<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1997, or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________.
Commission file number 03502
First National of Nebraska, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Nebraska 47-0523079
- --------------------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One First National Center Omaha, NE 68102
- --------------------------------------------- --------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (402) 341-0500
--------------------------
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
----- -----
As of November 3, 1997, the number of outstanding shares of the registrant's
common stock ($5.00 par value) was 335,000.
<PAGE>
Part I. Item 1. Financial Statements
FIRST NATIONAL OF NEBRASKA, INC.
Consolidated Statements of Financial Condition
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Assets September 30, December 31,
1997 1996
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(In Thousands)
<S> <C> <C>
Cash and due from banks $ 319,595 $ 397,886
Federal funds sold and other short-term investments 427,629 277,028
- ----------------------------------------------------------------------------------------------------------------------------
Total cash and cash equivalents 747,224 674,914
Securities available-for-sale (amortized cost $404,072,000 and $255,653,000) 406,143 256,919
Securities held-to-maturity (fair value $702,815,000 and $650,897,000) 701,350 649,799
Loans 5,155,752 5,107,041
Less: Allowance for loan losses 115,520 104,812
Unearned income 13,041 11,494
- ----------------------------------------------------------------------------------------------------------------------------
Net loans 5,027,191 4,990,735
Premises and equipment, net 118,148 111,700
Other assets 276,950 227,990
- ----------------------------------------------------------------------------------------------------------------------------
Total assets $ 7,277,006 $ 6,912,057
============================================================================================================================
Liabilities and Stockholders' Equity
- ----------------------------------------------------------------------------------------------------------------------------
Deposits:
Noninterest-bearing $ 734,336 $ 721,448
Interest-bearing 5,441,267 5,114,721
- ----------------------------------------------------------------------------------------------------------------------------
Total deposits 6,175,603 5,836,169
Federal funds purchased and securities sold under repurchase agreements 141,386 146,015
Commercial paper and commercial paper based borrowings 259,580 273,298
Other liabilities 69,052 64,733
Other borrowings 48,076 7,260
Capital notes 94,151 96,616
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities 6,787,848 6,424,091
Stockholders' equity:
Common stock, $5 par value, 346,767 shares authorized,
335,000 and 346,767 shares issued and outstanding, respectively 1,675 1,734
Additional paid-in capital 2,515 2,604
Retained earnings 483,635 482,819
Net unrealized appreciation on available-for-sale securities,
net of tax 1,333 809
- ----------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 489,158 487,966
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 7,277,006 $ 6,912,057
============================================================================================================================
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
FIRST NATIONAL OF NEBRASKA, INC.
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Quarter Ended September 30, Nine Months Ended September 30,
1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
(In Thousands, Except Share and Per Share Data)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans and lease financing $182,532 $180,444 $549,974 $508,333
Interest on securities:
Taxable interest income 16,750 12,444 45,927 37,969
Nontaxable interest income 297 282 804 839
Interest on federal funds sold
and other short-term investments 4,403 2,851 9,604 9,866
- ------------------------------------------------------------------------------------------------------------------------------
Total interest income 203,982 196,021 606,309 557,007
- ------------------------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposits 73,039 61,193 211,190 184,095
Interest on commercial paper and
commercial paper based borrowings 4,053 3,874 11,819 12,035
Interest on federal funds purchased and
securities sold under repurchase agreements 2,119 1,738 5,663 4,189
Interest on other borrowings and capital notes 2,858 2,242 6,883 6,368
- ------------------------------------------------------------------------------------------------------------------------------
Total interest expense 82,069 69,047 235,555 206,687
- ------------------------------------------------------------------------------------------------------------------------------
Net interest income 121,913 126,974 370,754 350,320
Provision for loan losses 44,313 49,679 141,205 126,652
- ------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 77,600 77,295 229,549 223,668
Noninterest income:
Processing services 37,286 27,399 92,196 75,479
Deposit services 5,973 4,888 17,400 13,645
Trust and investment services 5,776 4,310 15,638 12,462
Commissions 2,374 1,774 11,185 9,299
Miscellaneous 9,208 6,988 24,997 20,723
- ------------------------------------------------------------------------------------------------------------------------------
Total noninterest income 60,617 45,359 161,416 131,608
- ------------------------------------------------------------------------------------------------------------------------------
Income before other operating expense 138,217 122,654 390,965 355,276
Noninterest expense:
Salaries and employee benefits 39,392 33,864 115,610 102,353
Communications and supplies 13,630 13,364 41,468 45,721
Loan services purchased 8,710 7,886 25,379 23,153
Purchased processing 7,960 6,054 18,918 15,788
Net occupancy expense of premises 5,890 5,290 16,523 15,673
Equipment rentals, depreciation and maintenance 7,464 6,255 21,727 18,889
Other professional services purchased 12,519 11,027 35,766 33,260
Miscellaneous 9,483 8,413 24,620 21,722
- ------------------------------------------------------------------------------------------------------------------------------
Total noninterest expense 105,048 92,153 300,011 276,559
- ------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 33,169 30,501 90,954 78,717
Income tax expense/(benefit):
Current 10,812 16,197 36,519 41,318
Deferred 2,030 (4,348) (202) (10,553)
- ------------------------------------------------------------------------------------------------------------------------------
Total income tax expense 12,842 11,849 36,317 30,765
- ------------------------------------------------------------------------------------------------------------------------------
Net income $ 20,327 $ 18,652 $ 54,637 $ 47,952
==============================================================================================================================
Average number of common shares outstanding 335,000 346,767 342,629 346,767
==============================================================================================================================
Net income per common share $ 60.68 $ 53.79 $ 159.46 $ 138.28
==============================================================================================================================
Cash dividends declared per common share $ 8.44 $ 8.44 $ 33.76 $ 37.22
==============================================================================================================================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
FIRST NATIONAL OF NEBRASKA, INC.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
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Nine Months Ended September 30,
1997 1996
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(In Thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 54,637 $ 47,952
Adjustments to reconcile net income to net cash
flows from operating activities:
Provision for loan losses 141,205 126,652
Depreciation and amortization 30,315 27,008
Provision for deferred taxes (202) (10,553)
Origination of loans for resale (29,380) (35,026)
Proceeds from the sale of loans 28,129 36,366
Other asset and liability activity, net (6,871) (7,707)
- ----------------------------------------------------------------------------------------------------------
Net cash flows from operating activities 217,833 184,692
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions, net of cash received (1) $ -- $ (11,584)
Maturities and sales of securities available-for-sale 149,052 --
Purchases of securities available-for-sale (296,536) (162,577)
Maturities of securities held-to-maturity 188,042 225,486
Purchases of securities held-to-maturity (241,046) (123,258)
Net change in loans (354,452) (345,866)
Purchases of premises and equipment, net (23,441) (28,241)
Securitization and sale of loans 420,330 --
Purchase of loan portfolio (288,998) --
Other, net 1,523 360
- ----------------------------------------------------------------------------------------------------------
Net cash flows from investing activities (445,526) (445,680)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in customer deposits $ 339,434 $ 227,842
Net change in federal funds purchased and
securities sold under repurchase agreements (4,629) (63,937)
Issuance of other borrowings and capital notes 107,111 57,799
Principal repayments of debt and capital notes (68,760) (58,853)
Net change in commercial paper and
commercial paper based borrowings (19,184) (36,621)
Repurchase of common stock (42,361) --
Cash dividends paid (11,608) (12,907)
- ----------------------------------------------------------------------------------------------------------
Net cash flows from financing activities 300,003 113,323
- ----------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents 72,310 (147,665)
Cash and cash equivalents at beginning of period 674,914 618,636
- ----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 747,224 $ 470,971
==========================================================================================================
Cash paid during the year for:
Interest $ 229,177 $ 205,663
Income taxes $ 35,784 $ 34,107
==========================================================================================================
NON-CASH INVESTING AND FINANCING ACTIVITIES
Increase to assets and liabilities from business
acquisitions $ -- $ 723
==========================================================================================================
</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.
4
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1997
Note A: Basis of Presentation
The accompanying unaudited consolidated financial statements of First National
of Nebraska, Inc. and subsidiaries (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete consolidated
financial statements. For purposes of comparability, certain prior period
amounts have been reclassified.
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 as of the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation of the financial statements have
been included. Operating results for the nine months ended September 30, 1997,
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1997. The notes to the consolidated financial statements
contained in the Annual Report on Form 10-K for the year ended December 31, 1996
should be read in conjunction with these consolidated financial statements.
Note B: Earnings per Common Share
Net income per share is calculated by dividing net income by the average number
of common shares outstanding during the period.
Part I. Item 2. 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
subsidiaries include First National Bank of Omaha and its wholly-owned
subsidiaries (the "Bank"); 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
banking subsidiaries: First National Bank, Fort Collins; Union Colony Bank,
Greeley; and The Bank of Boulder. The Company and First National of Colorado,
Inc. also have nonbanking subsidiaries, which in the aggregate are not material.
In addition to its position as a regional bank holding company, First National
of Nebraska, Inc. 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 generally originates new credit card accounts for
itself with the exception of a $265 million credit card portfolio purchase on
June 6, 1997. The Company performs credit card servicing activities on behalf
of its affiliate banks including data processing, payment processing, statement
rendering, marketing, customer service, credit administration and card
embossing. The Company primarily funds its credit card loans through the core
deposits of its affiliate banks.
Competitors of the Company include other 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.
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
5
<PAGE>
larger merchant credit card processors in the United States with over $15
billion merchant credit card transactions processed in 1996. It also ranked
among the 25 largest automated clearinghouse processors in the country during
1996 and is one of the largest check processors in its market area. Furthermore,
the Company provides data processing services to over 50 non-affiliated banks
located in ten states. Fee income continues to increase through the ongoing
expansion of these processing 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 quarter ending September 30, 1997 was $20.3 million, or
$60.68 per common share, increasing 9.0% from $18.7 million, or $53.79 per
common share for the same period in 1996. Net income for the nine months ending
September 30, 1997 was $54.6 million, or $159.46 per common share, increasing
13.9% from $48 million, or $138.28 per common share for the same period in 1996.
In spite of a year-to-date increase in the provision for loan losses, earnings
remain strong due to continued growth in year-to-date net interest income and
noninterest income which continues to surpass the increase in operating
expenses.
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.
For the quarter ended September 30, 1997, net interest income decreased $5.1
million or 4.0% to $121.9 million compared to $127 million for the same period
in 1996. For the nine months ended September 30, 1997, net interest income
increased $20.4 million or 5.8% to $370.8 million compared to $350.3 million for
the same period in 1996. This increase is primarily attributable to increased
earning assets net of an increase in the volume of interest-bearing liabilities
and decreases in the related yields. The favorable trend of increased net
interest income corresponds to the Company's strong loan growth and to its
successful asset and liability management strategies.
Provision for loan losses:
On a monthly basis, the Company evaluates the adequacy of its allowance for loan
losses based upon a review of collateral values, delinquencies, nonaccruals,
payment histories and various other analytical and subjective measures relating
to the various loan portfolios within the Company. For the quarter ended
September 30, 1997, the provision for loan losses decreased $5.4 million or
10.8% to $44.3 million compared to $49.7 million for the same period in 1996.
However, for the nine months ended September 30, 1997, the provision for loan
losses increased $14.6 million or 11.5% to $141.2 million compared to $126.7
million for the same period in 1996. The year-to-date increase in the provision
for loan losses relates to higher year-to-date net charge-offs, growth in the
loan portfolio, and continued strengthening of the loan loss allowance for
potential future losses. The increase in year-to-date net charge-offs is
primarily attributable to the continued 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 in net charge-
offs 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:
For the quarter ended September 30, 1997, noninterest income increased $15.3
million or 33.6% to $60.6 million compared to the same period in 1996. For the
nine months ended September 30, 1997, noninterest income increased $29.8 million
or 22.6% to $161.4 million compared to the same period in 1996. A portion of
this increase was due to processing services income increasing by 36.1% for the
quarter and 22.1% for the nine months ended September 30, 1997 relating to
increased processing income on securitized credit card loans and the growth in
volumes processed from new and existing customers in merchant processing.
Deposit services income increased 22.2% for the quarter and 27.5% for the nine
months ended September 30, 1997 due primarily to the growth in total deposits.
Income related to trust and investment services, commissions, and miscellaneous
income increased generally as a result of growth in the Company's customer base.
6
<PAGE>
Noninterest expense:
For the quarter ended September 30, 1997, noninterest expense increased $12.9
million or 14.0% to $105 million compared to the same period in 1996. For the
nine months ended September 30, 1997, noninterest expense increased $23.5
million or 8.5% to $300 million compared to the same period in 1996. A portion
of the increase in noninterest expense is due to salaries and employee benefits,
which increased 16.3% for the quarter and 13.0% for the nine months ended
September 30, 1997 and relates to overall Company growth. Increases in
remaining expense categories for purchased processing, loan services, equipment
expenses, and miscellaneous expenses also relate to general Company growth
including increased processing volumes and continued investments in technology.
The year-to-date increases are partially offset by a decrease of 9.3% in
communications and supplies expense for the nine months ended September 30, 1997
due primarily to a reduction in marketing expenditures. Management continues to
focus on expense control in their operating decisions to improve the
efficiencies of the Company.
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 also continues to
experience increased net charge-off and delinquency rates. As a result, the
Company increased its allowance for loan losses by $10.7 million, or 10.2%, from
December 31, 1996 to September 30, 1997. The increased charge-off trends are
likely to continue as the large volume of credit card loans originated in
previous years continue to season. The Company also expects that selected
segments of consumers may continue to experience declines in credit quality.
Therefore, management continues to evaluate credit standards and has reduced
marketing expenditures. Consumer behavior is being closely monitored to
determine if future changes in credit standards or marketing strategies will be
required.
7
<PAGE>
The following table reflects the delinquency rates for the Company's overall
loan portfolio and for credit cards and related plans. 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
3.91% at September 30, 1997 compared with 3.86% at December 31, 1996. The
delinquency rate for credit cards and related plans was 6.04% at September
30,1997 compared to 5.88% at December 31, 1996.
Delinquent Loans:
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
-----------------------------------------------------------
(Amounts in Thousands)
Total Loans % of Loans % of Loans
- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Loans outstanding $5,155,752 $5,107,041
Loans delinquent:
30 - 89 days $ 126,951 2.46% $ 123,420 2.42%
90 days or more & still accruing 74,698 1.45% 73,580 1.44%
------------------------------ --------------------------
Total delinquent loans $ 201,649 3.91% $ 197,000 3.86%
============================== ==========================
Nonaccrual loans $ 5,747 .11% $ 7,231 .14%
============================== ==========================
<CAPTION>
Credit Cards and Related Plans
- ------------------------------
<S> <C> <C> <C> <C>
Loans outstanding $2,737,933 $2,916,392
Loans delinquent:
30 - 89 days $ 95,222 3.48% $ 102,538 3.52%
90 days or more & still accruing 70,051 2.56% 68,827 2.36%
------------------------------ --------------------------
Total delinquent loans $ 165,273 6.04% $ 171,365 5.88%
============================== ==========================
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 $141.4 million for the nine months
ended September 30, 1997 compared to $101.2 million for the same period in 1996.
Net charge-offs as a percentage of average loans were 2.76% for the nine months
ended September 30, 1997 compared to 2.25% for the same period last year. The
allowance as a percentage of loans increased to 2.24% as of September 30, 1997
compared to 1.99% for the same period last year.
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.
<TABLE>
<CAPTION>
Allowance for Loan Losses:
For the Nine Months Ended September 30,
1997 1996
------------------------------
(Amounts in Thousands)
<S> <C> <C>
Balance at January 1 $ 104,812 $ 67,740
Addition due to loan portfolio purchase 10,895 --
Addition due to acquisition -- 1,738
Provision for loan losses 141,205 126,652
Loans charged off:
Credit cards and related plans (154,959) (101,227)
All other loans (6,018) (14,578)
Loans recovered:
Credit cards and related plans 17,886 13,187
All other loans 1,699 1,415
------------------------------
Total net charge-offs (141,392) (101,203)
------------------------------
Balance at September 30 $ 115,520 $ 94,927
==============================
Allowance as a percentage
of loans 2.24% 1.99%
Total net charge-offs as a percentage
of average loans 2.76% 2.25%
</TABLE>
8
<PAGE>
Capital Resources
- -----------------
The Company and its banking subsidiaries are required to maintain minimum
capital in accordance with regulatory guidelines. 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 total risk-based capital (as defined in
the regulations) of 8%, Tier 1 risk-based capital (as defined) of 4%, and Tier 1
leverage capital (as defined) of 4%. As of September 30, 1997, the most recent
notification from the OCC categorized the Company's banking subsidiaries as well
capitalized under the framework for prompt corrective action. To be categorized
as well capitalized, the Company's banking subsidiaries must maintain minimum
total risk-based capital of 10%, Tier 1 risk-based capital of 6%, and Tier 1
leverage capital of 5%. There are no conditions or events since that
notification that management believes have changed the institution's category.
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 million in 15 year subordinated
capital notes. These subordinated capital notes, along with $19 million in
capital notes outstanding as of September 30, 1997 issued 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 and Interest Rate Risk Management
- -------------------------------------------
Adequate liquidity levels are necessary to ensure that sufficient funds are
available for loan growth and deposit withdrawals. These funding demands 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 September 30, 1997, the Company had facilities to access the commercial paper
market up to a maximum of $315,000,000, of which $259,580,000 was outstanding
and maturing in 55 days. These issues are supported for liquidity purposes by
loan commitments from various financial institutions.
The Company utilizes credit card-backed securitization vehicles to assist in its
management of liquidity, interest rate risk and capital. Total securitization
as of September 30, 1997 was $620 million. In addition, the Company intends to
replace an existing $75 million credit facility with a $100 million syndicated
revolving credit facility in the fourth quarter of 1997. The existing $75
million credit facility has an outstanding balance of $40 million as of
September 30, 1997. The Company also intends to arrange an additional $150
million revolving credit facility for general purposes as part of this
syndication.
The Company's goal is to maximize profits while effectively managing rather than
eliminating interest rate risk. Since changes in the marketplace cannot be
reliably predicted, the Company uses net interest income simulation modeling to
simulate 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. The Company also uses static gap analysis to measure the difference
between rate-sensitive assets and rate-sensitive liabilities.
Part II. Other Information
Items 1,2,3,4, and 5: Not applicable or negative response.
9
<PAGE>
Item 6(a): Amended and Restated Articles of Incorporation and
Amended and Restated Bylaws of the Parent Company
(previously filed as Exhibits to form 10-Q filed with
the Securities and Exchange Commission by the Company on
June 30, 1997) is incorporated herein by reference.
Item 6(b): Not applicable or negative response.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRST NATIONAL OF NEBRASKA, INC.
By Dennis A. O'Neal
-----------------------------------------
Dennis A. O'Neal
Executive Vice President and Treasurer,
Principal Financial Officer
Date: 11/3/97
----------------
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 319,595
<INT-BEARING-DEPOSITS> 5,441,267
<FED-FUNDS-SOLD> 427,629
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 701,350
<INVESTMENTS-MARKET> 702,815
<LOANS> 5,155,752
<ALLOWANCE> 115,520
<TOTAL-ASSETS> 7,277,006
<DEPOSITS> 6,175,603
<SHORT-TERM> 0
<LIABILITIES-OTHER> 69,052
<LONG-TERM> 142,227<F1>
0
0
<COMMON> 1,675
<OTHER-SE> 487,483
<TOTAL-LIABILITIES-AND-EQUITY> 7,277,006
<INTEREST-LOAN> 549,974
<INTEREST-INVEST> 46,731
<INTEREST-OTHER> 9,604
<INTEREST-TOTAL> 606,309
<INTEREST-DEPOSIT> 211,190
<INTEREST-EXPENSE> 235,555
<INTEREST-INCOME-NET> 370,754
<LOAN-LOSSES> 141,205
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 300,011
<INCOME-PRETAX> 90,954
<INCOME-PRE-EXTRAORDINARY> 54,637
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,637
<EPS-PRIMARY> 159.46
<EPS-DILUTED> 159.46
<YIELD-ACTUAL> 0<F2>
<LOANS-NON> 5,747
<LOANS-PAST> 74,698
<LOANS-TROUBLED> 0<F2>
<LOANS-PROBLEM> 0<F2>
<ALLOWANCE-OPEN> 104,812
<CHARGE-OFFS> 160,977
<RECOVERIES> 19,585
<ALLOWANCE-CLOSE> 115,520
<ALLOWANCE-DOMESTIC> 0<F2>
<ALLOWANCE-FOREIGN> 0<F2>
<ALLOWANCE-UNALLOCATED> 0<F2>
<FN>
<F1>INCLUDES 94,151 IN CAPITAL NOTES
<F2>THIS INFORMATION IS NOT REQUIRED FOR INTERIM REPORTING PURPOSES.
</FN>
</TABLE>
