|
Previous: FIRST NATIONAL BANK OF ATLANTA, 8-K/A, 2000-03-22 |
Next: FLORIDA PUBLIC UTILITIES CO, 10-K405, 2000-03-22 |
To Stockholders
First National of Nebraska concluded the millennium with a record year and began the twenty-first century with a major investment for the future of the Company and for the redevelopment of downtown Omaha. We moved into a new 194,000 square foot Technology Center, and construction began for the 40-story one million square foot First National Tower.
Net income totaled $92.4 million, up from $86.5 million in 1998. Return on average stockholders' equity was 15.1%. This is the twenty-seventh consecutive year that return on average stockholders' equity has been 15% or greater. I doubt that any other multi-billion dollar banking company in the United States can make that claim.
On December 31, 1999, total managed assets reached a new high of $9.2 billion. This compares to $8.8 billion at year-end 1998.
In 1999, we purchased 24 credit card loan portfolios, 2 community banks, a savings and loan branch and a document imaging company. We also added 406 new jobs.
During the decade of the 1990's, the Company grew more than four-fold extending its banking operations to communities across Nebraska and into Colorado and Kansas.
The conclusion of the twentieth century creates a good opportunity to reflect on where we are and the direction in which we are headed. One of the great strengths of the Company is its organization into decentralized, independently managed businesses, each with its own president and management team. This gives us the ability to vigorously compete at the local level - closest to the customer.
The Company's banking business is primarily focused in three areas:
Community Banking
We are a collection of ten community banks located in Nebraska, Colorado, Kansas and South Dakota. These ten banks serve customers with 68 offices located in 31 communities. We have been in community banking for 142 years. It is an area which we know well and consider one of our core competencies.
We have the Number One bank market share in eight of the ten primary communities where we are located. We have achieved this dominant position competing against some very strong independent banks as well as six of the 14 largest banks in the nation. I believe that our strong market share indicates clearly that our customers appreciate this organization's combination of quality products, convenient locations, current technology, and superior personalized service.
We will continue to expand in this part of our business. In 1999, we acquired the Commercial Trust and Savings Bank headquartered in Mitchell, South Dakota with offices in Huron and Woonsocket. We also purchased the First National Bank of Johnstown, Colorado, and a branch of the World Savings Bank in Brighton, Colorado. New branches were opened in Omaha and Broomfield, Colorado. Internet banking went live in 1999.
Although the growth in our community banks varies widely, depending on their location, our largest investments during the 1990's have been in the faster growing areas of suburban Kansas City and the front range of Colorado. During 1999, our community banks' non-credit card loan portfolios increased a record 25.8%.
MAP DEPICTING:
Nebraska | South Dakota | Kansas | Colorado |
|
|||
Omaha | Yankton | Fairway | Fort Collins |
North Platte | Mitchell | Overland Park | Greeley |
Columbus | Huron | Olathe | Loveland |
Kearney | Woonsocket | Shawnee* | Windsor |
Fremont |
Boulder | ||
Beatrice | Longmont | ||
David City | Louisville | ||
Chadron | Broomfield | ||
Alliance | Brighton | ||
Scottsbluff | Johnstown | ||
Gering | |||
Norfolk |
*Opening Summer 2000
Credit Card Issuing
First National Bank of Omaha was a pioneer in the issuing of bank credit cards in 1953. We have continued to be a leader in this industry for nearly half a century. Today, with cardholders throughout the nation, we rank as the 11th largest bank issuer of credit cards, and the 18th largest overall issuer based on the amount of managed credit card loans outstanding.
Over the years, the success of credit card issuing has been phenomenal for the Company. During the quarter of a century from 1971 through 1996, our managed credit card portfolio grew at a compounded annual rate of 25%.
However, extraordinary nation-wide competition during the last few years has resulted in a substantial slowdown in our credit card growth rate since 1996. This competition has also created an excess of easy credit to consumers throughout the United States which has raised the level of delinquencies and chargeoffs for all of us in the industry.
While issuing credit cards has been a major driver in this Company's growth during most of the last 30 years, the industry has now reached a point of maturity which forecasts minimal growth in the years ahead. As a result, a number of banks are disposing of their credit card portfolios. We have acquired 50 portfolios in the last three years, including 24 in 1999. I believe credit card issuing will continue to be attractive for the Company, however we will need to maintain substantial investments in technology and marketing in order to preserve our position.
Processing
For decades, the Company has considered automation of currency and the processing which surrounds our business to be a core competency. We are one of the 10 largest merchant credit card processors in the United States. We rank among the top 15 in retail lockbox transactions and we are the 19th largest in automated clearinghouse transactions.
In 1999, First National Bank of Omaha occupied a new Technology Center in downtown Omaha. This $64 million project with 194,000 square feet on four square blocks gives us a state-of-the-art facility in which to expand our processing enterprises. This is a major commitment for the future and a part of the business which we believe can be expanded dramatically. As corporations continue to outsource backroom activities, the Company should see opportunities to grow in the processing of both paper and electronic transactions.
We also see a future in converting paper to images. During 1999, we purchased Path Technology Group of Des Moines, a company involved with document imaging. In January 2000, we acquired Mountain States Imaging of Denver. We believe this further advancement in the imaging business is a great complement to our growing expertise in this arena.
MAP DEPICTING ALL 50 STATES:
First National has employees or paid sales people related to processing services in all 50 states excluding Alaska, New Hampshire, West Virginia and Wyoming
The following cities have First National sales and/or processing office locations:
Birmingham, AL | Boston, MA | Columbus, OH |
Little Rock, AR | Baltimore, MD | Oklahoma City, OK |
Phoenix, AZ | Portland, ME | Portland, OR |
Fresno, CA | Detroit, MI | Philadelphia, PA |
Denver, CO | Minneapolis, MN | Charleston, SC |
Hartford, CT | Kansas City, MO | Sioux Falls, SD |
Naples, FL | Albuquerque, NM | Nashville, TN |
Atlanta, GA | Charlotte, NC | Dallas, TX |
Des Moines, IA | Lincoln, NE | Houston, TX |
Boise, ID |
Omaha, NE | Salt Lake City, UT |
Chicago, IL | Edison, NJ | Richmond, VA |
Indianapolis, IN | Las Vegas, NV | Seattle, WA |
Kansas City, KS |
The Company has compiled more than a quarter of a century of strong earnings after a major investment in 1969-1971 which resulted in First National Bank of Omaha's current headquarters. That investment was primarily needed in order to better handle automobile traffic. In 1968, we found ourselves in a 53 year old building which was too small and had no drive-in bank and no parking. The conclusion at the time was to build First National Center which was a major commitment for this Company.
In many ways we have faced the same difficult decision in the last three years. However, instead of needing to better service automobile traffic, we are now facing the need to better service electronic traffic. As a result, three new facilities in Omaha have been or are being constructed for our use: a 222,000 square foot office building at 142nd and Dodge, a new Technology Center at 16th and Capitol Avenue, and a 40-story office building across the street at 16th and Dodge. These facilities are not traditional banks. No one will be able to cash a check nor make a deposit in any of these buildings. They are designed to bring together thousands of people who interact with our millions of customers nation-wide, making it possible for us to more efficiently automate currency throughout the country.
The major commitments we are making in people, software, equipment, facilities, and marketing are investments in the future. They may have an adverse impact on our earnings over the next few years. However, we believe that these commitments will help us to fulfill the vision of being a regional as well as a national competitor well into the twenty-first century.
I want to thank our customers, shareholders, and associates throughout the United States who have supported the First National family of companies during the past century and who look forward with me to the excitement of the twenty-first century!
Bruce R. Lauritzen
|
First National of Nebraska and
Subsidiaries
Performance Trends
(in millions)
BAR GRAPHS DEPICTING
[CHART]
Managed Assets* 1999: $9,211 | Earnings 1999: $92.4 | Capital & Loan Loss
Allowance 1999: $757 |
|||||
Year | Year | Year | |||||
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 | 6,311
|
1995 | 82.241
|
1995 | 498
|
||
1996 | 7,112
|
1996 | 70.232
|
1996 | 593
|
||
1997 | 8,282
|
1997 | 75.187
|
1997 | 639
|
||
1998 | 8,841
|
1998 | 86.492
|
1998 | 706
|
||
1999 | 9,211
|
1999 | 92.361
|
1999 | 757
|
[CHART]
Managed Assets* 1999: $6,949 | Deposits 1999: $7,009 | Return On Average
Equity: 1999; 15.1% |
|||||
Year | Year | 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 | 268
|
1978 | 369
|
1978 | 18.2
|
||
1979 | 318
|
1979 | 411
|
1979 | 17.9
|
||
1980 | 289
|
1980 | 428
|
1980 | 17.7
|
||
1981 | 370
|
1981 | 411
|
1981 | 17.4
|
||
1982 | 411
|
1982 | 432
|
1982 | 17.1
|
||
1983 | 515
|
1983 | 557
|
1983 | 16.3
|
||
1984 | 634
|
1984 | 608
|
1984 | 18.6
|
||
1985 | 729
|
1985 | 741
|
1985 | 18.0
|
||
1986 | 806
|
1986 | 799
|
1986 | 18.0
|
||
1987 | 979
|
1987 | 970
|
1987 | 19.8
|
||
1988 | 1,312
|
1988 | 1,308
|
1988 | 25.7
|
||
1989 | 1,570
|
1989 | 1,642
|
1989 | 24.3
|
||
1990 | 1,878
|
1990 | 2,097
|
1990 | 23.2
|
||
1991 | 2,212
|
1991 | 2,575
|
1991 | 23.3
|
||
1992 | 2,591
|
1992 | 3,070
|
1992 | 24.7
|
||
1993 | 3,173
|
1993 | 3,652
|
1993 | 26.8
|
||
1994 | 3,934
|
1994 | 4,383
|
1994 | 24.1
|
||
1995 | 4,639
|
1995 | 5,090
|
1995 | 20.8
|
||
1996 | 5,296
|
1996 | 5,836
|
1996 | 15.4
|
||
1997 | 5,948
|
1997 | 6,401
|
1997 | 15.2
|
||
1998 | 6,386
|
1998 | 6,868
|
1998 | 15.7
|
||
1999 | 6,949
|
1999 | 7,009
|
1999 | 15.1
|
* Reported assets or loans plus securitized credit card loans
First National of Nebraska and Subsidiaries
Financial Highlights
|
|||||
|
Years ended December
31,
|
||||
1999 |
1998
|
1997
|
1996
|
1995
|
|
|
|||||
(in thousands except per share data) |
|||||
Total assets |
$ 8,560,444
|
$ 8,187,815
|
$ 7,332,021
|
$ 6,912,057
|
$ 6,110,542
|
Net income |
$ 92,361
|
$ 86,492
|
$ 75,187
|
$ 70,232
|
$ 82,241
|
Stockholders' equity |
$ 650,474
|
$ 584,303
|
$ 510,057
|
$ 487,966
|
$ 429,831
|
Allowance for loan losses |
$ 106,484
|
$ 121,877
|
$ 128,990
|
$ 104,812
|
$ 67,740
|
|
|||||
|
|||||
Per share data: |
|||||
Net income |
$ 276.02
|
$ 258.19
|
$ 220.68
|
$ 202.53
|
$ 237.17
|
Dividends |
$ 38.72
|
$ 35.00
|
$ 33.76
|
$ 37.22
|
$ 33.73
|
Stockholders' equity |
$ 1,943.91
|
$ 1,744.19
|
$ 1,522.56
|
$ 1,407.19
|
$ 1,239.54
|
|
|||||
|
|||||
Profit ratios: |
|||||
Return on average equity |
15.1%
|
15.7%
|
15.2%
|
15.4%
|
20.8%
|
Return on average assets |
1.2%
|
1.2%
|
1.1%
|
1.1%
|
1.5%
|
|
A picture of a three-dimensional model
depicting First National Technology
Center located at 201 North 16th Street, Omaha, NE, 68102.
First National of Nebraska and Subsidiaries
Consolidated Statements of Financial Condition
|
||
December 31, |
||
1999 |
1998
|
|
|
||
(in thousands except share and per share data) |
||
Assets |
||
Cash and due from banks |
$ 407,584
|
$ 434,275
|
Federal funds sold and other short-term investments |
247,148
|
382,234
|
|
||
Total cash and cash equivalents |
654,732
|
816,509
|
Investment securities: |
||
Available-for-sale (amortized cost $987,943 and $834,471) |
971,449
|
836,280
|
Held-to-maturity (fair value $178,188 and $423,554) |
179,406
|
420,918
|
Federal Home Loan Bank stock and other securities, at cost |
42,215
|
17,903
|
|
||
Total investment securities |
1,193,070
|
1,275,101
|
Loans |
6,313,732
|
5,746,054
|
Less: Allowance for loan losses |
106,484
|
121,877
|
Unearned income |
15,429
|
13,450
|
|
||
Net loans |
6,191,819
|
5,610,727
|
Premises and equipment, net |
149,803
|
138,853
|
Other assets |
371,020
|
346,625
|
|
||
Total assets |
$ 8,560,444
|
$8,187,815
|
|
||
Liabilities and Stockholders' Equity |
||
Deposits: |
||
Noninterest-bearing |
$ 858,895
|
$ 896,485
|
Interest-bearing |
6,149,817
|
5,971,396
|
|
||
Total deposits |
7,008,712
|
6,867,881
|
Federal funds purchased and securities sold under repurchase agreements |
341,485
|
358,975
|
Federal Home Loan Bank advances |
372,077
|
28,535
|
Other borrowings |
3,758
|
4,504
|
Other liabilities |
89,549
|
250,753
|
Capital notes |
94,389
|
92,864
|
|
||
Total liabilities |
7,909,970
|
7,603,512
|
Contingencies and commitments |
||
Stockholders' equity: |
||
Common
stock, $5 par value, 346,767 shares authorized,
|
1,673
|
1,675
|
Additional paid-in capital |
2,511
|
2,515
|
Retained earnings |
656,786
|
578,951
|
Accumulated other comprehensive income (loss) |
(10,496)
|
1,162
|
|
||
Total stockholders' equity |
650,474
|
584,303
|
|
||
Total liabilities and stockholders' equity |
$ 8,560,444
|
$ 8,187,815
|
|
See Notes to Consolidated Financial Statements
First National of Nebraska and Subsidiaries
Consolidated Statements of Income
|
|||
For the years ended December 31, |
|||
1999 |
1998
|
1997
|
|
|
|||
(in thousands except share and per share data) |
|
||
Interest income: |
|||
Interest and fees on loans and lease financing |
$749,376
|
$755,803
|
$735,638
|
Interest on securities: |
|||
Taxable interest income |
65,504
|
65,598
|
64,165
|
Nontaxable interest income |
1,191
|
835
|
1,036
|
Interest on federal funds sold
|
9,557
|
13,320
|
14,268
|
|
|||
Total interest income |
825,628
|
835,556
|
815,107
|
|
|||
Interest expense: |
|||
Interest on deposits |
284,482
|
305,127
|
286,226
|
Interest on federal funds purchased and
|
8,394
|
8,310
|
7,841
|
Interest on Federal Home Loan Bank advances |
7,162
|
1,003
|
159
|
Interest on other borrowings |
391
|
1,435
|
2,068
|
Interest on capital notes |
7,104
|
7,187
|
7,322
|
Interest on commercial paper and
|
|
|
13,479
|
|
|||
Total interest expense |
307,533
|
323,062
|
317,095
|
|
|||
Net interest income |
518,095
|
512,494
|
498,012
|
Provision for loan losses |
144,573
|
173,311
|
201,494
|
|
|||
Net interest income after provision for loan losses |
373,522
|
339,183
|
296,518
|
Noninterest income: |
|||
Processing services |
74,829
|
81,481
|
76,014
|
Credit card securitization income |
64,384
|
60,980
|
51,817
|
Deposit services |
27,865
|
24,948
|
22,879
|
Trust and investment services |
22,980
|
22,979
|
20,616
|
Commissions |
15,471
|
15,703
|
14,212
|
Miscellaneous |
43,088
|
52,672
|
31,640
|
|
|||
Total noninterest income |
248,617
|
258,763
|
217,178
|
|
|||
Noninterest expense: |
|||
Salaries and employee benefits |
216,263
|
182,848
|
155,956
|
Communications and supplies |
58,529
|
58,046
|
55,922
|
Equipment rentals, depreciation and maintenance |
40,913
|
36,993
|
29,880
|
Professional services |
35,267
|
53,023
|
48,701
|
Net occupancy expense of premises |
30,554
|
30,045
|
22,355
|
Loan servicing expense |
29,917
|
26,065
|
20,560
|
Processing expense |
27,661
|
28,784
|
26,560
|
Miscellaneous |
40,724
|
39,942
|
29,857
|
|
|||
Total noninterest expense |
479,828
|
455,746
|
389,791
|
|
|||
Income before income taxes |
142,311
|
142,200
|
123,905
|
Income tax expense (benefit): |
|||
Current |
50,059
|
57,165
|
53,947
|
Deferred |
(109)
|
(1,457)
|
(5,229)
|
|
|||
Total income tax expense |
49,950
|
55,708
|
48,718
|
|
|||
Net income |
$ 92,361
|
$ 86,492
|
$ 75,187
|
|
|||
Average number of common shares outstanding |
334,622
|
335,000
|
340,706
|
|
|||
Net income per common share |
$ 276.02
|
$ 258.19
|
$ 220.68
|
|
|||
Cash dividends declared per common share |
$ 38.72
|
$ 35.00
|
$ 33.76
|
|
See Notes to Consolidated Financial Statements
First National of Nebraska and Subsidiaries
Consolidated Statements of Comprehensive
Income
|
|||
For the years ended December 31, |
|||
|
1999 |
1998
|
1997
|
|
|||
(in thousands) | |||
Net Income |
$ 92,361 | $86,492 | $75,187 |
Other comprehensive income (loss), before tax: |
|||
Net unrealized holding gains (losses) on available-for-sale securities |
(19,191)
|
495
|
2,626
|
Less: Reclassification adjustment for net gains realized in net income |
888
|
1,307
|
1,267
|
|
|||
Other comprehensive gain (loss), before tax |
(18,303)
|
(812)
|
1,359
|
Less: Income tax expense (benefit) for other comprehensive income |
(6,645)
|
(291)
|
485
|
|
|||
Other comprehensive gain (loss), net of tax |
(11,658)
|
(521)
|
874
|
|
|||
Comprehensive income |
$ 80,703
|
$85,971
|
$76,061
|
|
|||
Consolidated Statements of Stockholders' Equity |
|||
|
|||
For the years ended December 31, 1999, 1998 and 1997 |
|||
|
Common Stock
|
Additional
|
Retained
|
Accumulated
|
Total
|
|
|
|||||
(in thousands except per share data) |
|||||
Balance, January 1, 1997 |
$1,734
|
$2,604
|
$482,819
|
$ 809
|
$487,966
|
Net Income |
|
|
75,187
|
|
75,187
|
Repurchase of common stock |
(59)
|
(89)
|
(42,214)
|
|
(42,362)
|
Net unrealized appreciation on
securities
|
|
|
|
874
|
874
|
Cash dividends - $33.76 per share |
|
|
(11,608)
|
|
(11,608)
|
|
|||||
Balance, December 31, 1997 |
1,675
|
2,515
|
504,184
|
1,683
|
510,057
|
Net Income |
|
|
86,492
|
|
86,492
|
Net unrealized depreciation on
securities
|
|
|
|
(521)
|
(521)
|
Cash dividends - $35.00 per share |
|
|
(11,725)
|
|
(11,725)
|
|
|||||
Balance, December 31, 1998 |
1,675
|
2,515
|
578,951
|
1,162
|
584,303
|
Net Income |
|
|
92,361
|
|
92,361
|
Repurchase of common stock |
(2)
|
(4)
|
(1,568)
|
|
(1,574)
|
Net unrealized depreciation on
|
|
|
|
(11,658)
|
(11,658)
|
Cash dividends - $38.72 per share |
|
|
(12,958)
|
|
(12,958)
|
|
|||||
Balance, December 31, 1999 |
$1,673
|
$2,511
|
$656,786
|
$(10,496)
|
$650,474
|
|
See Notes to Consolidated Financial Statements
First National of Nebraska and Subsidiaries
Consolidated Statements of Cash
Flows
|
|||
For the years ended December 31, |
|||
1999 |
1998
|
1997
|
|
|
|||
(in thousands) |
|||
CASH FLOWS FROM OPERATING ACTIVITIES |
|||
Net Income |
$ 92,361
|
$ 86,492
|
$ 75,187
|
Adjustments to reconcile net income to net cash
|
|||
Provision for loan losses |
144,573
|
173,311
|
201,494
|
Depreciation and amortization |
55,381
|
44,412
|
41,888
|
Provision for deferred taxes |
(109)
|
(1,457)
|
(5,229)
|
Origination of mortgage loans for resale |
(132,466)
|
(146,816)
|
(41,991)
|
Proceeds from the sale of mortgage loans for resale |
142,921
|
131,847
|
40,851
|
Other asset and liability activity, net |
(168,713)
|
8,537
|
(41,440)
|
|
|||
Net cash flows from operating activities |
133,948
|
296,326
|
270,760
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|||
Acquisitions, net of cash received (1) |
(20,539)
|
(855)
|
|
Maturities and sales of securities available-for-sale |
402,204
|
348,663
|
211,676
|
Purchases of securities available-for-sale |
(518,571)
|
(659,504)
|
(331,553)
|
Maturities of securities held-to-maturity |
266,526
|
625,871
|
283,446
|
Purchases of securities held-to-maturity |
(7,343)
|
(174,065)
|
(507,975)
|
Purchases of FHLB stock and other securities |
(24,312)
|
(5,888)
|
(2,619)
|
Net change in loans |
(567,210)
|
(230,115)
|
(586,113)
|
Credit card securitization activities |
(1,978)
|
(296,978)
|
750,000
|
Purchases of loan portfolios |
(48,586)
|
(402,331)
|
(288,998)
|
Purchases of premises and equipment |
(41,372)
|
(41,987)
|
(41,072)
|
Other, net |
3,178
|
2,277
|
2,141
|
|
|||
Net cash flows from investing activities |
(558,003)
|
(834,912)
|
(511,067)
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|||
Net change in deposits |
(84,414) | 466,836 | 564,876 |
Assumption of deposits, net |
39,712
|
|
|
Net
change in federal funds purchased and
|
(17,490)
|
141,084
|
71,876
|
Issuance of FHLB advances |
452,267
|
72,063
|
83,742
|
Principal repayments on FHLB advances |
(111,725)
|
(47,484)
|
(80,525)
|
Issuance of other borrowings |
10,286
|
14,000
|
52,029
|
Principal repayments on other borrowings |
(11,032)
|
(34,333)
|
(34,060)
|
Principal repayments on capital notes |
(794)
|
(1,188)
|
(2,564)
|
Net
change in commercial paper and
|
|
|
(280,169)
|
Repurchase of common stock |
(1,574)
|
|
(42,362)
|
Cash dividends paid |
(12,958)
|
(11,725)
|
(11,608)
|
|
|||
Net cash flows from financing activities |
262,278
|
599,253
|
321,235
|
|
|||
Net change in cash and cash equivalents |
(161,777)
|
60,667
|
80,928
|
Cash and cash equivalents at beginning of year |
816,509
|
755,842
|
674,914
|
|
|||
Cash and cash equivalents at end of year |
$ 654,732
|
$ 816,509
|
$ 755,842
|
|
|||
Cash paid during the year for: |
|||
Interest |
$ 310,471
|
$ 324,766
|
$ 312,318
|
Income taxes |
$ 52,632
|
$ 53,387
|
$ 44,979
|
Non-cash investing and
financing activities:
|
$ 2,319
|
$
|
$
|
|
See Notes to Consolidated Financial Statements
(1) | In acquisitions during 1999, the Company acquired non-cash assets of $214 million and assumed liabilities of $191.2 million. |
First National of Nebraska and Subsidiaries
Notes to Consolidated Financial Statements
Years Ended December 31, 1999, 1998 and 1997
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation The consolidated financial statements of First National of Nebraska and subsidiaries (the Company) include the accounts of the parent company; its 99.67% owned subsidiary, First National Bank of Omaha and 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 processing and other services.
These operating activities involve similar types of customers, products and services and distribution methods. Financial information is maintained and analyzed on a total entity basis for decision making and performance assessment. The Company's operations are also regulated by common regulatory authorities. Therefore, in accordance with Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information, " the Company has determined that it is a single reportable entity.
Use of Estimates In preparing consolidated financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents For the purpose of the consolidated statements of cash flows, cash and cash equivalents include cash and due from banks, federal funds sold and other short-term investments with original maturities of three months or less.
Securities Debt securities for which the Company has the positive intent and ability to hold to maturity are classified as "held-to-maturity" and reported at amortized cost. Securities not classified as held-to-maturity or trading, including equity securities with readily determinable fair values, are classified as "available-for-sale" and recorded at fair value, with unrealized gains and losses on a net-of-tax basis excluded from earnings and reported in other comprehensive income. Federal Home Loan Bank stock and other securities are not actively traded and do not have readily determinable fair values.
Purchase premiums and discounts are recognized in interest income using the level yield method over the period to maturity. Gains and losses on the sale of securities are determined using the specific-identification method.
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.
Accrual of interest is discontinued on a loan when management believes collection of interest is doubtful after considering economic and business conditions, collection efforts, and the financial condition of the borrower.
Leases Equipment acquired with no outside financing is leased to customers under direct financing lease 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.
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 Securitizations The Company has sold, on a revolving basis, credit card loans through securitization programs. These securitizations have been recorded as sales in accordance with SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." A residual earnings stream and servicing have been retained and are recorded at estimated fair value based on the present value of estimated expected future cash flows using a discount rate commensurate with the risks involved. A servicing liability related to the securitization has also been recorded.
Securities Sold Under Repurchase Agreements Securities sold under agreements to repurchase, which are classified as secured borrowings, generally mature within one day from the transaction date. Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction. The Company may be required to provide additional collateral based on the fair value of the underlying securities.
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. Under the liability method used to calculate income taxes, the Company accounts for differences between the financial statement carrying amounts and tax bases of existing assets and liabilities by applying currently enacted statutory tax rates which are applicable to future periods.
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. Purchased credit card relationships represent the intangible value of acquired credit card relationships and are amortized over 15 years using an accelerated method.
The Company periodically assesses the recoverability of intangible assets by reviewing such assets whenever events or changes in circumstances indicate that the book value may not be recoverable. An impairment is recognized when undiscounted cash flows of assets are estimated to be insufficient to recover their related carrying value.
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. The Company has no potentially dilutive common stock equivalents.
Other Certain reclassifications were made to prior years' financial statements to conform them to the improved classifications used in 1999. These reclassifications had no effect on net income or total assets.
B. INVESTMENT SECURITIES
Debt and equity securities have been classified in the consolidated statements of financial condition according to management's intent.
Available-for-sale
The amortized cost of available-for-sale securities and their approximate
fair values at December 31 were as follows:
Amortized Cost |
Gross
Unrealized Gains |
Gross
Unrealized Losses |
Fair Value |
|
|
||||
(in thousands) | ||||
1999 | ||||
U.S. Government obligations | $924,897 | $ 89 | $(15,366) | $909,620 |
Obligations of states and political subdivisions | 3,500 | | | 3,500 |
Mortgage-backed securities | 52,530 | 14 | (1,197) | 51,347 |
Other securities | 7,016 | 2 | (36) | 6,982 |
|
||||
Total securities available-for-sale | $987,943 | $ 105 | $(16,599) | $971,449 |
|
||||
1998 | ||||
U.S. Government obligations | $812,156 | $3,340 | $ (1,325) | $814,171 |
Obligations of states and political subdivisions | 30 | | | 30 |
Mortgage-backed securities | 22,285 | | (206) | 22,079 |
Other securities | | | | |
|
||||
Total securities available-for-sale | $834,471 | $3,340 | $ (1,531) | $836,280 |
|
||||
1997 | ||||
U.S. Government obligations | $366,584 | $2,623 | $ | $369,207 |
Obligations of states and political subdivisions | 115 | | | 115 |
Other securities | | | | |
|
||||
Total securities available-for-sale | $366,699 | $2,623 | $ | $369,322 |
|
The following table presents the amortized cost and fair value by the contractual maturity of available-for-sale debt securities held on December 31, 1999 as well as the weighted average yield for each range (stated on a taxable equivalent basis assuming a 35% marginal tax rate). Yield information does not give effect to changes in fair value that are reflected as a component of stockholders' equity.
Amortized
Cost |
Fair
Value |
Weighted
Average Yield |
|
|
|||
(in thousands) | |||
U.S. Government obligations | |||
Due in one year or less | $172,031 | $171,458 | 5.52% |
Due after one year through five years | 751,366 | 736,688 | 5.40% |
Due after five years through ten years | 1,500 | 1,474 | 5.40% |
Due after ten years | | | |
|
|||
Total | $924,897 | $909,620 | 5.42% |
|
|||
Obligations of states and political subdivisions | |||
Due in one year or less | $ | $ | |
Due after one year through five years | | | |
Due after five years through ten years | 1,615 | 1,615 | 10.98% |
Due after ten years | 1,885 | 1,885 | 11.81% |
|
|||
Total | $ 3,500 | $ 3,500 | 11.43% |
|
|||
Other securities | |||
Due in one year or less | $ 550 | $ 550 | 6.44% |
Due after one year through five years | 6,466 | 6,432 | 7.08% |
Due after five years through ten years | | | |
Due after ten years | | | |
|
|||
Total | $ 7,016 | $ 6,982 | 7.03% |
|
Gross realized gains on sales of available-for-sale securities were $888,000 in 1999 and $1.3 million in 1998 and 1997. The proceeds from sales of available-for-sale securities were $200 million and $303.1 million for 1999 and 1998, respectively.
Held-to-maturity
The amortized cost of held-to-maturity securities and their approximate
fair values at December 31 were as follows:
Amortized
Cost |
Gross
Unrealized Gains |
Gross
Unrealized Losses |
Fair
Value |
|
|
||||
(in thousands) | ||||
1999 | ||||
U.S. Government obligations | $124,731 | $ 7 | $ (732) | $124,006 |
Obligations of states and political subdivisions | 34,945 | 66 | (292) | 34,719 |
Mortgage-backed securities | 19,280 | 7 | (274) | 19,013 |
Other securities | 450 | | | 450 |
|
||||
Total securities held-to-maturity |
$179,406 | $ 80 | $ (1,298) | $178,188 |
|
||||
1998 | ||||
U.S. Government obligations | $374,009 | $2,109 | $ | $376,118 |
Obligations of states and political subdivisions | 16,671 | 210 | | 16,881 |
Mortgage-backed securities | 29,788 | 325 | (8) | 30,105 |
Other securities | 450 | | | 450 |
|
||||
Total securities held-to-maturity | $420,918 | $2,644 | $ (8) | $423,554 |
|
||||
1997 | ||||
U.S. Government obligations | $809,581 | $1,903 | $ (265) | $811,219 |
Obligations of states and political subdivisions | 17,184 | 192 | (21) | 17,355 |
Mortgage-backed securities | 45,692 | 31 | (101) | 45,622 |
Other securities | 450 | | | 450 |
|
||||
Total securities held-to-maturity | $872,907 | $2,126 | $ (387) | $874,646 |
|
||||
The following table presents the amortized cost and fair value by the contractual maturity of held-to-maturity debt securities held on December 31, 1999 as well as the weighted average yield for each range (stated on a taxable equivalent basis assuming a 35% marginal tax rate).
Amortized
Cost |
Fair
Value |
Weighted
|
|
|
|||
(in thousands) | |||
U.S. Government obligations | |||
Due in one year or less | $ 74,132 | $ 73,728 | 5.85% |
Due after one year through five years | 50,599 | 50,278 | 6.02% |
Due after five years through ten years | | | |
Due after ten years | | | |
|
|||
Total | $124,731 | $124,006 | 5.92% |
|
|||
Obligations of states and political subdivisions | |||
Due in one year or less | $ 4,844 | $ 4,849 | 9.94% |
Due after one year through five years | 21,647 | 21,474 | 10.54% |
Due after five years through ten years | 4,486 | 4,422 | 10.98% |
Due after ten years | 3,968 | 3,974 | 9.95% |
|
|||
Total | $ 34,945 | $ 34,719 | 10.44% |
|
|||
Other securities | |||
Due in one year or less | $ | $ | |
Due after one year through five years | 450 | 450 | 6.64% |
Due after five years through ten years | | | |
Due after ten years | | | |
|
|||
Total | $ 450 | $ 450 | 6.64% |
|
C. LOANS
The Company grants individual consumer, commercial, agricultural, and real estate loans to its customers. The commercial loan portfolio is diversified, consisting of numerous industries located or headquartered primarily in the Company's operating region which includes Nebraska, Colorado, Kansas, South Dakota and Iowa. The majority of individual consumer loans are to customers located in the central part of the United States and these loans consist primarily of credit cards and related plans.
For the years ended December 31, loans were comprised of the following:
1999
|
1998
|
|
|
||
(in thousands) | ||
Individual consumer |
$3,016,705 | $3,188,367 |
Real estate - mortgage | 1,176,024 | 959,904 |
Commercial and financial | 1,171,786 | 832,070 |
Agricultural | 534,004 | 427,274 |
Real estate - construction | 303,836 | 234,757 |
Lease financing | 80,196 | 73,726 |
Other | 31,181 | 29,956 |
|
||
Gross loans | 6,313,732 | 5,746,054 |
Less: | ||
Allowance for loan losses | 106,484 | 121,877 |
Unearned income | 15,429 | 13,450 |
|
||
Net loans | $6,191,819 | $5,610,727 |
|
Lease financing for the years ended December 31 was comprised of the following:
1999
|
1998
|
|
|
||
(in thousands) | ||
Direct financing leases: | ||
Lease payments
receivable
|
$67,945 | $62,731 |
Estimated residual value of equipment
|
12,251 | 10,995 |
|
||
80,196 | 73,726 | |
Less unearned income | 10,166 | 9,364 |
|
||
Net leases | $70,030 | $64,362 |
|
At December 31, 1999, minimum lease financing payments receivable for each of the five succeeding years are approximately: $20.2 million for 2000; $19.1 million for 2001; $13.5 million for 2002; $8.3 million for 2003; and $4.2 million for 2004.
In addition to loans owned by the Company, credit card loans securitized and serviced for others totaled $651 million and $653 million at December 31, 1999 and 1998, respectively. Mortgage loans serviced for others totaled $490.9 million and $394.7 million, respectively, at December 31, 1999 and 1998. Loan participations sold to banks owned by shareholders of the Company were $93 million and $90.6 million, respectively, at December 31, 1999 and 1998. Loan participations of $24.9 million were also purchased from companies owned by shareholders at December 31, 1999. Loans to subsidiary bank directors and their associates were approximately $27 million and $27.7 million at December 31, 1999 and 1998, respectively.
An analysis of the changes in the allowance for loan losses for the years ended December 31 is as follows:
1999
|
1998
|
1997
|
|
|
|||
(in thousands) | |||
Balance beginning of year |
$ 121,877 | $ 128,990 | $ 104,812 |
Addition due to acquisitions of loans | 3,054 | 13,035 | 10,895 |
Reduction due to sales of loans | | (8,990) | |
Provision for loan losses | 144,573 | 173,311 | 201,494 |
Loans charged off | (191,257) | (213,325) | (213,348) |
Loans recovered | 28,237 | 28,856 | 25,137 |
|
|||
Total net charge-offs | (163,020) | (184,469) | (188,211) |
|
|||
Balance end of year |
$ 106,484 | $ 121,877 | $ 128,990 |
|
The Company evaluates each borrower's creditworthiness on a case-by-case basis. The individual consumer loan 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. The amount of collateral obtained is based upon management's evaluation of the borrower.
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.
As of December 31, 1999, 1998 and 1997 and for each of the three years then ended, the Company's recorded investment in impaired loans and associated interest income was immaterial.
D. PREMISES AND EQUIPMENT
Premises and equipment were comprised of the following:
December 31,
|
||
1999
|
1998
|
|
|
||
(in thousands) | ||
Land | $ 18,091 | $ 14,166 |
Buildings | 84,568 | 77,557 |
Leasehold improvements | 27,281 | 24,526 |
Equipment | 192,960 | 164,958 |
|
||
322,900 | 281,207 | |
Less accumulated depreciation | 173,097 | 142,354 |
|
||
Net premises and equipment | $149,803 | $138,853 |
|
E. DEPOSITS
At December 31, 1999, the scheduled maturities of total certificates of deposit were as follows:
|
|
(in thousands) | |
2000 | $ 2,638,729 |
2001 | 827,027 |
2002 | 110,098 |
2003 | 48,667 |
2004 and thereafter | 82,482 |
|
|
Total certificates of deposit | $ 3,707,003 |
|
The aggregate amount of certificates of deposit, each with a minimum denomination of $100,000, was approximately $762 million and $674.4 million at December 31, 1999 and 1998, respectively.
F. FEDERAL HOME LOAN BANK ADVANCES
The Company had advances from the Federal Home Loan Bank as follows:
December 31, 1999
|
December 31, 1998
|
|||
|
|
|||
Weighted
Average Rate |
Amount
|
Weighted
Average Rate |
Amount
|
|
|
||||
(in thousands) | ||||
Scheduled maturities due on regular advances: | ||||
Due in one year or less | 5.66% | $123,001 | 6.07% | $ 639 |
Due after one year through two years | 6.18% | 915 | 6.04% | 752 |
Due after two years through three years | 6.30% | 1,336 | 6.10% | 669 |
Due after three years through four years | 5.25% | 21,238 | 6.28% | 1,088 |
Due after four years through five years | 5.57% | 30,846 | 4.84% | 20,986 |
Due after five years | 5.67% | 59,741 | 6.41% | 4,401 |
|
||||
Total regular advances | 5.62% | $237,077 | 5.23% | $ 28,535 |
Total line of credit advances | 5.00% | $135,000 | | |
|
||||
Total Federal Home Loan Bank advances | 5.39% | $372,077 | 5.23% | $ 28,535 |
|
These Federal Home Loan Bank advances carried interest rates ranging from 4.47% to 7.34% as of December 31, 1999. Fixed-rate advances totaling $94.5 million at December 31, 1999 are convertible into adjustable-rate advances at the option of the Federal Home Loan Bank with call dates ranging from March 2000 to September 2006. These convertible advances include $40 million with scheduled maturities due after two years through three years, $3 million with maturities due after four years through five years and $51.5 million with maturities due after five years. At December 31, 1999 and 1998, outstanding advances were collateralized by real estate loans totaling $443.5 million and $50.6 million, respectively, mortgage-backed securities totaling $48.1 million and $300,000, respectively, and investment securities totaling $15 million and $0, respectively, in compliance with Federal Home Loan Bank requirements. Additionally, the Company held Federal Home Loan Bank stock totaling $33 million at December 31, 1999 and $6.2 million at December 31, 1998 which is also held as collateral.
G. OTHER BORROWINGS
At December 31, 1999 and 1998, Bank premises were subject to a mortgage which requires annual payments of $1.3 million including interest at 7.75%, through the year 2003. The Bank may prepay the mortgage with a prepayment premium. The mortgage balance was $3.4 million and $4.4 million at December 31, 1999, and 1998, respectively.
The parent company has a $100 million syndicated revolving credit facility available for acquisitions or other corporate purposes which bears a variable rate of interest tied to publicly announced debt ratings of the Bank. At December 31, 1999 and 1998, there was no balance outstanding under this credit facility. The credit facility will mature on December 4, 2000, at which time, any outstanding balance will be due. Among other restrictions, the loan agreement requires that the Company maintain certain financial covenants.
H. CAPITAL NOTES
The Bank has $75 million in subordinated capital notes which are due to mature on December 1, 2010. The subordinated capital notes pay interest semi-annually on June 1 and December 1 at a fixed rate of 7.32%. The subordinated capital 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 capital notes may not be redeemed, in whole or in part, prior to maturity.
The parent company has unsecured capital notes which require principal payments through 2006. At December 31, 1999 and 1998, $17.1 million and $17.9 million, respectively, were outstanding on these notes. The capital notes are noncallable and carry interest rates ranging from 9.00% to 12.50%. Principal amounts due on capital notes in each of the succeeding five years and thereafter are approximately: $800,000 in 2000; $700,000 in 2001; $7.5 million in 2002; $1.9 million in 2003 and 2004; and $4.3 million in years thereafter.
In November 1999, a subsidiary bank issued $2.3 million in capital notes which require principal payments beginning in 2006 through 2009. The capital notes pay interest quarterly beginning February 5, 2000 at a fixed rate of 7.5%. The capital notes are unsecured and subordinated to the claims of depositors and general creditors of the subsidiary. There are no principal amounts due on these capital notes in 2000 through 2004 and $2.3 million is due in the years thereafter.
I. 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 were as follows:
1999
|
1998
|
|
|
||
(in thousands) | ||
Deferred tax assets: |
||
Allowance for loan losses | $36,927 | $42,870 |
Employee benefits | 10,246 | 7,212 |
Purchased credit card relationships | 6,113 | 3,473 |
Net unrealized loss on available-for-sale securities | 6,090 | |
Other | 5,345 | 3,254 |
|
||
Total deferred tax assets | 64,721 | 56,809 |
|
||
Deferred tax liabilities: | ||
Lease financing | 2,469 | 3,577 |
Change in accrual method recognized over future periods for tax purposes | 4,550 | 6,825 |
Retained interests recorded for securitization | 3,755 | 3,823 |
Net unrealized gain on available-for-sale securities | | 646 |
Other | 2,255 | 1,176 |
|
||
Total deferred tax liabilities | 13,029 | 16,047 |
|
||
Net deferred tax assets |
$51,692 | $40,762 |
|
The following is a comparative analysis of the provision for federal and state taxes:
For the years ended December
31,
|
|||
1999
|
1998
|
1997
|
|
|
|||
(in thousands) | |||
Current: | |||
Federal | $45,073 | $51,680 | $49,969 |
State | 4,986 | 5,485 | 3,978 |
|
|||
50,059 | 57,165 | 53,947 | |
Deferred: | |||
Federal | (30) | (1,497) | (4,841) |
State | (79) | 40 | (388) |
|
|||
(109) | (1,457) | (5,229) | |
|
|||
Total provision for income taxes | $49,950 | $55,708 | $48,718 |
|
The effective rates of total tax expense for the years ended December 31, 1999, 1998 and 1997 were different than the statutory federal tax rate. The reasons for the differences were as follows:
For the years ended December 31, |
|||
1999
|
1998
|
1997
|
|
|
|||
(percent of pretax income) | |||
Statutory federal tax rate | 35.0% | 35.0% | 35.0% |
Additions (reductions) in taxes resulting from: | |||
Tax-exempt interest income | (0.7)% | (0.6)% | (0.8)% |
State taxes | 2.2% | 2.0% | 2.1% |
Change in tax estimate | (2.7)% | | |
Other items, net | 1.3% | 2.8% | 3.0% |
|
|||
Effective tax rate | 35.1% | 39.2% | 39.3% |
|
J. EMPLOYEE BENEFIT PLANS
The Company provides a noncontributory defined benefit pension plan to employees. The pension plan covers substantially all employees with one or more years of service. Pension benefits are based on years of service and the employee's highest average compensation using 60 consecutive months out of the last 120 months of employment. The pension benefits are funded under a self-administered pension trust with the Bank's trust department acting as trustee. The Company's policy is to fund the pension plan with sufficient assets necessary to meet benefit obligations as determined on an actuarial basis (normally up to the amount deductible under existing tax regulations).
In addition to providing pension benefits, the Company also provides postretirement medical and death benefits to retired employees meeting certain eligibility requirements. The medical plan is contributory, whereby the retired employee pays a portion of the health insurance premium, and contains other cost-sharing features such as deductibles and coinsurance.
The following tables provide a reconciliation of the benefit obligations, plan assets and funded status of the pension and postretirement benefit plans.
Pension Benefits
|
Postretirement
Benefits
|
|||
|
|
|||
1999 |
1998
|
1999
|
1998
|
|
|
||||
(in thousands) | ||||
Change in benefit obligation: | ||||
Benefit obligation at January 1 | $58,753
|
$45,532
|
$6,567
|
$5,373
|
Service cost | 4,940
|
4,605
|
614
|
526
|
Interest cost | 3,524
|
3,329
|
443
|
382
|
Retiree contributions |
|
|
65
|
61
|
Actuarial (gain) loss | (7,501)
|
6,656
|
(549)
|
406
|
Benefits paid | (1,334)
|
(1,369)
|
(218)
|
(181)
|
|
||||
Benefit obligation at December 31 | $58,382
|
$58,753
|
$6,922
|
$6,567
|
|
Pension Benefits
|
Postretirement Benefits
|
|||
1999
|
1998
|
1999
|
1998
|
|
|
||||
(in thousands) | ||||
Change in plan assets: | ||||
Fair value of plan assets at January 1 | $78,519
|
$78,875
|
|
|
Actual return on plan assets | (12,235)
|
1,013
|
|
|
Benefits paid | (1,334)
|
(1,369)
|
|
|
|
||||
Balance at December 31 | $64,950
|
$78,519
|
|
|
|
Pension Benefits |
Postretirement
Benefits |
|||
1999
|
1998
|
1999
|
1998
|
|
|
||||
(in thousands) | ||||
Funded status | $ 6,568
|
$ 19,766
|
$(6,922)
|
$(6,567)
|
Unrecognized net actuarial gain | (4,554)
|
(16,509)
|
(2,010)
|
(1,497)
|
Unrecognized prior service cost | 422
|
485
|
|
|
Unrecognized net assets at transition | (333)
|
(728)
|
|
|
Unrecognized transition obligation |
|
|
2,834
|
3,052
|
|
||||
Prepaid (accrued) benefit cost | $2,103
|
$3,014
|
$(6,098)
|
$(5,012)
|
|
||||
Assumptions as of December 31: | ||||
(weighted averages) | ||||
Discount rate | 7.50%
|
6.75%
|
7.50%
|
6.75%
|
Expected return on plan assets | 8.00%
|
8.00%
|
|
|
Rate of compensation increase | 5.00%
|
5.00%
|
|
|
Pension plan assets consist primarily of equity securities, corporate bonds and government and agency securities. At December 31, 1999, the pension plan owned parent company common stock with an original cost of $270,000 and a fair value of $26.6 million.
Net periodic benefit cost (income) included the following components:
Pension Benefits |
Postretirement Benefits |
|||||
1999
|
1998
|
1997
|
1999
|
1998
|
1997
|
|
|
||||||
(in thousands) | ||||||
Service cost | $4,940
|
$4,605
|
$3,817
|
$614
|
$526
|
$415
|
Interest cost | 3,524
|
3,329
|
2,676
|
443
|
382
|
306
|
Amortization of prior service costs | 63
|
63
|
63
|
|
|
|
Expected return on plan assets | (6,231)
|
(6,262)
|
(5,219)
|
|
|
|
Recognized net actuarial gain | (991)
|
(1,427)
|
(1,683)
|
(36)
|
(72)
|
(105)
|
Amortization of transition amounts | (394)
|
(394)
|
(394)
|
217
|
217
|
217
|
|
||||||
Net periodic benefit cost (income) | $911
|
$(86)
|
$(740)
|
$1,238
|
$1,053
|
$833
|
|
The assumed healthcare cost trend rate used to measure the expected cost of benefits covered by the postretirement benefit plan was 6% in 1999 decreasing to 5% in 2000, and remaining constant thereafter. The healthcare cost trend rate assumption could have a significant effect on the amounts reported. A one percentage point change in the assumed healthcare cost trend rates would have the following effects:
One Percentage
Point Increase |
One Percentage
Point Decrease |
|
|
|
|
(in thousands) | ||
Effect on total of service and
interest cost components
of net periodic postretirement healthcare cost |
$58
|
$(56)
|
Effect on postretirement benefit obligation | 279
|
(265)
|
In addition to the pension and postretirement benefit plans, the Company also has 401(k) savings plans which cover substantially all employees. Total cost for these plans, included within noninterest expense, for the years ended December 31, 1999, 1998 and 1997 approximated $3.1 million, $1.7 million and $1.3 million, respectively.
K. CONTINGENCIES AND 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 funding requirements. The Company uses the same credit and collateral policies in making commitments as those described in Note C.
At December 31, 1999 and 1998, the Company had unused loan commitments, excluding consumer credit card lines, of $1.9 billion and $1.6 billion, respectively. Additionally, standby letters of credit of $138 million and $86.4 million at December 31, 1999 and 1998, respectively, 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 $21.5 billion and $21.3 billion at December 31, 1999 and 1998, 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.
In December 1999, the Bank entered into an interest rate swap agreement for $15 million as a hedge against a future loan commitment. The interest rate swap agreement has an effective date of July 1, 2001 and a termination date of July 1, 2011.
The Company has operating leases for office space with terms ranging from one to ten years, which may include renewal options. Certain leases also include residual value guarantees up to $148.9 million, or alternatively, the Company may elect to exercise purchase options totaling $172.4 million. Operating leases on equipment and office space require future minimum annual rental payments as follows: 2000-$21.6 million; 2001-$20.9 million; 2002-$24.2 million; 2003-$22.2 million; 2004-$21.5 million; and $37.3 million thereafter through the year 2026. Net rental expense on leases for the years ending December 31, 1999, 1998 and 1997 was approximately $18.6 million, $17.5 million and $12.5 million, respectively.
L. REGULATORY MATTERS
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, three state-chartered banks and two trust companies, all of which are insured by the FDIC. The state-chartered banks are also regulated by 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. 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 banks are subject to limitations under federal law in the amount of dividends they may declare. At December 31, 1999, approximately $112.5 million of subsidiary banks' retained earnings was available for dividend declaration without prior regulatory approval.
The parent company has filed an election to become a "financial holding company" under the Gramm-Leach-Bliley Act. As a financial holding company, the Company would be permitted to engage in and to acquire companies engaged in "financial in nature" activities. These activities could include, among other things, securities and insurance activities and investment banking (through appropriate entities). Engaging in these activities could subject the parent company and its subsidiaries to regulation by additional functional regulators. The parent company would be required to satisfy certain conditions in order to retain its rights as a financial holding company. One such condition is that all of the depository institutions controlled by the Company must be and remain well capitalized and well managed. Failure to satisfy this condition could result in regulatory action against the Company, including forced divestiture of its depository institution subsidiaries.
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 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 amounts and ratios (set forth in the following table) 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 and its banking subsidiaries' capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
As of December 31, 1999, the most recent notification from the bank regulators 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 Company'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%.
The Company's and First National Bank of Omaha's actual capital amounts and ratios are presented in the following table.
Actual
|
For Minimum
Capital Adequacy Purposes
|
To Be Well Capitalized Under Prompt Corrective Action Provisions |
||||
|
||||||
(in
thousands)
|
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
As of December 31, 1999 |
||||||
Total Capital to
Risk Weighted Assets
Consolidated |
$751,810
|
10.8%
|
$554,935
|
8.0%
|
N/A
|
|
First National Bank of Omaha |
$363,314
|
10.5%
|
$276,853
|
8.0%
|
$346,066
|
10.0%
|
Tier I Capital
to Risk Weighted Assets
|
$577,331
|
8.3%
|
$277,467
|
4.0%
|
N/A
|
|
First
National Bank of Omaha
|
$245,578
|
7.1%
|
$138,426
|
4.0%
|
$207,640
|
6.0%
|
Tier I Capital to Average
Assets
Consolidated |
$577,331
|
7.1%
|
$323,176
|
4.0%
|
N/A |
|
First
National Bank of Omaha
|
$245,578
|
6.0%
|
$163,710
|
4.0%
|
$204,637
|
5.0% |
As of December 31,
1998
|
||||||
Total Capital to
Risk Weighted Assets
Consolidated |
$689,260
|
10.7%
|
$515,343
|
8.0%
|
N/A |
|
First
National Bank of Omaha
|
$348,203
|
10.5%
|
$264,559
|
8.0%
|
$330,699
|
10.0%
|
Tier I Capital
to Risk Weighted Assets
Consolidated |
$520,574 |
8.1%
|
$257,671
|
4.0%
|
N/A
|
|
First
National Bank of Omaha
|
$231,690 |
7.0%
|
$132,280
|
4.0%
|
$198,419
|
6.0%
|
Tier I Capital to Average
Assets
Consolidated |
$520,574 |
6.8%
|
$304,980
|
4.0%
|
N/A
|
|
First
National Bank of Omaha
|
$231,690
|
5.8% |
$159,924
|
4.0%
|
$199,905
|
5.0%
|
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. Pursuant to Federal Reserve Bank reserve requirements, the Company's banking subsidiaries were required to maintain certain cash reserve balances with the Federal Reserve system of approximately $21.7 million and $24.1 million at December 31, 1999 and 1998, respectively.
M. FAIR VALUES OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument is the current amount that would be exchanged between willing parties. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company's various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. SFAS No. 107, "Disclosures About Fair Value of Financial Instruments," excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.
The following table presents the carrying amounts and fair values of the specified assets and liabilities held by the Company at December 31, 1999 and 1998. The information presented is based on pertinent information available to management as of December 31, 1999 and 1998. 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 since that point in time.
December 31, 1999
|
December 31,
1998
|
|||
|
|
|||
Carrying
Amount |
Estimated
Fair Value |
Carrying
Amount |
Estimated
Fair Value |
|
|
||||
(in thousands) | ||||
Financial assets: | ||||
Cash and cash equivalents | $654,732
|
$654,732
|
$816,509
|
$816,509
|
Investment securities | 1,193,070
|
1,191,852
|
1,275,101
|
1,277,737
|
Net loans and lease financing | 6,191,819
|
6,393,141
|
5,610,727
|
5,939,462
|
Accrued interest receivable | 77,063
|
77,063
|
73,980
|
73,980
|
Financial liabilities: | ||||
Deposits | $7,008,712
|
$6,996,408
|
$6,867,881
|
$6,894,757
|
Federal funds purchased and
securities sold
under repurchase agreements |
341,485
|
341,485
|
358,975
|
358,975
|
Federal Home Loan Bank advances | 372,077
|
370,963
|
28,535
|
30,031
|
Other borrowings | 3,758
|
3,758
|
4,504
|
4,503
|
Accrued interest payable | 34,025
|
34,025
|
35,148
|
35,148
|
Capital notes | 94,389
|
89,159
|
92,864
|
100,646
|
Off-balance sheet financial instruments: | ||||
Unused loan commitments | $1,865,269
|
$1,865,269
|
$1,579,853
|
$1,579,853
|
Standby letters of credit | 138,032
|
138,032
|
86,403
|
86,403
|
Unused consumer credit card lines | 21,462,937
|
21,462,937
|
21,250,552
|
21,250,552
|
|
The following methods and assumptions were used in estimating fair value disclosures for the Company's financial instruments:
Cash and Cash Equivalents - The carrying amounts of cash and due from banks, federal funds sold and other short-term investments approximate the fair values.
Investment Securities - The fair values of the Company's securities, excluding Federal Home Loan Bank stock and other securities, are based on the quoted market prices at December 31, 1999 and 1998. Available-for-sale securities are carried at their aggregate fair values. The carrying value of the Federal Home Loan Bank stock approximates fair value based on the redemption provisions of the Federal Home Loan Bank.
Net Loans and Lease Financing - The fair values of the Company's loans and lease financing have been estimated using two methods: 1) the carrying amounts of short-term and variable rate loans approximate fair values excluding certain credit card loans tied to an index floor; and 2) for all other loans, discounting of projected future cash flows. When using the discounting method, loans are pooled in 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 values for all loans, the allowance for loan losses is subtracted from the calculated fair values for consideration of credit issues.
Accrued Interest Receivable - The carrying amount of accrued interest receivable approximates the fair value.
Deposits - The methodologies used to estimate the fair values of deposits are similar to the two methods used to estimate the fair values of loans. Deposits are pooled in homogeneous groups and the future cash flows of these groups are discounted using current market rates offered for similar products at year end.
Federal Funds Purchased and Securities Sold Under Repurchase Agreements - The carrying amounts of federal funds purchased and securities sold under repurchase agreements approximate the fair values.
Federal Home Loan Bank Advances - The fair values of Federal Home Loan Bank advances are estimated by discounting future cash flows using current market rates for similar types of borrowing arrangements.
Other Borrowings - The fair values of other borrowings are estimated by discounting future cash flows using current market rates for similar types of borrowing arrangements.
Accrued Interest Payable - The carrying amount of accrued interest payable approximates the fair value.
Capital Notes - The fair values of capital notes are estimated by discounting future cash flows using current market rates for similar types of borrowing arrangements.
Off-Balance Sheet Financial Instruments - All material amounts of off-balance sheet financial instruments are characterized as short-term instruments because of the conditions of the contract and repricing ability. The carrying values of all off-balance sheet financial instruments approximate the fair values.
N. ACQUISITIONS
In November 1999, a subsidiary of the parent company, First National Bank South Dakota, acquired Commercial Banshares, Inc., parent of Commercial Trust and Savings Bank, in a transaction accounted for as a purchase. Commercial Banshares, Inc. had consolidated assets of approximately $161 million. At acquisition, Commercial Trust and Savings Bank was renamed to Commercial Bank, a division of First National Bank South Dakota. Commercial Bank has branches in Mitchell, Huron and Woonsocket, South Dakota.
A second acquisition occurred in November 1999 and it was also accounted for as a purchase. A bank holding company subsidiary acquired FNBJ Company, a parent of First National Bank of Johnstown, Colorado. FNBJ Company, the holding company of First National Bank of Johnstown, had consolidated assets of approximately $30 million. At acquisition, First National Bank of Johnstown merged into Union Colony Bank and was renamed Union Colony - Johnstown Branch.
O. NEW ACCOUNTING PRONOUNCEMENTS
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133." SFAS No. 137 postponed the effective date for SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" to all fiscal quarters of all fiscal years beginning after June 15, 2000. The Company intends to adopt SFAS No. 133 effective January 1, 2001. SFAS No. 133 establishes accounting and reporting standards requiring that every derivative (including certain derivatives embedded in contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The statement requires that changes in the fair value of derivatives be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gain or loss to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting treatment. Management does not expect the adoption of SFAS No. 133 to have a significant impact on the financial position or results of operations of the Company because the Company currently does not have significant derivative activity.
P. CONDENSED FINANCIAL INFORMATION OF FIRST NATIONAL OF NEBRASKA
First National of Nebraska
(parent company only)
Condensed Statements of Financial Condition
|
|||
December 31, | |||
1999 | 1998 | ||
|
|||
(in thousands) | |||
Assets | |||
Cash and due from banks | $411 | $529 | |
Other short-term investments | 6,100 | 2,750 | |
|
|||
Total cash and cash equivalents | 6,511 | 3,279 | |
Other securities | 406 | 445 | |
Loans to nonbanking subsidiaries | 8,294 | 2,525 | |
Investment in subsidiaries: | |||
First National Bank of Omaha | 239,979 | 231,976 | |
Other banking subsidiaries | 403,412 | 365,091 | |
Nonbanking subsidiaries | 11,401 | 5,164 | |
|
|||
Total investment in subsidiaries | 654,792 | 602,231 | |
Other assets | 4,976 | 5,324 | |
|
|||
Total assets | $674,979 | $613,804 | |
|
|||
Liabilities and Stockholders' Equity | |||
Other liabilities | 2,873 | 6,472 | |
Deferred gain on sale of buildings | 4,562 | 5,165 | |
Capital notes | 17,070 | 17,864 | |
|
|||
Total liabilities | 24,505 | 29,501 | |
Stockholders' equity: | |||
Common stock | 1,673 | 1,675 | |
Additional paid-in capital | 2,511 | 2,515 | |
Retained earnings | 656,786 | 578,951 | |
Accumulated other comprehensive income (loss) | (10,496) | 1,162 | |
|
|||
Total stockholders' equity | 650,474 | 584,303 | |
|
|||
Total liabilities and stockholders' equity |
$674,979 | $613,804 | |
|
First National of Nebraska (parent company only)
Condensed Statements of Operations
For the years ended December
31,
|
|||
1999
|
1998
|
1997
|
|
|
|||
(in thousands except share and
per share data)
|
|||
Revenues:
|
|||
Income
from subsidiaries:
|
|
||
Dividends from First National Bank of Omaha
|
$27,066
|
$14,988
|
$21,491
|
Dividends from other banking subsidiaries
|
31,000
|
23,575
|
20,100
|
Dividends from nonbanking subsidiaries |
|
|
13,069
|
Interest income on commercial paper |
38
|
159
|
2,380
|
Recognized gain on sale of buildings |
602
|
602
|
602
|
Investment interest and other income |
1,599
|
462
|
796
|
|
|||
Total revenues |
60,305
|
39,786
|
58,438
|
Expenses: |
|||
Interest |
1,656
|
2,749
|
5,622
|
Other |
6,094
|
3,358
|
2,243
|
|
|||
Total expenses |
7,750
|
6,107
|
7,865
|
|
|||
Income before income taxes and equity in undistributed earnings of subsidiaries |
52,555
|
33,679
|
50,573
|
Income tax expense (benefit) |
(5,507)
|
641
|
371
|
|
|||
Total income before equity in undistributed earnings of subsidiaries |
58,062
|
33,038
|
50,202
|
|
|||
Equity in undistributed (overdistributed) earnings of subsidiaries: |
|||
First National Bank of Omaha |
13,589
|
30,688
|
14,978
|
Other banking subsidiaries |
18,473
|
22,530
|
14,737
|
Nonbanking subsidiaries |
2,237
|
236
|
(4,730)
|
|
|||
Total equity in undistributed earnings of subsidiaries |
34,299
|
53,454
|
24,985
|
|
|||
Net income |
$92,361
|
$86,492
|
$75,187
|
|
|||
Average number of shares outstanding |
334,622
|
335,000
|
340,706
|
|
|||
Net income per share |
$276.02
|
$258.19
|
$220.68
|
|
First National of Nebraska (parent company only)
Condensed Statements of Cash Flows
|
|||
For the years ended December
31,
|
|||
1999
|
1998
|
1997
|
|
|
|||
(in thousands) | |||
CASH FLOWS FROM OPERATING ACTIVITIES | |||
Net Income | $92,361
|
$86,492
|
$75,187
|
Adjustments to reconcile net income to net cash | |||
flows from operating activities: | |||
Equity in undistributed earnings of subsidiaries | (34,299)
|
(53,454)
|
(24,985)
|
Recognized gain on sale of buildings | (602)
|
(602)
|
(602)
|
Other, net | (2,678)
|
2,913
|
(28)
|
|
|||
Net cash flows from operating activities | 54,782
|
35,349
|
49,572
|
CASH FLOWS FROM INVESTING ACTIVITIES | |||
Change in investment in subsidiaries and other assets | (36,168)
|
(2,090)
|
(14,975)
|
|
|||
Net cash flows from investing activities | (36,168)
|
(2,090)
|
(14,975)
|
CASH FLOWS FROM FINANCING ACTIVITIES | |||
Issuance of other borrowings | 10,000
|
14,000
|
52,029
|
Principal repayments of other borrowings | (10,056)
|
(33,070)
|
(33,098)
|
Principal repayments of capital notes | (794)
|
(1,188)
|
(2,564)
|
Net change in commercial paper |
|
|
(45,000)
|
Repayment of payable to subsidiary |
|
|
(2,075)
|
Repurchase of common stock | (1,574)
|
|
(42,362)
|
Cash dividends paid | (12,958)
|
(11,725)
|
(11,608)
|
|
|||
Net cash flows from financing activities | (15,382)
|
(31,983)
|
(84,678)
|
|
|||
Net change in cash and cash equivalents | 3,232
|
1,276
|
(50,081)
|
Cash and cash equivalents at beginning of year | 3,279
|
2,003
|
52,084
|
|
|||
Cash and cash equivalents at end of year | $6,511
|
$3,279
|
$2,003
|
|
|||
Cash paid during the year for: | |||
Interest | $1,701
|
$2,833
|
$5,735
|
Income taxes | $52,632
|
$53,387
|
$44,979
|
Cash received from affiliates for income taxes | $49,271
|
$51,895
|
$39,919
|
|
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, 1999 and 1998, and the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1999. 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, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Omaha, Nebraska
January 28, 2000
Management's Discussion and Analysis of
Financial Condition and Results of
Operations
The Company
The Company consists of the parent company, which is a Nebraska-based interstate bank holding company organized in 1968, and its consolidated subsidiaries. Its principal subsidiaries include First National Bank of Omaha and its 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 and its wholly-owned subsidiary: Nebraska Trust Company, N.A.; 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 which primarily include: First National Bank, Fort Collins; Union Colony Bank, Greeley; The Bank in Boulder; and FNC Trust Group, N.A. The Company also has nonbanking subsidiaries, which in the aggregate are not material. The Company had 5,867 employees as of December 31, 1999.
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, three state-chartered banks and two trust companies, all of which are insured by the FDIC. The state-chartered banks are also regulated by state banking authorities.
The Company has 47 years of experience providing credit card services and was one of the originators of the bank credit card industry. 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 central part of the country. In 1999, the Company was ranked the eleventh largest bank issuer of credit cards and the eighteenth largest overall 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 affiliate 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 1999, the Company was ranked one of the ten largest merchant credit card processors in the United States with over $20.5 billion in transactions processed in 1999 and $19.2 billion in transactions processed in 1998. It was also ranked the nineteenth largest automated clearinghouse processor in the country and the largest check processor in its market area. Furthermore, the Company provides data processing services to 42 non-affiliated banks located in ten states. The Company continues to closely monitor the risks and competitive conditions as they relate to pricing and technological issues associated with these processing services.
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. As a result of this nation-wide competition, the credit card industry has experienced a decline in the credit card growth rate since 1996 and has reached a point of maturity where future growth is projected to be minimal. Also, high levels of consumer delinquencies and bankruptcies continue to be an industry-wide concern for all credit card issuers due to the excess of easy credit to consumers throughout the United States. Due to the competitive pressures and asset quality issues, a number of companies are exiting the credit card industry.
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 different results.
Results of Operations
Overview
The Company earned a record net income for 1999 of $92.4 million which is an increase of $5.9 million, or 6.8%, from 1998. In 1998, net income increased $11.3 million, or 15%, from 1997. Earnings increases are primarily due to growth in non-credit card loans and noninterest income and a decline in the provision for loan losses. In 1998, net income reflected proceeds received by the Company related to the settlement of litigation. Excluding the settlement of litigation recognized in 1998, noninterest income has experienced steady growth over the last three years. The Company also reduced its income tax accrual in 1999 compared to 1998 and 1997 due to management's updated evaluation of its tax obligations as a result of recent developments including a favorable court decision on a tax case relating to multi-state taxation of credit card operations and the status of an Internal Revenue Service examination currently in progress. In 1999, net income per share was $276.02 compared to $258.19 and $220.68, respectively, for 1998 and 1997. Return on average stockholders' equity for 1999 was 15.1% compared to 15.7% for 1998 and 15.2% for 1997. Return on average assets was 1.2% for 1999 and 1998, respectively, and 1.1% for 1997.
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. The following table presents a summary of net interest income on a tax-equivalent basis, related average earning assets and net interest margin:
1999
|
1998
|
1997
|
|
|
|||
(in thousands) | |||
Net interest income on a tax equivalent basis | $ 518,734
|
$ 512,944
|
$ 498,570
|
Average earning assets | 7,117,622
|
6,801,408
|
6,466,847
|
Net interest margin | 7.29%
|
7.54%
|
7.71%
|
The decreases in net interest margins relate to declines in higher yielding outstanding credit card and related plan average balances net of increases in outstanding non-credit card loan average balances. Net interest margin decreases also relate to asset yields repricing downward in response to competitive market conditions at a faster rate than the repricing of deposits.
Provision for loan losses
On a monthly basis, the Company evaluates 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. The provision for loan losses decreased $28.7 million to $144.6 million for 1999 compared to $173.3 million for 1998. In 1998, the provision for loan losses decreased $28.2 million to $173.3 million compared to $201.5 million for 1997. The reduction in the provision for loan losses for 1999 is due to improved delinquency and charge-off rates and a reduction in the outstanding balances of credit card loans and related plans relative to the entire portfolio. These reductions resulted in a decline in the Company's allowance for loan losses as a percentage of loans. The decrease in the provision for loan losses in 1998 related primarily to an improvement in total net charge-offs as a percentage of average loans and the Company's increased collection efforts. Although the level of net charge-offs as a percentage of average loans has improved, it remains high primarily due to delinquencies on consumer credit card loans and consumer bankruptcies which continue to adversely affect the credit card industry.
Noninterest income
Noninterest income was $248.6 million in 1999, a decrease of 3.9%, or $10.1 million, from 1998. In 1998, noninterest income was $258.8 million, an increase of 19.1%, or $41.6 million, from 1997. The 1999 decrease in noninterest income compared to 1998 is attributable to miscellaneous income recognized in the first quarter of 1998 from proceeds received in the settlement of litigation. This decrease was partially offset by an increase in credit card securitization income of $3.4 million, or 5.6%, to $64.4 million for 1999 when compared to $61 million for 1998. The increase in credit card securitization income for 1999 when compared to 1998 resulted from the net impact of a $3.9 million, or 8.2%, increase in net servicing income to $51.7 million from $47.8 million net of a $500,000, or 3.8%, decrease in securitization gains to $12.7 million from $13.2 million. In 1998, credit card securitization income increased $9.2 million, or 17.7%, to $61 million when compared to $51.8 million for 1997. The increase in credit card securitization income for 1998 when compared to 1997 resulted from the net impact of a $13.2 million, or 38.3%, increase in net servicing income to $47.8 million from $34.6 million net of a $4 million, or 23.6%, decrease in securitization gains to $13.2 million from $17.2 million. Deposit services income increased $2.9 million, or 11.7%, in 1999 compared to 1998 and $2.1 million, or 9%, in 1998 compared to 1997 generally as a result of growth in the Company's customer base and overall transaction volume. Trust and investment services were $23 million for both 1999 and 1998, while these services increased in 1998 compared to 1997 by $2.4 million, or 11.5%, from growth in the Company's customer base. Commission income was $15.5 million in 1999, a decrease of $232,000, or 1.5%, from 1998 while commission income was $15.7 million in 1998, a 10.5% increase from 1997. The increase in 1998 compared to 1997 was due to growth in investment sales activities.
Noninterest expense
Noninterest expense was $479.8 million in
1999, an increase of 5.3%, or $24.1 million, from 1998. Noninterest expense
in 1998 was $455.7 million, an increase of 16.9%, or $66 million, from 1997.
A significant portion of these increases was due to salaries and employee
benefits which increased $33.4 million, or 18.3%, in 1999 compared to 1998
and $26.9 million, or 17.2%, in 1998 compared to 1997 resulting from Company
growth and expansion into new products and into new markets. Loan servicing
expense increased $3.9 million, or 14.8%, in 1999 compared to 1998 and $5.5
million, or 26.8%, in 1998 compared to 1997 due to the Company's increased
collection efforts and associated costs as well as increased costs during
1999 for credit reports and the costs related to acquiring additional agent
bank relationships. Professional services decreased $17.8 million, or 33.5%,
in 1999 compared to 1998 principally due to decreased fees paid to a third
party merchant sales organization. Miscellaneous expense in 1999 compared to
1998 increased only 2% in comparison to a 33.8% increase in 1998 compared to
1997. The 1998 increase was largely due to the amortization of the premiums
paid relating to credit card portfolio acquisitions. Increases in remaining
expense categories generally relate to the acquisition of new customer
relationships and loan portfolios, continued investments in technology and
addressing Year 2000 issues.
Credit Card Loan Activities
The Company securitizes credit card loans on a revolving basis as a funding vehicle to supplement its use of core deposits as its primary source of funding. These securitizations are accounted for as sales in accordance with SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." Since the Company continues to service these securitized loans, it takes the role of a loan servicer rather than a lender. As loans are sold, gains which represent the present value of retained cash flows are recorded, and the loans along with the related allowance for credit losses are removed from the balance sheet. The securitizations result in differences in the amount of reported loans versus managed loans. Reported loans reflect the removal of these securitized loans from the balance sheet in accordance with generally accepted accounting principles while managed loans include both securitized loans and reported loans. The following table reflects the reconciliation of the loan portfolio net of unearned income between reported and managed loans at December 31, 1999 and December 31, 1998.
December 31, 1999
|
December 31, 1998
|
|||||
Reported
|
Securitized
|
Managed
|
Reported
|
Securitized
|
Managed
|
|
|
||||||
(in thousands) |
||||||
Managed Loan Data |
||||||
|
||||||
As of Year End: |
||||||
Total loans outstanding |
$6,298,303
|
$651,044
|
$6,949,347
|
$5,732,604
|
$653,022
|
$6,385,626
|
Total credit cards and related plans outstanding |
$2,540,774
|
$651,044
|
$3,191,818
|
$2,781,626
|
$653,022
|
$3,434,648
|
Annual Average: |
||||||
Total loans outstanding |
$5,741,204
|
$652,599
|
$6,393,803
|
$5,440,079
|
$695,367
|
$6,135,446
|
Total credit cards and related
plans outstanding
|
$2,587,720
|
$652,599
|
$3,240,319
|
$2,728,328
|
$695,367
|
$3,423,695
|
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 credit card loan portfolio with the use of statistically-based simulation models.
The consumer credit industry continues to experience high levels of delinquencies and charge-offs. As a major credit card issuer, the Company also continues to experience high net charge-off and delinquency rates. While delinquency and charge-off rates have declined, selected segments of consumers will continue to experience credit problems. Therefore, management continues to closely evaluate and monitor consumer behavior, credit standards and marketing strategies.
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 improved to a level of 2.86% at December 31, 1999 compared with 3.37% at December 31, 1998. The delinquency rate as a percentage of total credit card loans and related plans was 5.01% at December 31, 1999 down from 5.94% at December 31, 1998.
Delinquent Loans:
|
December 31, 1999
|
December 31, 1998
|
||
|
||||
(in thousands)
|
||||
Total Loans |
% of Loans
|
% of Loans
|
||
|
||||
Loans outstanding |
$6,298,303
|
$5,732,604
|
||
Loans delinquent: |
||||
30 - 89 days |
$121,465
|
1.93%
|
$121,237
|
2.11%
|
90 days or more & still accruing |
58,809
|
0.93%
|
72,482
|
1.26%
|
|
|
|
|
|
Total delinquent loans |
$180,274
|
2.86%
|
$193,719
|
3.37%
|
|
|
|
|
|
Nonaccrual loans |
$11,766
|
.19%
|
$7,027
|
.12%
|
|
|
|
|
|
Credit Cards and Related Plans |
||||
|
||||
Loans outstanding |
$2,540,774
|
$2,781,626
|
||
Loans delinquent: |
||||
30 - 89 days |
$74,335
|
2.93%
|
$96,625
|
3.47%
|
90 days or more & still accruing |
52,903
|
2.08%
|
68,578
|
2.47%
|
|
|
|
|
|
Total delinquent loans |
$127,238
|
5.01%
|
$165,203
|
5.94%
|
|
|
|
|
|
Nonaccrual loans |
|
|
|
|
|
|
|
|
The Company's policy is to charge off credit card and related plans 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. 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 $163 million for the year ended December 31, 1999 compared to $184.5 million for the same period in 1998. Net charge-offs as a percentage of average loans were 2.84% for 1999 compared to 3.39% for 1998. The allowance as a percentage of loans was 1.69% as of December 31, 1999 compared to 2.13% as of December 31, 1998.
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:
For the Years Ended December
31,
|
||
1999
|
1998
|
|
|
||
(in thousands) | ||
Balance at January 1 |
$121,877
|
$128,990
|
Addition due to acquisitions of loans |
3,054
|
13,035
|
Reduction due to sales of loans |
|
(8,990)
|
Provision for loan losses |
144,573
|
173,311
|
Loans charged off: | ||
Credit cards and related plans | (186,785)
|
(208,530)
|
All other loans | (4,472)
|
(4,795)
|
Loans recovered: |
||
Credit cards and related plans | 26,137
|
26,527
|
All other loans |
2,100
|
2,329
|
|
|
|
Total net charge-offs | (163,020)
|
(184,469 )
|
|
|
|
Balance at December 31 | $106,484
|
$121,877
|
|
|
|
Allowance as a percentage of loans |
1.69%
|
2.13%
|
Total net charge-offs as a percentage of average loans |
2.84%
|
3.39%
|
Capital Resources
As described in Note L, the Company and its banking subsidiaries are required to maintain minimum capital in accordance with regulatory guidelines. At December 31, 1999, 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 1999, the Company repurchased 500 shares of the Company's common stock. These shares were retired decreasing the total number of shares issued and outstanding to 334,500.
In 1995, First National Bank of Omaha issued $75 million in 15 year subordinated capital notes. During 1999, another banking subsidiary of the Company issued $2.3 million in capital notes related to the acquisition and merger of a bank. These capital notes, along with the parent company's $17.1 million in capital notes outstanding as of December 31, 1999 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 approximately 85% of net income in capital to fund growth of future operations and to maintain minimum capital standards.
Liquidity Management
Adequate liquidity levels are 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 and 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. The parent company's cash flows are dependent upon the receipt of dividends from its banking subsidiaries which are subject to regulatory restrictions.
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 sources. These other sources include securities sold under repurchase agreements, federal funds purchased, credit card-backed securitizations, Federal Home Loan Bank advances, other debt agreements and subordinated capital notes.
The Company utilizes credit card-backed securitization vehicles to assist in its management of liquidity, interest rate risk and capital. At December 31, 1999 and 1998, $651 million and $653 million, respectively, of the Company's managed credit card portfolio was securitized with an additional $255 million and $275 million, respectively, in unused securitization lines available. Additionally, the Company had Federal Home Loan Bank advances of $372.1 million as of December 31, 1999 and $28.5 million as of December 31, 1998. At December 31, 1999, the parent company had no balance outstanding under a $100 million syndicated revolving credit facility.
Year 2000 Readiness
As is the case with many financial services companies, the Company is heavily dependent on internal and external computer systems and services to serve its customers. As a result, the Company began working on Year 2000 challenges in 1994 and established a Year 2000 Project Management Office (PMO) to monitor, evaluate and manage the risks, solutions and costs associated with Year 2000 issues. The PMO developed a project plan for the Company and served as a resource to assist the Company's various business units in assessment, remediation and testing for Year 2000 readiness. The PMO monitored and incorporated into the Company's plans the numerous regulatory guidelines issued by the Federal Financial Institutions Examination Council. To date, the Company has experienced no material interruptions related to Year 2000 concerns; however, the Company continues to monitor Year 2000 issues on an ongoing basis.
The total cumulative costs relating directly to Year 2000 issues from the project's inception through December 31, 1999 totaled approximately $11.6 million. A significant portion of the total cost included the cost of existing staff that were redeployed to the Year 2000 project from other technology development plans. These costs did not include system upgrades and replacements that were made in the normal course of operations for other purposes in addition to addressing Year 2000 issues.
Market Risk
The Company's primary component of market risk is interest rate volatility. It is the goal of the Company 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 Interest Rate Sensitivity Gap Analysis.
Net Interest Income Simulation
The Company uses a simulation model to analyze net interest income sensitivity to movements in interest rates. The simulation model projects net interest income based on both upward and downward interest rate shifts over a twelve month period. Alternative scenarios are simulated by applying immediate shifts in interest rates (rate shocks) and gradual shifts in interest rates (rate ramps). These interest rate shifts are applied to a projected balance sheet for the Company for the twelve month simulation period. Based on the information and assumptions in effect at December 31, 1999, management believes that a 200 basis point rate shock or rate ramp over a twelve month period, up or down, would not significantly affect the Company's annualized net interest income.
The Company has established guidelines that limit the acceptable potential change in net interest margin and net income under these interest rate and balance sheet scenarios. The Company intends to use interest rate swap agreements on a limited basis in the future to change the characteristics of selected fixed rate exposures as an element of its risk management policy. All swaps will be linked to an underlying debt or obligation.
Interest Rate Sensitivity Gap Analysis
The Company uses interest rate sensitivity gap analysis to monitor the relationship between the maturity and repricing of its interest-earning assets and interest-bearing liabilities, while maintaining an acceptable interest rate spread. Interest rate sensitivity gap is defined as the difference between the amount of interest-earning assets maturing or repricing within a specific time period and the amount of interest-bearing liabilities maturing or repricing within that time period. A gap is considered positive when the amount of interest-rate-sensitive assets exceeds the amount of interest-rate-sensitive liabilities, and is considered negative when the amount of interest-rate-sensitive liabilities exceeds the amount of interest-rate-sensitive assets. Generally, during a period of rising interest rates, a negative gap would adversely affect net interest income, while a positive gap would result in an increase in net interest income. Conversely, during a period of falling interest rates, a negative gap would result in an increase in net interest income, while a positive gap would negatively affect net interest income. Management's goal is to maintain a reasonable balance between exposure to interest rate fluctuations and earnings.
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, 1999. 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.
As of December 31, 1999
|
Three Months
or Less |
Greater Than
Three Months Less Than One Year |
One Year
Through Five Years |
Over
|
Total
|
||||
|
|||||||||
(in thousands) |
|||||||||
Earning assets:
|
|||||||||
Investment activities
|
$278,940
|
$218,229
|
$894,018
|
$49,031
|
$1,440,218
|
||||
Lending activities |
3,015,964
|
377,927
|
1,888,437
|
1,015,975
|
6,298,303
|
||||
|
|||||||||
Earning assets |
3,294,904
|
596,156
|
2,782,455
|
1,065,006
|
7,738,521
|
||||
Interest-bearing liabilities
|
3,373,090
|
1,883,355
|
1,598,864
|
106,217
|
6,961,526
|
||||
|
|||||||||
Interest sensitive
gap
|
(78,186)
|
(1,287,199)
|
1,183,591
|
958,789
|
776,995
|
||||
Gap as a percent of earning assets |
(1.01)%
|
(16.63)%
|
15.29%
|
12.39%
|
10.04%
|
||||
|
|||||||||
Cumulative interest sensitive
gap
|
(78,186)
|
(1,365,385)
|
(181,794)
|
776,995
|
|||||
Cumulative gap as a percent of earning assets |
(1.01)%
|
(17.64)%
|
(2.35)%
|
10.04%
|
|||||
|
First National of Nebraska and Subsidiaries
Selected Financial Data
Years ended December 31, |
|||||
1999
|
1998
|
1997
|
1996
|
1995
|
|
|
|||||
(in thousands except per share
data)
|
|||||
Total interest income and noninterest income |
$1,074,245
|
$1,094,319
|
$1,032,285
|
$926,022
|
$813,710
|
Provision for loan losses |
144,573
|
173,311
|
201,494
|
180,059
|
102,767
|
Net income |
92,361
|
86,492
|
75,187
|
70,232
|
82,241
|
Net income per share |
276.02
|
258.19
|
220.68
|
202.53
|
237.17
|
Cash dividends per share |
38.72
|
35.00
|
33.76
|
37.22
|
33.73
|
Dividend payout ratio |
14.0%
|
13.6%
|
15.3%
|
18.4%
|
14.2%
|
Total assets |
8,560,444
|
8,187,815
|
7,332,021
|
6,912,057
|
6,110,542
|
Managed assets (1) |
9,211,488
|
8,840,837
|
8,282,021
|
7,112,057
|
6,310,542
|
Average equity to average assets ratio |
7.8%
|
7.4%
|
7.0%
|
7.4%
|
7.0%
|
Other borrowings and capital notes |
98,147
|
97,368
|
118,541
|
103,136
|
109,216
|
Federal Home Loan Bank advances |
372,077
|
28,535
|
3,957
|
740
|
|
The Company's stock is traded
over-the-counter.
Bid price quotes per share, high and low,
by quarter (2)
1999
|
1998
|
|||
High
|
Low
|
High
|
Low
|
|
|
||||
1st quarter
|
$3,390
|
$2,900
|
$3,675
|
$3,600
|
2nd quarter |
3,000
|
2,950
|
3,940
|
3,650
|
3rd quarter
|
2,985
|
2,725
|
3,900
|
3,500
|
4th quarter
|
2,725
|
2,400
|
3,500
|
3,250
|
Dividends per share
1999
|
1998
|
|
|
||
1st quarter | $12.47
|
$ 8.75
|
2nd quarter | 17.50
|
17.50
|
3rd quarter |
8.75
|
8.75
|
Number of stockholders
As of March 7, 2000, there were 334,500 shares of common stock issued and outstanding which were held by 332 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) Reported assets plus securitized credit card loans
(2) Source: Kirkpatrick Pettis 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 Company's common stock experiences limited trading.
First National of Nebraska
[LOGO]
Officers and Directors*
Bruce R. Lauritzen*
Chairman
J. William Henry*
President
Dennis A. O'Neal*
Executive Vice President and
Treasurer
Elias J. Eliopoulos*
Executive Vice President
Daniel K. O'Neill*
Executive Vice President
Lauritzen Corporation
F. Phillips Giltner*
Chairman Emeritus
Margaret Lauritzen Dodge*
Commercial Loan Officer
First National Bank of Omaha
Timothy D. Hart
Secretary
Steven K. Ritzman
Senior Vice President
First National Bank Of Omaha
Senior Officers and Directors*
Bruce R. Lauritzen,
Chairman*
|
||
Elias J.
Eliopoulos*
|
J. William Henry*
|
Dennis A. O'Neal*
|
President, Consumer Banking
|
Executive Vice President
|
President, Corporate
Banking
|
Nicholas W. Baxter | Senior Vice President, First
of Omaha Merchant Processing
|
Richard A. Frandeen* |
Senior Vice President, Real
Estate Lending
|
Charles H. Fries, Jr.* |
Senior Vice President,
Corporate & Financial Institutions
|
Thomas R. Haller* |
Senior Vice President, Retail
Banking
|
Timothy D. Hart* |
Senior Vice President,
Corporate Administration
|
Frances A. Marshall* |
Senior Vice President, Human
Resources
|
Craig V. McGarry |
Vice President and Division
Head, Trust
|
Marc M Diehl* |
Senior Vice President,
Trust
|
Russell K. Oatman* |
Senior Vice President, First
Financial Services
|
James C.C. Schmidt* |
Senior Vice President,
Technology Services
|
F. Phillips Giltner*, Chairman Emeritus | James L. Doody* | Robert W. Tritsch* | |
* Director |
The Bank In Boulder | Boulder - Longmont - Louisville - Broomfield,
Colorado
|
Directors | |||
Larry F. Frey | Richard E. Geesaman, MD | David M. Gilman | Caroline J. Hoyt |
Earl McLaughlin | Dennis A. O'Neal | Thomas W. Ward | Dorothy A. Horrell, PhD |
First National Bank | Fort Collins - Loveland, Colorado
|
Thomas J. Gleason, Chairman
|
Mark P. Driscoll,
President
|
Directors | |||
Mark P. Driscoll | John A. Duffey | Dwight L. Ghent | Thomas J. Gleason |
Roger G. Gunlikson | Lucia A. Liley
|
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 |
First National Bank and Trust Company of Columbus | Columbus - Norfolk, Nebraska
|
John M. Peck, Chairman &
President - Columbus
|
James R. Mangels, President -
Norfolk
|
Directors |
|||
James M. Bator | Donald N. Dworak |
Randal J. Emrich | Clark D. Lehr |
John F. Lohr | Robert P. Loshbaugh | James R. Mangels | Larry D. Marik |
John M. Peck | Steven K. Ritzman | Richard A. Robinson | Noyes W. Rogers |
Donald M. Schupbach | Dwayne G. Smith |
First National Bank of Kansas | Overland Park - Fairway - Olathe - Shawnee,
Kansas
|
Directors | |||
Linda A. Acker | Ben T. Embry | Blair L. Gogel | J. William Henry |
Stuart C. Lang |
James A. Polsinelli | Marilyn Scafe | Mary Kay Horner |
First National Bank |
North Platte - Alliance - Chadron -
Gering - Scottsbluff, Nebraska
|
Gary L. Conell, MD |
J. William Henry
|
Orville A. Kaschke
|
James D. Keenan
|
L.H. "Rick" Kolkman |
William J. Pfister
|
William C.
Snodgrass
|
Gary M. Trego
|
Ralph M. Tysdal |
The Fremont National Bank and Trust Company | Fremont,
Nebraska
|
Thomas J. Milliken, Chairman |
David N. Simmons, President
|
Marc M Diehl |
William R. Emanuel
|
H. Haines Hill
|
Jim A. Hoshor
|
Helen J. Krause |
Thomas J. Milliken
|
David N. Simmons
|
Bart E. Qualsett
|
Platte Valley State Bank & Trust Company |
Kearney,
Nebraska
|
Wayne R. McKinney, Chairman |
Mark A. Sutko,
President
|
Jeff G. Beattie |
Gerald L. 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 |
First National Bank South Dakota |
Yankton - Mitchell - Huron -
Woonsocket, South Dakota
|
Joseph W. Barry | Wilbur P. Foss | Randall A. Johnson | Joleen M. Smith | J. William Henry |
Union Colony Bank |
Greeley - Windsor -
Johnstown - Brighton, Colorado
|
Lawrence W. Menefee, Chairman |
Thomas J. Flanagan, Jr.,
President
|
Victor J. Campbell |
George W. Doering | Harold G. Evans | Thomas J. Flanagan, Jr. |
Kay Kosmicki |
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 |
John C. Todd, Director Emeritus |
Cornerstone Mortgage Company |
Houston - Austin - Beaumont
- Bryan - Dallas
San Antonio - Temple - Waco, Texas |
Marc N. Laird, President |
Judith A. Belanger, Executive
Vice President
|
Data Management Products | Omaha
|
James A. Mills,
President
|
|
Michael J. Reynolds, Senior Vice President |
Darren L. Snodgrass, Vice
President
|
First Integrated Systems |
Omaha
|
James A. Mills, President |
William G. Pierce, National
Sales Manager
|
First National Information Services |
Omaha - Des Moines - Denver
- Kansas City
St. Paul - Minneapolis - Chicago |
Russell K. Oatman,
Chairman
|
|
LeRoy A. Swedlund, President, Information Systems Kurt Shedenhelm, President, Path Technology Group |
|
Christopher P. Candela, President, Mountain States Imaging |
First National Services Corporation |
Omaha
|
R. Ray Lockhart, Director of
Risk Management
|
|
Michael J. Dunetts, Director of Internal Audit |
James M. Van Lent, Risk Officer |
Donald A. Fees, Director of Loan Review |
Bernard K. Williams, Operations Officer |
David E. Harris, Director of Risk Consulting |
First of Omaha Merchant Processing |
Omaha
|
Nicholas W. Baxter,
President
|
|
Donald M. Gerhard, Executive Vice President |
Michael C. Phelan, Senior Vice
President
|
Christa M. Titus, Vice President & Chief Financial Officer |
First Technology Solutions |
Omaha
|
James C.C. Schmidt,
President
|
|
Charles M. Huetter, Vice President |
Deane McGuire, Software
Services Division Manager
|
Kimberly M. Whittaker, Regional Sales Manager |
FNC Trust Group |
Fort Collins - Boulder -
Greeley - Loveland
|
Marc M Diehl,
President
|
|
Sean P. Shelley, Senior Vice President |
Barbara Meneely, Vice President |
Cheryl M. Jarchow, Vice President |
Dennis G. Swartz, Vice President - Greeley |
David C. Jordon, Vice President & Investment Manager |
Gaylen R. Williams, Vice President - Loveland |
Nebraska Trust Company |
Fremont Columbus Kearney
North Platte
|
David N. Simmons,
President
|
|
Leanne K. Anderson, Vice
President North Platte
|
Bruce T. Lear, Vice President
Kearney
|
John R. Scott, Vice President
Columbus
|
Stacy A. Auman, Vice President
Fremont
|
Jeffrey S. Arnold, Vice
President Fremont
|
Stephen C. Wade, Vice President
Fremont
|
Tim G. Gregan, Vice President
Fremont
|
Mark L. Andrews, Trust
Officer
|
Platinum Recovery
Solutions
|
Omaha
|
Joseph W. Barry,
President
|
|
James W. Shanahan, Vice
President
|
John K. Keady, Vice
President
|
Mark L. Mathia, Second Vice
President
|
Retriever Payment
Systems
|
Houston
|
Elias J. Eliopoulos,
Chairman
|
William H. Higgins,
President
|
Joseph M. Natoli, Vice
President & Sales Manager
|
Whitetail Finance
Company
|
North Platte
Scottsbluff Fremont Lexington
|
DiAnne Kolkman,
President
|
William J. Pfister,
Treasurer
|
|