First National of Nebraska (FINN) 10-Q 2000 Q2 Quarterly report

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period Ended June 30, 2000, or
[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from __________ to _________.

Commission file number 03502

First National of Nebraska, Inc.

(Exact name of registrant as specified in its charter)

Nebraska	47-0523079
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
One First National Center Omaha, NE	68102
(Address of principal executive offices)	(Zip Code)
Registrant's telephone number, including area code	(402) 341-0500

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X   No   .

As of August 2, 2000, the number of outstanding shares of the registrant's common stock ($5.00 par value) was 334,500.

Part I. FINANCIAL INFORMATION

Part I. Item 1. Financial Statements

FIRST NATIONAL OF NEBRASKA, INC.
Consolidated Statements of Financial Condition

	June 30, 2000	December 31, 1999
(in thousands except share and per share data)	(unaudited)
Assets
Cash and due from banks	$366,070	$407,584
Federal funds sold and other short-term investments	301,128	247,148
Total cash and cash equivalents	667,198	654,732
Investment Securities:
Available-for-sale (amortized cost $917,993 and $987,943)	901,263	971,449
Held-to-maturity (fair value $217,862 and $178,188)	219,293	179,406
Federal Home Loan Bank stock and other securities, at cost	34,593	42,215
Total investment securities	1,155,149	1,193,070
Loans	6,475,568	6,313,732
Less:  Allowance for loan losses	97,678	106,484
Unearned income	18,647	15,429
Net loans	6,359,243	6,191,819
Premises and equipment, net	156,983	149,803
Other assets	397,674	371,020
Total assets	$8,736,247	$8,560,444
Liabilities and Stockholders' Equity
Deposits:
Noninterest-bearing	$876,411	$858,895
Interest-bearing	6,527,022	6,149,817
Total deposits	7,403,433	7,008,712
Federal funds purchased and securities sold under repurchase    agreements	236,251	341,485
Federal Home Loan Bank advances	141,050	372,077
Other borrowings	81,225	3,758
Other liabilities	99,327	89,549
Capital notes	94,048	94,389
Total liabilities	8,055,334	7,909,970
Stockholders' equity:
Common stock, $5 par value, 346,767 shares authorized,
334,500 shares issued and outstanding	1,673	1,673
Additional paid-in capital	2,511	2,511
Retained earnings	687,447	656,786
Accumulated other comprehensive income (loss)	(10,718)	(10,496)
Total stockholders' equity	680,913	650,474
Total liabilities and stockholders' equity	$8,736,247	$8,560,444

See Notes to Consolidated Financial Statements.

FIRST NATIONAL OF NEBRASKA, INC.
Consolidated Statements of Income
(unaudited)

	Quarter Ended June 30,			Six Months Ended June 30,
		2000	1999		2000	1999
(in thousands except share and per share data)
Interest income:
Interest and fees on loans and lease financing		$194,493	$182,780		$385,312	$367,392
Interest on securities:
Taxable interest income		16,423	16,321		32,886	31,900
Nontaxable interest income		482	256		967	478
Interest on federal funds sold and other short-term         investments		2,936	1,992		6,682	4,162
Total interest income		214,334	201,349		425,847	403,932
Interest expense:
Interest on deposits		82,704	69,884		159,617	140,936
Interest on federal funds purchased and securities sold         under repurchase agreements		2,822	1,758		5,400	3,364
Interest on Federal Home Loan Bank advances		3,081	868		6,258	1,361
Interest on other borrowings		701	78		1,036	162
Interest on capital notes		1,867	1,773		3,663	3,543
Total interest expense		91,175	74,361		175,974	149,366
Net interest income		123,159	126,988		249,873	254,566
Provision for loan losses		28,578	30,643		56,650	71,209
Net interest income after provision for loan losses		94,581	96,345		193,223	183,357
Noninterest income:
Credit card securitization income		22,463	14,995		40,364	31,239
Processing services		21,907	17,672		40,349	35,997
Deposit services		8,348	6,699		15,765	12,893
Commissions		5,363	2,873		11,902	9,880
Trust and investment services		5,450	5,592		11,030	11,590
Miscellaneous		12,742	9,931		27,306	19,672
Total noninterest income		76,273	57,762		146,716	121,271
Noninterest expense:
Salaries and employee benefits		62,884	51,453		126,761	104,576
Communications and supplies		18,276	15,213		31,755	29,374
Equipment rentals, depreciation and maintenance		13,732	12,547		26,503	24,083
Net occupancy expense of premises		10,210	7,084		20,322	14,802
Processing expense		8,225	6,884		15,985	14,290
Loan servicing expense		8,682	7,321		14,718	14,418
Professional services		7,253	5,326		13,654	13,240
Miscellaneous		10,720	10,028		20,955	20,169
Total noninterest expense		139,982	115,856		270,653	234,952
Income before income taxes		30,872	38,251		69,286	69,676
Income tax expense (benefit):
Current		13,368	12,181		27,807	24,153
Deferred		(1,362)	2,299		(1,381)	2,283
Total income tax expense		12,006	14,480		26,426	26,436
Net income		$18,866	$23,771		$42,860	$43,240
Average number of common shares outstanding		334,500	334,500		334,500	334,746
Net income per common share		$56.40	$71.06		$128.13	$129.17
Cash dividends declared per common share		$20.00	$17.50		$36.47	$29.97

See Notes to Consolidated Financial Statements.

FIRST NATIONAL OF NEBRASKA, INC.
Consolidated Statements of Cash Flows
(unaudited)

	Six Months Ended June 30,
	2000	1999
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$42,860	$43,240
Adjustments to reconcile net income to net cash flows from     operating activities:
Provision for loan losses	56,650	71,209
Depreciation and amortization	31,071	25,038
Provision for deferred taxes	(1,381)	2,283
Origination of mortgage loans for resale	(308,691)	(79,265)
Proceeds from the sale of mortgage loans for resale	289,382	89,400
Other asset and liability activity, net	(7,170)	(158,631)
Net cash flows from operating activities	102,721	(6,726)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions, net of cash received	(13,587)	(3,967)
Maturities of securities available-for-sale	85,050	137,113
Sales of securities available-for-sale	15,918	199,818
Purchases of securities available-for-sale	(32,918)	(375,581)
Maturities of securities held-to-maturity	6,579	172,213
Purchases of securities held-to-maturity	(44,886)	(3,503)
Redemption of FHLB stock and other securities	7,887	178
Purchases of FHLB stock and other securities	(264)	(13,848)
Net change in loans	(376,013)	23,964
Credit card securitization activities	247,085	—
Purchases of loan portfolios	(64,222)	(35,089)
Purchases of premises and equipment	(24,981)	(18,228)
Other, net	1,057	702
Net cash flows from investing activities	(193,295)	83,772
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits	394,559	(248,824)
Assumption of deposits	—	39,712
Net change in federal funds purchased and securities sold         under repurchase agreements	(105,233)	(243,886)
Issuance of FHLB advances	340,930	102,886
Principal repayments on FHLB advances	(571,957)	(64,837)
Issuance of other borrowings	282,457	287
Principal repayments on other borrowings	(225,176)	(542)
Principal repayments on capital notes	(341)	(794)
Repurchase of common stock	—	(1,575)
Cash dividends paid	(12,199)	(10,031)
Net cash flows from financing activities	103,040	(427,604)
Net change in cash and cash equivalents	12,466	(350,558)
Cash and cash equivalents at beginning of   period	654,732	816,509
Cash and cash equivalents at end of period	$667,198	$465,951
Cash paid during the period for:
Interest	$170,906	$153,191
Income taxes	33,732	25,699
See Notes to Consolidated Financial Statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

June 30, 2000

Note A: Basis of Presentation

The accompanying unaudited consolidated financial statements of First National of Nebraska, Inc. and subsidiaries (the Company) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. For purposes of comparability, certain prior period amounts have been reclassified.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial statements have been included. Operating results for the six months ended June 30, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. The notes to the consolidated financial statements contained in the Annual Report on Form 10-K for the year ended December 31, 1999 should be read in conjunction with these consolidated financial statements.

Note B: Earnings per Common Share

Net income per share is calculated by dividing net income by the average number of common shares outstanding during the period.

Note C: Comprehensive Income

Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events or circumstances from nonowner sources. Comprehensive income includes net income and other items of comprehensive income meeting the above criteria. The Company's only component of other comprehensive income is the change in unrealized appreciation or depreciation of available-for-sale securities. The following table reflects consolidated statements of comprehensive income for the quarter ended and six months ended June 30, 2000 and June 30, 1999.

	Quarter ended June 30,		Six Months Ended June 30,
	2000	1999	2000	1999
(in thousands)
Net Income	$ 18,866	$ 23,771	$ 42,860	$ 43,240
Other comprehensive income (loss), before tax
Net unrealized holding gains (losses) on available-for-sale securities	3,494	(8,337)	1,730	(11,706)
Less: Reclassification adjustment for net gains realized in net income	—	10	2,040	904
Other comprehensive gain (loss), before tax	3,494	(8,347)	(310)	(12,610)
Less: Income tax expense (benefit) for other comprehensive gain (loss)	1,256	(3,017)	(88)	(4,552)
Other comprehensive gain (loss), net of tax	2,238	(5,330)	(222)	(8,058)
Comprehensive income	$ 21,104	$ 18,441	$ 42,638	$ 35,182

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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

Net income for the quarter ended June 30, 2000 was $18.9 million, or $56.40 per common share, decreasing 20.6% from $23.8 million, or $71.06 per common share, for the same period ended in 1999. Net income for the six months ended June 30, 2000 was $42.9 million, or $128.13 per common share which was comparable to net income of $43.2 million, or $129.17 per common share recognized in the same period in 1999.The decrease in net income for the quarter ended and six months ended June 30, 2000 compared to the same periods in 1999 results from compressed net interest margins and increased noninterest expense partially offset by increased noninterest income for the period.

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.

	Quarter Ended June 30,		Six Months Ended      June 30,
	2000	1999		2000	1999
(in thousands)
Net interest income on a tax-equivalent basis	$123,417	$127,126		$250,394	$254,825
Average earning assets	7,763,917	6,978,332		7,672,202	6,976,145
Net interest margin (annualized)	6.39%	7.31%		6.56%	7.37%

The decrease in net interest margin relates primarily to declines in higher yielding outstanding credit card balances net of increases in outstanding non-credit card loan average balances.The decrease in net interest margin caused by the change in loan mix was partially offset by asset yields repricing upward in response to market rates 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. For the quarter ended June 30, 2000, the provision for loan losses decreased $2.1 million, or 6.7%, to $28.6 million compared to $30.6 million for the same period in 1999. For the six months ended June 30, 2000, the provision for loan losses decreased $14.6 million, or 20.5%, to $56.7 million compared to $71.2 million for the same period in 1999. The reduction in the provision for loan losses for the quarter ended and six months ended June 30, 2000 compared to the same periods in 1999 is due to improved delinquency and charge-off rates and a reduction in the outstanding balances of credit card loans and related plans which bear a higher credit risk relative to the entire portfolio. These reductions have resulted in a decline in the Company's allowance for loan losses as a percentage of loans.

Noninterest income

Noninterest income for the quarter ended June 30, 2000, increased $18.5 million, or 32.1%, to $76.3 millioncompared to the same period in 1999. For the six months ended June 30, 2000, noninterest income increased $25.4 million, or 21%, to $146.7 million compared to the same period in 1999. A portion of the increase in noninterest income is due to credit card securitization income which increased $7.5 million, or 49.8%, to $22.5 million for the quarter ended June 30, 2000 and $9.1 million, or 29.2%, to $40.4 million for the six months ended June 30, 2000 when compared to the same periods in 1999. The increase in credit card securitization income for the quarter ended June 30, 2000 resulted from the net impact of a $3.8 million increase in securitization gains to $6.7 million from $2.9 million and a $3.7 million increase in servicing income to $15.8 million from $12.1 million. The increase in credit card securitization income for the six months ended June 30, 2000 resulted from the net impact of a $8.9 million increase in securitization gains to $14.8 million from $5.9 million and a $200,000 increase in servicing income to $25.6 million from $25.4 million. The increase in securitization gains for the quarter ended June 30, 2000 relates to an increase in credit card loans sold of $200 million while the increase in securitization gains for the six months ended June 30, 2000 relates to a year-to-date increase in credit card loans sold of $455 million. In addition, commission income increased $2.5 million, or 86.7%, for the quarter ended June 30, 2000 and $2 million, or 20.5%, for the six months ended June 30, 2000 primarily due to a renegotiated contract that resulted in retroactive payment of increased fees. Miscellaneous income increased $2.8 million, or 28.3%, in the quarter ended June 30, 2000 and $7.6 million, or 38.8%, for the six months ended June 30, 2000 which was primarily attributable to net gains recognized on the sale of mortgage loans, charged-off credit card loans and investment securities. In addition, imaging revenue also increased compared to the same period in 1999. Income related to deposit services and processing services increased as a result of growth in the Company's customer base and overall transaction volume.

Noninterest expense

For the quarter ended June 30, 2000 noninterest expense increased $24.1 million, or 20.8%, to $140 million compared to the same period in 1999. For the six months ended June 30, 2000, noninterest expense increased $35.7 million, or 15.2%, to $270.7 million compared to the same period in 1999. A significant portion of the increase was due to salaries and employee benefits which increased $11.4 million, or 22.2%, for the quarter ended June 30, 2000 and $22.2 million, or 21.2%, for the six months ended June 30, 2000 resulting from Company growth and expansion into new products and new markets. Communication and supplies expense increased $3.1 million, or 20.1%, for the quarter ended June 30, 2000 and $2.4 million, or 8.1%, for the six months ended June 30, 2000 compared to the same period in 1999 primarily due to increased marketing expenses.Additionally, for the quarter ended June 30, 2000, loan servicing expense increased $1.4 million, or 18.6%, from the same period last year due toincreased costs for credit applications andcustomer rebates resulting from increased marketing efforts.Increases in remaining expense categories generally relate to the acquisition of new customer relationships and portfolios and continued investments in technology.

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 June 30, 2000 and December 31, 1999.

		June 30, 2000			December 31, 1999
	Reported	Securitized	Managed	Reported	Securitized	Managed
(in thousands)
Managed Loan Data
As of Period End:
Total loans outstanding	$6,456,921	$898,129	$7,355,050	$6,298,303	$651,044	$6,949,347
Total credit cards and related plans outstanding	$2,228,855	$898,129	$3,126,984	$2,540,774	$651,044	$3,191,818
Year-to-Date Average:
Total loans outstanding	$6,252,572	$781,951	$7,034,523	$5,741,204	$652,599	$6,393,803
Total credit cards and related plans outstanding	$2,371,634	$781,951	$3,153,585	$2,587,720	$652,599	$3,240,319

The decrease in reported credit cards and related plans outstanding at June 30, 2000 is partially attributable to a net increase in securitization volume of $247.1 million during the first half of 2000. In addition to credit card securitization activities, the Company acquired credit card loan portfolios totaling $61.8 million during the six months ended June 30, 2000.

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 computer simulation models.

The level of loan delinquencies and charge-offs has improved compared to 1999 levels. Delinquencies have now declined to a more acceptable range of 4% to 5% for our national credit card portfolio. Charge-offs are still slightly above desired levels, but are following delinquencies down to a reasonable rate.

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 2.27% at June 30, 2000 compared with 2.86% at December 31, 1999. The delinquency rate as a percentage of total credit card loans and related plans was 4.28% at June 30, 2000 down from 5.01% at December 31, 1999.

Delinquent Loans:

	June 30, 2000		December 31, 1999
(in thousands)
Total Loans		% of Loans			% of Loans
Loans outstanding	$6,456,921			$6,298,303
Loans delinquent:
30 - 89 days	$99,138	1.54%		$121,465	1.93%
90 days or more & still accruing	47,210	.73%		58,809	0.93%
Total delinquent loans	$146,348	2.27%		$180,274	2.86%
Nonaccrual loans	$15,163	.23%		$11,766	.19%
Credit Cards and Related Plans
Loans outstanding	$2,228,855			$2,540,774
Loans delinquent:
30 - 89 days	$56,646	2.54%		$74,335	2.93%
90 days or more & still accruing	38,794	1.74%		52,903	2.08%
Total delinquent loans	$95,440	4.28%		$127,238	5.01%
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 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 $62.4 million for the six months ended June 30, 2000 compared to $89.4 million for the same period in 1999. Net charge-offs as a percentage of average loans has improved to 1% for the six months ended June 30, 2000 compared to 1.59% for the same period last year.

The following table presents the activity in the Company's allowance for loan losses with a breakdown of charge-off and recovery activity related to credit cards and related plans.

Allowance for Loan Losses:
	For the Six Months Ended June 30,
	2000	1999
(in thousands)
Balance at January 1	$106,484	$121,877
Addition due to acquisitions of loans	1,790	953
Reduction due to sales of loans	(4,832)	—
Provision for loan losses	56,650	71,209
Loans charged off:
Credit cards and related plans	(72,443)	(102,480)
All other loans	(1,946)	(2,118)
Loans recovered:
Credit cards and related plans	11,181	13,995
All other loans	794	1,192
Total net charge-offs	(62,414)	(89,411)
Balance at June 30	$ 97,678	$104,628
Allowance as a percentage of loans	1.51%	1.85%
Total net charge-offs as a percentageof average loans	1.00%	1.59%

Capital Resources

The Company and its banking subsidiaries are required to maintain minimum capital in accordance with regulatory guidelines. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company 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 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 judgements by the regulators about components, risk weightings and other factors.

As of June 30, 2000, 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 is required to maintain sufficient capital in each of its banking subsidiaries to remain in the "well capitalized" category in order to retain its rights as a financial holding company.

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 $16.7 million in capital notes outstanding as of June 30, 2000 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 the 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 regulatoryrestrictions.

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  June 30, 2000 and December 31, 1999, $898.1 million and $651million, respectively, of the Company's managed credit card portfolio was securitized with no additional unused securitization lines available at June 30, 2000 and $255 million lines available at December 31, 1999. The Company's ability to securitize additional credit card loans is dependent on arranging a new credit card-backed securitization vehicle which the Company intends to arrange in the third quarter. Additionally, the Company had Federal Home Loan Bank advances of $141 million as of June 30, 2000 and $372.1 million as of December 31, 1999. At June 30, 2000, the parent company had $32 million outstanding under a $100 million syndicated revolving credit facility which will mature on December 4, 2000. The Company intends to negotiate a similar credit facility prior to the maturity of this revolving credit facility.

Item 3. 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 June 30, 2000, 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.

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.

Part II. OTHER INFORMATION

Items 1, 2 and 3:	Not applicable or negative response.
Item 4:	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
	The annual meeting of the Company's stockholders was held on June 21, 2000 for thepurpose of electing three directors for terms of three years. Proxies for the meeting were solicited pursuant to Sections 14(a) of the Securities Exchange Act of 1934, and there was no solicitation in opposition to management's nominees. Each of management's nominees for director as listed in the Proxy Statement was elected. The voting tabulation for the elected directors was as follows:

	Shares Voted "FOR"	Shares Voted "WITHHELD"
Elias J. Eliopoulos	320,411	1,124
Dennis A. O'Neal	320,402	1,133
Margaret Lauritzen Dodge	320,447	1,088

Item 5: Other Information
		On July 7, 2000, the Company acquired InfiCorp Holdings, Inc. based in Atlanta, Georgia. InfiCorp Holdings, Inc. and its subsidiaries provide credit card portfolio management services and consumer loan origination services for financial institutions.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits	3(i)(ii)	Amended and Restated Articles of Incorporation and Amended and Restated Bylaws of the parent company (previously filed as Exhibits to form 10-Q filed with the Securities and Exchange Commission by the Company on June 30, 1997) are incorporated herein by reference.
	4	Fiscal and Paying Agency Agreement entered into in connection with the issuance of $75 million of Subordinated Notes by First National Bank of Omaha (the "Bank") dated December 7, 1995 between the Bank as "Issuer" and the Bank as "Fiscal and Paying Agent" incorporated by reference to the Company's Report on Form 8-K, filed December 12, 1995.
	10(a)	Deferred Compensation and Consultative Services Agreement between the Bank and John R. Lauritzen and Amendment to Deferred Compensation and Consultative Services Agreement between the Bank and John R. Lauritzen, incorporated by reference to Exhibit 10(a) of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992.
	10(b)	Deferred Compensation and Consultative Services Agreement between the Bank and F. Phillips Giltner and Amendment to Deferred Compensation and Consultative Services Agreement between the Bank and F. Phillips Giltner, incorporated by reference to Exhibit 10(b) of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992.
	10(c)	First National of Nebraska Senior Management Long Term Incentive Plan, incorporated by reference to Exhibit 10(c) of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992.
	10(d)	Management Incentive Plan, incorporated by reference to Exhibit 10(d) of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992.
	10(e)	Employment Contract between the parent company and Bruce R. Lauritzen, incorporated by reference to Exhibit 10(i) of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992.
	27	Financial Data Schedule (EDGAR filing only).
(b) Reports on Form 8-K		No reports on Form 8-K were filed during the quarter for which this report was filed.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FIRST NATIONAL OF NEBRASKA, INC.
By:	/s/ Timothy D. Hart	Date:	August 4, 2000
	Timothy D. Hart
	Secretary and Treasurer,
	Principal Financial Officer