available-for-sale securities, net of tax 809 --
- --------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 487,966 429,831
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $6,912,057 $6,110,542
==========================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
First National of Nebraska and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
For the years ended December 31,
1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
(Amounts in Thousands Except Share and Per Share Data)
<S> <C> <C> <C>
Interest income:
Interest and fees on loans and lease financing $700,472 $634,157 $490,169
Interest on securities:
Taxable interest income 49,809 45,492 32,777
Nontaxable interest income 1,116 1,436 1,465
Interest on federal funds sold
and other short-term investments 14,017 10,298 5,780
- --------------------------------------------------------------------------------------------------------------------------------
Total interest income 765,414 691,383 530,191
- --------------------------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposits 250,170 234,694 152,746
Interest on commercial paper and
commercial paper based borrowings 15,943 18,435 8,797
Interest on federal funds purchased
and U.S. Treasury notes 5,667 3,642 2,333
Interest on long-term debt and other obligations and capital
notes 8,451 7,689 4,340
- --------------------------------------------------------------------------------------------------------------------------------
Total interest expense 280,231 264,460 168,216
- --------------------------------------------------------------------------------------------------------------------------------
Net interest income 485,183 426,923 361,975
Provision for loan losses 180,059 102,767 71,698
- --------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 305,124 324,156 290,277
Noninterest income:
Processing services 103,436 73,387 59,229
Deposit services 21,373 18,520 19,419
Trust and investment services 17,818 15,086 13,039
Commissions 11,064 9,823 8,243
Miscellaneous 26,794 20,614 15,685
- --------------------------------------------------------------------------------------------------------------------------------
Total noninterest income 180,485 137,430 115,615
- --------------------------------------------------------------------------------------------------------------------------------
Income before other operating expense 485,609 461,586 405,892
Noninterest expense:
Salaries and employee benefits 135,718 119,698 97,481
Communications and supplies 61,273 56,382 52,949
Loan services purchased 32,637 29,810 25,404
Purchased processing 21,000 19,388 19,280
Net occupancy expense of premises 21,570 19,362 18,876
Equipment rentals, depreciation and maintenance 26,117 23,879 18,646
Other professional services purchased 44,072 31,400 25,869
Miscellaneous 28,869 31,576 30,274
- --------------------------------------------------------------------------------------------------------------------------------
Total noninterest expense 371,256 331,495 288,779
- --------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 114,353 130,091 117,113
Income tax expense/(benefit):
Current 57,641 54,284 44,159
Deferred (13,520) (6,434) (4,179)
- --------------------------------------------------------------------------------------------------------------------------------
Total income tax expense 44,121 47,850 39,980
- --------------------------------------------------------------------------------------------------------------------------------
Net income $ 70,232 $ 82,241 $ 77,133
================================================================================================================================
Average number of shares outstanding 346,767 346,767 346,767
================================================================================================================================
Net income per share $ 202.53 $ 237.17 $ 222.43
================================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
First National of Nebraska and Subsidiaries
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Net Unrealized
Additional Appreciation on Total
Common Stock Paid-in Retained Available-For-Sale Stockholders'
($5 par value) Capital Earnings Securities Equity
- -------------------------------------------------------------------------------------------------------------------
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $1,734 $2,604 $291,016 $ -- $295,354
Net Income -- -- 77,133 -- 77,133
Net changes in unrealized
appreciation on securities
available-for-sale, net of taxes -- -- -- (70) (70)
Cash dividends - $38.07 per share -- -- (13,201) -- (13,201)
- -------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 1,734 2,604 354,948 (70) 359,216
Net Income -- -- 82,241 -- 82,241
Net changes in unrealized
appreciation on securities
available-for-sale, net of taxes -- -- -- 70 70
Cash dividends - $33.73 per share -- -- (11,696) -- (11,696)
- -------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 1,734 2,604 425,493 -- 429,831
Net Income -- -- 70,232 -- 70,232
Net changes in unrealized
appreciation on securities
available-for-sale, net of taxes -- -- -- 809 809
Cash dividends - $37.22 per share -- -- (12,906) -- (12,906)
- -------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 $1,734 $2,604 $482,819 $809 $487,966
===================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
6
<PAGE>
First National of Nebraska and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
For the years ended December 31,
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
(Amounts in Thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 70,232 $ 82,241 $ 77,133
Adjustments to reconcile net income to net cash
flows from operating activities:
Provision for loan losses 180,059 102,767 71,698
Depreciation and amortization 37,195 32,145 20,572
Provision for deferred taxes (13,520) (6,434) (4,179)
Net change in trading account securities -- -- 5,416
Origination of loans for resale (46,887) (25,054) (63,685)
Proceeds from the sale of loans 47,053 26,730 76,158
Other asset and liability activity, net (27,159) 5,001 (8,967)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities 246,973 217,396 174,146
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions, net of cash received (1) $ (11,584) $ 28,041 $ 104,833
Maturities and sales of securities available-for-sale 7,176 -- 4,793
Purchases of securities available-for-sale (226,734) -- --
Maturities of securities held-to-maturity 312,406 354,495 217,403
Purchases of securities held-to-maturity (127,598) (395,064) (345,221)
Net increase in customer loans (723,203) (691,893) (808,436)
Securitization and sale of loans -- 200,000 --
Purchases of premises and equipment, net (26,363) (26,089) (26,546)
Other, net 732 4,069 1,561
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash flows from investing activities (795,168) (526,441) (851,613)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in customer deposits $ 647,066 $ 539,118 $ 571,062
Net change in federal funds purchased 2,548 33,924 48,860
Issuance of debt and capital notes 61,799 115,914 46,162
Principal repayments of debt and capital notes (68,889) (93,362) (35,048)
Net change in commercial paper and
commercial paper based borrowings (25,145) (22,822) 132,570
Cash dividends paid (12,906) (11,696) (13,201)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities 604,473 561,076 750,405
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents 56,278 252,031 72,938
Cash and cash equivalents at beginning of year 618,636 366,605 293,667
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 674,914 $ 618,636 $ 366,605
====================================================================================================================================
Cash paid during the year for:
Interest $ 269,919 $ 244,957 $ 158,783
Income taxes $ 50,233 $ 53,213 $ 46,973
====================================================================================================================================
NON-CASH INVESTING AND FINANCING ACTIVITIES
Increase to assets and liabilities from business
acquisitions $ 724 $ 15,198 $ --
====================================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
(1) In two separate acquisitions during 1996, the Company assumed liabilities of
$117,860,000 and non-cash assets of $130,168,000. In two separate acquisitions
during 1995, the Company assumed liabilities of $169,394,000 and non-cash assets
of $156,551,000. In two separate acquisitions during 1994, the Company assumed
liabilities of $163,383,000 and non-cash assets of $58,550,000.
7
<PAGE>
First National of Nebraska and Subsidiaries
Notes to Consolidated Financial Statements
Years Ended December 31, 1996, 1995, and 1994
(Columnar Amounts in Footnotes are in Thousands Except Per Share Data)
- -------------------------------------------------------------------------------
A. Summary of Significant Accounting Policies:
Principles of Consolidation - The consolidated financial statements of
First National of Nebraska and subsidiaries (the Company) include the
accounts of the parent company; its substantially wholly-owned
subsidiary, First National Bank of Omaha and its wholly-owned
subsidiaries (the Bank); its wholly-owned other banking subsidiaries;
and its nonbanking subsidiaries. All material intercompany transactions
and balances have been eliminated in consolidation.
Nature of Business - The Company is a Nebraska-based interstate bank
holding company whose primary assets are its banking subsidiaries. The
banking subsidiaries are principally engaged in consumer, commercial,
real estate and agricultural lending and retail deposit activities. The
Company also has subsidiaries which provide merchant credit card and
other processing services.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Cash and Cash Equivalents - For the purpose of reporting cash flows,
cash and cash equivalents include cash and due from banks, federal funds
sold and other short-term investments. Generally, federal funds are
purchased and sold for a one-day period.
Securities - Debt securities for which the Company has the positive
intent and ability to hold to maturity are reported at amortized cost.
Premiums and discounts are recognized in interest income using the level
yield method over the period to maturity.
Debt and equity securities which the Company may not hold to maturity
are classified as available-for-sale if they are not considered to be
part of trading-related activities. Available-for-sale securities are
reported at their fair values, with unrealized holding gains and losses
reported on a net-of-tax basis as a separate component of stockholders'
equity. Gains and losses on the sale of available-for-sale securities
are determined using the specific-identification method. Premiums and
discounts are recognized in interest income using the level yield method
over the period to maturity.
Debt and equity securities that are held principally for resale in the
near term are classified as trading account securities and recorded at
their fair values. Unrealized gains and losses on trading account
securities are included immediately in earnings. The Company did not
hold any trading securities at December 31, 1996 or 1995.
Loans - Loans are reported at their outstanding principal balance net of
the allowance for loan losses and any deferred fees or costs on
originated loans. Loan fees and certain direct loan origination costs
are deferred and recognized as an adjustment of the yield of the related
loan over the estimated average life of the loan.
Leases - Equipment acquired with no outside financing is leased to
customers under direct lease financing arrangements. The net investment
in direct financing leases is the sum of all minimum lease payments and
estimated residual values, less unearned income. Unearned income is
recognized as interest income over the terms of the leases by methods
that approximate the level yield method.
Allowance for Loan Losses - The allowance for loan losses is increased
by charges to income and decreased by charge-offs, net of recoveries.
Management's periodic evaluation of the adequacy of the allowance is
based on the Company's past loan loss experience, known and inherent
risks in the portfolio, adverse situations that may affect the
borrower's ability to repay, the estimated value of any underlying
collateral and current economic conditions. The allowance for loan
losses related to impaired loans, excluding large groups of smaller
balance homogeneous loans (such as consumer loans) that are collectively
evaluated for impairment, is measured based on the present value of
expected future cash flows discounted at the loan's effective interest
rate, or as a practical expedient, at the observable market price of the
loan or the fair value of the underlying collateral.
8
<PAGE>
Premises and Equipment - Premises, furniture and equipment, and
leasehold improvements are carried at cost, less accumulated
depreciation and amortization computed using the straight-line method
over the estimated useful lives of the assets or the terms of the
leases. Land is carried at cost.
Credit Card Loan Securitization - The Bank has sold, on a revolving
basis, credit card loans through a securitization program. Fees earned
for servicing the loans are reported as income when the related loan
payments are collected. Loan servicing costs are charged to expense as
incurred. A controlled amortization method is used to allocate principal
payments to the investors after the reinvestment period.
Income Taxes - The Company files consolidated federal and state tax
returns. Taxes of the subsidiaries, computed on a separate return basis,
are remitted to the parent company. Deferred tax assets and liabilities
are reflected at currently enacted income tax rates applicable to the
period in which the deferred tax assets or liabilities are expected to
be realized or settled. As changes in tax laws or rates are enacted,
deferred tax assets and liabilities are adjusted through the provision
for income taxes.
Intangible Assets - Goodwill represents the excess of the purchase price
over the estimated fair value of identifiable net assets associated with
merger and acquisition transactions. Goodwill is amortized on a
straight-line basis over periods ranging up to 25 years. Core deposit
intangibles represent the intangible value of depositor relationships
resulting from deposit liabilities assumed in acquisitions and are
amortized over periods not exceeding 10 years using straight-line and
accelerated methods, as appropriate.
Fair Values of Financial Instruments - Fair values of financial
instruments that are not actively traded are based on market prices of
similar instruments and/or valuation techniques using market
assumptions. Although management uses its best judgment in estimating
the fair value of these financial instruments, there are inherent
limitations in any estimation technique. The Company assumes that the
carrying amount of cash and short-term financial instruments
approximates their fair value.
Trust Assets - Property (other than cash deposits) held by banking
subsidiaries in fiduciary or agency capacities for their customers is
not included in the accompanying consolidated statements of financial
condition since such items are not assets of the Company.
Net Income Per Share - Net income per share of common stock has been
computed on the basis of the weighted-average number of shares of common
stock outstanding.
Other - Certain reclassifications were made to prior years' financial
statements to conform them to the improved classifications used in 1996.
These reclassifications had no effect on net income or total assets.
9
<PAGE>
B. Securities:
Debt and equity securities have been classified in the consolidated
statements of financial condition according to management's intent. The
amortized cost of securities and their approximate fair values at
December 31 are as follows:
<TABLE>
<CAPTION>
December 31, 1996
-----------------------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-----------------------------------------------------------------------------------------------------------------
Available-for-sale securities:
<S> <C> <C> <C> <C>
U.S. Government obligations $245,218 $1,265 $ (8) $246,475
Obligations of states and political subdivisions 305 9 -- 314
Other securities 10,130 -- -- 10,130
-----------------------------------------------------------------------------------------------------------------
Total securities available-for-sale $255,653 $1,274 $ (8) $256,919
=================================================================================================================
Held-to-maturity securities:
U.S. Government obligations $626,690 $1,231 $ (657) $627,264
Obligations of states and political subdivisions 19,588 214 (40) 19,762
Other securities 3,521 360 (10) 3,871
-----------------------------------------------------------------------------------------------------------------
Total securities held-to-maturity $649,799 $1,805 $ (707) $650,897
=================================================================================================================
December 31, 1995
-----------------------------------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-----------------------------------------------------------------------------------------------------------------
U.S. Government obligations $811,338 $7,652 $ (674) $818,316
Obligations of states and political subdivisions 21,438 479 (49) 21,868
Other securities 13,961 366 (38) 14,289
-----------------------------------------------------------------------------------------------------------------
Total securities held-to-maturity $846,737 $8,497 $ (761) $854,473
=================================================================================================================
</TABLE>
At December 31, 1996 and 1995, the Company did not hold any trading
securities. Gross realized gains and gross realized losses on sales of
available-for-sale securities were immaterial in 1996 and 1995. At
December 31, 1995, the Company did not hold any available-for-sale
securities.
At December 31, 1996 and 1995, securities totaling $457,265,000 and
$360,293,000, respectively, were pledged to secure public deposits
and for other purposes required or permitted by law.
Contractual maturities at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Held-to-maturity securities: Available-for-sale securities:
------------------------------- ------------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less $274,893 $275,758 $41,759 $ 41,908
Due after one year through five years 369,209 369,383 203,764 204,881
Due after five years through ten years 4,228 4,268 -- --
Due after ten years 1,469 1,488 10,130 10,130
-----------------------------------------------------------------------------------------------------------------
Total securities $649,799 $650,897 $255,653 $256,919
=================================================================================================================
</TABLE>
10
<PAGE>
C. Loans:
Loans are comprised of the following:
<TABLE>
<CAPTION>
December 31,
1996 1995
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Individual consumer $3,290,410 $2,896,900
Commercial and financial 668,676 565,264
Real estate - mortgage 632,520 518,394
Real estate - construction 152,211 131,401
Agricultural 285,008 269,330
Lease financing 66,061 59,054
Other 12,155 10,777
--------------------------------------------------------------------------------------------------
Gross loans 5,107,041 4,451,120
Less:
Allowance for loan losses 104,812 67,740
Unearned income 11,494 11,693
--------------------------------------------------------------------------------------------------
Net loans $4,990,735 $4,371,687
==================================================================================================
</TABLE>
In addition to the above loans owned by the Company, credit card loans
securitized and serviced for others totaled $200,000,000 in 1996 and 1995.
Mortgage loans serviced for others totaled $370,570,000 in 1996 and
$328,217,000 in 1995.
<TABLE>
<CAPTION>
Lease financing is comprised of the following: December 31,
1996 1995
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Direct financing leases:
Lease payments receivable $56,207 $49,716
Estimated residual value of equipment 9,854 9,338
--------------------------------------------------------------------------------------------------
66,061 59,054
Less unearned income 9,011 8,607
--------------------------------------------------------------------------------------------------
Net leases $57,050 $50,447
==================================================================================================
</TABLE>
Transactions in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
For the years ended December 31,
1996 1995 1994
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance beginning of year $ 67,740 $ 55,265 $ 49,589
Balance at date of acquisition of acquired banks 1,738 1,568 189
Provision charged to operations 180,059 102,767 71,698
Loans charged off (164,711) (108,757) (81,992)
Recoveries of amounts charged off 19,986 16,897 15,781
--------------------------------------------------------------------------------------------------
Net loans charged off (144,725) (91,860) (66,211)
--------------------------------------------------------------------------------------------------
Balance end of year $ 104,812 $ 67,740 $ 55,265
==================================================================================================
</TABLE>
At December 31, 1996, minimum lease financing payments receivable for each
of the five succeeding years are approximately: $16,454,000 for 1997;
$15,143,000 for 1998; $11,753,000 for 1999; $7,834,000 for 2000; and
$3,679,000 for 2001.
The Company grants individual consumer, commercial, agricultural, and
residential loans to customers. The business loan portfolio is well
diversified, consisting of numerous industries located or headquartered
primarily in the Company's operating region which includes Nebraska,
Colorado, Kansas, and South Dakota. The majority of individual consumer
loans are to customers located in the Midwest.
11
<PAGE>
The Company evaluates each borrower's creditworthiness on a case-by-case
basis. The amount of collateral obtained is based upon management's
evaluation of the borrower. The individual consumer category is
predominately unsecured, and the allowance for potential losses associated
with these loans has been established accordingly. The majority of the non-
consumer loan categories are generally secured by real estate, operating
assets, or financial instruments.
As of December 1996 and 1995 and for the years then ended, the Company's
recorded investment in impaired loans as defined by FASB Statement No. 114,
as amended by FASB Statement No. 118, was immaterial.
D. Premises and Equipment:
Premises and equipment is comprised of the following:
<TABLE>
<CAPTION>
December 31,
1996 1995
------------------------------------------------------------------
<S> <C> <C>
Land $ 13,562 $ 15,715
Buildings 45,609 38,051
Leasehold improvements 44,858 37,638
Equipment 114,133 91,013
------------------------------------------------------------------
218,162 182,417
Less accumulated depreciation 106,462 82,867
------------------------------------------------------------------
Net premises and equipment $111,700 $ 99,550
==================================================================
</TABLE>
E. Commercial Paper and Lines of Credit:
At December 31, 1996, the Company had facilities to access the commercial
paper market up to a maximum of $315,000,000, of which $273,298,000 was
outstanding. Obligations are collateralized by $286,526,000 of consumer
loans receivable. All of the facilities are fully backed by unused bank
credit lines. In addition, the parent company has an unused bank line of
credit of $15,000,000. Commitment fees of .125% to .375% are paid on these
lines. The Company's commercial paper and commercial paper based borrowings
are distributed on a national basis with proceeds used to finance consumer
receivables.
After the successful placement of subordinated notes in December 1995, the
Company was able to decrease a $95,000,000 revolving line of credit in 1996
to $75,000,000. This line of credit bears a variable rate of interest tied
to LIBOR. At December 31, 1996 and 1995, the Company had no outstandings on
this line of credit. The line will expire in October 1997, at which time,
any outstanding balance will be converted into a term loan payable in
sixteen equal quarterly installments. Among other restrictions, the loan
agreement requires: minimum consolidated Tier I capital to total risk-
adjusted assets of 5.00%; a consolidated return on average assets of not
less than 1.00%; and approval from the lender to incur or assume additional
debt.
F. Long-Term Debt and Capital Notes:
At December 31, 1996 and 1995, Bank premises were subject to a mortgage
which required annual payments of $1,253,000, including interest at 7.75%,
through the year 2003. The Bank may prepay the mortgage after 1996, with a
prepayment premium. The mortgage balance was $6,062,000 and $6,813,000 at
December 31, 1996, and 1995, respectively.
In December 1995, the Bank issued $75,000,000 in subordinated notes, due to
mature on December 1, 2010. The subordinated notes pay interest semi-
annually on June 1 and December 1 at a rate of 7.32%. The subordinated
notes are unsecured and subordinated to the claims of depositors and
general creditors of the Bank. No sinking fund has been provided, and the
subordinated notes may not be redeemed, in whole or in part, prior to
maturity.
The parent company has issued a total of $26,172,000 of unsecured capital
notes, which require principal payments through 2006. The capital notes are
noncallable and carry interest rates ranging from 9.00% to 12.50%. At
December 31, 1996 and 1995, $21,616,000 and $25,779,000, respectively, were
outstanding on these notes.
Principal amounts due on long-term debt and other interest-bearing
obligations and capital notes in each of the succeeding five years and
thereafter are approximately: 1997 - $3,615,000; 1998 - $2,393,000; 1999-
$1,835,000; 2000 - $2,094,000; and 2001 - $1,805,000; thereafter -
$92,134,000.
12
<PAGE>
G. Income Taxes:
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $37,111 $23,316
Other 9,671 8,609
------------------------------------------------------------------------------------------
Total deferred tax assets 46,782 31,925
------------------------------------------------------------------------------------------
Deferred tax liabilities:
Purchase accounting 1,013 1,397
Lease financing 2,755 2,603
Other 2,786 2,115
------------------------------------------------------------------------------------------
Total deferred tax liabilities 6,554 6,115
------------------------------------------------------------------------------------------
Net deferred tax assets $40,228 $25,810
==========================================================================================
</TABLE>
The income tax provisions differ from amounts currently payable because of
different methods used in reporting for financial statement purposes and
for income tax return purposes. The effect of these differences is as
follows:
<TABLE>
<CAPTION>
For the years ended December 31,
Deferred tax provision/(benefit): 1996 1995 1994
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Financing versus operating method of
lease income accounting $ 152 $ 581 $ 334
Bad debt deduction (13,795) (3,855) (1,973)
Other items, net 123 (3,160) (2,540)
------------------------------------------------------------------------------------------
Total deferred tax benefit $(13,520) $(6,434) $(4,179)
==========================================================================================
</TABLE>
The effective rates of total tax expense for the years ended December 31,
1996, 1995, and 1994 are different than the statutory federal tax rate. The
reasons for the differences are as follows:
<TABLE>
<CAPTION>
For the years ended December 31,
1996 1995 1994
------------------------------------------------------------------------------------------
(Percent of pretax income)
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal tax rate 35.0% 35.0% 35.0%
Additions/(reductions) in taxes resulting from:
Tax-exempt interest income (0.8) (0.7) (1.0)
State taxes 1.9 1.9 1.1
Other items, net 2.5 0.6 (1.0)
------------------------------------------------------------------------------------------
Effective tax rate 38.6% 36.8% 34.1%
==========================================================================================
</TABLE>
13
<PAGE>
H. Employee Benefit Plans:
The Company has a noncontributory, self-trusteed pension plan (the Plan)
covering substantially all full-time employees with one or more years of
service. The Plan generally provides for employee retirement at age sixty-
five (early retirement at age fifty-five) and benefits based upon length of
service and compensation. Lump sum death benefits are available as well as
pre-retirement protection in the event of death before benefits commence.
The Company's policy is to fund accrued pension cost necessary to provide
the Plan, on an actuarial basis, with sufficient assets to meet the benefits
to be paid to the Plan participants (normally up to the extent deductible
under existing tax regulations). The benefits are funded under a self-
administered pension trust with the Bank's Trust Department acting as
Trustee.
The net periodic pension credits, netted within noninterest expense, are
comprised of:
<TABLE>
<CAPTION>
For the years ended December 31,
1996 1995 1994
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 3,210 $ 2,925 $ 2,540
Interest cost 2,288 2,103 1,812
Actual return on plan assets (590) (21,135) (17,814)
Net amortization and deferral (6,960) 16,007 13,378
-------------------------------------------------------------------------------------------------------
Net periodic pension credits $(2,052) $ (100) $ (84)
=======================================================================================================
</TABLE>
The actuarial computation, using the "projected unit credit" actuarial
method for these years, assumed a discount rate on benefit obligations
of 7.25% for 1996 and 7.00% for 1995 and 1994, an expected long-term
rate of return on plan assets of 7.25% for 1996 and 7.00% for 1995 and
1994, and annual compensation increases of 5% over the remaining service
lives of employees covered under the Plan for 1996, 1995 and 1994.
Variances between cost assumptions, expected return on assets and actual
experience are amortized over the remaining service lives of employees
covered under the Plan. At December 31, 1996, the Plan owned parent
company common stock at a cost of $269,548.
The table of actuarially computed benefit obligations and trusteed net
assets of the Plan is presented below:
<TABLE>
<CAPTION>
December 31,
1996 1995
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $(22,347) $(21,891)
Nonvested benefits (4,024) (1,390)
-------------------------------------------------------------------------------------------------------
Accumulated benefit obligations (26,371) (23,281)
Additional amounts related to projected salary increases (9,500) (11,436)
-------------------------------------------------------------------------------------------------------
Projected benefit obligations (35,871) (34,717)
Plan assets at market value consisting primarily of
U.S. Government securities, common stocks and corporate bonds 72,553 73,128
-------------------------------------------------------------------------------------------------------
Excess of Plan assets over projected benefit obligations 36,682 38,411
Unrecognized net gain from past experience different from that assumed (33,590) (37,039)
Unrecognized Plan net assets at January 1, 1987 being recognized over 15 years (1,517) (1,912)
Unrecognized prior service cost 613 676
-------------------------------------------------------------------------------------------------------
Prepaid pension cost included within other assets $ 2,188 $ 136
=======================================================================================================
</TABLE>
In addition to the pension plan, the Company also has a profit sharing plan
and 401(k) savings plan. Total cost for these plans, included within other
operating expense, for the years ended December 31, 1996, 1995 and 1994
approximated $1,175,000, $977,000 and $838,000, respectively.
14
<PAGE>
The Company also provides certain health care and death benefits to retired
employees. The estimated costs of these retiree benefits are accrued during
the employees' active service and benefit costs are funded as they are
incurred. The following tables summarize the accumulated postretirement
benefit obligation (APBO) and the related cost which is recognized in the
Company's consolidated balance sheets and statements of income as of
December 31:
<TABLE>
<CAPTION>
December 31,
1996 1995
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ (896) $(1,125)
Active plan participants (3,589) (3,232)
--------------------------------------------------------------------------------------------------------
Total unfunded accumulated postretirement benefit obligation (4,485) (4,357)
Unrecognized net obligation at transition 3,486 3,703
Unrecognized net gain (2,411) (2,302)
--------------------------------------------------------------------------------------------------------
Accrued postretirement benefit cost $(3,410) $(2,956)
========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
For the years ended December 31,
1996 1995 1994
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net periodic postretirement benefit cost includes:
Service cost-benefits earned during the period $ 314 $ 253 $ 373
Interest cost on accumulated postretirement benefit obligation 300 269 369
Net amortization and deferral 122 112 210
--------------------------------------------------------------------------------------------------------
Net periodic postretirement benefit cost $ 736 $ 634 $ 952
========================================================================================================
</TABLE>
The weighted average discount rate used to determine the APBO was 7.25% for
1996 and 7.0% for 1995 and 1994. The assumed health care cost trend rate
used in measuring APBO was 9.0% in 1996 decreasing gradually to 5% in 2000,
and remaining constant thereafter. A one-percentage-point increase in the
assumed health care cost trend rate for each year would increase the APBO as
of December 31, 1996 by $640,000 and the aggregate of the service and
interest cost components of the net periodic postretirement cost for the
year then ended by $107,000.
I. Commitments:
In the normal course of business, there are various outstanding commitments
to extend credit in the form of unused loan commitments and standby letters
of credit that are not reflected in the consolidated financial statements.
Since commitments may expire without being exercised, these amounts do not
necessarily represent future cash requirements. The Company uses the same
credit and collateral policies in making commitments as those described in
Note C.
At December 31, 1996 and 1995, the Company had unused loan commitments of
$1.3 billion and $1.1 billion, respectively. Additionally, standby letters
of credit at December 31, 1996 of $51 million and $36 million at December
31, 1995 had been issued. The majority of these commitments are
collateralized by various assets. No material losses are anticipated as a
result of these transactions.
The Company had unused consumer credit card lines of $15.4 billion and $11.9
billion at December 31, 1996 and 1995, respectively. The Company has the
contractual right to change the conditions of the credit card members'
benefits or terminate the unused line at any time without prior notice.
Since many unused credit card lines are never actually drawn upon, the
unfunded amounts do not necessarily represent future funding requirements.
The Company has certain operating leases on equipment and office space
requiring minimum annual rental payments as follows: 1997-$14,600,000;
1998-$16,203,000; 1999-$11,165,000; 2000-$7,545,000; 2001-$3,363,000; and
$5,318,000 thereafter through the year 2014. Rental expense on leases for
the years ending December 31, 1996, 1995, and 1994 was approximately
$12,848,000; $13,476,000; and $11,532,000, respectively.
15
<PAGE>
J. Regulatory Restrictions:
The Company is governed by various regulatory agencies. Bank holding
companies and their nonbanking subsidiaries are regulated by the Federal
Reserve Board. National banks are primarily regulated by the Office of the
Comptroller of the Currency (OCC). All federally-insured banks are also
regulated by the Federal Deposit Insurance Corporation (FDIC). The Company's
banking subsidiaries include seven national banks and three state-chartered
banks, all of which are insured by the FDIC. The state-chartered banks are
also regulated by state banking authorities.
The ability of the parent company to pay cash dividends to its shareholders
and service debt may be dependent upon cash dividends from its subsidiary
banks. Subsidiary national banks are subject to regulatory restrictions on
the amount they may pay in dividends. At December 31, 1996, approximately
$43,519,000 of subsidiary national banks' retained earnings were available
for dividend declaration without prior regulatory approval.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Company must meet specific capital guidelines that
involve quantitative measures of the Company's assets, liabilities, and
certain off-balance sheet items as calculated under regulatory accounting
practices. These quantitative measures require the Company to maintain
minimum amounts and ratios (set forth in the table below) of total and Tier
I capital (as defined in the regulations) to risk-weighted assets (as
defined), and of Tier I capital (as defined) to average assets (as defined).
The Company's capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings
and other factors.
As of December 31, 1996, the most recent notification from the OCC
categorized the Company's banking subsidiaries as well capitalized under the
regulatory framework for prompt corrective action. There are no conditions
or events since that notification that management believes have changed the
institution's category. To be categorized as well capitalized the Company's
banking subsidiaries must maintain minimum total risk-based capital of 10%,
Tier I risk-based capital of 6%, and Tier I leverage capital of 5.0%. The
Company's and First National Bank of Omaha's actual capital amounts and
ratios are presented in the following table.
<TABLE>
<CAPTION>
For Minimum Capital
Actual Adequacy Purposes: Actual
--------------------------------------------------------------------------
(Consolidated Company) (Consolidated Company) (First National Bank
of Omaha)
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
Total Capital $575,245 10.7% $431,779 8.0% $295,775 10.7%
Tier I Capital $415,147 7.7% $215,890 4.0% $186,025 6.7%
Tier I Leverage Capital $415,147 6.4% $257,547 4.0% $186,025 5.8%
As of December 31, 1995
Total Capital $514,302 11.1% $370,295 8.0% $268,235 11.7%
Tier I Capital $362,826 7.8% $185,148 4.0% $164,437 7.2%
Tier I Leverage Capital $362,826 6.3% $231,862 4.0% $164,437 5.8%
</TABLE>
Pursuant to Federal Reserve Bank requirements, the Company's banking
subsidiaries are required to maintain certain cash reserve balances with
the Federal Reserve system. At December 31, 1996 and 1995, the aggregate
required cash reserve balances were approximately $55,784,000 and
$52,546,000, respectively.
16
<PAGE>
K. Fair Values of Financial Instruments:
The following presents the carrying amount and fair value of the
specified assets and liabilities held by the Company at December 31,
1996 and 1995. The information presented is based on pertinent
information available to management as of December 31, 1996 and 1995.
Although management is not aware of any factors that would significantly
affect the estimated fair value amounts, such amounts have not been
comprehensively revalued since that time, and the current estimated fair
value of these financial instruments may have changed significantly
since that point in time.
Securities: The fair value of the Company's securities is based on the
quoted market prices at December 31, 1996 and 1995. Available-for-sale
securities are carried at their aggregate fair value. The carrying
amount and fair value of the Company's held-to-maturity securities at
December 31, 1996 was $649,799,000 and $650,897,000, respectively. The
carrying amount and fair value of the Company's available-for-sale
securities at December 31, 1996 was $256,919,000. The carrying amount
and fair value of the Company's held-to-maturity securities at December
31, 1995 was $846,737,000 and $854,473,000, respectively. At December
31, 1995, the Company did not hold any available-for-sale securities.
Loans: The fair value of the Company's loans have been estimated using
two methods: 1) the carrying amount of short-term loans approximates
fair value; and 2) for all other loans, discounting of projected future
cash flows. When using the discounting method, loans are gathered by
homogeneous groups with similar terms and conditions and discounted at a
target rate at which similar loans would be made to borrowers at year
end. In addition, when computing the estimated fair value for all loans,
the allowance for loan losses is subtracted from the calculated fair
value for consideration of credit issues. At December 31, 1996, the
carrying amount and fair value of the Company's loans was $4,945,179,000
and $5,143,940,000, respectively. The carrying amount of loans for 1996
consists of gross loans of $5,107,041,000 less allowance for loan losses
of $104,812,000 less net leases of $57,050,000. The fair value of loans
for 1996 consists of gross loans of $5,305,802,000 less allowance for
loan losses and net leases. At December 31, 1995, the carrying amount
and fair value of the Company's loans was $4,332,933,000 and
$4,457,962,000, respectively. The carrying amount of loans for 1995
consists of gross loans of $4,451,120,000 less allowance for loan losses
of $67,740,000 less net leases of $50,447,000. The fair value of loans
for 1995 consists of gross loans of $4,576,149,000 less allowance for
loan losses and net leases.
Deposits: The methodologies used to estimate the fair value of deposits
are similar to the two methods used to fair value loans. Deposits are
gathered in homogeneous groups and the future cash flows of these groups
are discounted using current market rates offered for similar products
at year end. The carrying amount and fair value of the Company's
deposits at December 31, 1996 was $5,836,169,000 and $5,851,127,000,
respectively. The carrying amount and fair value of the Company's
deposits at December 31, 1995 was $5,089,880,000 and $5,126,951,000,
respectively.
Long-term Debt and Capital Notes: The fair value of long-term debt and
other interest-bearing obligations and capital notes is estimated by
discounting future cash flows using current market rates for similar
debt instruments. The carrying amount and fair value of long-term debt
and other interest-bearing obligations and capital notes at December 31,
1996 was $103,876,000 and $104,812,000, respectively. The carrying
amount and fair value of long-term debt and other interest-bearing
obligations and capital notes at December 31, 1995 was $109,216,000 and
$110,329,000, respectively.
Other Financial Instruments: All other financial instruments of a
material nature fall into the definition of short-term and fair value is
estimated as the carrying amount. The carrying amount and fair value at
December 31, 1996 of cash and due from banks was $397,886,000, federal
funds sold and other short-term investments was $277,028,000, and other
receivables and interest earned not collected was $90,763,000, which is
included in other assets. The carrying amount and fair value at December
31, 1995 of cash and due from banks was $309,405,000, federal funds sold
and other short-term investments was $309,231,000, and other receivables
and interest earned not collected was $58,664,000, which is included in
other assets.
The carrying amount and fair value at December 31, 1996 of federal funds
purchased and U.S. Treasury notes was $146,015,000, commercial paper and
commercial paper based borrowings was $273,298,000, and accounts payable
and accrued interest payable was $41,435,000, which is included in other
liabilities. The carrying amount and fair value at December 31, 1995 of
federal funds purchased and U.S. Treasury notes was $133,488,000,
commercial paper and commercial paper based borrowings was $289,827,000,
and accounts payable and accrued interest payable was $38,689,000, which
is included in other liabilities.
17
<PAGE>
Off-Balance Sheet Financial Instruments: All material amounts of
off-balance sheet items are characterized as short-term instruments
because of the conditions of the contract and repricing ability. The
carrying value of all off-balance sheet instruments approximates the
fair value. At December 31, 1996 and 1995, the Company had unused loan
commitments of $1.3 billion and $1.1 billion, respectively; standby
letters of credit of $51 million and $36 million, respectively; and
unused consumer credit card lines of $15.4 billion and $11.9 billion,
respectively.
L. Acquisitions:
During 1996 and 1995, a bank holding company subsidiary acquired two
financial institutions in Colorado in line with the Company's strategy
of expanding the banking franchise into the growing areas of neighboring
states. These acquisitions, which were accounted for as purchases,
include the August 6, 1996 acquisition of Bolder Bancorporation, the
holding company of the Bank of Boulder which had consolidated assets of
approximately $126 million. The Bank of Boulder operates in two
locations in Boulder, Colorado. On January 5, 1995, Union Colony Bank,
with assets of $200 million, was acquired. Union Colony Bank operates in
Greeley, Fort Collins, Loveland and Windsor, Colorado.
M. Current Accounting Pronouncements:
SFAS 125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities, as amended by SFAS 127. In June 1996,
Statement of Financial Accounting Standards No. 125 was issued. This
statement, among other things, applies a "financial-components approach"
that focuses on control, whereby an entity recognizes the financial and
servicing assets it controls and the liabilities it has incurred,
derecognizes assets when control has been surrendered, and derecognizes
liabilities when extinguished. SFAS No. 125 provides consistent
standards for distinguishing transfers of financial assets that are
sales from transfers that are secured borrowings. This statement is
effective for transfers of financial assets and extinguishment of
liabilities occurring after December 31, 1996, and is to be applied
prospectively. In December 1996, SFAS No. 127, an amendment to SFAS No.
125, was issued which defers for one year the effective date of SFAS No.
125 related to secured borrowings and collateral, repurchase agreements,
dollar-rolls, securities lending, and similar transactions. Management
believes that the adoption of SFAS No. 125 and 127 will not have a
material impact on the Company's financial position, liquidity or
results of operations.
18
<PAGE>
N. Condensed Financial Information of First National of Nebraska:
First National of Nebraska (parent company only)
Condensed Statements of Financial Condition
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
December 31,
Assets 1996 1995
-----------------------------------------------------------------------------------------------------------------------
(Amounts in Thousands)
<S> <C> <C>
Cash and due from banks (1) $ 744 $ 437
Other short-term investments 6,340 9,350
-----------------------------------------------------------------------------------------------------------------------
Total cash and cash equivalents 7,084 9,787
Securities (1) 414 414
Commercial paper (1) 45,000 45,000
Loans to subsidiaries (1) 2,708 1,377
Investment in subsidiaries (1 and 2):
First National Bank of Omaha 186,264 163,656
Other banking subsidiaries 310,336 276,374
Nonbanking subsidiaries 14,590 15,509
-----------------------------------------------------------------------------------------------------------------------
Total investment in subsidiaries 511,190 455,539
Other assets (1) 1,120 832
-----------------------------------------------------------------------------------------------------------------------
Total assets $567,516 $512,949
=======================================================================================================================
<CAPTION>
Liabilities and Stockholders' Equity
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Payable to subsidiaries (1) $ 2,075 $ 2,075
Commercial paper (1) 45,000 45,000
Other liabilities (1) 4,239 2,970
Deferred gain on sale of buildings (1) 6,369 6,974
Long-term debt and other interest-bearing obligations 251 320
Capital notes 21,616 25,779
-----------------------------------------------------------------------------------------------------------------------
Total liabilities 79,550 83,118
Stockholders' equity:
Common stock 1,734 1,734
Additional paid-in capital 2,604 2,604
Retained earnings 482,819 425,493
Net unrealized appreciation on available-for-sale securities, net of tax 809 --
-----------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 487,966 429,831
-----------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $567,516 $512,949
=======================================================================================================================
</TABLE>
(1) Partially or totally eliminated in consolidation.
(2) Carried at cost plus equity in undistributed earnings and capital
changes since date of acquisition or origination.
19
<PAGE>
First National of Nebraska (parent company only)
Condensed Statements of Operations
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
For the years ended December 31,
1996 1995 1994
------------------------------------------------------------------------------------------------------------------------------
(Amounts in Thousands Except Share and Per Share Data)
<S> <C> <C> <C>
Revenues:
Income from subsidiaries (1):
Dividends from First National Bank of Omaha $ 23,436 $ 81,724 $ 32,879
Dividends from other banking subsidiaries 24,200 5,411 14,770
Dividends from nonbanking subsidiaries 5,600 2,800 1,350
Interest income on commercial paper (1) 2,498 2,744 1,635
Recognized gain on sale of buildings (1) 602 602 602
Recognized gain on sale of option -- 1,389 --
Investment interest and other income (1) 617 849 218
------------------------------------------------------------------------------------------------------------------------------
Total revenues 56,953 95,519 51,454
Expenses:
Interest 5,065 9,461 5,628
Other (1) 2,338 837 883
------------------------------------------------------------------------------------------------------------------------------
Total expenses 7,403 10,298 6,511
------------------------------------------------------------------------------------------------------------------------------
Income before income tax and equity in undistributed/
(overdistributed) earnings of subsidiaries 49,550 85,221 44,943
Income tax benefit (174) (2,273) (6,104)
------------------------------------------------------------------------------------------------------------------------------
Total income before equity in undistributed/
(overdistributed) earnings of subsidiaries 49,724 87,494 51,047
------------------------------------------------------------------------------------------------------------------------------
Equity in undistributed/(overdistributed) earnings of subsidiaries (1):
First National Bank of Omaha 21,669 (20,801) 19,258
Other banking subsidiaries 598 14,355 5,488
Nonbanking subsidiaries (1,759) 1,193 1,340
------------------------------------------------------------------------------------------------------------------------------
Total equity in undistributed/
(overdistributed) earnings of subsidiaries 20,508 (5,253) 26,086
------------------------------------------------------------------------------------------------------------------------------
Net income $ 70,232 $ 82,241 $ 77,133
==============================================================================================================================
Average number of shares outstanding 346,767 346,767 346,767
==============================================================================================================================
Net income per share $ 202.53 $ 237.17 $ 222.43
==============================================================================================================================
</TABLE>
(1) Partially or totally eliminated in consolidation.
20
<PAGE>
First National of Nebraska (parent company only)
Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
For the years ended December 31,
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
(Amounts in Thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 70,232 $ 82,241 $ 77,133
Adjustments to reconcile net income to net cash
flows from operating activities:
Equity in (undistributed)/overdistributed
earnings of subsidiaries (20,508) 5,253 (26,086)
Recognized gain on sale of buildings (602) (602) (602)
Recognized gain on sale of option -- (1,389) --
Other, net 415 (259) (4,921)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities 49,537 85,244 45,524
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in commercial paper $ -- $ -- $(10,000)
Proceeds from sale of option -- 2,889 --
Change in investment in subsidiaries and other assets (35,102) (16,237) (43,482)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash flows from investing activities (35,102) (13,348) (53,482)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of debt and capital notes $ 23,000 $ 15,000 $ 45,800
Principal repayments of debt and capital notes (27,232) (66,894) (34,300)
Net change in commercial paper -- -- 10,000
Cash dividends paid (12,906) (11,696) (13,201)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities (17,138) (63,590) 8,299
- ----------------------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents (2,703) 8,306 341
Cash and cash equivalents at beginning of year 9,787 1,481 1,140
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 7,084 $ 9,787 $ 1,481
==================================================================================================================================
Cash paid during the year for:
Interest $ 5,328 $ 9,171 $ 5,541
Income taxes $ -- $ -- $ --
==================================================================================================================================
NON-CASH INVESTING AND FINANCING ACTIVITIES
Increase to assets and liabilities from business
acquisitions $ -- $ 15,198 $ --
==================================================================================================================================
</TABLE>
21
<PAGE>
Independent Auditors' Report
Board of Directors and Stockholders
First National of Nebraska, Inc.
Omaha, Nebraska
We have audited the accompanying consolidated statements of financial condition
of First National of Nebraska, Inc. and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of First National of
Nebraska, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996 in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche LLP
January 31, 1997
Omaha, Nebraska
22
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
- --------------------------------------------------------------------------------
General:
The Company consists of the parent company, which is a Nebraska-based interstate
bank holding company, and its consolidated subsidiaries. Its principal assets
include First National Bank of Omaha and its wholly-owned subsidiaries; First
National Bank and Trust Company of Columbus; First National Bank, North Platte;
Platte Valley State Bank and Trust Company, Kearney; The Fremont National Bank
and Trust Company; First National Bank of Kansas, Overland Park, Kansas; First
National Bank South Dakota, Yankton, South Dakota; and First National of
Colorado, Inc., and its wholly-owned Colorado subsidiaries: First National Bank,
Fort Collins; Union Colony Bank, Greeley; and The Bank of Boulder. The Company
also has nonbanking subsidiaries, which in the aggregate are not material.
The Company is governed by various regulatory agencies. Bank holding companies
and their nonbanking subsidiaries are regulated by the Federal Reserve Board.
National banks are primarily regulated by the OCC. All federally-insured banks
are also regulated by the FDIC. The Company's banking subsidiaries include seven
national banks and three state-chartered banks, all of which are insured by the
FDIC. The state-chartered banks are also regulated by state banking authorities.
The Company was one of the originators of the bank credit card industry and has
over 40 years' experience in this line of business. Through a banking
subsidiary, the Company conducts a significant consumer credit card service
under license arrangements with VISA USA and MasterCard International, Inc. The
Company's credit card customers are located throughout the United States, but
primarily in the Midwest. At December 31, 1996, the Company ranked among the top
25 card issuing entities based on the amount of managed credit card loans
outstanding. The Company originates all new credit card accounts for itself and
its affiliates and has not purchased existing accounts from other originators.
Gross revenues associated with credit card loans were 54% of total gross
revenues in 1996.
Competitors of the Company include commercial banks, savings and loan
associations, consumer and commercial finance companies, credit unions and other
financial services companies. The Company's credit card operation competes with
other issuers of credit cards ranging from other national issuers of bank cards
to local retailers which provide their own credit cards. Like other companies
with significant credit card operations, declining asset quality due to
increased delinquencies and charge-offs has resulted in industry-wide pressure
on the profitability of credit card operations.
The Company continues to make substantial investments in data processing
technology for both its own data processing needs and to provide various data
processing services for unaffiliated parties. The services provided include
automated clearinghouse transactions, merchant credit card processing, and check
processing. The Company ranks as one of the larger merchant credit card
processors in the United States with over $15 billion processed in 1996 and $13
billion processed in 1995. It also ranked among the 25 largest automated
clearinghouse processors in the country during 1995 and is one of the largest
check processors in its market area. Furthermore, the Company provides data
processing services to over 45 non-affiliated banks located in ten states. Fee
income continues to increase through the ongoing expansion of these services.
The Company continues to closely monitor the risks and competitive conditions as
they relate to pricing and technological issues associated with these processing
services.
Management's discussion and analysis contains forward looking statements which
reflect management's current views and estimates of future economic
circumstances, industry conditions, company performance and the financial
results. The statements are based on many assumptions and factors, including
general economic conditions, consumer behavior, competitive environment and
related market conditions, operating efficiencies, and actions of governments.
Any changes in such assumptions or factors could produce significantly different
results.
Results of Operations:
Overview:
Net income for the year 1996 was $70.2 million, or $202.53 per share, compared
to $82.2 million, or $237.17 per share, for 1995. Net income decreased in 1996
by 14.6% compared to 1995. In 1995, net income rose by $5.1 million, or 6.6%
over 1994. Return on average equity for 1996 decreased to 15.4% from 20.8% in
1995 and 24.1% in 1994. Return on average assets for 1996 decreased to 1.1% from
1.5% in 1995 and 1.7% in 1994. The performance ratios remain favorable although
they have declined over the past three years. The primary reason for the overall
reduction in earnings and performance ratios relates to the increases in the
provision for loan losses as a result of increased
23
<PAGE>
delinquencies and charge-offs on credit card and other consumer loans. In spite
of the increased provision for loan losses, earnings have remained strong due to
continued growth in net interest income and noninterest income which has
consistently surpassed the growth rate of operating expenses. Net income before
the provision for loan losses and income taxes rose by 26.4% in 1996 compared to
1995 and by 23.3% in 1995 compared to 1994.
Net interest income:
The Company's primary source of income is net interest income which is defined
as the difference between interest income and fees derived from earning assets
and interest expense on interest-bearing liabilities. Interest income and
expense are affected by changes in the volume and mix of interest-earning assets
and interest-bearing liabilities, in addition to changes in interest rates.
In 1996, net interest income was $485.2 million, a 13.7% increase over 1995. In
1995, net interest income was $426.9 million, a 17.9% increase over 1994. These
increases are primarily attributable to increased earning assets and the related
yield net of an increase in the volume of interest-bearing liabilities. The
favorable trend of increased net interest income over the three-year period
ending December 31, 1996 corresponds to the Company's strong loan growth and to
its successful asset and liability management strategies.
Provision for loan losses:
The Company evaluates its allowance for loan losses on a monthly basis. This
review of the adequacy of the allowance for loan losses is based upon a review
of collateral values, delinquencies, non-accruals, payment histories and various
other analytical and subjective measures relating to the various loan portfolios
within the Company.
The provision for loan losses increased $77.3 million to $180.1 million for 1996
compared to $102.8 million for 1995. In 1995, the provision for loan losses
increased $31.1 million compared to 1994. The increases in the provision for
loan losses relates to higher net charge-offs, growth in the loan portfolio, and
strengthening of the loan loss allowance for potential future losses. The
increase in net charge-offs is primarily attributable to the significant rise in
delinquencies on credit card loans which is being experienced throughout the
credit card industry due to increased consumer debt levels and other factors.
The increase is further augmented by the large volume of credit card and other
consumer loans originated in earlier years which continue to mature and
contribute to higher credit loss experience.
Noninterest income:
Noninterest income was $180.5 million in 1996, an increase of 31.3% or $43.1
million, compared to 1995. In 1995, noninterest income was $137.4 million, an
increase of 18.9%, or $21.8 million, from 1994. The majority of these increases
were due to processing services income increasing by 40.9% in 1996 and 23.9% in
1995. This increase is largely due to the growth in volumes processed for new
and existing customers in merchant processing. Deposit services income increased
15.4% in 1996 due primarily to the growth in total deposits. Income related to
trust and investment services and commissions increased in 1996 and 1995 as a
result of the general growth of the Company. Miscellaneous income increased by
30.0% in 1996 primarily due to income derived from a change in merchant
authorization processing and increased collection fees. In 1995 miscellaneous
income increased by 31.4% due to increased revenues from non-banking
subsidiaries and the gain on the sale of an option.
Noninterest expense:
Noninterest expense was $371.3 million in 1996, an increase of 12.0% or $39.8
million, from 1995. Noninterest expense in 1995 was $331.5 million, an increase
of 14.8% or $42.7 million from 1994. Management continues to focus on expense
control in their operating decisions to improve the efficiencies of the Company.
A significant portion of the increase in noninterest expense is due to salaries
and employee benefits which increased 13.4% in 1996 and 22.8% in 1995. These
additional employee-related expenses relate to the overall growth of the
Company. Other professional services increased 40.4% in 1996 and 21.4% in 1995
due to increased merchant acquisition costs. Increases in remaining expense
categories for communications and supplies, loan services purchased, purchased
processing, and net occupancy and equipment expenses relate to general Company
growth. This growth is primarily due to increased processing volumes, the
acquisition of new customer relationships, continued investments in technology,
and acquisitions.
24
<PAGE>
Asset Quality:
The Company's loan delinquency rates and net charge-off activity reflect, among
other factors, general economic conditions, the quality of the loans, the
average seasoning of the loans and the success of the Company's collection
efforts. The Company's objective in managing its loan portfolio is to balance
and optimize the profitability of the loans within the context of acceptable
risk characteristics. The Company continually monitors the risks embedded in the
loan portfolio with the use of statistically-based computer simulation models.
The consumer credit industry continues to experience increased delinquencies and
charge-offs. As a major credit card issuer, the Company is also experiencing an
increase in its credit card loan delinquency and net charge-off rates. As a
result, the Company has increased its allowance for loan losses by $37.1
million, or 54.7%, from December 31, 1995 to December 31, 1996. The increased
delinquency and charge-off trends are likely to continue as the large volume of
credit card loans originated in previous years continue to season. The Company
anticipates selected segments of consumers will continue to experience a decline
in credit quality. Therefore, management has modestly tightened credit standards
and reduced marketing expenditures. Consumer behavior is being closely monitored
to determine if future changes will be required.
The following table reflects the delinquency rates of the Company's loan
portfolio. An account is contractually delinquent if the minimum payment is not
received by the specified billing date. The overall delinquency rate as a
percentage of total loans was 3.86% at December 31, 1996 compared with 3.18% at
December 31, 1995.
Delinquent Loans:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
--------------------------------------------------------------
(Amounts in Thousands)
Total Loans % of Loans % of Loans
- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Loans outstanding $ 5,107,041 $ 4,451,120
Loans delinquent:
30 - 89 days $ 123,420 2.42% $ 95,236 2.14%
90 days or more & still accruing 73,580 1.44% 46,396 1.04%
-------------- --------------- ---------------- --------------
Total delinquent loans $ 197,000 3.86% $ 141,632 3.18%
============== =============== ================ ==============
Nonaccrual loans $ 7,231 .14% $ 8,718 .20%
============== =============== ================ ==============
Credit Cards and Related Plans
- ------------------------------
Loans outstanding $ 2,916,392 $ 2,572,307
Loans delinquent:
30 - 89 days $ 102,538 3.52% $ 81,125 3.15%
90 days or more & still accruing 68,827 2.36% 42,928 1.67%
-------------- --------------- ---------------- --------------
Total delinquent loans $ 171,365 5.88% $ 124,053 4.82%
============== =============== ================ ==============
Nonaccrual loans -- -- -- --
============== =============== ================ ==============
</TABLE>
Generally, the Company's policy is to charge off loans when they become 180 days
contractually past due. Net loan charge-offs include the principal amount of
losses resulting from borrowers' unwillingness or inability to pay, in addition
to bankrupt and deceased borrowers, less current period recoveries of previously
charged-off loans. The allowance for loan losses is intended to cover losses
inherent in the Company's loan portfolio as of the reporting date and is
continually monitored using statistically-based computer simulation models. The
provision for loan losses is charged against earnings to cover both current
period net charge-offs and to maintain the allowance at an acceptable level to
cover losses inherent in the portfolio as of the reporting date. Net charge-offs
for the Company's overall portfolio were $144.7 million for the year ended
December 31, 1996 compared to $91.9 million for the same period in 1995. Net
charge-offs as a percentage of average loans were 3.15% for 1996 compared to
2.14% for 1995. The allowance as a percentage of loans has increased to 2.05%
for 1996 compared to 1.52% for 1995.
25
<PAGE>
The following table presents the activity in the Company's allowance for loan
losses with a breakdown of charge-off and recovery activity related to credit
cards and related plans.
Allowance for Loan Losses:
<TABLE>
<CAPTION>
For the Years Ended December 31,
1996 1995
-----------------------------------------------------------------
(Amounts in Thousands)
<S> <C> <C>
Balance at January 1 $ 67,740 $ 55,265
Addition due to acquisition 1,738 1,568
Provision for credit losses 180,059 102,767
Loans charged off:
Credit cards and related plans (142,582) (100,604)
All other loans (22,129) (8,153)
Loans recovered:
Credit cards and related plans 18,082 15,637
All other loans 1,904 1,260
------------------------ ------------------------
Total net charge-offs (144,725) (91,860)
------------------------ ------------------------
Balance at December 31 $ 104,812 $ 67,740
======================== ========================
Allowance as a percentage
of loans 2.05% 1.52%
Total net charge-offs as a percentage
of average loans 3.15% 2.14%
</TABLE>
Capital Resources:
As described in Note J, the Company and its banking subsidiaries are required to
maintain minimum capital in accordance with regulatory guidelines. At December
31, 1996, First National Bank of Omaha and all other banking subsidiaries of the
Company exceeded the minimum requirements for the "well-capitalized" category as
established by supervisory agencies. The Company intends to maintain sufficient
capital in each of its banking subsidiaries to remain in the "well capitalized"
category.
In 1995, First National Bank of Omaha issued $75.0 million in 15 year
subordinated capital notes. These subordinated capital notes, along with $21.6
million in capital notes outstanding as of December 31, 1996 in connection with
the Company's previous acquisitions, count towards meeting the required capital
standards, subject to certain limitations. The Company has historically retained
85% of net income in capital to fund the growth of future operations and to
maintain minimum capital standards.
Liquidity Management:
Adequate liquidity level is necessary to ensure that sufficient funds are
available for loan growth and deposit withdrawals. These funding needs are
offset by funds generated from loan repayments, investment maturities, and core
deposit growth. The Company's Asset/Liability Committee is responsible for
monitoring the current and forecasted balance sheet structure to ensure
anticipated funding needs can be met at a reasonable cost. Contingency plans are
in place to meet unanticipated funding needs or loss of funding sources.
Domestic retail deposits are used as the primary source of funding for all
banking subsidiaries. In order to maintain flexibility and diversity in
liquidity management the Company also has access to a variety of other funding
tools. These other sources include securities sold under repurchase agreements,
federal funds purchased, commercial paper, securitization, other short-term and
long-term debt, and subordinated capital notes.
At December 31, 1996, the commercial paper issued by the Company was at $273
million with maturities of less than 60 days. These issues are supported for
liquidity purposes by loan commitments from various financial institutions. See
Note E to the Consolidated Financial Statements for further discussion.
The Company's securitization program was established in 1995, providing further
diversity of credit card funding. At December 31, 1996 and 1995, $200 million of
the Company's managed credit card portfolio was securitized.
26
<PAGE>
Interest Rate Risk Management:
The Company's goal is to maximize profits while effectively managing rather than
eliminating interest rate risk. Two primary measures are used to measure and
manage interest rate risk: Net Interest Income Simulation Modeling and Static
Gap Analysis.
Net Interest Income Simulation:
Since changes in the marketplace cannot be reliably predicted, the Company
simulates several possible events. These events include immediate and sustained
shifts in interest rates upward and downward, and gradual and sustained shifts
in interest rates upward and downward. Possible changes in balance sheet
structure over a forecast period of three years are also simulated. The Company
has established guidelines that limit the acceptable potential change in net
interest margin and net income under these balance sheet and interest rate
scenarios. Given the minimal potential for significant risk exposure illustrated
by the simulations, the Company does not engage in derivative transactions such
as hedges, swaps, or futures.
Static Gap Analysis:
Gap analysis measures the difference between rate sensitive assets and rate
sensitive liabilities. The following table represents management's estimate of
projected maturity or repricing of the Company's interest-earning assets and
interest-bearing liabilities at December 31, 1996. Management believes that the
table will approximate actual experience; however, it should be noted that the
gap analysis is a point in time measurement that does not capture all aspects of
interest rate risk.
<TABLE>
<CAPTION>
Greater Than
Three Months One Year Over
Three Months Less Than Through Five
As of December 31, 1996 or Less One Year Five Years Years Total
- ---------------------------------------------------------------------------------------------------------------------
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Earning assets:
Investment activities $ 331,561 $ 268,435 $ 565,473 $ 18,277 $1,183,746
Lending activities 2,827,713 469,598 769,099 1,040,631 5,107,041
- ---------------------------------------------------------------------------------------------------------------------
Total earning assets 3,159,274 738,033 1,334,572 1,058,908 6,290,787
Interest-bearing liabilities 2,388,792 1,646,142 1,440,881 162,095 5,637,910
- ---------------------------------------------------------------------------------------------------------------------
Interest sensitive gap 770,482 (908,109) (106,309) 896,813 652,877
Gap as a percent of
total earning assets 12.2% (14.4)% (1.7)% 14.3% 10.4%
=====================================================================================================================
Cumulative interest sensitive gap 770,482 (137,627) (243,936) 652,877
Cumulative gap as a percent
of total earning assets 12.2% (2.2)% (3.9)% 10.4%
=====================================================================================================================
</TABLE>
27
<PAGE>
First National of Nebraska and Subsidiaries
Selected Financial Data
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------
(Amounts in Thousands Except Per Share Data)
<S> <C> <C> <C> <C> <C>
Total interest income and
other operating income $ 945,899 $ 828,813 $ 645,806 $ 546,106 $ 481,423
Provision for loan losses $ 180,059 $ 102,767 $ 71,698 $ 67,083 $ 64,467
Net income $ 70,232 $ 82,241 $ 77,133 $ 70,082 $ 52,126
Net income per share $ 202.53 $ 237.17 $ 222.43 $ 202.10 $ 150.32
Cash dividends per share (2) $ 37.22 $ 33.73 $ 38.07 $ 16.86 $ 30.42
Total assets $ 6,912,057 $ 6,110,542 $ 5,261,907 $ 4,271,853 $ 3,573,556
Long-term debt and capital notes $ 103,876 $ 109,216 $ 60,966 $ 60,705 $ 21,534
<CAPTION>
The Company's stock is traded over-the-counter.
Bid price quotes per share, high and low, by quarter (1)
- ---------------------------------------------------------------------------------------------------------------------------
1996 1995
High Low High Low
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1st quarter $4,300 $3,650 $2,400 $2,350
2nd quarter 4,100 3,900 2,710 2,400
3rd quarter 3,900 3,400 2,935 2,710
4th quarter 3,400 3,400 3,650 2,935
<CAPTION>
Dividends per share
- ---------------------------------------------------------------------------------------------------------------------------
1996 1995
--------------------------------------------------------------------
<S> <C> <C>
January $11.90 $9.73
April 8.44 8.00
June 8.44 8.00
September 8.44 8.00
</TABLE>
Number of stockholders
- ---------------------------------------------------------------------------
As of January 31, 1997, there were 346,767 shares of common stock issued and
outstanding which were held by more than 350 shareholders of record. The
shareholders of record number does not reflect the persons or entities who hold
their stock in nominee or "street" name.
(1) Source: Kirkpatrick, Pettis, Smith, Polian, Inc., Omaha, Nebraska
Such over-the-counter market quotations reflect
interdealer prices, without retail mark-up,
mark-down or commission and may not necessarily
represent actual transactions. The parent
company's common stock experiences limited
trading activities.
(2) On a historical basis, a dividend of $10.92 per share paid in December 1992
would have been paid in January 1993.
28
<PAGE>
==========================================
FIRST NATIONAL OF NEBRASKA
OFFICERS AND DIRECTORS
==========================================
F. PHILLIPS GILTNER
CHAIRMAN & SECRETARY
BRUCE R. LAURITZEN
PRESIDENT & TREASURER
JOHN R. LAURITZEN
CHAIRMAN EMERITUS
29
<PAGE>
FIRST NATIONAL BANK OF OMAHA
SENIOR OFFICERS AND DIRECTORS
<TABLE>
====================================================================================================================
<S> <C>
F. PHILLIPS GILTNER...............CHAIRMAN ELIAS J. ELIOPOULOS...............EXECUTIVE VICE PRESIDENT
BRUCE R. LAURITZEN................PRESIDENT J. WILLIAM HENRY..................EXECUTIVE VICE PRESIDENT
DENNIS A. O'NEAL..................EXECUTIVE VICE PRESIDENT
JOHN R. LAURITZEN.................CHAIRMAN EMERITUS CHARLES R. WALKER.................EXECUTIVE VICE PRESIDENT
- --------------------------------------------------------------------------------------------------------------------
Howard M. Dietz...................Director Herbert J. Young..................Director
- --------------------------------------------------------------------------------------------------------------------
Marc M Diehl................Senior Vice President, Trust
James L. Doody..............Senior Vice President, First Bankcard Center
Charles H. Fries, Jr........Senior Vice President, Corporate & Financial Institutions
Frances A. Marshall.........Senior Vice President, First Integrated Systems
Laurie A. Minarik...........Senior Vice President, Retail Banking
James C.C. Schmidt..........Senior Vice President, Data Automation
Robert J. Urban.............Senior Vice President, Personnel
Timothy D. Hart....................Vice President & Comptroller, Corporate Administration
Russell K. Oatman..................Vice President & Cashier, Operations
====================================================================================================================
THE BANK OF BOULDER BOULDER, COLORADO
- --------------------------------------------------------------------------------------------------------------------
Directors
Steven K. Bosley Larry F. Frey Richard E. Geesaman Bruce R. Lauritzen
Earl McLaughlin Dennis A. O'Neal Carroll V. SoRelle Myrtle Tisone, Honorary
- --------------------------------------------------------------------------------------------------------------------
CARROLL V. SORELLE, CHAIRMAN STEVEN K. BOSLEY, PRESIDENT
====================================================================================================================
FIRST NATIONAL BANK FORT COLLINS-LOVELAND, COLORADO
- --------------------------------------------------------------------------------------------------------------------
Directors
Mark P. Driscoll John A. Duffey Dwight L. Ghent Thomas J. Gleason
Roger G. Gunlikson Bruce R. Lauritzen Douglas E. Markley Dennis A. O'Neal
Merlin G. Otteman, MD Stephen J. Schrader Wayne K. Schrader David L. Wood
Mark J. Soukup, Director Emeritus
- --------------------------------------------------------------------------------------------------------------------
THOMAS J. GLEASON, CHAIRMAN MARK P. DRISCOLL, PRESIDENT
====================================================================================================================
FIRST NATIONAL BANK AND TRUST COMPANY OF COLUMBUS COLUMBUS-NORFOLK, NEBRASKA
- --------------------------------------------------------------------------------------------------------------------
Directors
Donald N. Dworak Randal J. Emrich John F. Lohr Robert P. Loshbaugh
John M. Peck Steven K. Ritzman Noyes W. Rogers Donald M. Schupbach
Dwayne G. Smith William H. Smith Charles R. Walker
- --------------------------------------------------------------------------------------------------------------------
JOHN M. PECK, PRESIDENT - COLUMBUS JAMES R. MANGELS, PRESIDENT - NORFOLK
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
<TABLE>
===================================================================================================================
FIRST NATIONAL BANK OF KANSAS OVERLAND PARK, KANSAS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Directors
Linda A. Acker Ben T. Embry, Jr. J. William Henry Stuart C. Lang
Blair E. Lauritzen James A. Polsinelli Marilyn Scafe
- -------------------------------------------------------------------------------------------------------------------
STUART C. LANG, PRESIDENT
===================================================================================================================
FIRST NATIONAL BANK NORTH PLATTE - ALLIANCE - CHADRON - GERING - SCOTTSBLUFF, NEBRASKA
- -------------------------------------------------------------------------------------------------------------------
Directors
J. William Henry James D. Keenan Donald D. Kilgore L.H. "Rick" Kolkman
William J. Pfister Gary M. Trego Ralph M. Tysdal
- -------------------------------------------------------------------------------------------------------------------
L.H. "RICK" KOLKMAN, PRESIDENT
===================================================================================================================
THE FREMONT NATIONAL BANK AND TRUST COMPANY FREMONT, NEBRASKA
- -------------------------------------------------------------------------------------------------------------------
Directors
Rupert Dunklau William R. Emanuel H. Haines Hill Thomas J. Milliken
David N. Simmons Charles R. Walker Richard O. Wikert, Honorary
- -------------------------------------------------------------------------------------------------------------------
THOMAS J. MILLIKEN, CHAIRMAN DAVID N. SIMMONS, PRESIDENT
===================================================================================================================
PLATTE VALLEY STATE BANK & TRUST COMPANY KEARNEY, NEBRASKA
- -------------------------------------------------------------------------------------------------------------------
Directors
Jeff G. Beattie Gerald Dulitz Byron D. Hansen Peter G. Kotsiopulos
Robin W. Marshall Wayne R. McKinney Dennis A. O'Neal John H. Schulte, MD
Mark A. Sutko Gerald J. Tomka Sidney R. Hellman, Honorary Jack M. Horner, Honorary
Robert P. Sahling, Honorary Carl C. Spelts, Honorary
- -------------------------------------------------------------------------------------------------------------------
WAYNE R. MCKINNEY, CHAIRMAN MARK A. SUTKO, PRESIDENT
===================================================================================================================
FIRST NATIONAL BANK SOUTH DAKOTA YANKTON, SOUTH DAKOTA
- -------------------------------------------------------------------------------------------------------------------
Directors
James L. Doody Elias J. Eliopoulos Wilbur P. Foss Randal A. Johnson Joleen M. Smith
- -------------------------------------------------------------------------------------------------------------------
RANDAL A. JOHNSON, PRESIDENT
===================================================================================================================
UNION COLONY BANK GREELEY-WINDSOR, COLORADO
- -------------------------------------------------------------------------------------------------------------------
Directors
George W. Doering Harold G. Evans Kay Kosmicki Bruce R. Lauritzen
James R. Listen Lawrence W. Menefee Dennis A. O'Neal Robert A. Ruyle
Masoud S. Shirazi Michael V. Shoop F. Scott Thomas John M. Todd
James L. Tuggle Donald W. Wittnam John C. Todd, Director Emeritus
- -------------------------------------------------------------------------------------------------------------------
LAWRENCE W. MENEFEE, CHAIRMAN JAMES L. TUGGLE, PRESIDENT
- -------------------------------------------------------------------------------------------------------------------
31
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
COLLECTION CORPORATION OF AMERICA
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
JAMES W. SHANAHAN, PRESIDENT JOHN K. KEADY, VICE PRESIDENT DOUGLAS E. KOZENY, VICE PRESIDENT
====================================================================================================================================
DATA MANAGEMENT PRODUCTS
- ------------------------------------------------------------------------------------------------------------------------------------
JAMES A. MILLS, PRESIDENT MICHAEL J. REYNOLDS, VICE PRESIDENT
====================================================================================================================================
FIRST OF OMAHA MERCHANT PROCESSING
- ------------------------------------------------------------------------------------------------------------------------------------
ELIAS J. ELIOPOULOS, PRESIDENT DONALD M. GERHARD, EXECUTIVE VICE PRESIDENT
====================================================================================================================================
FIRST NATIONAL SERVICES CORPORATION
- ------------------------------------------------------------------------------------------------------------------------------------
DONALD A. FEES, DIRECTOR OF LOAN REVIEW R. RAY LOCKHART, DIRECTOR OF INTERNAL AUDIT
====================================================================================================================================
FIRST TECHNOLOGY SOLUTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
JAMES C.C. SCHMIDT, PRESIDENT
CHARLES M. HUETTER, NETWORK SERVICES DIVISION MANAGER WILLIAM A. SWICK, SOFTWARE SERVICES DIVISION MANAGER
PATRICK R. SMITH, MARKETING & PRODUCT DEVELOPMENT MANAGER LARRY D. WATSON, BUSINESS DEVELOPMENT MANAGER
====================================================================================================================================
PLATTE VALLEY FINANCE COMPANY
- ------------------------------------------------------------------------------------------------------------------------------------
DIANN PETERSEN, PRESIDENT ROGER L. MILLER, MANAGER
====================================================================================================================================
RETRIEVER PAYMENT SYSTEMS
- ------------------------------------------------------------------------------------------------------------------------------------
WALTER L. RAINES, PRESIDENT WILLIAM H. HIGGINS, SENIOR VICE PRESIDENT
- ------------------------------------------------------------------------------------------------------------------------------------
32
</TABLE>
