FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997, or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
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Commission file number 03502.
First National of Nebraska, Inc.
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(Exact name of registrant as specified in its charter)
Nebraska 47-0523079
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One First National Center Omaha, NE 68102
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (402) 341-0500
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $5.00 par value
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. X
-----
As of February 27, 1998, the aggregate market value of the voting shares held by
nonaffiliates of the registrant was $463,765,350.
The number of outstanding shares of the registrant's common stock, as of March
26, 1998 was 335,000.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents have been incorporated by reference into this Form 10-K
as indicated below:
Annual Report to Shareholders for fiscal year ended December 31, 1997 (Parts I
and II).
Proxy statement of the registrant to be filed with the Securities and Exchange
Commission (Part III).
PART I
ITEM 1. BUSINESS.
THE COMPANY
First National of Nebraska, Inc. (the "Parent Company") is a Nebraska-based
interstate multi-bank holding company. It was organized in 1968 and owns or
substantially owns all of the common stock of eleven banking subsidiaries
located in Nebraska, Kansas, Colorado and South Dakota. The Company also has
other nonbanking subsidiaries, which in the aggregate are not material.
First National of Nebraska, Inc. and subsidiaries (the "Company") was one of the
originators of the bank credit card industry and has 45 years experience in this
business. Through banking subsidiaries, the Company conducts a significant
consumer credit card service under license arrangements with VISA USA and
MasterCard International Inc. The Company's credit card customers are located
throughout the United States, but primarily in the Midwest.
At December 31, 1997, the Company ranked among the top 25 card issuing entities
based on the amount of managed credit card loans outstanding. To date, the
Company has generally originated new credit card accounts for itself with the
exception of a $265 million credit card portfolio purchased in June 1997. The
Company performs credit card servicing activities on behalf of its affiliate
banks including data processing, payment processing, statement rendering,
marketing, customer service, credit administration and card embossing. The
Company primarily funds its credit card loans through the core deposits of its
subsidiary banks.
The Company continues to make substantial investments in data processing
technology for its own data processing needs and to provide various data
processing services for unaffiliated parties. The services provided include
automated clearinghouse transactions, merchant credit card processing, and check
processing. As of the date of the latest available information, the Company has
ranked among the top six merchant credit card processors in the United States.
It has also ranked among the 25 largest automated clearinghouse processors in
the country, and is one of the largest check processors in its market area.
Furthermore, the Company provides data processing services to 40 non-affiliated
banks located in nine states.
BANKING SUBSIDIARIES
First National Bank of Omaha (the "Bank") is a national banking association
founded in 1863 and owns five nonbanking subsidiaries. As of December 31, 1997,
the Bank had assets in excess of $3,885,000,000 and is the largest bank
headquartered in Nebraska. The Bank is engaged in general banking business and
offers complete banking and trust services to retail, commercial, industrial and
agricultural customers in Nebraska, Iowa, Kansas, South Dakota, Colorado and
other nearby states. The Bank offers time and demand deposits, certificates of
deposits, individual retirement accounts and other products. The Bank also
provides customers with trust services, safe deposit boxes, cash management and
investment services. The Bank makes a variety of loans such as individual
consumer loans (including credit card, installment and home equity loans),
agricultural, real estate, and commercial loans. The Bank has branch locations
in Omaha, Bellevue, Beatrice, and David City, Nebraska.
2
In addition to the Bank, the Parent Company owns all of the outstanding common
stock of the following banks. These banks engage in general banking business
and offer complete banking services to retail, commercial, industrial and
agricultural customers.
Bank Locations
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The Bank of Boulder Boulder, Colorado
Louisville, Colorado
First National Bank Fort Collins, Colorado
Loveland, Colorado
First National Bank of Kansas Overland Park, Kansas
Fairway, Kansas
Olathe, Kansas
First National Bank North Platte, Nebraska
Alliance, Nebraska
Chadron, Nebraska
Gering, Nebraska
Scottsbluff, Nebraska
First National Bank and Trust Company Columbus, Nebraska
of Columbus Norfolk, Nebraska
Union Colony Bank Greeley, Colorado
Windsor, Colorado
The Fremont National Bank and Trust Company Fremont, Nebraska
Platte Valley State Bank & Trust Company Kearney, Nebraska
First National Bank South Dakota Yankton, South Dakota
FNC Trust Group, National Association Boulder, Colorado
COMPETITION
Competitors of the Company include commercial banks, savings and loan
associations, consumer and commercial finance companies, credit unions and other
financial services companies. The Company's credit card operation competes with
other issuers of credit cards ranging from other national issuers of bank cards
to local retailers which provide their own credit cards. In addition, the
Company's banking subsidiaries compete for interest-bearing funds with other
banking institutions, mutual funds and other securities. As the industry
consolidates and nonbanking companies continue to offer products traditionally
offered by banks, competitive forces continue to impact product pricing and
profitability.
3
EMPLOYEES
The Company had 4,553 full-time equivalent employees as of December 31, 1997.
REGULATION
The Company is governed by various regulatory agencies. Bank holding companies
and their nonbanking subsidiaries are regulated by the Federal Reserve Board.
National banks are primarily regulated by the Office of the Comptroller of the
Currency (OCC). All federally-insured banks are also regulated by the FDIC.
The Company's banking subsidiaries include eight national banks and three state-
chartered banks, all of which are insured by the FDIC. The state-chartered
banks are also regulated by the state banking authorities.
Various requirements and restrictions under federal and state laws regulate the
operations of the Company. These laws, among other things, require the
maintenance of reserves against deposits, impose certain restrictions on the
nature and terms of loans, restrict investments and other activities, and
regulate mergers and the establishment of branches and related operations. In
addition, subsidiary national banks are subject to limitations under federal law
in the amount of dividends they may declare.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA)
imposed a significant amount of regulation on the banking industry. One of the
major provisions of this legislation established levels of capitalization with
more scrutiny and restrictions placed on institutions with lower levels of
capital. The legislation also includes regulations which relate to corrective
regulatory action, audit and reporting requirements, standards of safety and
soundness and various deposit insurance reforms.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Company and its bank subsidiaries must meet specific
capital guidelines that involve quantitative measures of the assets,
liabilities, and certain off-balance sheet items as calculated under regulatory
accounting practices. These quantitative measures include requirements that the
Company and its bank subsidiaries maintain minimum total risk-based capital (as
defined in the regulations) of 8% and Tier 1 risk-based capital (as defined) of
4%. As of December 31, 1997, the most recent notification from the OCC
categorized the Company's banking subsidiaries as well capitalized under the
framework for prompt corrective action. To be categorized as well capitalized,
the Company's banking subsidiaries must maintain minimum total risk-based
capital of 10%, Tier I risk-based capital of 6%, and Tier I leverage capital of
5%. There are no conditions or events since that notification that management
believes have changed the institution's category. For further discussion, see
Note J in the Annual Report to Shareholders of the Company, an exhibit to this
report which is incorporated herein by reference.
4
The banking industry is also affected by the monetary and fiscal policies of
regulatory authorities, including the Federal Reserve Board. Through open market
securities transactions, variations in the discount rate, the establishment of
reserve requirements, and the regulation of certain interest rates payable by
member banks, the Federal Reserve Board exerts considerable influence over the
cost and availability of funds obtained for lending and investing. Changes in
interest rates, deposit levels, and loan demand are influenced by the changing
conditions in the national economy and in the money markets, as well as the
effect of actions by monetary and fiscal authorities.
ADDITIONAL FINANCIAL INFORMATION
The following tables set forth statistical data, as specified by Guide 3, or are
incorporated by reference from the Company's Annual Report to Shareholders for
the year ended December 31, 1997. Such data should be read in conjunction with
the other financial statements and related notes with respect to the Company and
in conjunction with Management's Discussion and Analysis of Financial Condition
and Results of Operations, which is included in the Annual Report. The
information with respect to such tables should not be construed to imply any
conclusion on the part of management that the results, causes or trends
indicated therein will continue in the future.
5
SCHEDULE I.A. - AVERAGE CONSOLIDATED BALANCE SHEETS
The following table presents the average consolidated balance sheets of the
Company for the years 1995 through 1997 (1):
For the years ended December 31,
ASSETS 1997 1996 1995
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(Amounts in Thousands)
Cash and due from banks (2) $ 291,635 $ 260,258 $ 234,563
Federal funds sold and other short-term
investments 260,968 181,632 177,915
Securities:
Taxable 1,064,831 918,315 770,064
Nontaxable 18,370 20,832 24,632
Loans, net of allowance for loan losses and
unearned income 5,021,500 4,517,487 4,209,515
Premises and equipment, net 117,275 113,423 98,323
Other assets 249,180 178,858 156,385
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Total assets $ 7,023,759 $ 6,190,805 $ 5,671,397
=========================================================================================================================
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Deposits: (2)
Noninterest-bearing $ 622,308 $ 561,713 $ 510,920
Interest-bearing 5,305,636 4,623,506 4,263,650
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Total deposits 5,927,944 5,185,219 4,774,570
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Federal funds purchased and securities sold under
repurchase agreements 151,675 117,715 67,295
Commercial paper and commercial
paper based borrowings 249,557 265,775 284,914
Other liabilities 73,274 56,595 49,375
Other borrowings 32,863 11,247 69,021
Capital notes 94,425 96,906 31,049
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Total liabilities 6,529,738 5,733,457 5,276,224
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Stockholders' equity:
Common stock 1,705 1,734 1,734
Additional paid-in capital 2,559 2,604 2,604
Retained earnings 489,226 452,956 390,835
Net unrealized appreciation on available-for-sale
securities, net of tax 531 54 --
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Total stockholders' equity 494,021 457,348 395,173
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Total liabilities and
stockholders' equity $ 7,023,759 $ 6,190,805 $ 5,671,397
=========================================================================================================================
(1) All significant intercompany balances have been eliminated in
consolidation.
(2) The December 31 balances are higher than the average balances as shown
in this schedule due to significant growth during the year and many of the
Company's customers making large deposits at year-end.
6
SCHEDULE I.B. - INTEREST RATES AND DIFFERENTIAL
The following tables present an analysis of net interest earnings for the years
1995 through 1997:
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For the years ended December 31,
ASSETS 1997 1996 1995
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(Amounts in Thousands Except Percents)
Average amount outstanding for year:
Loan and lease financing (1) (4) $ 5,122,678 $ 4,593,550 $ 4,267,290
Taxable securities (3) 1,064,831 918,315 770,064
Nontaxable securities (3) 18,370 20,832 24,632
Federal funds sold and
other short-term investments 260,968 181,632 177,915
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Total $ 6,466,847 $ 5,714,329 $ 5,239,901
=========================================================================================================================
Total interest earned during the year:
Loan and lease financing (1) $ 735,638 $ 700,472 $ 634,157
Taxable securities 64,165 54,295 45,492
Nontaxable securities (2) 1,594 1,716 2,210
Federal funds sold and
other short-term investments 14,268 9,531 10,298
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Total $ 815,665 $ 766,014 $ 692,157
=========================================================================================================================
Yield:
Loan and lease financing 14.36% 15.25% 14.86%
Taxable securities 6.03% 5.91% 5.91%
Nontaxable securities (2) 8.68% 8.24% 8.97%
Federal funds sold and
other short-term investments 5.47% 5.25% 5.79%
Total 12.61% 13.41% 13.21%
=========================================================================================================================
(1) Non-accruing loans are included within the average loan and lease
financing amount outstanding. No interest on these non-accruing loans is
included within the "Total interest earned during the year" amount.
(2) Calculated on a taxable equivalent basis with a 35% marginal tax rate
in 1997, 1996 and 1995.
(3) Includes securities held-to-maturity and securities available-for-sale.
(4) Calculated net of unearned income.
7
SCHEDULE I.B. - INTEREST RATES AND DIFFERENTIAL (Continued)
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For the years ended December 31,
LIABILITIES 1997 1996 1995
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(Amounts in Thousands Except Percents)
Average amount outstanding for year:
Interest-bearing deposits $ 5,305,636 $ 4,623,506 $ 4,263,650
Federal funds purchased and securities sold under
repurchase agreements 151,675 117,715 67,295
Commercial paper and commercial paper
based borrowings 249,557 265,775 284,914
Other borrowings and capital notes 127,288 108,153 100,070
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Total $ 5,834,156 $ 5,115,149 $ 4,715,929
=========================================================================================================================
Total interest expensed during the year:
Interest-bearing deposits $ 286,226 $ 250,170 $ 234,694
Federal funds purchased and securities sold under
repurchase agreements 7,841 5,667 3,642
Commercial paper and commercial paper
based borrowings 13,479 15,943 18,435
Other borrowings and capital notes 9,549 8,451 7,689
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Total $ 317,095 $ 280,231 $ 264,460
=========================================================================================================================
Yield:
Interest-bearing deposits 5.39% 5.41% 5.50%
Federal funds purchased and securities sold under
repurchase agreements 5.17% 4.81% 5.41%
Commercial paper and commercial paper
based borrowings 5.40% 6.00% 6.47%
Other borrowings and capital notes 7.50% 7.81% 7.68%
Total 5.44% 5.48% 5.61%
=========================================================================================================================
Net interest income (1) $ 498,570 $ 485,783 $ 427,697
Net yield on earning assets 7.71% 8.50% 8.16%
=========================================================================================================================
(1) Reflects the effect of interest on nontaxable securities calculated on
a taxable equivalent basis with a 35% marginal tax rate in 1997, 1996 and 1995.
8
SCHEDULE I. C. - INTEREST RATE AND VOLUME CHANGES
The following table presents the changes in interest income and interest expense
and the amounts attributable to changes in volume and changes in rates (1):
Year 1997 Over 1996 Year 1996 Over 1995
----------------------------------------- -----------------------------------------
Variance Variance
Attributable to Attributable to
Amount Rate Volume Amount Rate Volume
------------ ---------- ----------- ------------ ---------- ------------
(Amounts in Thousands)
Loan and lease financing $ 35,166 $ (42,399) $ 77,565 $ 66,315 $ 16,886 $ 49,429
Taxable securities 9,870 1,059 8,811 8,803 38 8,765
Nontaxable securities (2) (122) 88 (210) (494) (171) (323)
Federal funds sold and other
short-term investments 4,737 415 4,322 (767) (978) 211
Interest bearing deposits 36,056 (745) 36,801 15,476 (4,052) 19,528
Federal funds purchased and
securities sold under repurchase
agreements 2,174 443 1,731 2,025 (441) 2,466
Commercial paper and commercial
paper based borrowings (2,464) (1,528) (936) (2,492) (1,297) (1,195)
Other borrowings and capital notes 1,098 (348) 1,446 762 132 630
(1) Variances attributable to rate and volume were calculated as follows:
A. A rate variance is the change in rate times the prior period volume.
B. A volume variance is the change in volume times the prior period rate.
C. The remaining variance is due to a combination of rate and volume
changes. This amount was allocated proportionately to the rate and
volume changes obtained in A and B.
(2) Calculated on a taxable equivalent basis with a 35% marginal tax rate in
1997, 1996 and 1995.
9
SCHEDULE II. A. - SECURITIES PORTFOLIO
The following table indicates the amortized cost of securities of the Company as
of December 31 for the years indicated:
1997 1996 1995
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(Amounts in Thousands)
Available-for-sale securities:
U.S. Government obligations $366,584 $245,218 $ --
Obligations of states and political subdivisions 115 305 --
Other securities 12,015 10,130 --
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Total securities available-for-sale $378,714 $255,653 $ --
================================================================================================================================
Held-to-maturity securities:
U.S. Government obligations $809,581 $626,690 $811,338
Obligations of states and political subdivisions 17,184 19,588 21,438
Mortgage-backed securities 45,692 1,376 1,961
Other securities 450 2,145 12,000
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Total securities held-to-maturity $872,907 $649,799 $846,737
================================================================================================================================
SCHEDULE II. B. - SECURITIES MATURITIES
The following table presents the maturity of securities held on December 31,
1997 and the weighted average yield for each range (stated on a taxable
equivalent basis assuming a 35% marginal tax rate). Yield information for
securities available-for-sale does not give effect to changes in fair value that
are reflected as a component of stockholders' equity.
Held-to-Maturity Securities: Available-for-Sale Securities:
------------------------------ ----------------------------------
Amortized Weighted Amortized Weighted
Cost Average Yield Cost Average Yield
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(Amounts in Thousands)
U.S. Government obligations:
One year or less $223,904 5.79% $ 65,157 5.92%
After one through five years 585,677 6.21% 301,427 6.12%
After five through ten years -- -- -- --
After ten years -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total $809,581 6.09% $366,584 6.09%
=================================================================================================================================
Obligations of states and political subdivisions:
One year or less $5,288 8.45% $50 7.31%
After one through five years 8,809 8.07% 65 11.31%
After five through ten years 2,947 8.97% -- --
After ten years 140 11.91% -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total $17,184 8.37% $115 9.57%
=================================================================================================================================
Other securities:
One year or less -- -- 445 1.77%
After one through five years 400 6.50% -- --
After five through ten years 50 7.80% -- --
After ten years -- -- 11,570 6.28%
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Total $450 6.64% $12,015 6.11%
=================================================================================================================================
10
SCHEDULE III. A. - LOAN PORTFOLIO TYPES
The following table indicates the distribution of loans, net of unearned income,
of the Company as of December 31, for the years indicated:
1997 1996 1995 1994 1993
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(Amounts in Thousands)
Individual consumer (1) $ 2,804,402 $ 3,290,374 $ 2,895,617 $ 2,646,865 $ 2,066,266
Commercial and financial 722,130 668,585 565,075 486,540 393,760
Real estate-mortgage 791,980 630,768 517,375 394,920 366,204
Agricultural 408,110 284,580 268,940 246,267 225,124
Real estate-construction 196,650 152,035 131,196 105,347 71,908
Lease financing 65,394 57,050 50,447 48,976 44,521
Other 8,936 12,155 10,777 5,003 5,103
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4,997,602 5,095,547 4,439,427 3,933,918 3,172,886
Less:
Allowance for loan losses 128,990 104,812 67,740 55,265 49,589
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Net Loans $ 4,868,612 $ 4,990,735 $ 4,371,687 $ 3,878,653 $ 3,123,297
=============================================================================================================================
(1) Individual consumer loans include credit cards and related plans.
SCHEDULE III. B. - LOAN MATURITIES AND SENSITIVITIES OF LOANS TO
CHANGES IN INTEREST RATES
The following table presents certain consolidated loan maturities by ranges
based upon contract dates. Also included for loans maturing after one year are
the amounts which have predetermined interest rates and floating or adjustable
interest rates.
Maturities as of December 31, 1997
- -----------------------------------------------------------------------------------------------------------------------------
--AFTER ONE YEAR--
After One Predetermined Adjustable
One Year Through After Five Interest Interest
or Less Five Years Years Rates Rates
- -----------------------------------------------------------------------------------------------------------------------------
(Amounts in Thousands)
Individual consumer $ 2,239,665 $ 520,332 $ 44,405 $ 244,594 $ 320,143
Commercial and financial 433,274 223,132 65,724 120,213 168,643
Real estate-mortgage 208,927 320,167 262,886 293,435 289,618
Agricultural 318,896 83,363 5,851 66,064 23,150
Real estate-construction 111,000 80,958 4,692 24,901 60,749
Lease financing 17,279 45,438 2,677 48,115 --
Other 8,916 16 4 20 --
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11
SCHEDULE III. C. - RISK ELEMENTS
1. Nonaccrual, Restructured and Past Due Loans:
As of December 31,
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------------
(Amounts in Thousands)
Nonaccrual loans (a) $ 5,289 $ 7,231 $ 8,718 $ 5,830 $ 8,257
Restructured loans (b) 258 972 1,527 1,887 2,469
--------------------------------------------------------------------------------
Total nonaccrual and restructured
loans (c) 5,547 8,203 10,245 7,717 10,726
Loans past due 90 days or more (d) 66,221 73,580 46,396 27,305 25,219
--------------------------------------------------------------------------------
Total nonaccrual, restructured and
past due loans $ 71,768 $ 81,783 $ 56,641 $ 35,022 $ 35,945
================================================================================
(a) Loans are placed on nonaccrual status when there is sufficient evidence
to indicate the borrower may be unable to meet the obligation.
(b) Does not include loans classified in the nonaccrual loans or loans past
due 90 days or more categories.
(c) The gross amount of interest income which would have been recorded on
these loans for the year ended December 31, 1997 if such loans had been
current is $1,435,000. The amount of interest income on these loans that
was included in net income for the same year is $638,000.
(d) Does not include loans classified in the nonaccrual loans category. For
further information regarding loans past due 90 days or more, see the Asset
Quality section of Management's Discussion and Analysis in the Annual
Report to Shareholders of the Company, an exhibit to this report which is
incorporated herein by reference.
It is the Company's policy for a committee of senior loan officers to review all
loans 90 days or more past due for placement on nonaccrual status. If there is
sufficient evidence to indicate that the borrower may be unable to meet the
obligation, the loan is placed on nonaccrual status. Loans may be placed on
nonaccrual status prior to reaching 90 days or more past due if circumstances
warrant.
2. Potential Problem Loans for the Year Ended December 31, 1997:
The following table presents potential problem loans categorized by loan type.
Potential problem loans include all loans that are classified by management as
substandard and doubtful less nonaccrual loans, restructured loans and loans
past due 90 days or more.
(Amounts in
Thousands)
-------------
Individual consumer $ 2,810
Commercial and financial 11,988
Real estate-mortgage 3,392
Agricultural 13,219
Real estate-construction 1,617
Lease financing 100
Other --
3. Foreign Outstandings: None
4. Loan Concentrations: There were no concentrations of loans exceeding 10% of
total loans which are not otherwise disclosed as a category of loans under
III.A.
12
SCHEDULE III. D. - OTHER INTEREST BEARING ASSETS
There were no other interest bearing assets that would require disclosure under
Item III.C.1. or 2., if such assets were loans.
SCHEDULE IV. - SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes activity in the allowance for loan losses of the
Company:
For the years ended December 31,
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------------
(Amounts in Thousands Except Percents)
Average amount of loans
outstanding $ 5,122,678 $ 4,593,550 $ 4,267,290 $ 3,403,324 $ 2,706,475
Allowance for loan losses:
Balance, beginning of year 104,812 67,740 55,265 49,589 41,298
Addition due to loan portfolio purchase 10,895 -- -- -- --
Addition due to acquisition -- 1,738 1,568 189 4,565
Provision charged to operations 201,494 180,059 102,767 71,698 67,083
Loans charged off:
Individual consumer 213,305 163,320 107,370 80,933 73,456
Commercial and financial 1,607 631 922 694 62
Real estate-mortgage 60 57 96 159 2,107
Agricultural 103 645 302 148 498
Real estate-construction -- -- -- -- --
Lease financing 50 11 67 41 150
Other 19 47 -- 17 --
Loans recovered:
Individual consumer 26,120 19,082 16,250 15,295 12,626
Commercial and financial 536 478 317 205 86
Real estate-mortgage 90 219 52 91 66
Agricultural 157 77 176 83 43
Real estate-construction -- 50 5 2 --
Lease financing 18 61 42 81 70
Other 12 19 55 24 25
- --------------------------------------------------------------------------------------------------------------------------------
Net loans charged off 188,211 144,725 91,860 66,211 63,357
- --------------------------------------------------------------------------------------------------------------------------------
Balance, end of year $ 128,990 $ 104,812 $ 67,740 $ 55,265 $ 49,589
================================================================================================================================
Ratio of net charge-offs to
average loans outstanding 3.67% 3.15% 2.15% 1.95% 2.34%
================================================================================================================================
13
SCHEDULE IV. - SUMMARY OF LOAN LOSS EXPERIENCE (Continued)
The following table presents the loan loss allowance by loan category and the
percentage of loans in each category to loans, net of unearned income, as of
December 31 for the years indicated:
(Amounts in Thousands Except Percents)
1997 1996 1995 1994 1993
------------------- ------------------- ------------------- ------------------- --------------------
Percent Percent Percent Percent Percent
of Loans of Loans of Loans of Loans of Loans
in Each in Each in Each in Each in Each
Category Category Category Category Category
to Total Loan Loss to Total Loan Loss to Total Loan Loss to Total Loan Loss to Total Loan Loss
Loans Allowance Loans Allowance Loans Allowance Loans Allowance Loans Allowance
-------- --------- -------- --------- -------- --------- -------- --------- -------- ----------
Individual consumer 56.1% $105,808 64.6% $ 85,810 65.2% $52,453 67.3% $38,897 65.1% $35,140
Commercial and financial 14.5% 9,070 13.1% 8,243 12.7% 6,143 12.4% 8,436 12.4% 6,399
Real estate-mortgage 15.8% 6,053 12.4% 4,559 11.7% 4,444 10.0% 3,182 11.5% 4,635
Agricultural 8.2% 5,032 5.6% 3,767 6.1% 3,156 6.3% 3,074 7.1% 2,507
Real estate-construction 3.9% 1,979 3.0% 1,551 3.0% 862 2.7% 1,009 2.3% 567
Lease financing 1.3% 443 1.1% 419 1.1% 389 1.2% 331 1.4% 302
Other 0.2% 605 0.2% 463 0.2% 293 0.1% 336 0.2% 39
- ------------------------------------------------------------------------------------------------------------------------------------
Total 100.0% $128,990 100.0% $104,812 100.0% $67,740 100.0% $55,265 100.0% $49,589
====================================================================================================================================
The allowance for loan losses is intended to cover losses inherent in the
Company's loan portfolio as of the reporting date and is continually monitored
using statistically-based computer simulation models. The provision for loan
losses is charged against earnings to cover both current period net charge-offs
and to maintain the allowance at an acceptable level to cover losses inherent in
the portfolio as of the reporting date. Management's review of the adequacy of
the allowance for loan losses is based upon a review of collateral values,
delinquencies, nonaccruals, payment histories and various other analytical and
subjective measures relating to the various loan portfolios within the Company.
For further discussion, see the Asset Quality section of Management's Discussion
and Analysis in the Annual Report to Shareholders of the Company, an exhibit to
this report which is incorporated herein by reference.
14
SCHEDULE V. - DEPOSITS
The following table shows the breakdown of average deposits of the Company for
the years 1995 through 1997:
For the years ended December 31,
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
(Amounts in Thousands Except Percents)
Amount Rate Amount Rate Amount Rate
Average non-interest bearing
demand deposits $ 622,308 0.0% $ 561,713 0.0% $ 510,920 0.0%
Average interest bearing demand deposits 502,348 2.1% 470,303 2.1% 464,244 2.3%
Average interest bearing savings deposits 1,082,866 4.4% 897,295 4.2% 635,504 4.1%
Average time deposits 3,720,422 6.1% 3,255,908 6.2% 3,163,902 6.2%
- ---------------------------------------------------------------------------------------------------------------------------------
Average total deposits $ 5,927,944 $ 5,185,219 $ 4,774,570
=================================================================================================================================
The following table indicates the maturity of time certificates of deposit and
other time deposits issued in amounts of $100,000 or more as of December 31,
1997:
(Amounts in Thousands)
- ------------------------------------------------------------------------------
Time CD's Other Time
- -----------------------------------------------------------------------------
Three months or less $ 111,643 $ 5,958
Over three months through six months 87,131 2,067
Over six months through twelve months 159,914 646
Over twelve months 215,463 --
- -----------------------------------------------------------------------------
Total $ 574,151 $ 8,671
=============================================================================
15
SCHEDULE VI. - RETURN ON EQUITY AND ASSETS
The following table presents the return on average assets, the return on average
equity, the dividend payout ratio and the equity to assets ratio of the Company:
For the years ended December 31,
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
(Amounts in Thousands Except Percents and Per Share Data)
Average total assets $ 7,023,759 $ 6,190,805 $ 5,671,397
Average equity 494,021 457,348 395,173
Net income 75,187 70,232 82,241
Net income per share 220.68 202.53 237.17
Dividends per share 33.76 37.22 33.73
Return on average assets 1.1% 1.1% 1.5%
Return on average equity 15.2% 15.4% 20.8%
Dividend payout ratio 15.3% 18.4% 14.2%
Average equity to average assets ratio 7.0% 7.4% 7.0%
SCHEDULE VII. - SHORT-TERM BORROWINGS
Transactions in short-term borrowings are summarized below:
Federal funds purchased and securities
sold under repurchase agreements (1) Commercial paper
----------------------------------------- --------------------------------------
1997 1996 1995 1997 1996 1995
----------------------------------------- --------------------------------------
(Amounts in Thousands Except Percents)
Amount outstanding at year-end $ 217,891 $ 146,015 $ 133,488 $ -- $ 273,298 $ 289,827
Weighted average interest rate
at year-end 5.3% 5.3% 5.6% -- 5.4% 5.6%
Maximum amount outstanding 254,709 253,222 133,488 228,916 245,728 257,828
Average amount outstanding 151,675 117,715 67,295 249,557 265,775 284,914
Weighted average interest rate
during the year 5.2% 4.8% 5.4% 5.4% 6.0% 6.5%
(1) The majority of federal funds purchased and securities sold under
repurchase agreements mature each day and are replaced by a new issue.
16
ITEM 2. PROPERTIES.
The Company owns a 22 story office building in Omaha, Nebraska where its primary
corporate offices are located. The Company's business is also operated at
various other facilities in the Omaha area which are either owned or leased by
the Company. The Company's banking business is operated in facilities located
in Nebraska, South Dakota, Kansas, and Colorado. Refer to Item 1., pages 2 and
3 for locations of the branches. Of the 55 branch locations, 38 are owned by
the Company and 17 are leased. The leases on the branches and office space (not
assuming renewals of exercise options) run through the year 2006.
For more explanation or detail, please see Notes D, F, and I to the consolidated
financial statements contained in the Annual Report to Shareholders of the
Company, an exhibit to this report which is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings, other than routine litigation
incidental to the Company's business, to which the Company is a party or of
which any of its properties is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's security holders during the
fourth quarter of 1997.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Reference is made to page 30 of the Annual Report to Shareholders of the Company
for the fiscal year ended December 31, 1997, an exhibit to this report which is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
Reference is made to page 30 of the Annual Report to Shareholders of the Company
for the fiscal year ended December 31, 1997, an exhibit to this report which is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
Reference is made to pages 24-29 of the Annual Report to Shareholders of the
Company for the fiscal year ended December 31, 1997, an exhibit to this report
which is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Reference is made to pages 28-29 of the Annual Report to Shareholders of the
Company for the fiscal year ended December 31, 1997, an exhibit to this report
which is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Reference is made to pages 4-23 of the Annual Report to Shareholders of the
Company for the fiscal year ended December 31, 1997, an exhibit to this report
which is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
17
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Reference is made to the section of the Company's proxy statement captioned
"Election of Directors" to be filed with the Securities and Exchange Commission,
which is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Reference is made to the section of the Company's proxy statement captioned
"Compensation of Directors and Executive Officers" to be filed with the
Securities and Exchange Commission, which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Reference is made to the section of the Company's proxy statement captioned
"Security Ownership of Certain Beneficial Owners and Management" to be filed
with the Securities and Exchange Commission, which is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Reference is made to the section of the Company's proxy statement captioned
"Information Concerning Certain Interests of Directors and Transactions with
Management" to be filed with the Securities and Exchange Commission, which is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
The following documents are filed as a part of this report and are either
attached hereto or incorporated by reference to documents previously filed with
the Securities and Exchange Commission as exhibits:
(a) (1) Financial Statements: (See Item 8 for a listing of all financial
statements).
(2) Financial Statement Schedules:
All schedules normally required by Form 10-K are omitted since they
either are not applicable or the required information is shown in the
financial statements or the notes thereto.
(3) Exhibits: See exhibit index on page 21.
(b) The Company filed no reports on Form 8-K for the quarter ended
December 31, 1997.
18
(c) Exhibits to this Form 10-K are attached or incorporated by reference as
stated above.
(d) No financial statement schedules are filed, and as such are excluded
from the Annual Report as provided by Exchange Act Rule 14a-3(b)(i).
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
FIRST NATIONAL OF NEBRASKA, INC.
By /s/ Bruce R. Lauritzen
----------------------
Bruce R. Lauritzen
Date: March 20, 1998 Chairman, President and Director
--------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ Bruce R. Lauritzen
--------------------------------
Bruce R. Lauritzen
Date: March 20, 1998 Chairman, President and Director
--------------
/s/ Dennis A. O'Neal
--------------------------------
Dennis A. O'Neal
Executive Vice President and Treasurer,
Principal Accounting and Financial Officer
Date: March 17, 1998 and Director
--------------
/s/ Elias J. Eliopoulos
--------------------------------
Elias J. Eliopoulos
Date: March 18, 1998 Executive Vice President and Director
--------------
/s/ F. Phillips Giltner
--------------------------------
F. Phillips Giltner
Date: March 17, 1998 Chairman Emeritus and Director
--------------
/s/ J. William Henry
--------------------------------
J. William Henry
Date: March 18, 1998 Executive Vice President and Director
--------------
/s/ Margaret M. Lauritzen
--------------------------------
Margaret M. Lauritzen
Date: March 18, 1998 Director
--------------
/s/ Daniel K. O'Neill
--------------------------------
Daniel K. O'Neill
Date: March 17, 1998 Director
--------------
/s/ Charles R. Walker
--------------------------------
Charles R. Walker
Executive Vice President and Secretary
Date: March 17, 1998 and Director
--------------
20
EXHIBIT INDEX
Page
----
3(i) Amended and Restated Articles of Incorporation of the Parent Company,
incorporated by reference to Exhibit 3(i) to the Company's Report on Form
10-Q for the fiscal quarter ended June 30, 1997. *
3(ii) Amended and Restated Bylaws of the Parent Company, incorporated by
reference to Exhibit 3(i) to the Company's Report on Form 10-Q for the
fiscal quarter ended June 30, 1997. *
4 Fiscal and Paying Agency Agreement entered into in connection with the
issuance of $75 million of Subordinated Notes by the Bank dated December 7,
1995 between the Bank as "Issuer" and the Bank as "Fiscal and Paying Agent"
incorporated by reference to the Company's Report on Form 8-K, filed *
December 12, 1995.
10(a) Deferred Compensation and Consultative Services Agreement between the Bank
and John R. Lauritzen and Amendment to Deferred Compensation and
Consultative Services Agreement between the Bank and John R. Lauritzen,
incorporated by reference to Exhibit 10(a) of the Company's Annual Report *
on Form 10-K for the fiscal year ended December 31, 1992.
10(b) Deferred Compensation and Consultative Services Agreement between the Bank
and F. Phillips Giltner and Amendment to Deferred Compensation and
Consultative Services Agreement between the Bank and F. Phillips Giltner,
incorporated by reference to Exhibit 10(b) of the Company's Annual Report *
on Form 10-K for the fiscal year ended December 31, 1992.
10(c) First National of Nebraska Senior Management Long Term Incentive Plan,
incorporated by reference to Exhibit 10(c) of the Company's Annual Report *
on Form 10-K for the fiscal year ended December 31, 1992.
10(d) Management Incentive Plan, incorporated by reference to Exhibit 10(d) of *
the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1992.
10(e) Amended Split Dollar Agreement between the Bank, F. Phillips Giltner, and
First National Bank of Omaha, as Trustee of the F. Phillips Giltner
Irrevocable Insurance Trust, incorporated by reference to Exhibit 10(f) of *
the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1992.
10(f) 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.
* incorporated by reference (see Part IV, Item 14(a)(3)).
21
EXHIBIT INDEX (continued)
13 Annual Report to Shareholders of the Company for the fiscal year ended
December 31, 1997 (incorporated by reference).
21 Subsidiaries of the Corporation.
27 Financial Data Schedule.
22