<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998, 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)
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
-----------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $5.00 par value
-----------------------------
(Title of class)
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 .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
As of February 26, 1999, the aggregate market value of the voting shares held by
nonaffiliates of the registrant was $426,150,150.
The number of outstanding shares of the registrant's common stock, as of March
17, 1999 was 335,000.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents have been incorporated by reference into this Form 10-K
as indicated below:
Annual Report to Shareholders for fiscal year ended December 31, 1998 (Parts I
and II).
Proxy statement of the registrant for the Company's 1999 annual meeting of
shareholders to be filed with the Securities and Exchange Commission (Part III).
<PAGE>
PART I
ITEM 1. BUSINESS.
THE COMPANY
First National of Nebraska, Inc. (the Parent Company) is a Nebraska-based
interstate multi-bank holding company. It was organized in 1968 and owns or
substantially owns all of the common stock of twelve banking subsidiaries
located in Nebraska, Kansas, Colorado and South Dakota. The Company also has
other nonbanking subsidiaries, which in the aggregate are not material.
First National of Nebraska, Inc. and subsidiaries (the Company) was one of the
originators of the bank credit card industry and has 46 years experience in this
business. Through banking subsidiaries, 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,
1998, the Company was the eighteenth largest bank credit card issuer based on
the amount of managed credit card loans outstanding. 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 subsidiary banks.
The Company continues to make substantial investments in data processing
technology for 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. In 1998, the Company was ranked the ninth largest merchant credit
card processor in the United States. It was also ranked among the top twenty
largest automated clearinghouse processors in the country and is one of the
largest check processors in its market area. Furthermore, the Company provides
data processing services to 44 non-affiliated banks located in ten states.
BANKING SUBSIDIARIES
First National Bank of Omaha is a national banking association founded in 1863.
First National Bank of Omaha and its five wholly-owned nonbanking subsidiaries
(the Bank) had total assets as of December 31, 1998 in excess of $4.4 billion
and is the largest bank headquartered in Nebraska. The Bank is engaged in
general banking business and offers complete banking and trust services to
retail, commercial, industrial and agricultural customers in Nebraska, Iowa,
Kansas, South Dakota, Colorado and other nearby states. The Bank offers time and
demand deposits, certificates of deposits, individual retirement accounts and
other products. The Bank also provides customers with trust services, safe
deposit boxes, cash management and investment services. The Bank makes a variety
of loans such as individual consumer loans (including credit card, installment
and home equity loans), agricultural, real estate and commercial loans. The Bank
has branch locations in Omaha, Bellevue, Beatrice and David City, Nebraska.
In addition, the Company engages in general banking business through its
ownership of the following banks. These banks offer complete banking services to
retail, commercial, industrial and agricultural customers.
Bank Locations
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The Bank in Boulder Boulder, Longmont and Louisville, Colorado
Broomfield, Colorado (opening May 1999)
First National Bank Fort Collins and Loveland, Colorado
First National Bank of Kansas Overland Park, Fairway and Olathe, Kansas
First National Bank North Platte, Alliance, Chadron, Gering and
Scottsbluff, Nebraska
First National Bank and Trust Columbus and Norfolk, Nebraska
Company of Columbus
1
<PAGE>
Bank Locations
- --------------------------------------------------------------------------------
Union Colony Bank Greeley and Windsor, Colorado
The Fremont National Bank and
Trust Company Fremont, Nebraska
Nebraska Trust Company, National
Association Fremont, Nebraska
Platte Valley State Bank &
Trust Company Kearney, Nebraska
First National Bank South Dakota Yankton, South Dakota
FNC Trust Group, National
Association Boulder, Greeley and Loveland, Colorado
COMPETITION
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. In addition, the
Company's banking subsidiaries compete for interest-bearing funds with other
banking institutions, mutual funds and other securities. As the industry
consolidates and nonbanking companies continue to offer products traditionally
offered by banks, competitive forces continue to impact product pricing and
profitability.
EMPLOYEES
The Company had 5,047 full-time equivalent employees as of December 31, 1998.
REGULATION
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
nine national banks and three state-chartered banks, all of which are insured by
the FDIC. The state-chartered banks are also regulated by the state banking
authorities.
Various requirements and restrictions under federal and state laws regulate the
operations of the Company. These laws, among other things, require the
maintenance of reserves against deposits, impose certain restrictions on the
nature and terms of loans, restrict investments and other activities, and
regulate mergers and the establishment of branches and related operations. In
addition, subsidiary national banks are subject to limitations under federal law
in the amount of dividends they may declare.
The FDIC Improvement Act of 1991 (FDICIA) imposed a significant amount of
regulation on the banking industry. One of the major provisions of this
legislation established levels of capitalization with more scrutiny and
restrictions placed on institutions with lower levels of capital. The
legislation also includes regulations which relate to corrective regulatory
action, audit and reporting requirements, standards of safety and soundness and
various deposit insurance reforms.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Company and its banking subsidiaries must meet specific
capital guidelines that involve quantitative measures of the assets, liabilities
and certain off-balance sheet items as calculated under regulatory accounting
practices. These quantitative measures require the Company and its banking
subsidiaries to maintain minimum total risk-based capital to risk-weighted
assets (as defined in the regulations) of 8%, Tier 1 risk-based capital to
risk-weighted assets (as defined) of 4% and Tier 1 capital to average assets (as
defined) of 4%. As of December 31, 1998, the most recent notification from the
OCC categorized the Company's banking subsidiaries as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Company's banking subsidiaries must maintain minimum total
risk-based capital to risk-weighted assets of 10%, Tier I risk-based capital to
risk-weighted assets of 6% and Tier I capital to average assets of 5%. There are
no conditions or events since that notification that management believes have
changed the Company's category. For further discussion, see Note J in the Annual
Report to Shareholders of the Company, an exhibit to this report which is
incorporated herein by reference.
2
<PAGE>
The banking industry is also affected by the monetary and fiscal policies of
regulatory authorities, including the Federal Reserve Board. Through open market
securities transactions, variations in the discount rate, the establishment of
reserve requirements, and the regulation of certain interest rates payable by
member banks, the Federal Reserve Board exerts considerable influence over the
cost and availability of funds obtained for lending and investing. Changes in
interest rates, deposit levels, and loan demand are influenced by the changing
conditions in the national economy and in the money markets, as well as the
effect of actions by monetary and fiscal authorities.
ADDITIONAL FINANCIAL INFORMATION
The following tables set forth statistical data, as specified by Guide 3, or are
incorporated by reference from the Company's Annual Report to Shareholders for
the year ended December 31, 1998. Such data should be read in conjunction with
the other financial statements and related notes with respect to the Company and
in conjunction with Management's Discussion and Analysis of Financial Condition
and Results of Operations, which is included in the Annual Report. The
information with respect to such tables should not be construed to imply any
conclusion on the part of management that the results, causes or trends
indicated therein will continue in the future.
3
<PAGE>
SCHEDULE I.A. and I.B. - CONSOLIDATED AVERAGE BALANCE SHEETS/
INTEREST RATES AND DIFFERENTIAL
The following table presents the consolidated average balance sheets and an
analysis of net interest earnings for the years 1996 through 1998(1):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
1998
- ----------------------------------------------------------------------------------------------------
(in thousands)
Average Income/ Interest
Balances Expense Rate
---------- ----------- -----------
<S> <C> <C> <C>
Assets
Interest-Earning Assets:
Loan and lease financing (2) $5,440,079 $ 755,803 13.89%
Taxable securities (3) 1,099,306 65,598 5.97%
Nontaxable securities (3) (4) 16,231 1,285 7.92%
Federal funds sold and other short-term investments 245,792 13,320 5.42%
- ----------------------------------------------------------------------------------------------------
Total interest-earning assets 6,801,408 836,006 12.29%
Cash and due from banks 322,804 -- --
Other assets 340,941 -- --
- ----------------------------------------------------------------------------------------------------
Total assets $7,465,153 $ -- --
====================================================================================================
Liabilities and Stockholders' Equity
Interest-Bearing Liabilities:
Interest-bearing deposits $5,785,201 $ 305,127 5.27%
Federal funds purchased and securities sold under
repurchase agreements 163,063 8,310 5.10%
Commercial paper and commercial paper based borrowings -- -- --
Other borrowings and capital notes 133,222 9,625 7.22%
- ----------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 6,081,486 323,062 5.31%
Noninterest-bearing deposits 735,005 -- --
Other liabilities 97,858 -- --
- ----------------------------------------------------------------------------------------------------
Total liabilities 6,914,349 -- --
Total stockholders' equity 550,804 -- --
- ----------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $7,465,153 $ -- --
====================================================================================================
Net Interest Margin (5) $ -- $ 512,944 7.54%
====================================================================================================
</TABLE>
(1) All significant intercompany balances have been eliminated in consolidation.
(2) Calculated net of unearned income. Non-accruing loans are included within
the average loan and lease financing amount outstanding. No interest on these
non-accruing loans is included within the loan and lease financing interest
income amount. Loan fee income of $134.1 million, $115.8 million and $107
million are included for 1998, 1997 and 1996, respectively.
(3) Includes securities held-to-maturity and securities available-for-sale.
(4) Calculated on a taxable equivalent basis with a 35% marginal tax rate in
1998, 1997 and 1996.
(5) Reflects the effect of interest on nontaxable securities calculated on a
taxable equivalent basis with a 35% marginal tax rate in 1998, 1997 and 1996.
4
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
1997 1996
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Average Income/ Interest Average Income/ Interest
Balances Expense Rate Balances Expense Rate
---------- ---------- -------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest-Earning Assets:
Loan and lease financing (2) $5,122,678 $ 735,638 14.36% $4,593,550 $ 700,472 15.25%
Taxable securities (3) 1,064,831 64,165 6.03% 918,315 54,295 5.91%
Nontaxable securities (3) (4) 18,370 1,594 8.68% 20,832 1,716 8.24%
Federal funds sold and other short-term investments 260,968 14,268 5.47% 181,632 9,531 5.25%
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets 6,466,847 815,665 12.61% 5,714,329 766,014 13.41%
Cash and due from banks 291,635 -- -- 260,258 -- --
Other assets 265,277 -- -- 216,218 -- --
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Total assets $7,023,759 $ -- -- $6,190,805 $ -- --
==================================================================================================================================
Liabilities and Stockholders' Equity
Interest-Bearing Liabilities:
Interest-bearing deposits $5,305,636 $ 286,226 5.39% $4,623,506 $ 250,170 5.41%
Federal funds purchased and securities sold under
repurchase agreements 151,675 7,841 5.17% 117,715 5,667 4.81%
Commercial paper and commercial paper based borrowings 249,557 13,479 5.40% 265,775 15,943 6.00%
Other borrowings and capital notes 127,288 9,549 7.50% 108,153 8,451 7.81%
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 5,834,156 317,095 5.44% 5,115,149 280,231 5.48%
Noninterest-bearing deposits 622,308 -- -- 561,713 -- --
Other liabilities 73,274 -- -- 56,595 -- --
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Total liabilities 6,529,738 -- -- 5,733,457 -- --
Total stockholders' equity 494,021 -- -- 457,348 -- --
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Total liabilities and stockholders' equity $7,023,759 $ -- -- $6,190,805 $ -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net Interest Margin (5) $ -- $ 498,570 7.71% $ -- $ 485,783 8.50%
==================================================================================================================================
</TABLE>
5
<PAGE>
SCHEDULE I. C. - INTEREST RATE AND VOLUME CHANGES
The following table presents the changes in interest income and interest expense
and the amounts attributable to changes in volume and changes in rates (1):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1998 - 1997 1997 - 1996
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Change in Change in
Income/ Volume Rate Income/ Volume Rate
Expense Effect Effect Expense Effect Effect
----------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Loan and lease financing $ 20,165 $ 44,608 $ (24,443) $ 35,166 $ 77,565 $ (42,399)
Taxable securities 1,433 2,062 (629) 9,870 8,811 1,059
Nontaxable securities (2) (309) (176) (133) (122) (210) 88
Federal funds sold and other short-term
investments (948) (823) (125) 4,737 4,322 415
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets 20,341 45,671 (25,330) 49,651 90,488 (40,837)
Interest-Bearing Liabilities:
Interest-bearing deposits 18,901 25,408 (6,507) 36,056 36,801 (745)
Federal funds purchased and securities
sold under repurchase agreements 469 582 (113) 2,174 1,731 443
Commercial paper and commercial paper
based borrowings (13,479) (13,479) -- (2,464) (936) (1,528)
Other borrowings and capital notes 76 436 (360) 1,098 1,446 (348)
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 5,967 12,947 (6,980) 36,864 39,042 (2,178)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Interest Margin $ 14,374 $ 32,724 $ (18,350) $ 12,787 $ 51,446 $ (38,659)
====================================================================================================================================
</TABLE>
(1) Variances attributable to rate and volume were calculated as follows:
A. A volume variance is the change in volume times the prior period rate.
B. A rate variance is the changes in rate times the prior period volume.
C. The remaining variance is due to a combination of rate and volume
changes. The unallocated portion of the total change has been
pro-rated into volume and rate components.
(2) Calculated on a taxable equivalent basis with a 35% marginal tax rate in
1998, 1997 and 1996.
6
<PAGE>
SCHEDULE II. A. - SECURITIES PORTFOLIO
The following table depicts the amortized cost of securities of the Company:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
As of December 31,
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Available-for-sale securities:
U.S. Government obligations $ 812,156 $ 366,584 $ 245,218
Obligations of states and political subdivisions 30 115 305
Mortgage-backed securities 22,285 -- --
Other securities 17,903 12,015 10,130
- ----------------------------------------------------------------------------------------------------------------------------------
Total securities available-for-sale $ 852,374 $ 378,714 $ 255,653
==================================================================================================================================
Held-to-maturity securities:
U.S. Government obligations $ 374,009 $ 809,581 $ 626,690
Obligations of states and political subdivisions 16,671 17,184 19,588
Mortgage-backed securities 29,788 45,692 1,376
Other securities 450 450 2,145
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Total securities held-to-maturity $ 420,918 $ 872,907 $ 649,799
==================================================================================================================================
</TABLE>
SCHEDULE II. B. - SECURITIES MATURITIES
The following table presents the maturity of securities held on December 31,
1998 and the weighted average yield for each range (stated on a taxable
equivalent basis assuming a 35% marginal tax rate). Yield information for
securities available-for-sale does not give effect to changes in fair value that
are reflected as a component of stockholders' equity.
<TABLE>
<CAPTION>
Available-for-Sale Securities Held-to-Maturity Securities
--------------------------------- -------------------------------
Amortized Weighted Amortized Weighted
Cost Average Yield Cost Average Yield
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
U.S. Government obligations:
One year or less $ 231,183 6.23% $ 143,215 5.97%
After one through five years 580,973 5.38% 230,794 5.99%
After five through ten years -- -- -- --
After ten years -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 812,156 5.62% $ 374,009 5.98%
====================================================================================================================================
Obligations of states and political subdivisions:
One year or less $ 30 10.78% $ 3,788 11.09%
After one through five years -- -- 7,339 10.40%
After five through ten years -- -- 2,104 10.18%
After ten years -- -- 3,440 9.62%
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Total $ 30 10.78% $ 16,671 10.37%
====================================================================================================================================
Other securities:
One year or less $ -- -- $ -- --
After one through five years -- -- 400 6.50%
After five through ten years -- -- 50 7.80%
After ten years 17,903 5.28% -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 17,903 5.28% $ 450 6.64%
====================================================================================================================================
</TABLE>
7
<PAGE>
SCHEDULE III. A. - LOAN PORTFOLIO
The following table indicates the distribution of loans, net of unearned income,
of the Company as of December 31 for the years indicated:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Individual consumer (1) $ 3,188,367 $ 2,804,402 $ 3,290,374 $ 2,895,617 $ 2,646,865
Commercial and financial 831,966 722,130 668,585 565,075 486,540
Real estate-mortgage 957,203 791,980 630,768 517,375 394,920
Real estate-construction 234,217 196,650 152,035 131,196 105,347
Agricultural 426,573 408,110 284,580 268,940 246,267
Lease financing 64,362 65,394 57,050 50,447 48,976
Other 29,916 8,936 12,155 10,777 5,003
- ------------------------------------------------------------------------------------------------------------------------------
5,732,604 4,997,602 5,095,547 4,439,427 3,933,918
Less:
Allowance for loan losses 121,877 128,990 104,812 67,740 55,265
- ------------------------------------------------------------------------------------------------------------------------------
Net Loans $ 5,610,727 $ 4,868,612 $ 4,990,735 $ 4,371,687 $ 3,878,653
==============================================================================================================================
</TABLE>
(1) Individual consumer loans consists primarily of credit cards and related
plans.
SCHEDULE III. B. - MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN
INTEREST RATES
The following table presents consolidated loan maturities by ranges based upon
contract dates. Also included for loans maturing after one year are the amounts
which have predetermined interest rates and floating or adjustable interest
rates.
<TABLE>
<CAPTION>
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Maturities as of December 31, 1998
- ----------------------------------------------------------------------------------------------------------------------------------
(in thousands) -DUE AFTER ONE YEAR-
After One Predetermined Adjustable
One Year Through After Five Interest Interest
or Less Five Years Years Rates Rates
------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Individual consumer $ 2,399,984 $ 749,703 $ 38,680 $ 263,879 $ 524,504
Commercial and financial 493,205 269,960 68,801 139,441 199,320
Real estate-mortgage 249,356 451,780 256,067 391,615 316,232
Real estate-construction 154,218 75,067 4,932 43,426 36,573
Agricultural 337,182 84,028 5,363 67,588 21,803
Lease financing 29,743 32,734 1,885 34,619 --
Other 28,733 771 412 777 406
</TABLE>
8
<PAGE>
SCHEDULE III. C. - RISK ELEMENTS
1. Nonaccrual, Restructured and Past Due Loans:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
As of December 31,
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 7,027 $ 5,289 $ 7,231 $ 8,718 $ 5,830
Restructured loans (1) 114 258 972 1,527 1,887
- ----------------------------------------------------------------------------------------------------------------------------------
Total nonaccrual and restructured loans (2) 7,141 5,547 8,203 10,245 7,717
Loans past due 90 days or more (3) 72,482 66,221 73,580 46,396 27,305
- ----------------------------------------------------------------------------------------------------------------------------------
Total nonaccrual, restructured and past due loans $ 79,623 $ 71,768 $ 81,783 $ 56,641 $ 35,022
==================================================================================================================================
</TABLE>
It is the Company's policy for a committee of senior loan officers to review all
loans 90 days or more past due for placement on nonaccrual status. If there is
sufficient evidence to indicate that the borrower may be unable to meet the
obligation, the loan is placed on nonaccrual status. Loans may be placed on
nonaccrual status prior to reaching 90 days or more past due if circumstances
warrant.
(1) Does not include loans classified in the nonaccrual loans or loans past due
90 days or more categories.
(2) The gross amount of interest income which would have been recorded on these
loans for the year ended December 31, 1998 if such loans had been current is
$1.1 million. The amount of interest income on these loans included in net
income for the same year is $600,000.
(3) Does not include loans classified in the nonaccrual loans category. For
further information regarding loans past due 90 days or more, see the Asset
Quality section of Management's Discussion and Analysis in the Annual Report to
Shareholders of the Company, an exhibit to this report which is incorporated
herein by reference.
2. Potential Problem Loans:
The following table presents potential problem loans categorized by loan type.
Potential problem loans include all loans that are classified by management as
substandard and doubtful less nonaccrual loans, restructured loans and loans
past due 90 days or more.
- --------------------------------------------------------------------------------
For the year ended December 31, 1998
- --------------------------------------------------------------------------------
(in thousands)
Individual consumer $ 662
Commercial and financial 12,958
Real estate-mortgage 4,172
Real estate-construction 358
Agricultural 13,793
Lease financing 15
Other --
3. Foreign Outstandings: None
4. Loan Concentrations: There were no concentrations of loans exceeding 10% of
total loans which are not otherwise disclosed as a category of loans under
III.A.
9
<PAGE>
SCHEDULE III. D. - OTHER INTEREST BEARING ASSETS
There were no other interest bearing assets that would require disclosure under
Item III.C.1. or 2., if such assets were loans.
SCHEDULE IV. - SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes activity in the allowance for loan losses of the
Company:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
For the years ended December 31,
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Allowance for loan losses:
Balance, beginning of year $ 128,990 $ 104,812 $ 67,740 $ 55,265 $ 49,589
Addition due to acquisitions and
loan purchases 13,035 10,895 1,738 1,568 189
Reduction due to sales of loans (8,990) -- -- -- --
Provision charged to operations 173,311 201,494 180,059 102,767 71,698
Loans charged off:
Individual consumer (211,855) (211,509) (163,320) (107,370) (80,933)
Commercial and financial (1,134) (1,607) (631) (922) (694)
Real estate-mortgage (202) (60) (57) (96) (159)
Real estate-construction -- -- -- -- --
Agricultural (71) (103) (645) (302) (148)
Lease financing (63) (50) (11) (67) (41)
Other -- (19) (47) -- (17)
- ---------------------------------------------------------------------------------------------------------------------------------
Total loans charged off (213,325) (213,348) (164,711) (108,757) (81,992)
Loans recovered:
Individual consumer 27,894 24,324 19,082 16,250 15,295
Commercial and financial 546 536 478 317 205
Real estate-mortgage 64 90 219 52 91
Real estate-construction -- -- 50 5 2
Agricultural 137 157 77 176 83
Lease financing 10 18 61 42 81
Other 205 12 19 55 24
- ---------------------------------------------------------------------------------------------------------------------------------
Total loans recovered 28,856 25,137 19,986 16,897 15,781
- ---------------------------------------------------------------------------------------------------------------------------------
Total net loans charged off (184,469) (188,211) (144,725) (91,860) (66,211)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, end of year $ 121,877 $ 128,990 $ 104,812 $ 67,740 $ 55,265
=================================================================================================================================
Average amount of loans outstanding $ 5,440,079 $ 5,122,678 $ 4,593,550 $ 4,267,290 $ 3,403,324
=================================================================================================================================
Ratio of net charge-offs to average
loans outstanding 3.39% 3.67% 3.15% 2.15% 1.95%
=================================================================================================================================
</TABLE>
10
<PAGE>
SCHEDULE IV. - SUMMARY OF LOAN LOSS EXPERIENCE (Continued)
The following table presents the loan loss allowance by loan category and the
percentage of loans in each category to loans, net of unearned income, as of
December 31 for the years indicated:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Loan Loss Percent of Loans in Each
Allowance Category to Total Loans
- ---------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
As of December 31, 1998:
Individual consumer $ 98,218 55.6%
Commercial and financial 9,663 14.5%
Real estate-mortgage 5,379 16.7%
Real estate-construction 1,682 4.1%
Agricultural 5,417 7.4%
Lease financing 485 1.1%
Other 1,033 0.6%
- ---------------------------------------------------------------------------------------------------------------------------------
Total $ 121,877 100.0%
=================================================================================================================================
As of December 31, 1997:
Individual consumer $ 105,808 56.1%
Commercial and financial 9,070 14.5%
Real estate-mortgage 6,053 15.8%
Real estate-construction 1,979 3.9%
Agricultural 5,032 8.2%
Lease financing 443 1.3%
Other 605 0.2%
- ---------------------------------------------------------------------------------------------------------------------------------
Total $ 128,990 100.0%
=================================================================================================================================
As of December 31, 1996:
Individual consumer $ 85,810 64.6%
Commercial and financial 8,243 13.1%
Real estate-mortgage 4,559 12.4%
Real estate-construction 1,551 3.0%
Agricultural 3,767 5.6%
Lease financing 419 1.1%
Other 463 0.2%
- ---------------------------------------------------------------------------------------------------------------------------------
Total $ 104,812 100.0%
=================================================================================================================================
</TABLE>
11
<PAGE>
SCHEDULE IV. - SUMMARY OF LOAN LOSS EXPERIENCE (Continued)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Loan Loss Percent of Loans in Each
Allowance Category to Total Loans
- ---------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
As of December 31, 1995:
Individual consumer $ 52,453 65.2%
Commercial and financial 6,143 12.7%
Real estate-mortgage 4,444 11.7%
Real estate-construction 862 3.0%
Agricultural 3,156 6.1%
Lease financing 389 1.1%
Other 293 0.2%
- ---------------------------------------------------------------------------------------------------------------------------------
Total $ 67,740 100.0%
=================================================================================================================================
As of December 31, 1994:
Individual consumer $ 38,897 67.3%
Commercial and financial 8,436 12.4%
Real estate-mortgage 3,182 10.0%
Real estate-construction 1,009 2.7%
Agricultural 3,074 6.3%
Lease financing 331 1.2%
Other 336 0.1%
- ---------------------------------------------------------------------------------------------------------------------------------
Total $ 55,265 100.0%
=================================================================================================================================
</TABLE>
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. Management's review of the adequacy of
the allowance for loan losses is 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 further discussion, see the Asset Quality section of Management's Discussion
and Analysis in the Annual Report to Shareholders of the Company, an exhibit to
this report which is incorporated herein by reference.
12
<PAGE>
SCHEDULE V. - DEPOSITS
The following table shows the breakdown of average deposits of the Company for
the years 1996 through 1998:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
For the years ended December 31,
1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Amount Rate Amount Rate Amount Rate
------------------------ ------------------------ --------------------------
<S> <C> <C> <C> <C> <C> <C>
Average Deposits:
Noninterest-bearing demand deposits $ 735,005 0.0% $ 622,308 0.0% $ 561,713 0.0%
Interest-bearing demand deposits 534,731 2.0% 502,348 2.1% 470,303 2.1%
Interest-bearing savings deposits 1,409,292 4.5% 1,082,866 4.4% 897,295 4.2%
Time deposits 3,841,178 6.0% 3,720,422 6.1% 3,255,908 6.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Average total deposits $ 6,520,206 $ 5,927,944 $ 5,185,219
====================================================================================================================================
</TABLE>
The following table depicts the maturity of time certificates of deposit and
other time deposits issued in amounts of $100,000 or more as of December 31,
1998:
- --------------------------------------------------------------------------------
Time CD's Other Time
- --------------------------------------------------------------------------------
(in thousands)
Three months or less $ 229,307 $ 4,134
Over three months through six months 112,638 4,485
Over six months through twelve months 186,127 2,523
Over twelve months 128,124 7,054
- --------------------------------------------------------------------------------
Total $ 656,196 $ 18,196
================================================================================
SCHEDULE VI. - RETURN ON EQUITY AND ASSETS
The following table presents the return on average assets, the return on average
equity, the dividend payout ratio and the equity to assets ratio of the Company:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
For the years ended December 31,
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------
(in thousands except per share data)
<S> <C> <C> <C>
Average total assets $ 7,465,153 $ 7,023,759 $ 6,190,805
Average equity 550,804 494,021 457,348
Net income 86,492 75,187 70,232
Net income per share 258.19 220.68 202.53
Dividends per share 35.00 33.76 37.22
Return on average assets 1.2% 1.1% 1.1%
Return on average equity 15.7% 15.2% 15.4%
Dividend payout ratio 13.6% 15.3% 18.4%
Average equity to average assets ratio 7.4% 7.0% 7.4%
</TABLE>
13
<PAGE>
SCHEDULE VII. - SHORT-TERM BORROWINGS
Transactions in short-term borrowings are summarized below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Federal funds purchased and securities
sold under repurchase agreements (1) Commercial paper
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands)
1998 1997 1996 1998 1997 1996
------------ ------------- ------------ ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Amount outstanding at year-end $ 358,975 $ 217,891 $ 146,015 $ -- $ -- $ 273,298
Weighted average interest rate
at year-end 5.2% 5.3% 5.3% -- -- 5.4%
Maximum amount outstanding 358,975 254,709 253,222 -- 228,916 245,728
Average amount outstanding 163,063 151,675 117,715 -- 249,557 265,775
Weighted average interest rate
during the year 5.1% 5.2% 4.8% -- 5.4% 6.0%
</TABLE>
(1) The majority of federal funds purchased and securities sold under repurchase
agreements mature each day and are replaced by a new issue.
14
<PAGE>
ITEM 2. PROPERTIES.
The Company owns a 22 story office building in Omaha, Nebraska where its primary
corporate offices are located. The Company's business is also operated at
various other facilities in the Omaha area which are either owned or leased by
the Company. The Company's banking business is operated in facilities located in
Nebraska, South Dakota, Kansas, and Colorado. Refer to Item 1., pages 1 and 2
for locations of the branches. Of the 59 branch locations, 39 are owned by the
Company and 20 are leased. The leases on the branches and office space (not
assuming renewals of exercise options) run through the year 2022.
For more explanation or detail, please see Notes D, F, and I to the consolidated
financial statements contained in the Annual Report to Shareholders of the
Company, an exhibit to this report which is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings, other than routine litigation
incidental to the Company's business, to which the Company is a party or of
which any of its properties is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's security holders during the
fourth quarter of 1998.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Reference is made to page 32 of the Annual Report to Shareholders of the Company
for the fiscal year ended December 31, 1998, an exhibit to this report which is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
Reference is made to page 32 of the Annual Report to Shareholders of the Company
for the fiscal year ended December 31, 1998, an exhibit to this report which is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Reference is made to pages 24-31 of the Annual Report to Shareholders of the
Company for the fiscal year ended December 31, 1998, an exhibit to this report
which is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Reference is made to pages 30-31 of the Annual Report to Shareholders of the
Company for the fiscal year ended December 31, 1998, an exhibit to this report
which is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Reference is made to pages 4-23 of the Annual Report to Shareholders of the
Company for the fiscal year ended December 31, 1998, an exhibit to this report
which is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
15
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Reference is made to the section of the Company's proxy statement captioned
"Election of Directors" to be filed with the Securities and Exchange Commission,
which is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Reference is made to the section of the Company's proxy statement captioned
"Compensation of Directors and Executive Officers" to be filed with the
Securities and Exchange Commission, which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Reference is made to the section of the Company's proxy statement captioned
"Security Ownership of Certain Beneficial Owners and Management" to be filed
with the Securities and Exchange Commission, which is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Reference is made to the section of the Company's proxy statement captioned
"Information Concerning Certain Interests of Directors and Transactions with
Management" to be filed with the Securities and Exchange Commission, which is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
The following documents are filed as a part of this report and are either
attached hereto or incorporated by reference to documents previously filed with
the Securities and Exchange Commission as exhibits:
(a) (1) Financial Statements: See Item 8 for a listing of all financial
statements.
(2) Financial Statement Schedules:
All schedules normally required by Form 10-K are omitted since they
either are not applicable or the required information is shown in the
financial statements or the notes thereto.
(3) Exhibits: See exhibit index on page 18.
(b) The Company filed no reports on Form 8-K for the quarter ended
December 31, 1998.
(c) Exhibits to this Form 10-K are attached or incorporated by reference
as stated above.
(d) No financial statement schedules are filed, and as such are excluded
from the Annual Report as provided by Exchange Act Rule 14a-3(b)(i).
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
/s/ Bruce R. Lauritzen Date: March 16, 1999
- -------------------------------------- -------------------------
by: Bruce R. Lauritzen
Chairman, President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ Bruce R. Lauritzen Date: March 16, 1999
- -------------------------------------- --------------------------
Bruce R. Lauritzen
Chairman, President and Director
/s/ Margaret Lauritzen Dodge Date: March 17, 1999
- -------------------------------------- --------------------------
Margaret Lauritzen Dodge
Director
/s/ Elias J. Eliopoulos Date: March 17, 1999
- -------------------------------------- --------------------------
Elias J. Eliopoulos
Executive Vice President and Director
/s/ F. Phillips Giltner Date: March 17, 1999
- -------------------------------------- --------------------------
F. Phillips Giltner
Chairman Emeritus and Director
/s/ J. William Henry Date: March 17, 1999
- -------------------------------------- --------------------------
J. William Henry
Executive Vice President and Director
/s/ Dennis A. O'Neal Date: March 22, 1999
- -------------------------------------- --------------------------
Dennis A. O'Neal
Executive Vice President, Treasurer,
Principal Accounting and Financial
Officer and Director
/s/ Daniel K. O'Neill Date: March 18, 1999
- -------------------------------------- --------------------------
Daniel K. O'Neill
Director
/s/ Charles R. Walker Date: March 16, 1999
- -------------------------------------- --------------------------
Charles R. Walker
Executive Vice President, Secretary
and Director
17
<PAGE>
EXHIBIT INDEX
3(i) Amended and Restated Articles of Incorporation of the Parent Company,
incorporated by reference to Exhibit 3(i) to the Company's Report on Form
10-Q for the fiscal quarter ended June 30, 1997.
3(ii) Amended and Restated Bylaws of the Parent Company, incorporated by
reference to Exhibit 3(i) to the Company's Report on Form 10-Q for the
fiscal quarter ended June 30, 1997.
4 Fiscal and Paying Agency Agreement entered into in connection with the
issuance of $75 million of Subordinated Notes by the Bank dated December
7, 1995 between the Bank as "Issuer" and the Bank as "Fiscal and Paying
Agent" incorporated by reference to the Company's Report on Form 8-K,
filed December 12, 1995.
10(a) Deferred Compensation and Consultative Services Agreement between the
Bank and John R. Lauritzen and Amendment to Deferred Compensation and
Consultative Services Agreement between the Bank and John R. Lauritzen,
incorporated by reference to Exhibit 10(a) of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992.
10(b) Deferred Compensation and Consultative Services Agreement between the
Bank and F. Phillips Giltner and Amendment to Deferred Compensation and
Consultative Services Agreement between the Bank and F. Phillips Giltner,
incorporated by reference to Exhibit 10(b) of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992.
10(c) First National of Nebraska Senior Management Long Term Incentive Plan,
incorporated by reference to Exhibit 10(c) of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992.
10(d) Management Incentive Plan, incorporated by reference to Exhibit 10(d) of
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992.
10(e) Employment Contract between the Parent Company and Bruce R. Lauritzen,
incorporated by reference to Exhibit 10(i) of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992.
13 Annual Report to Shareholders of the Company for the fiscal year ended
December 31, 1998 is incorporated by reference and was filed March 11,
1999.
21 Subsidiaries of the Company.
27 Financial Data Schedule (EDGAR filing only).
18
<PAGE>
EXHIBIT 21
FIRST NATIONAL OF NEBRASKA. INC.
<TABLE>
<CAPTION>
State or Other Jurisdiction of
Incorporation or Organization
<S> <C>
First National Bank of Omaha United States (pursuant to the National Bank Act)
Wholly-owned subsidiaries:
EFC, Inc. Nebraska
SPC, Inc. (doing business as First of Omaha
Merchant Processing) Nebraska
RPSI, Inc. (doing business as Retreiver Payment
Systems, Inc.) Nebraska
FIS, Inc. Nebraska
First National of Nebraska Community
Development Corporation Nebraska
First National Credit Corporation Nebraska
First National Bank South Dakota United States (pursuant to the National Bank Act)
MCV Acceptance Corporation Nebraska
Credit Card Finance Corporation Nebraska
Data Management Products, Inc. Nebraska
First National Bank and Trust Company of United States (pursuant to the National Bank Act)
Columbus
First National Bank (doing business as United States (pursuant to the National Bank Act)
First National Bank of Alliance-Chadron-
Gering-North Platte-Scottsbluff)
Collection Corporation of America Nebraska
Platte Valley State Bank & Trust Company Nebraska (state-chartered bank)
The Fremont National Bank and Trust Company United States (pursuant to the National Bank Act)
Wholly-owned subsidiary:
Nebraska Trust Company, National Association United States (pursuant to the National Bank Act)
First National Services Corporation Nebraska
First National Bank of Kansas United States (pursuant to the National Bank Act)
First National of Colorado, Inc. Delaware
Wholly-owned subsidiaries:
First National Bank (Fort Collins, Colorado) United States (pursuant to the National Bank Act)
Union Colony Bank (Greeley, Colorado) Colorado (state-chartered bank)
The Bank in Boulder Colorado (state-chartered bank)
Professional Career Services, Inc. Colorado
FNC Trust Group, National Association United States (pursuant to the National Bank Act)
Platte Valley Finance Company Nebraska
First Technology Solutions, Inc. Nebraska
Insync Investments, Ltd. (doing business as Information Nebraska
Systems, Inc.)
First National Buildings, Inc. Nebraska
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 434,275
<INT-BEARING-DEPOSITS> 5,971,396
<FED-FUNDS-SOLD> 382,234
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 854,183
<INVESTMENTS-CARRYING> 420,918
<INVESTMENTS-MARKET> 423,554
<LOANS> 5,746,054
<ALLOWANCE> 121,877
<TOTAL-ASSETS> 8,187,815
<DEPOSITS> 6,867,881
<SHORT-TERM> 0
<LIABILITIES-OTHER> 250,753
<LONG-TERM> 125,903<F1>
0
0
<COMMON> 1,675
<OTHER-SE> 582,628
<TOTAL-LIABILITIES-AND-EQUITY> 8,187,815
<INTEREST-LOAN> 755,803
<INTEREST-INVEST> 66,433
<INTEREST-OTHER> 13,320
<INTEREST-TOTAL> 835,556
<INTEREST-DEPOSIT> 305,127
<INTEREST-EXPENSE> 323,062
<INTEREST-INCOME-NET> 512,494
<LOAN-LOSSES> 173,311
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 471,321
<INCOME-PRETAX> 142,200
<INCOME-PRE-EXTRAORDINARY> 86,492
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 86,492
<EPS-PRIMARY> 258.19
<EPS-DILUTED> 258.19
<YIELD-ACTUAL> 12.29
<LOANS-NON> 7,027
<LOANS-PAST> 72,482
<LOANS-TROUBLED> 114
<LOANS-PROBLEM> 31,958
<ALLOWANCE-OPEN> 128,990
<CHARGE-OFFS> 213,325
<RECOVERIES> 28,856
<ALLOWANCE-CLOSE> 121,877
<ALLOWANCE-DOMESTIC> 121,877
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>INCLUDES 92,864 IN CAPITAL NOTES
</FN>
</TABLE>
