First Commerce Bancshares & Subsidiaries o 1
Description of Business

First Commerce  Bancshares,  Inc. (the Company) is a multi-bank  holding company
organized  as a Nebraska  corporation.  The  Company's  primary  business is the
ownership  and  management of eight  commercial  bank  subsidiaries,  a mortgage
company  and  an  asset  management  company.   These  subsidiaries   provide  a
comprehensive  range  of  trust,  commercial,  consumer,  correspondent,  retail
deposit services and mortgage banking  services.  The Company provides  computer
services  to banks  throughout  Nebraska  and  surrounding  states  through  its
subsidiary,  First  Commerce  Technologies,  Inc.  First  Commerce  Technologies
presently has four computer centers in Nebraska, two in Kansas, one in Arkansas,
Colorado, Florida, New Mexico and Texas.

The Company is  geographically  located  throughout  Nebraska  with full service
banking  offices in  Alliance,  Bridgeport,  Grand  Island,  Hastings,  Kearney,
Lincoln, McCook, North Platte, Valentine and West Point. Loan/deposit production
offices are located in Cairo, Holdrege, Hyannis, Mullen, Snyder, and Wood River,
Nebraska; Burlington, Colorado; and Goodland, Kansas.

<TABLE>
<CAPTION>

Financial Highlights  (In Thousands Except Per Share Data)
                                                                                                         Percent
At December 31,                                                            1998            1997          Change
                                                                          ------          ------         -------

<S>                                                                      <C>            <C>                <C> 
Assets                                                                   $2,384,745     $2,251,100         5.9%
Investments                                                                 747,844        691,144         8.2
Loans                                                                     1,284,007      1,236,443         3.8
Deposits                                                                  1,728,500      1,649,494         4.8
Stockholders' equity                                                        248,646        232,580         6.9
Per share data:
   Stockholders' equity before net unrealized gains
     (losses) on securities available for sale                                17.36          15.57        11.5
   Total stockholders' equity                                                 18.40          17.19         7.0
   Closing bid price
     Class A                                                                  26.25          29.00        (9.5)
     Class B                                                                  28.00          32.50       (13.8)
</TABLE>
<TABLE>
<CAPTION>

                                                           Percent                        Percent
Year Ended December 31,                      1998          Change          1997           Change          1996
                                           --------       --------       --------        --------       --------

<S>                                          <C>            <C>             <C>             <C>            <C>    
Net interest income                          $82,197         7.3%           $76,586         9.2%           $70,106
Provision for loan losses                      7,658        (7.7)             8,297        21.3              6,839
Noninterest income                            65,714        22.1             53,839        22.3             44,030
Noninterest expense                           95,286        17.5             81,103         9.7             73,912
Net income                                    29,035         9.2             26,597        22.3             21,756

Return on average equity before
   net unrealized gains (losses) on
   securities available for sale               13.05%                         13.28%                        12.14%
Per share data:
   Basic net income                            $2.15                          $1.96                         $1.60
   Dividends                                     .34                            .30                           .26
Marketable equities (cost)                   $52,057                        $43,217                        $33,309
Marketable equities (fair value)              72,258                         73,913                         44,169
</TABLE>


<PAGE>


Dear Stockholders:
Our Company had another good year of earnings growth and operational improvement
in 1998.  Net income for the year was $29.0  million,  up 9.2% over the previous
record year of $26.6  million.  On a per share basis,  1998  earnings were $2.15
versus $1.96 in 1997, up 9.7%.

Our  earnings  improvement  was due to another  year of  increased  net interest
income,  very low loan losses,  a wonderful  year of increased  fee income,  and
gains on  securities  in our Global Fund.  Asset growth during the year was less
impressive,  up only 5.9% over 1997, ending 1998 at $2.38 billion. Average asset
growth was somewhat better,  up 9% for the year.  [OBJECT  OMITTED]A year ago we
introduced a new earnings term called "normalized earnings" which we hoped would
be  helpful  to you in being  able to compare  earnings  for  different  periods
without being distorted by "non-core" earnings such as Global gains, bond gains,
gains  from sale of  venture  capital  positions,  etc.  In 1998 our  normalized
earnings were $26 million, up 11% over normalized earnings in 1997.

                          Normalized Earnings Schedule

                                   1995       1996       1997       1998
                                   ----       ----       ----       ----
Net income                       $17,420    $21,756    $26,597    $29,035
Less global gains net of tax         332      1,063      3,067      2,986
Less venture capital gains (losses)   76       (116)         -        (36)
Less securities gains net of tax        46        24           94        26
                                --------------------   --------------------
Normalized earnings              $16,966    $20,785    $23,436    $26,059
                                  ======     ======     ======     ======


As I mentioned in the 1998 Third Quarter Report,  the healthy earnings growth of
our Company in 1998 is a continuation  of a pattern of earnings and asset growth
which began ten years ago.  During  these past ten years,  our Company has grown
from $955 million of total assets in 1988 to $2.38 billion on December 31, 1998,
and earnings  have  increased  from $9.7 million in 1988 to $29 million in 1998.
This  ten-year  report card is very,  very good.  Needless to say, all of us are
proud of this excellent business success.

During this past ten-year  period,  we have generally had a solid economic arena
in which to compete.  Our  agricultural  commodity  prices have been  reasonably
good,  our national  economy has been  growing at a  surprising  pace for a long
period,  and our U. S. equity markets have enjoyed  unprecedented  gains.  Also,
during  this  period we have had some  unique  opportunities  to  capitalize  on
mistakes made by some of our competitors which in some markets has enabled us to
accelerate  our growth rate and improve  market share.  I have said this before,
and I am  repeating  myself,  as I believe that the big picture  environment  of
today and what I see  during the next few years  will be more  difficult  for us
than the past ten years.  I am not  predicting  doom and  gloom,  just a tougher
environment.

In the next few pages I will discuss many  important  components of our business
to give you a big picture look at recent important Company activity.  We provide
you with this  information  because review of our  consolidated  profit and loss
statement and balance  sheet,  although very real,  does not paint a complete or
clear picture of our Company activity.  At the conclusion of this review, I will
also share some of my  thoughts  on what I expect  our  Company  will be able to
accomplish in the few years ahead.

GROWTH
Although  asset and loan growth has been good during the past ten years,  assets
this past year increased  only 5.9% to $2.38 billion at year-end.  Loans were up
only 3.8% to $1.28 billion at year-end. This reduced growth occurred in part due
to poor cattle and hog prices and poor grain  prices in our farm  sector.  Other
loan sectors were  impacted by low interest  rates that enabled many of our loan
customers to find long-term  fixed rate loans from long-term  lenders to replace
our shorter term credits.  Changing  competitive patterns in our installment and
student loan  activities  also slowed our overall  loan growth rate,  and a very
tough competitive  environment in general  negatively  impacted our overall loan
growth.

LOAN QUALITY
As I continue  to mention in these  reviews,  excessive  loan  losses  kill bank
earnings,  and ultimately can kill banks,  period. We continue our strong credit
quality  standard and have not and will not alter our  long-term  commitment  to
credit quality,  even in this new arena of tougher competition.  Our loss ratios
(excluding  credit card) are well in line with industry averages as are our loss
reserves to loans. Our "watch list" grew  considerably this past year, mostly as
a result of the poor farm economy. A larger watch list does not necessarily mean
higher  actual  loan  losses,  but  another  year  of  economic  stress  in  our
agricultural sector will certainly translate into higher future losses.  [OBJECT
OMITTED][OBJECT  OMITTED]  CREDIT  CARD Our  credit  card  business  made  major
progress  this year in  stabilizing  loss rates,  improving  profitability,  and
continuing  rapid growth.  This business began to change rapidly a few years ago
with a  proliferation  of card  offerings at lower rates and fees to  consumers,
many of which had sub-par  credit  standings.  This rapid shift in the  industry
norm caused many that were previously in this business to fold their tents, lick
their wounds, and look for other things to do. At First Commerce,  we have found
ways to reduce  losses,  improve our  collection  process,  increase  fees,  and
continue to grow.

As mentioned in past  reports,  a few years ago we entered into a joint  venture
with Cabela's, "The World's Foremost Outfitter of Hunting,  Fishing, and Outdoor
Gear." This  co-branded card  partnership  continues to be very  successful.  We
admire and work well with our partners. With this partnership, our active credit
card accounts  outstanding now number over 160,000,  and our managed loan volume
from credit cards now exceeds $200  million.  Our hats are off to those who have
provided excellent leadership to this rapidly changing and important business --
Mark Hansen,  Executive Vice  President and Senior  Lending  Officer at NBC; Tom
Boatman,  Senior  Vice  President  and  Manager of our  BankCard  Division;  Sue
Saathoff, Vice President and Chief Operating Officer of our BankCard Division.
[OBJECT OMITTED][OBJECT OMITTED]

FIRST COMMERCE MORTGAGE
Our mortgage company had another  wonderful year in 1998 with net income of $1.2
million, and loan servicing growth of 36.8%, ending the 1998 year with servicing
volume of $1.6 billion. At the beginning of 1998, mortgage rates fell rapidly to
levels we have not seen for many years.  This created a huge wave of refinancing
activity,  increasing  volume for FCM to levels three times that of normal.  Our
management  team did a skillful job of  controlling  interest  rate exposure and
were very successful in profitably selling unhedged mortgages into the secondary
markets,  enabling us to offset the losses  incurred by writing down  previously
booked mortgage servicing rights caused by the heavy refinancing  activity.  FCM
borrows heavily from NBC to support its warehouse activity.  And, it is also one
of NBC's  largest  deposit  customers  with  average  balances  in excess of $47
million.

During the year Jeff Holmberg was named Chief Executive Officer, effectively and
smoothly  completing  the  management  transition  planned  a year  ago.  We are
thankful for the many years of dedicated service which Doug Alford, FCM's former
president, provided us. This past year, between the earnings of FCM, origination
fees generated from our operating  businesses,  dollars earned by NBC from loans
made to FCM,  and interest  earned on the FCM deposit  balances,  this  business
activity earned First Commerce over $3 million.
[OBJECT OMITTED][OBJECT OMITTED]


FEE INCOME
During 1998, fee income generated in various parts of our  consolidated  Company
increased  $11.0 million to $58.2  million,  up 23.3% over 1997.  This is a very
substantial  increase  without  which we would not have been able to achieve our
1998 earnings targets. This excellent fee income growth occurred in our BankCard
Division,  Trust Division,  our mortgage origination  activity,  brokerage,  and
investment fees generated by First Commerce  Investors.  This has been wonderful
growth for us.

RETAIL
Our retail function continues to strengthen our relationships with our customers
through  continued quality service and cross selling  activities.  Our customers
like to bank with us, and we are  working  hard to  continue to earn their trust
and find more good people to do business  with.  Jo Kinsey and staff are doing a
great  job of  making  banking  fun  again  for our  customers  and our  people.
Important  pieces of new  technology  were put in place  this past year - a data
base marketing system (managed by Judy Terwilliger) and an account profitability
measuring system, which will make us more effective marketers and will enable us
to do a better job managing customer relationships for future growth.

During 1998,  we opened our new Call Center at NBC,  and it has been  enormously
successful.  Under the leadership of Sandra Walsh,  our Call Center now receives
customer calls at a rate of 4,000 a week. This translates into 208,000 calls per
year.  Sandra  and  our  excellent  Call  Center  staff  do a  wonderful  job of
maintaining  our   traditional   quality   service,   do  an  excellent  job  of
cross-selling,  and free up our Personal  Bankers for  effective  and  important
face-to-face work with our customers in our banks and branches.

We have web sites  (www.fcbi.com)  for every  bank and now an  interactive  home
banking product that allows our customers to access our bank services with their
home  PC over  the  Internet.  This  "electronic  banking"  function  will  grow
importantly  over the next five  years and keep our  Company in the front of the
race in  providing  our  customers  new,  convenient  ways to  access  our  many
financial services.

FIRST COMMERCE INVESTORS AND NBC TRUST DIVISION
Our Trust  Division,  which is part of the National Bank of Commerce,  and First
Commerce  Investors,  which  is a  holding  company  subsidiary,  have  done  an
excellent job of increasing  revenue and profits during the past three years. In
the fall of 1997, the vast majority of the NBC  co-mingled  funds were converted
into mutual funds,  which provide a better product for our customers.  Our Trust
Division is capably led by Steve  Caswell and a team of real pros who do a great
job for our customers  and bring in  significant  new business each year.  Vicki
Huff and the Trust Department staff continue to lead the new business charge for
us and deserve a big hand for their wonderful work.

At First Commerce Investors, Jim Stuart, III, Chairman, and Cam Hinds, President
and Chief  Investment  Officer,  along with a crew of very  capable  people have
developed a very  important  investment  business,  which has the  potential  to
provide us with good future growth.  The current challenge is growing our mutual
funds.





FIRST COMMERCE TECHNOLOGIES, INC.
First Commerce  Technologies lost $888,000 in 1998. Principal causes of the loss
were 1) communication expenses running much higher than plan, 2) increased costs
relative to work done to be Year 2000 ready (mostly extra people),  and 3) costs
incurred  (hardware and software) to provide better customer service and enhance
our existing products.  Needless to say, none of us are happy about the loss. We
anticipate  being  able to run FCT at  breakeven  levels  in 1999,  and are then
hopeful  that our improved  products  and service  quality will begin to produce
higher revenues and profits in 2000 and beyond.

Bank technology has been changing very rapidly during the past five years and we
have invested heavily during this period to provide  ourselves and FCT customers
with the  technology  and service  level to enable us to remain  competitive  in
today's and tomorrow's banking environment.

FCT has excellent people,  they have improved service levels, and they have made
excellent  product  improvement.  This year,  we have yet another  year of heavy
investment in products and a heavy year of  completion of converting  all of our
customers  to new Year  2000  ready  and  more  user-friendly  products.  In the
following  year,  we should begin to see the results of our heavy  investment in
this business. We have not done a good job of predicting results.

WESTERN NEBRASKA NATIONAL BANKS
At Western  Nebraska  National Banks (North Platte and Valentine),  which I call
"Western," growth continues at a very rapid pace. Total loans (when Valentine is
included)  increased to $162 million at the end of last year, up 17% from a year
ago, and total assets as of year-end 1998 (when Valentine is included) were $240
million,  up 14% over the  previous  year,  and up 176%  from  five  years  ago.
Expansion  of our Alliance  building is nearly  complete,  and we have  recently
hired two new outstanding  people,  Daryl Krejci and Jerry Beagle, to complement
Frank  Tolstedt,  Marvin Larabee and Miles Colson.  This great team has the town
"abuzz" and new customers are standing in line to get in.

In  Valentine,  Jan  Lallman  and  Monty  Nieffer  have  a  new  building  under
construction  that, when  completed,  will boost the already strong growth which
has occurred there. Total assets at year-end in Valentine were $17 million. This
is a conversion  of an LPO which we began only three years ago.  Jan,  Monty and
their staff have plans to add a significant  amount of new business this year in
this wonderful Nebraska Sandhills ranch country.

Mary Gerdes,  President of Western, Joe Scherger,  Executive Vice President, and
Leland Poppe, Executive Vice President,  have created a wonderful team of highly
motivated people who are working hard, having fun, and winning. Upfront costs of
goodwill created from past acquisitions and strong depreciation  charges created
by  construction  of the  many  new  facilities  dampen  current  earnings,  but
continued  growth and time will make Western one of our largest profit  centers.
As I have said before, this is not "business as usual."

GLOBAL
We had  another  good year with our Global  investments.  At year end,  Global's
market  value was $70.1  million  with a cost of $52.1  million,  thus  creating
potential  future  pre-tax  gains (if  December  31,  1998  prices  hold) of $18
million.  During 1998, $3.0 million was taken in net after tax gains and income,
which was included in Company net income.

Investment  returns in 1998 for Global were 16.86%,  which  compares well to the
Lipper  Global Equity Index of 14.63%.  Over the past three and five years,  our
Global  returns have been 18.33% and 16.06%,  respectively,  which is quite good
and  better  than  our  expectation.  Global  continues  to  provide  us  with a
diversified  earnings  stream,  a source  of  spare  capital,  and a  source  of
potential emergency liquidity.  Jim Stuart, III, and Cam Hinds, our FCI leaders,
do a good job of managing this important pool of Company capital.


COMPANY ACTIVITIES
During  this  past  year,  Stuart  Bartruff  and I looked  at a good  number  of
potential  acquisitions  and bid on a few. We were not  successful on any of our
bids at the prices we felt would benefit our Company over the long run.  Current
acquisition  prices for banks with little growth potential have been in the 2.5x
book value area, and banks in growth  markets are fetching  handsome 3x book and
higher  prices.  Stuart  and I have not been able to  justify  paying  excessive
prices which would dilute our per share  earnings  caused mostly by the goodwill
amortization created when excessive prices are paid.

We continue to look for  acquisition  opportunities,  which will  accelerate our
growth rate. Buying more  agriculturally  based Midwest banks does not meet this
criteria  unless the price is low enough that it does  provide  overall  Company
value.

In April we will be  opening  a new bank on the  northern  borders  of  Colorado
Springs.  We are very pleased that Tom  Feilmeier has agreed to be our president
there.  Tom is a very  bright,  high  energy  banker who has the  financial  and
leadership  skills to build a successful new bank in Colorado.  This  investment
will require patience on our part, as this start-up will not breakeven for about
three to five years.  This is, we think,  an  excellent  way to enter new growth
markets at  reasonable  prices  (book  value plus  losses  versus 3x book for an
existing bank). We are excited about this new venture.

During 1998 we  increased  our cash  dividend  payment  rate from 30 cents to 34
cents per share. Your Board also voted in December to increase the cash dividend
rate in 1999 to 36 cents per share.

During the 1998 year, we also purchased  18,017 of FCB shares at what we believe
to be good prices for our Company and our  stockholders.  We will  continue this
practice  when  good  opportunities   present   themselves.   We  compare  these
purchases/investments  at prices of approximately  1.4x book value versus making
an  acquisition  of another bank at 2.5x earnings that dilutes our earnings on a
per share  basis.  On  balance,  as much as we like  Nebraska,  we think we have
enough  mid-western  ag banks.  Acquisition  excitement for us comes from growth
markets at fair prices,  or continued  investments in the Global Fund, or in our
own Company when the price is right.

During the past 18 months,  we have spent a great deal of time and money in both
our computer company, and our banks and other businesses to assure ourselves and
customers  that we are prepared for the turn of the century  which will occur at
the end of this year.  Our principal  focus has been to assure our customers and
ourselves  that our computer based hardware and software will work when we enter
the Year 2000.

We estimate that we have spent  approximately $5.5 million through 1998 and will
spend  another  $7.0  million in 1999 in both hard and soft dollars to make sure
our  hardware and  software  systems will work January 1, 2000.  In our computer
company, Terri Raffety, Mary Anne Classen, and Sandy Deets have done a great job
defining,  testing,  and fixing our  systems.  And in NBC,  Steve Slope and Dave
Wellsfry  have done an  outstanding  job of getting  our  systems  prepared  and
tested. These five individuals have earned "Hero" status in my book. We are very
proud of them.  We will have nearly all systems  tested by June 30 of this year.
At this  writing,  all of our efforts and tests have gone very well,  leaving me
confident  that we will be fully  prepared for business as usual in January next
year.

CURRENT YEAR THOUGHTS
Our business plans for 1999 call for us to continue with reasonable  bottom line
growth  from  both  asset  generated  income,  fee  income,  and  normal  profit
production from Global. As mentioned earlier, I am worried that continued stress
on our ag customers due to poor prices (below breakeven  levels) could result in
increased  levels of loan losses and the need to beef up loss  reserves to cover
current and future losses.  We clearly need price improvement or we are going to
begin to see some  unwanted  liquidations  a year  from now in our  agricultural
sector. Our U.S. equity prices have been increasing in value at an unprecedented
and an  unsustainable  rate for four years now. A rapid stock market  correction
could cause GDP growth in the U. S. economy to slow causing our general business
climate to soften, making it tougher for our brokers to sell investments, making
it tougher to produce  good  returns in  Global,  and  producing  a general  and
potentially  scary slowdown in the U.S.  economy.  We know about the troubles of
our trading  partners in Asia and Latin  America,  which will continue to have a
negative  impact on U.S. GDP growth and ag prices here at home.  Even with these
concerns,  our budgets  call for  continued  growth and we work hard each day to
achieve our plans for another successful year.

Long term I continue  to be  optimistic  about the growth of our country and the
world  economy and I feel there are  reasonable  prospects  for  agriculture  in
America.

I also believe that given the current  potential  troublesome  environment,  our
company is focused on the right things to maximize  both our short and long-term
potential.  We have  made  important  investments  in  people,  technology,  and
buildings  to enhance  asset and bottom  line  growth.  Our people are  skilled,
seasoned,  and motivated to win. This, of course, is extremely important both in
good times and even more so when our environment toughens up.

It is possible that none of the things that concern me today will ever happen. I
hope this turns out to be the case. We are not waiting for bad things to happen.
We are working hard every day to make good things happen and being opportunistic
along the way.

We are very  appreciative  of the many people who have and who are helping  make
this an outstanding  business  organization.  It has taken tremendous energy and
commitment to get us where we are today, and we have no intention of letting any
of our success slip away.

As in past  letters,  I have  ended by  inviting  any of you who have a good 
idea  which  will be helpful to us to call me, and I again invite you to do so.

Sincerely,

James Stuart, Jr.
James Stuart, Jr.
Chairman and CEO
                           The First Commerce Bancshares Organization


The multi-resource,  statewide  organization First Commerce Bancshares is today,
traces its roots to the founding of Lincoln's National Bank of Commerce in 1902.
The  organization  has since expanded not only in Nebraska,  but into Kansas and
Colorado. The numerous banking locations that comprise First Commerce Bancshares
are indicated on the map below.


<PAGE>

<TABLE>
<CAPTION>

                                                    Index To Financial Information




                  <S>                                                                            <C>
                  Consolidated Balance Sheets....................................................10
                  Consolidated Statements of Income..............................................11
                  Consolidated Statements of Stockholders' Equity................................12
                  Consolidated Statements of Cash Flows..........................................13
                  Notes to Consolidated Financial Statements.....................................14
                  Independent Auditors' Report...................................................26
                  Selected Quarterly Financial Data..............................................27
                  Selected Financial Data........................................................28
                  Management's Discussion and Analysis...........................................32
                  Officers and Directors.........................................................48
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
                                                                                           December 31,
                                                                                    --------------------------
                                                                                    1998                  1997
                                                                                  ---------             --------
                                                                                      (Amounts In Thousands)
                                                                ASSETS

<S>                                                                              <C>                   <C>        
Cash and due from banks                                                          $   135,731           $   156,664
Federal funds sold                                                                    31,865                36,495
                                                                                   ---------             ---------
   Cash and cash equivalents                                                         167,596               193,159
Mortgage loans held for sale                                                          66,178                31,360
Securities available for sale (cost of
   $430,747,000 and $294,691,000)                                                    452,301               328,376
Securities held to maturity (fair value of
   $300,502,000 and $367,489,000)                                                    295,543               362,768
Loans                                                                              1,284,007             1,236,443
Less allowance for loan losses                                                        24,292                22,458
                                                                                   ---------             ---------
     Net loans                                                                     1,259,715             1,213,985
Federal Home Loan Bank stock, at cost                                                  9,347                 8,481
Accrued interest receivable                                                           22,257                21,476
Premises and equipment, net                                                           62,392                54,468
Other assets                                                                          49,416                37,027
                                                                                   ---------             ---------
                                                                                  $2,384,745            $2,251,100
                                                                                   =========             =========

                                                 LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
<S>                                                                              <C>                   <C>        
   Noninterest bearing                                                           $   365,782           $   353,109
   Interest bearing                                                                1,362,718             1,296,385
                                                                                   ---------             ---------
                                                                                   1,728,500             1,649,494

Short-term borrowings                                                                213,470               198,395
Federal Home Loan Bank borrowings                                                    143,625               120,450
Accrued interest payable                                                               7,442                 7,734
Accrued expenses and other liabilities                                                29,562                26,277
Long-term debt                                                                        13,500                16,170
                                                                                   ---------             ---------
     Total liabilities                                                             2,136,099             2,018,520
Commitments and contingencies
Stockholders' equity:
   Common stock:
     Class A voting, $.20 par value; authorized
     10,000,000 shares; issued and outstanding 2,583,319
        and 2,591,336 shares;                                                            517                   518
       Class B nonvoting, $.20 par value; authorized
     40,000,000 shares, issued and outstanding 10,928,951
      and 10,938,951 shares                                                            2,186                 2,188
   Paid-in capital                                                                    21,572                21,601
   Retained earnings                                                                 210,361               186,377
   Accumulated other comprehensive income                                             14,010                21,896
                                                                                   ---------             ---------
       Total stockholders' equity                                                    248,646               232,580
                                                                                   ---------             ---------
                                                                                  $2,384,745            $2,251,100
                                                                                   =========             =========
</TABLE>


See notes to consolidated financial statements.
<TABLE>
<CAPTION>

Consolidated Statements of Income
                                                                                      Year ended December 31,
                                                                                   ----------------------------
                                                                                  1998         1997         1996
                                                                                 ------       ------       ------
                                                                           (Amounts In Thousands Except Per Share Data)
 Interest income:
<S>                                                                             <C>          <C>          <C>      
   Loans                                                                        $111,395     $104,018     $  97,228
   Securities:
     Taxable                                                                      41,635       39,463        32,485
     Nontaxable                                                                    1,503        1,381         1,483
     Dividends                                                                     2,110        1,653         1,313
   Mortgage loans held for sale                                                    3,419        1,674         1,953
   Federal funds sold                                                              1,898        1,980         2,037
                                                                                  ------       ------        ------
       Total interest income                                                     161,960      150,169       136,499
 Interest expense:
   Deposits                                                                       62,902       60,201        55,315
   Short-term borrowings                                                           9,181        8,706         7,256
   Federal Home Loan Bank borrowings                                               6,313        3,206         2,153
   Long-term debt                                                                  1,367        1,470         1,669
                                                                                  ------       ------        ------
       Total interest expense                                                     79,763       73,583        66,393
                                                                                  ------       ------        ------
 Net interest income                                                              82,197       76,586        70,106
 Provision for loan losses                                                         7,658        8,297         6,839
                                                                                  ------       ------        ------
 Net interest income after provision for loan losses                              74,539       68,289        63,267
 Noninterest income:
   Credit card                                                                    15,759       13,047        10,591
   Computer services                                                              11,427        8,904         8,491
   Other service charges and fees                                                 10,682        7,829         6,217
   Mortgage banking                                                                8,853        5,425         4,868
   Trust services                                                                  6,085        6,469         5,840
   Service charges on deposits                                                     5,427        5,562         5,231
   Gains on securities sales                                                       4,635        4,861         1,672
   Other income                                                                    2,846        1,742         1,120
                                                                                  ------       ------        ------
       Total noninterest income                                                   65,714       53,839        44,030
                                                                                  ------       ------        ------
 Noninterest expense:
   Salaries and employee benefits                                                 44,123       39,475        35,808
   Credit card fees                                                               11,403        7,921         7,055
   Equipment expense                                                               6,289        5,538         5,523
   Amortization of mortgage servicing rights                                       4,782        2,067         1,537
   Communications                                                                  4,447        4,221         4,159
   Net occupancy expense                                                           4,353        4,496         3,980
   Business development                                                            4,343        3,695         3,990
   Fees and insurance                                                              4,266        3,802         3,770
   Supplies                                                                        2,786        2,539         2,404
   Other expenses                                                                  8,494        7,349         5,686
                                                                                  ------       ------        ------
       Total noninterest expense                                                  95,286       81,103        73,912
                                                                                  ------       ------        ------
 Income before income taxes                                                       44,967       41,025        33,385
 Income tax provision                                                             15,932       14,428        11,629
                                                                                  ------       ------        ------
 Net income                                                                    $  29,035    $  26,597     $  21,756
                                                                                  ======       ======        ======
Weighted average shares outstanding                                               13,529       13,541        13,566
                                                                                  ======       ======        ======
Basic net income per share                                                         $2.15        $1.96        $1.60
                                                                                  ======       ======        ======
</TABLE>

See notes to consolidated financial statements.


<PAGE>

<TABLE>
<CAPTION>

Consolidated Statements Of Stockholders' Equity

Accumulated
                                   Class A      Class B                                Compre-          Other
                                   Common       Common       Paid-In     Retained      hensive       Comprehensive
                                    Stock        Stock       Capital     Earnings      Income           Income
                                  --------     --------     --------     --------      -------       -------------
                             (Amounts in Thousands)

<S>                                   <C>        <C>          <C>          <C>          <C>           <C>     
Balance, January 1, 1996              $521       $2,193       $21,665      $146,269                   $  9,373
Purchase and retirement of stock         -           (5)          (37)         (321)                         -
Comprehensive income:
   Net income                            -            -             -        21,756     $21,756              -
   Unrealized gains on securities,
       net of reclassification
       adjustment (see disclosure)       -            -             -             -        (488)          (488)
                                                                                         ------
Comprehensive income                     -            -             -             -     $21,268              -
                                                                                         ======

Cash dividends ($.26 per share)          -            -             -        (3,528)                         -
                                      ----        -----        ------       -------                     ------

Balance, December 31, 1996             521        2,188        21,628       164,176                      8,885
                                      ----        -----        ------       -------                     ------

Purchase and retirement of stock        (3)           -           (27)         (330)                         -
Comprehensive income:
   Net income                            -            -             -        26,597     $26,597              -
   Unrealized gains on securities,       -            -             -             -                          -
       net of reclassification
       adjustment (see disclosure)       -            -             -             -      13,011         13,011
                                                                                         ------
   Comprehensive income                  -            -             -             -     $39,608              -
                                                                                         ======
Cash dividends ($.30 per share)          -            -             -        (4,066)                         -
                                      ----        -----        ------       -------                     ------
Balance, December 31, 1997             518        2,188        21,601       186,377                     21,896
                                      ----        -----        ------       -------                     ------

Purchase and retirement of stock        (1)          (2)          (29)         (451)                         -
Comprehensive income:
   Net income                            -            -             -        29,035     $29,035              -
   Unrealized gains on securities,
       net of reclassification
       adjustment (see disclosure)       -            -             -             -      (7,886)        (7,886)
                                                                                         ------
Comprehensive income                     -            -             -             -     $21,149              -
                                                                                         ======
Cash dividends ($.34 per share)          -            -             -        (4,600)                         -
                                      ----        -----        ------       -------                     ------

Balance, December 31, 1998            $517       $2,186       $21,572      $210,361                    $14,010
                                      ====        =====        ======       =======                     ======
</TABLE>

<TABLE>
<CAPTION>
Disclosure of reclassification amount:
(Amounts in Thousands)

Year ended December 31,                                                        1996        1997           1998
                                                                               ----        ----           ----
Unrealized holding gains arising during period, net of tax of
<S>                                                                        <C>          <C>            <C>     
   $322, $8,708, and $(2,868), respectively                                $    598     $16,171        $(5,326)
Less:  reclassification adjustment for gains included in net income,
   net of tax of $(584), $(1,700), and $(1,378), respectively                (1,086)     (3,160)        (2,560)
                                                                             ------      ------         ------
Net unrealized gains on securities, net of tax of
   $(262), $7,008, and $(4,246), respectively                               $  (488)    $13,011        $(7,886)
                                                                             ======      ======         ======

</TABLE>


See notes to consolidated financial statements.


<PAGE>
<TABLE>
<CAPTION>


Consolidated Statements Of Cash Flows
                                                                                      Year ended December 31,
                                                                                  1998          1997        1996
                                                                                 -------      -------       -------
                                                                                      (Amounts in Thousands)
<S>                                                                            <C>          <C>           <C>      
Net income                                                                     $  29,035    $  26,597     $  21,756
Adjustments to reconcile net income to net cash flows from
 operating activities:
   Depreciation and amortization                                                  12,217        8,472         7,901
   Provision for loan losses                                                       7,658        8,297         6,839
   Provision for deferred taxes                                                    1,792        1,188          (489)
   Gain on sales of mortgage loans and securities                                 (5,498)      (4,906)       (1,445)
Changes in assets and liabilities:
   Purchases of mortgage loans held for sale                                    (847,580)    (307,025)     (350,675)
   Proceeds from sales of mortgage loans held for sale                           813,625      292,003       359,803
   Accrued interest receivable                                                      (781)      (1,283)       (1,503)
   Accrued interest payable                                                         (292)          84           120
   Other assets                                                                   (1,039)      (3,329)         (759)
   Accrued expenses and other liabilities                                            122        1,277            34
   Other                                                                              56         (271)       (1,262)
                                                                                 -------      -------       -------
       Total adjustments                                                         (19,720)      (5,493)       18,564
                                                                                 -------      -------       -------
Net cash flows from operating activities                                           9,315       21,104        40,320
Cash flows from investing activities:
   Proceeds from sales of securities held to maturity                                  -          180           502
   Proceeds from maturities of securities held to maturity                       157,844       50,031       123,744
   Purchases of securities held to maturity                                      (90,619)    (142,967)     (193,574)
   Proceeds from sales of securities available for sale                           31,971      101,701         8,913
   Proceeds from maturities of securities available for sale                      55,183       67,403        71,553
   Purchases of securities available for sale                                   (219,269)     (99,784)      (93,591)
   Net increase in loans                                                         (76,388)    (140,200)     (165,571)
   Securitization and sale of credit card loans                                   23,000       19,000        56,000
   Purchases of premises and equipment                                           (13,966)     (11,054)       (6,229)
   Purchases of mortgage servicing rights                                        (11,663)      (3,922)       (4,204)
   Other                                                                             347         (459)         (280)
                                                                                 -------      -------       -------
Net cash flows from investing activities                                        (143,560)    (160,071)     (202,737)
Cash flows from financing activities:
   Net increase in deposits                                                       79,006       74,950       111,339
   Net increase in short-term borrowings                                          15,075       57,003        40,683
   Net increase in Federal Home Loan Bank borrowings                              23,175       47,381        41,569
   Repayment of long-term debt                                                    (2,670)      (2,534)       (2,546)
   Repurchase of common stock                                                       (483)        (360)         (363)
   Cash dividends paid                                                            (4,600)      (4,066)       (3,528)
   Other                                                                            (821)         (85)          (89)
                                                                                 -------      -------       -------

Net cash flows from financing activities                                         108,682      172,289       187,065
                                                                                 -------      -------       -------
Net change in cash and cash equivalents                                          (25,563)      33,322        24,648
Cash and cash equivalents at beginning of year                                   193,159      159,837       135,189
                                                                                 -------      -------       -------
Cash and cash equivalents at end of year                                        $167,596     $193,159      $159,837
                                                                                 =======      =======       =======
Supplemental disclosure:
   Interest paid                                                                 $79,911      $73,540       $66,210
   Income taxes paid                                                              13,290       13,465        12,540



</TABLE>


See notes to consolidated financial statements.


<PAGE>


Notes To Consolidated Financial Statements
(Columnar amounts in footnotes are in thousands except per share amounts)

A.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business - First Commerce Bancshares, Inc. (the Company) is a multi-bank holding
company whose  primary  business is providing  the normal  banking  functions of
trust, commercial, consumer, correspondent, mortgage banking, and retail deposit
services  through its Nebraska  based banks and  affiliated  organizations.  The
majority   of  the   Company's   operations   and  assets  are  related  to  its
Nebraska-based banking operations and none of the Company's other operations are
significant enough to be reportable segments.

Principles of Consolidation - The consolidated  financial statements include the
accounts  of the  Company  and  all  of  its  wholly  owned  and  majority-owned
subsidiaries.  All material  intercompany  accounts and  transactions  have been
eliminated in consolidation. Certain prior years' amounts have been reclassified
to conform to current year's classifications.

Assets held in agency or fiduciary  capacities  are not assets of the subsidiary
banks  and  accordingly,   are  not  included  in  the  accompanying   financial
statements.

Use  of  Estimates  -  In  preparing  the  consolidated   financial  statements,
management  is  required  to make  estimates  and  assumptions  that  affect the
reported  amounts of assets and liabilities and disclosure of contingent  assets
and  liabilities  as of the date of the balance sheet and income and expense for
the period.  Actual results could differ  significantly from those estimates.  A
material estimate that is particularly susceptible to significant change relates
to the adequacy of the allowance for loan losses.

Cash and Cash  Equivalents - For purposes of the  statements of cash flows,  the
Company  considers  cash,  due  from  banks,  federal  funds  sold  and  certain
securities  that  are  purchased  and  sold  for  one-day  periods  to  be  cash
equivalents.

Mortgage  Loans Held For Sale -  Mortgage  loans held for sale are stated at the
lower of aggregate cost or market.  Net unrealized losses are recognized through
a valuation allowance by charges to expense.

Securities - Debt  securities for which the Company has the positive  intent and
ability to hold to maturity are classified as held to maturity, and are reported
at amortized  cost.  Securities  that are acquired and held  principally for the
purpose of selling in the near term are classified as trading securities and are
reported at their fair  values,  with  unrealized  gains and losses  included in
earnings.  Debt and equity  securities not classified as either held to maturity
or trading  securities  are  classified  as available  for sale  securities  and
reported at fair value,  with unrealized gains and losses reported,  net of tax,
as the sole component of accumulated other comprehensive income in stockholders'
equity.  Realized  gains and  losses on  investments  are  recognized  using the
specific  identification  method.  Premiums  and  discounts  are  recognized  in
interest income using the interest method over the period to maturity.

Derivative  Financial  Instruments  - The  Company  had a  derivative  financial
instrument,  a collar  relating to a certain public equity  security held by the
Company,  which was settled in 1998. The Company utilizes the deferral method of
accounting  for this  instrument.  Under the deferral  method of  accounting,  a
$697,000 gain from the settlement of the derivative financial instrument, net of
tax of $244,000,  was deferred and will be  recognized in the same period as the
gains and losses of the security being hedged.

Loans -  Loans  are  stated  at the  principal  amount  outstanding,  net of the
allowance  for loan  losses.  Interest on loans is  calculated  by the  interest
method on the daily  outstanding  principal  balance.  Accrual  of  interest  is
discontinued on a loan when management believes,  after considering economic and
business  conditions  and  collection  efforts,  that the  borrower's  financial
condition is such that collection of interest is doubtful.  A loan is considered
impaired when, based on current  information and events, it is probable that the
Company will be unable to collect all amounts due  according to the  contractual
terms of the loan agreement. Certain direct loan costs and fees are deferred and
recognized over the life of the loan on the interest method.  Annual credit card
fees are recognized on a  straight-line  basis over the period that  cardholders
may use the card.

Credit Card Loan  Securitization  - The Company has sold, on a revolving  basis,
approximately  $98,000,000  and $75,000,000 of credit card loans at December 31,
1998 and 1997,  respectively,  through a master  trust  securitization  program.
These  securitizations  have been recorded as sales in accordance with Statement
of  Financial  Accounting  Standards  No. 125,  "Accounting  For  Transfers  and
Servicing of Financial  Assets and  Extinguishment  of  Liabilities." A residual
earnings stream and servicing have been retained in the securitization,  both of
which are immaterial to the Company's consolidated financial statements.

Allowance for Loan Losses - The allowance for loan losses is established through
a provision for loan losses  charged to expense.  Loans are charged  against the
allowance for loan losses when management  believes that the  collectibility  of
the  principal  is  unlikely.  The  allowance  is an estimate of the amount that
management  believes will be adequate to absorb  possible  losses based on prior
loan loss  experience,  the nature and volume of the loan  portfolio,  review of
specific problem loans and an evaluation of their impairment,  and an evaluation
of  the  overall  portfolio  quality  under  current  economic  conditions.  The
allowance for large groups of smaller  homogeneous loans, such as consumer loans
and credit card loans are collectively  evaluated for adequacy. For other loans,
specific  reserves are  established for any impaired loan for which the recorded
investment  exceeds the measured value of the loan.  Impaired loans are measured
based on either the present  value of expected  future cash flows  discounted at
the  loan's  effective  rate,  the  market  price of the loan,  or,  the  method
predominately used by the Company,  the fair value of the underlying  collateral
if the loan is collateral dependent.  A change in the economy can quickly affect
the financial  status of borrowers  and loan  quality.  Such changes can require
significant  adjustments  in the  allowance for loan losses on very short notice
and are possible in the future.

Premises  and  Equipment  - Premises  and  equipment  are  stated at cost,  less
accumulated  depreciation  and  amortization.  Depreciation and amortization are
computed using the  straight-line  method over the estimated useful lives of the
related  assets.  Leasehold  improvements  are  amortized  over the terms of the
respective leases or the useful lives of the improvements, whichever is shorter.

Advertising  Costs - The  Company  expenses  costs of  advertising,  except  for
direct-response  advertising  relating to its credit card  portfolios,  which is
capitalized  and  amortized  over  its  expected  period  of  future   benefits.
Direct-response  advertising consists primarily of direct-response  mailings and
telemarketing costs. The capitalized costs of the advertising are amortized over
the five-year  period  following  completion  of the  advertising  campaign.  At
December 31, 1998 and 1997,  $3,301,000 and $2,730,000 of advertising  costs are
reported in other assets.

Securities Sold Under Agreement To Repurchase - The Company enters into sales of
securities under agreement to repurchase with customers of the subsidiary banks,
which provide for the repurchase of the same security.  These  agreements may be
open ended or of a specific term in length.  Securities  sold under agreement to
repurchase identical securities are collateralized by assets which are held in a
safekeeping agent account at the Federal Reserve.

Loan Servicing - Mortgage  servicing  rights represent the cost of acquiring the
right to service  mortgage  loans.  Such  costs are  initially  capitalized  and
subsequently  amortized in proportion to, and over the period of,  estimated net
loan servicing income.

Effective January 1, 1997, the Company adopted Statement of Financial Accounting
Standards No. 125,  "Accounting for Transfers and Servicing of Financial  Assets
and  Extinguishments  of Liabilities"  (SFAS No. 125) on a prospective  basis as
required.  SFAS No. 125  supersedes  the  provisions  of  Statement of Financial
Accounting  Standards  No. 122 (SFAS 122),  "Accounting  for Mortgage  Servicing
Rights, an amendment to FASB Statement No. 65," which was adopted by the Company
on July 1, 1995,  on a prospective  basis.  The adoption of SFAS No. 125 did not
have a  material  effect on the  Company's  financial  position  or  results  of
operations. Both statements require that a mortgage banking enterprise recognize
as a separate  asset the rights to service  mortgage  loans for unrelated  third
parties that have been acquired  through either the purchase or origination of a
loan.  Previous to July 1, 1995, only purchased  mortgage  servicing rights were
capitalized as assets.  Both  statements  also provide that an institution  that
acquires mortgage servicing rights through either the purchase or origination of
mortgage  loans and sells or  securitizes  those  loans  with  servicing  rights
retained  will  allocate  the total cost of the  mortgage  loans to the mortgage
servicing rights and the loans (without the mortgage  servicing rights) based on
their relative fair values.

Amortization of mortgage servicing rights is based on the ratio of net servicing
income received in the current period to the net servicing  income  projected to
be realized from the mortgage  servicing rights.  Projected net servicing income
is in turn  determined  on the  basis of the  estimated  future  balance  of the
underlying  mortgage loan  portfolio,  which  decreases over time from scheduled
loan  amortization  and  prepayments.  Additionally,  SFAS No. 125 requires that
mortgage  servicing  rights be reported at the lower of cost or fair value.  The
value of mortgage  servicing  rights is determined based on the present value of
estimated  expected  future cash flows,  using  assumptions as to current market
discount rates, prepayment speeds and servicing costs per loan.

<PAGE>


The  unamortized  mortgage  servicing  rights  included  in  other  assets  were
$14,402,000  and  $7,521,000  at December 31, 1998 and 1997,  respectively.  The
amount of loans serviced for others approximated $1,606,829,000,  $1,174,357,000
and $1,038,021,000 at December 31, 1998, 1997, and 1996, respectively.

As of December 31, 1998 and 1997,  the fair value of the  Company's  capitalized
mortgage  servicing rights (including  mortgage  servicing rights purchased) was
approximately  $19.1  million  and  $15.4  million,  respectively.  There was no
valuation  allowance  for  impairment  relative to such  rights.  Fair value was
estimated by  determining  the present value of the estimated  future cash flows
using discount rates commensurate with the risks involved.  The predominant risk
characteristics which the Company uses to stratify mortgage servicing rights are
loan type, interest rate and origination date.

Income Taxes - The Company and its subsidiaries  file a consolidated  income tax
return.  The amount of income taxes  payable or  refundable is recognized in the
current year and deferred tax assets and liabilities are reflected on items that
are recognized in different time periods for financial accounting and income tax
purposes  using the then  current  enacted tax rates on the asset and  liability
method.

Basic Net Income Per Share - Basic net income per share is based on the weighted
average number of shares of common stock outstanding.

Accounting  Pronouncements  - In June 1998,  Statement of  Financial  Accounting
Standards No. 133 (SFAS133),  "Accounting for Derivative Instruments and Hedging
Activities" was issued.  This statement  addresses the accounting for derivative
instruments,   including  certain  derivative   instruments  embedded  in  other
contracts, and hedging activities.  The statement is effective for the Company's
2000 financial statements and establishes standards for reporting and display of
derivatives  on the  balance  sheet as assets or  liabilities,  measured at fair
value. The Company has not determined the impact this statement will have on the
consolidated financial statements.

B.  RESTRICTED CASH BALANCES
The average  compensating  balances held at correspondent  banks during 1998 and
1997  were  $11,957,000  and  $11,322,000  respectively.  The  subsidiary  banks
maintain such  compensating  balances to offset charges for services rendered by
the  correspondent  banks.  In addition,  the Federal  Reserve Bank required the
subsidiary banks to maintain average balances of $26,568,000 and $25,624,000 for
1998 and 1997, respectively, as a reserve requirement.

C.  SECURITIES
Debt and equity securities have been classified in the accompanying consolidated
balance  sheets  according  to  management's   intent.  The  amortized  cost  of
securities and their estimated fair values at December 31 were as follows.
<TABLE>
<CAPTION>

                                                                              Gross        Gross      Estimated
                                                              Amortized    Unrealized   Unrealized      Fair
                                                                Cost          Gains       Losses        Value
                                                              ---------     ---------    ---------    ---------
Securities available for sale:
December 31, 1998
------------------
<S>                                                            <C>          <C>       <C>             <C>     
U.S. government and agency securities                          $133,332     $  2,949  $         -     $136,281
Mortgage-backed securities                                      245,358          834       (2,430)     243,762
Marketable equity securities                                     52,057       23,092       (2,891)      72,258
                                                                -------       ------       ------      -------
       Totals                                                  $430,747      $26,875      $(5,321)    $452,301
                                                                =======       ======       ======      =======

December 31, 1997
------------------
U.S. government and agency securities                          $159,718     $  2,938    $     (44)    $162,612
Mortgage-backed securities                                       91,756          323         (228)      91,851
Marketable equity securities                                     43,217       31,929       (1,233)      73,913
                                                                -------       ------       ------      -------
       Totals                                                  $294,691      $35,190      $(1,505)    $328,376
                                                                =======       ======       ======      =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                                                              Gross        Gross      Estimated
                                                              Amortized    Unrealized   Unrealized      Fair
                                                                Cost          Gains       Losses        Value
                                                              ---------    ---------    ---------    ---------
Securities held to maturity:
December 31, 1998
------------------
<S>                                                            <C>            <C>        <C>          <C>     
U.S. government and agency securities                          $102,027       $2,458     $      -     $104,485
States and political subdivision securities                      36,802          589           (7)      37,384
Mortgage-backed securities                                      156,424        2,059         (139)     158,344
Other                                                               290            -           (1)         289
                                                                -------       ------       ------      -------
       Totals                                                  $295,543       $5,106     $   (147)    $300,502
                                                                =======       ======       ======      =======

December 31, 1997
-----------------
U.S. government and agency securities                          $183,037       $2,701    $     (22)    $185,716
States and political subdivision securities                      27,448          456          (10)      27,894
Mortgage-backed securities                                      151,858        1,779         (172)     153,465
Other                                                               425            -          (11)         414
                                                                -------       ------       ------      -------
       Totals                                                  $362,768       $4,936     $   (215)    $367,489
                                                                =======       ======       ======      =======
</TABLE>

The amortized cost and estimated  fair value of debt  securities at December 31,
1998, by contractual  maturity are shown below.  Expected maturities will differ
from  contractual  maturities  because  borrowers  may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>

                                                                   Held to Maturity            Available for Sale
                                                                ----------------------        ---------------------
                                                                               Estimated                  Estimated
                                                              Amortized          Fair        Amortized      Fair
                                                                Cost             Value         Cost         Value
                                                              ---------        ---------     ---------    ---------
<S>                                                          <C>            <C>             <C>           <C>      
Due in one year or less                                      $    4,255     $    4,277      $  35,653     $  36,229
Due after one year through five years                            29,101         29,570         46,646        48,015
Due after five years through ten years                           89,410         91,745         51,033        52,037
Due after ten years                                              16,353         16,566              -             -
                                                                -------        -------        -------       -------
                                                                139,119        142,158        133,332       136,281
Mortgage-backed securities                                      156,424        158,344        245,358       243,762
                                                                -------        -------        -------       -------
                                                               $295,543       $300,502       $378,690      $380,043
                                                                =======        =======        =======       =======
</TABLE>

The following table presents the securities  portfolio sales  activities for the
years ended December 31, 1998,  1997 and 1996.  All sales of securities  held to
maturity were within three months of the securities'  maturities,  or were early
calls of the securities.
<TABLE>
<CAPTION>
                                                  1998                     1997                      1996
                                           ------------------        -----------------     --------------------
                                             Held      Available      Held     Available      Held       Available
                                              to          for          to         for          to           for
                                           Maturity      Sale       Maturity     Sale       Maturity       Sale
                                            -------      -----      --------    ------       -------      -------
<S>                                        <C>         <C>             <C>     <C>             <C>        <C>   
Proceeds from sales of securities          $    -      $31,971         $180    $101,701        $502       $8,913
Gross gains on sales of securities              -        6,187            -       5,270           2        1,821
Gross losses on sales of securities             -       (1,552)           -        (409)          -         (151)
</TABLE>

Securities  with a carrying  value of  $544,328,000  at December 31,  1998,  and
$438,402,000  at December 31, 1997,  were  pledged to secure  obligations  under
repurchase agreements or to secure public or trust deposits in the normal course
of business.  Securities  with a carrying value of $81,592,000  and  $57,240,000
were pledged to secure  advances  from the Federal Home Loan Bank as of December
31, 1998 and 1997,  respectively.  As of December  31, 1997,  marketable  equity
securities  with a fair value of  $4,975,000  were pledged  against a derivative
financial instrument, a collar relating to a marketable equity security.

At December 31, 1998 and 1997, state and political  subdivision  securities with
an amortized cost of $31,871,000 and $23,899,000, respectively, and an estimated
fair value of $32,344,000 and $24,231,000, respectively, were issued by State of
Nebraska political subdivisions.

<PAGE>

<TABLE>
<CAPTION>

D.  LOANS
Loans at December 31 are summarized as follows:
                                                                                           1998         1997
                                                                                          -------      -------
<S>                                                                                   <C>          <C>        
Real estate mortgage                                                                  $   408,380  $   375,044
Consumer                                                                                  276,837      281,697
Commercial and financial                                                                  258,898      259,045
Agricultural                                                                              180,029      180,310
Credit card                                                                               109,176      106,737
Real estate construction                                                                   50,687       33,610
                                                                                        ---------    ---------
                                                                                       $1,284,007   $1,236,443
                                                                                        =========    =========
</TABLE>
Virtually all of the Company's loans are to Nebraska-based organizations, except
credit card loans which are  concentrated in the Midwest.  The loan portfolio is
well diversified by industry. The Nebraska economy is dependent upon the general
state of the agricultural  economy. As of December 31, 1998 and 1997, there were
$538,000 and  $1,581,000,  respectively,  of  nonaccruing  loans.  The amount of
impaired loans and the amount of restructured  loans as of December 31, 1998 and
1997 was not material.

The Company's  policy for requiring  collateral and  guarantees  varies with the
creditworthiness  of each  borrower.  The  portfolio  is  generally  secured  by
accounts receivable,  inventory, property, plant and equipment, income producing
commercial properties, marketable securities or interest-bearing time deposits.

Mortgage  loans with a carrying  value of  $159,619,000  and  $123,597,000  were
pledged against advances from the Federal Home Loan Bank as of December 31, 1998
and 1997, respectively.

E.  ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses are summarized as follows:
                                            1998         1997         1996
                                          -------      -------      -------
Balance, January 1                        $22,458      $20,157      $19,017
Provision for loan losses                   7,658        8,297        6,839
                                          -------      -------      -------
       Total                               30,116       28,454       25,856
Net charge-offs:
   Loans charged off                        8,501        8,630        7,794
   Less recoveries                          2,677        2,634        2,095
                                          -------      -------      -------
       Net loans charged off                5,824        5,996        5,699
                                          -------      -------      -------
Balance, December 31                      $24,292      $22,458      $20,157
                                          =======      =======      =======

F.  PREMISES AND EQUIPMENT
Premises and equipment at December 31 consists of the following:
                                                        1998         1997
                                                      -------      -------

Land                                                 $  7,307     $  7,176
Buildings and leasehold improvements                   65,849       60,936
Equipment and furnishings                              41,076       38,285
                                                      -------      -------
                                                      114,232      106,397
Less accumulated depreciation                          51,840       51,929
                                                      -------      -------
                                                      $62,392      $54,468
                                                      =======      =======

The Company has certain  obligations  under  noncancelable  operating leases for
premises and equipment.  Most of these leases have renewal or purchase  options.
Rental  expense on all leases for the years ended  December 31,  1998,  1997 and
1996, was approximately $1,787,000,  $1,646,000,  and $1,587,000,  respectively.
The approximate future minimum rental commitments under noncancelable leases are
as follows:



<PAGE>



                                 Premises         Equipment           Total
                                ---------        ---------         ---------
         1999                    $   711             $112           $   823
         2000                        484               79               563
         2001                        412               36               448
         2002                        338               24               362
         2003                        308               15               323
         Thereafter                1,873               15             1,888

G. DEPOSIT MATURITIES
Maturities of time deposits at December 31, 1998 are as follows:

         1999                            $718,327
         2000                              99,049
         2001                              20,017
         2002                               9,779
         2003                               1,614
         Thereafter                             3
H.  SHORT-TERM BORROWINGS
Amounts  and  interest  rates  related to  securities  sold under  agreement  to
repurchase are as follows:
<TABLE>
<CAPTION>

                                                                                               1998         1997
                                                                                              ------       ------

<S>                                                                                          <C>          <C>     
Amount outstanding at year-end                                                               $188,661     $142,941
Average interest rate outstanding at year-end                                                   4.8%         4.9%
Highest amount outstanding as of any month-end during the year                               $188,661     $176,572
Average amount outstanding during the year                                                    159,159      143,666
Approximate average interest rate                                                               4.9%         4.9%
</TABLE>

Other short-term  borrowings consisted of federal funds purchased of $14,880,000
and  $50,615,000  at December 31, 1998 and 1997,  respectively,  and  commercial
paper  totaling  $9,929,000  and  $4,839,000  at  December  31,  1998 and  1997,
respectively.

I.  FEDERAL HOME LOAN BANK BORROWINGS
Short-term  Federal  Home Loan Bank (FHLB)  advances  made to  subsidiary  banks
totaled $2,225,000 and $82,450,000 at December 31, 1998 and 1997,  respectively.
Subsidiary  banks had unused lines of credit with the FHLB of  $41,610,000 as of
December 31, 1998.

FHLB long-term  advances of $141,400,000 and $38,000,000 were made to subsidiary
banks at December 31, 1998 and 1997, respectively. These advances mature in 1999
to 2008.  Interest is paid monthly of which $1,000,000 bears interest based upon
LIBOR rates,  5.35% at December 31, 1998. The balance bears fixed interest rates
of 4.20% to 5.85%.  Virtually  all of the advances held at December 31, 1998 are
callable at the option of the FHLB within the next five years.  The advances are
collateralized  by a blanket  pledge of mortgage  loans and  certain  investment
securities.

Scheduled  principal  payments based on the earlier of the maturity date or call
date of the FHLB advances for the five years following December 31, 1998 are:
                                          1999         $75,225
                                          2000          36,400
                                          2001           3,000
                                          2002               -
                                          2003          29,000
J.  LONG-TERM DEBT
Long-term  debt at December 31 consists of capital  notes which bear interest at
8.10% to 8.70%. The capital notes are subject to redemption at the option of the
Company at any time on or after May 1, 1999, at a redemption price equal to 100%
of the  principal  amount  thereof  together  with the  accrued  interest to the
redemption  date.  The  Company  intends  to redeem  the  remaining  balance  of
$13,500,000  on May 1, 1999.  The  indenture  provides that the Company will not
create,  assume,  incur or suffer to exist any  mortgage or other liens upon the
shares  of  capital  stock of any  significant  bank  subsidiary  (of  which the
National  Bank of  Commerce  is the only one at  present)  owned by the  Company
unless certain  conditions are met. The indenture also provides that the Company
will not permit its debt to tangible  equity ratio to exceed 30%. The  Company's
debt to tangible equity ratio was below 30% as of December 31, 1998 and 1997.
<PAGE>

Scheduled principal payments, not considering the anticipated redemption, for 
the five years following December 31, 1998 are:
                                             1999           $2,500
                                             2000            2,000
                                             2001            2,000
                                             2002            7,000
                                             2003                -

K.   INCOME TAXES
Consolidated  income tax expense for the years ended December 31 consists of the
following:

                                              1998         1997         1996
                                             ------       ------       ------
Current provision:
   Federal                                 $13,359      $12,503       $11,418
   State                                       781          737           700
                                            ------       ------        ------
                                            14,140       13,240        12,118
Deferred income taxes                        1,792        1,188          (489)
                                            ------       ------        ------
Total consolidated income tax provision    $15,932      $14,428       $11,629
                                            ======       ======        ======

The effective rate of total tax expense  differs from the statutory  federal tax
rate as follows:

                                              1998         1997         1996
                                            ------       ------       ------
Tax at federal statutory rate                  35%          35%          35%
Tax-exempt interest on obligations
   of state and political subdivisions         (1)          (2)          (2)
Other                                           1            2            2
                                               --           --           --
Effective tax rate                             35%          35%          35%
                                               ==           ==           ==
Significant  items  comprising  the  Company's  net deferred tax liability as of
December 31, 1998 and 1997 are as follows:

Deferred tax assets:                                      1998         1997
                                                         ------       ------
Allowance for loan losses                             $ 8,421       $ 7,779
Other                                                   2,218         1,773
                                                       ------        ------
     Total deferred tax assets                         10,639         9,552

Deferred tax liabilities:

Net unrealized gains and losses on
   securities available for sale                        7,544        11,789
Mortgage servicing rights                               4,843         2,383
Premises and equipment                                  1,508         1,619
Other                                                   1,598         1,069
                                                       ------        ------
     Total deferred tax liabilities                    15,493        16,860
                                                       ------        ------
Net deferred tax liability                            $(4,854)      $(7,308)
                                                       ======        ======

L.  COMMITMENTS AND CONTINGENt liabilities
The  Company's   consolidated   financial  statements  do  not  reflect  various
commitments  and  contingent  liabilities  that  arise in the  normal  course of
business to meet the financing needs of customers.  These include commitments to
extend  credit and standby  letters of credit.  These  instruments  involve,  in
varying degrees,  elements of credit, interest rate and liquidity risk in excess
of the amount  recognized in the  consolidated  balance sheet. The extent of the
Company's  involvement  in various  commitments  or  contingent  liabilities  is
expressed by the contract amount of such instruments.
<PAGE>

Commitments to extend credit, excluding mortgage banking operations, amounted to
$617,940,000  and  $449,325,000  (exclusive of $928,372,000  and $866,217,000 of
unused  approved  lines of credit  related to credit  card loan  agreements)  at
December 31, 1998 and 1997,  respectively.  These  commitments are agreements to
lend to a customer as long as all  conditions  established  in the  contract are
fulfilled.   Commitments   generally  have  fixed   expiration  dates  or  other
termination  clauses  and  may  require  payment  of a fee.  Since  many  of the
commitments  are  expected  to  expire  without  being  drawn  upon,  the  total
commitment amounts do not necessarily  represent future cash  requirements.  The
Company evaluates each customer's  creditworthiness  on a case-by-case  basis in
conjunction with the normal lending function. The amount of collateral obtained,
if deemed  necessary  by the Company  upon  extension  of credit,  is based upon
management's  credit evaluation of the customer.  Collateral held varies but may
include  accounts  receivable,   inventory,   property,   plant  and  equipment,
income-producing    commercial    properties,    marketable    securities    and
interest-bearing time deposits.

The Company's  commitments to extend credit in its mortgage  banking  operations
amounted to approximately $108,696,000, and $46,878,000 at December 31, 1998 and
1997, respectively. Credit policies in the Company's mortgage banking operations
are designed to satisfy the requirements of the secondary mortgage market. These
requirements,  among  others,  include  that the loans that are subject to these
commitments be secured by a first  position in the underlying  property and meet
certain maximum loan-to-value and insurance requirements.

Mandatory commitments to deliver residential mortgages are binding agreements to
sell  mortgage  loans to  investors at fixed prices and  expiration  dates.  The
Company  could  incur  pair-off  costs  should  it  be  unable  to  fulfill  its
obligation,  which could occur if an  insufficient  level of  conforming  closed
loans is available  for delivery by the  specified  date.  This exposure is less
than the contract  amount of the  commitment  and is  determined by the delivery
shortfall and the then current market interest rates.  The Company  monitors its
position  relative to these commitments to deliver on a daily basis. The Company
had  mandatory  commitments  to  deliver  residential  mortgage  loans  totaling
approximately  $146,510,000  and  $64,043,000  as of December 31, 1998 and 1997,
respectively.  The  Company has an  agreement  to sell on a best  efforts  basis
$2,901,000 as of December 31, 1998.

Standby and commercial  letters of credit are conditional  commitments issued by
the Company  guaranteeing the performance of a customer to a third party.  These
guarantees  primarily  consist  of  performance  assurances  made on  behalf  of
customers  who have a  contractual  commitment  to produce  or deliver  goods or
services.  Most  guarantees  are for one year or less.  The risk to the  Company
arises  from its  obligation  to make  payment  in the  event of the  customers'
contractual default.  The amount of collateral obtained,  if deemed necessary by
the Company, is based upon management's  credit evaluation of the customer.  The
Company had  $22,587,000  and  $21,609,000  in letters of credit  outstanding at
December 31, 1998 and 1997, respectively.

The  Company is  involved  in  various  legal  actions  in the normal  course of
business.  Management  is of the opinion  that none of these legal  actions will
result in losses material to the financial  position or results of operations of
the Company.

M.  RELATED PARTY TRANSACTIONS
As of December 31, 1998, the subsidiary  banks had various loans  outstanding to
related parties (executive  officers,  directors,  loans guaranteed by directors
and  companies   employing  a  director  of  the  Company  and  its  significant
subsidiaries).  The Company believes these loans have been made under comparable
terms  and  conditions  as loans  made to  unrelated  parties.  An  analysis  of
aggregate   loans  to  related  parties  of  the  Company  and  its  significant
subsidiaries for the year ended December 31, 1998 is shown below:

                Beginning                                            Ending
                 Balance         Additions         Payments          Balance
                --------         --------          --------         --------
                $25,676         $101,212           $90,259          $36,629

N.  EMPLOYEE BENEFIT PLANS
The Company has two employee retirement plans. The Retirement  Accumulation Plan
is a  noncontributory  defined  contribution  plan  covering  substantially  all
employees  with six  months of  service.  Annual  contributions  are based  upon
defined  compensation  of  covered  employees.  Company  cost for this  plan was
$1,193,000 in 1998, $1,156,000 in 1997 and $1,020,000 in 1996.
<PAGE>

The Profit Sharing and Thrift Plan is a contributory,  defined contribution plan
covering  substantially  all  employees  with six  months of  service.  Employee
contributions  vary from 0 to 12% of  compensation.  The  Company  contribution,
subject  to  certain  limitations,  is based  upon  employee  contributions  and
profitability.  Company cost for this plan was $1,497,000 in 1998, $1,308,000 in
1997 and $1,289,000 in 1996.

O.  REGULATORY MATTERS
One of the  principal  sources  of cash of the  Company  is  dividends  from its
subsidiary  banks.  The total  dividends  that can be declared by the subsidiary
banks without  receiving prior approval from regulatory  authorities are limited
to a bank's  defined net income of that year combined with its retained  defined
net  income  from the  previous  two years.  For the  calendar  year  1999,  the
subsidiary  banks  have  retained  defined  net  income  from  1998  and 1997 of
approximately $21,000,000.

The  Company and its  subsidiaries  are  subject to various  regulatory  capital
requirements  administered  by the  federal  banking  agencies.  Failure to meet
minimum  capital  requirements  can initiate  certain  mandatory -- and possibly
additional  discretionary  -- actions by regulators  that, if undertaken,  could
have a  direct  material  effect  on the  Company's  financial  statements.  The
regulations  require the Company to meet specific  capital  adequacy  guidelines
that involve  quantitative  measures of the Company's assets,  liabilities,  and
certain  off-balance-sheet  items  as  calculated  under  regulatory  accounting
practices.  The Company's capital  classification is also subject to qualitative
judgments  by the  regulators  about  components,  risk  weightings,  and  other
factors.

As of December 31, 1998, the most recent  notification  from the OCC categorized
the Company's  banking  subsidiaries  as well  capitalized  under the regulatory
framework for prompt corrective action.  There are no conditions or events since
that  notification  that  management  believes  have  changed the  institutions'
categories.  Management believes,  as of December 31, 1998, that the Company and
its subsidiary  banks meet all capital  adequacy  requirements to which they are
subject.  The Company's and the National Bank of Commerce's  (the Company's most
significant bank subsidiary)  actual capital amounts and ratios are presented in
the following table:
<TABLE>
<CAPTION>


                                                                                               To Be Well
                                                                                            Capitalized Under
                                                                       For Capital          Prompt Corrective
                                                     Actual         Adequacy Purposes       Action Provisions
                                                --------------     ------------------      ------------------
                                                Amount     Ratio     Amount     Ratio       Amount        Ratio
                                                --------------     ------------------      ------------------
As of December 31, 1998:
  Total Capital (to Risk Weighted Assets):
<S>                                            <C>         <C>      <C>          <C>        <C>         <C>       
     Consolidated                              $252,967    15.4%    $131,854     8.0%           N/A      N/A
     National Bank of Commerce                  115,151    12.0       76,801     8.0        $96,001     10.0%
  Tier I Capital (to Risk Weighted Assets):
     Consolidated                               230,226    14.0       65,927     4.0            N/A      N/A
     National Bank of Commerce                  103,151    10.7       38,400     4.0         57,601      6.0
  Tier I Capital  (to Quarterly Average Assets):
     Consolidated                               230,226    10.0       91,868     4.0            N/A      N/A
     National Bank of Commerce                  103,151     7.9       52,390     4.0         65,488      5.0

As of December 31, 1997:
  Total Capital (to Risk Weighted Assets):
     Consolidated                              $226,623    14.9%    $121,724     8.0%           N/A      N/A
     National Bank of Commerce                  108,772    12.1       71,956     8.0        $89,945     10.0%
  Tier I Capital (to Risk Weighted Assets):
     Consolidated                               205,459    13.5       60,862     4.0            N/A      N/A
     National Bank of Commerce                   97,499    10.8       35,978     4.0         53,967      6.0
  Tier I Capital  (to Quarterly Average Assets):
     Consolidated                               205,459     9.7       84,362     4.0            N/A      N/A
     National Bank of Commerce                   97,499     8.1       48,046     4.0         60,058      5.0

</TABLE>
<PAGE>


P.  CONDENSED FINANCIAL INFORMATION
<TABLE>
<CAPTION>

Condensed Balance Sheets  (Parent Company Only)                                            December 31,
                                                                                       --------------------
                                                                                      1998              1997
                                                                                     ------            ------
                                                                ASSETS
<S>                                                                              <C>              <C>        
Cash on deposit with subsidiaries                                                $       226      $       142
Securities purchased under agreement to resell to subsidiary bank                      5,055            5,380
                                                                                     -------          -------
   Cash and cash equivalents                                                           5,281            5,522
Securities available for sale (cost of $55,882,000 and $47,063,000)                   75,889           77,676
Investment in subsidiaries:
   Equity in net assets of bank subsidiaries                                         172,587          161,180
   Equity in net assets of nonbank subsidiaries                                        1,848            1,291
Premises and equipment, net                                                           11,477           11,404
Other assets                                                                          13,903            9,140
                                                                                     -------          -------
                                                                                    $280,985         $266,213
                                                                                     =======          =======

                                                 LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued expenses and other liabilities                                            $    8,911      $    12,624
Commercial paper outstanding                                                           9,928            4,839
Long-term debt                                                                        13,500           16,170
                                                                                     -------          -------
   Total liabilities                                                                  32,339           33,633
Stockholders' equity                                                                 248,646          232,580
                                                                                     -------          -------
                                                                                    $280,985         $266,213
                                                                                     =======          =======
</TABLE>


Condensed Statements of Income  (Parent Company Only)
<TABLE>
<CAPTION>
                                                                                      Year ended December 31,
                                                                                   -----------------------------
                                                                                 1998          1997          1996
                                                                                ------        ------        ------
Income:
<S>                                                                            <C>           <C>            <C>    
   Dividends from bank subsidiaries                                            $18,278       $15,542        $14,186
   Dividends from nonbank subsidiaries                                             400           225            150
   Rent:
     Subsidiaries                                                                1,664         1,635          1,291
     Other                                                                       1,514         1,449          1,678
   Interest and dividend income                                                  2,502         1,963          1,541
   Other                                                                         4,613         4,733          1,219
                                                                               -------       -------        -------
                                                                                28,971        25,547         20,065
Expenses:
   Salaries and employee benefits                                                2,803         2,682          1,807
   Interest                                                                      1,866         1,780          1,669
   Interest paid to subsidiaries                                                     -             -            204
   Building expense                                                              2,321         2,412          2,246
   Other                                                                         1,515         1,597          1,945
                                                                               -------       -------        -------
                                                                                 8,505         8,471          7,871
                                                                               -------       -------        -------
Income before income tax benefit (expense)
   and equity in undistributed earnings of subsidiaries                         20,466        17,076         12,194
Income tax benefit (expense)                                                      (537)         (327)           706
                                                                               -------       -------        -------
Income before equity in undistributed earnings of subsidiaries                  19,929        16,749         12,900
Equity in undistributed earnings of subsidiaries                                 9,106         9,848          8,856
                                                                               -------       -------        -------
Net income                                                                     $29,035       $26,597        $21,756
                                                                               =======       =======        =======
</TABLE>

<PAGE>


Condensed Statements of Cash Flows  (Parent Company Only)
<TABLE>
<CAPTION>

                                                                                      Year ended December 31,
                                                                                   -----------------------------
                                                                                 1998          1997          1996
                                                                                ------        ------        ------

<S>                                                                            <C>           <C>            <C>    
Net income                                                                     $29,035       $26,597        $21,756
Adjustments to reconcile net income to net cash flows
   from operating activities:
     Depreciation and amortization                                               1,016           884            864
     Equity in undistributed earnings of subsidiaries                           (9,106)       (9,848)        (8,856)
     Gains on sale of securities                                                (4,595)       (4,717)        (1,635)
     Other                                                                         (98)         (450)         1,105
                                                                                ------        ------         ------
      Total adjustments                                                        (12,783)      (14,131)        (8,522)
                                                                                ------        ------         ------
Net cash flows from operating activities                                        16,252        12,466         13,234

Cash flows from investing activities:
   Proceeds from sales and maturities of securities available for sale          30,687        17,824          8,915
   Purchase of securities available for sale                                   (35,603)      (22,892)       (14,277)
   Purchase of premises and equipment                                             (790)         (365)          (244)
    Purchase of loans from subsidiary bank                                      (4,731)         (360)        (4,980)
   Cash and cash equivalents from nonbank subsidiaries merger                        -             -            245
   Investments in subsidiaries                                                  (4,089)          (13)           (93)
   Other                                                                           697          (447)          (494)
                                                                                ------        ------         ------
Net cash flows from investing activities                                       (13,829)       (6,253)       (10,928)

Cash flows from financing activities:
   Net increase in short-term borrowings                                         5,089           934          3,905
   Repayment of long-term debt                                                  (2,670)       (2,534)        (2,546)
   Repurchase of common stock                                                     (483)         (360)          (363)
   Cash dividends paid                                                          (4,600)       (4,066)        (3,528)
                                                                                ------        ------         ------
Net cash flows from financing activities                                        (2,664)       (6,026)        (2,532)
                                                                                ------        ------         ------

Net change in cash and cash equivalents                                           (241)          187           (226)
Cash and cash equivalents at beginning of year                                   5,522         5,335          5,561
                                                                                ------        ------         ------
Cash and cash equivalents at end of year                                      $  5,281      $  5,522       $  5,335
                                                                                ======        ======         ======

Supplemental disclosures of cash flow information: Cash paid during year for:
     Interest                                                                  $ 1,798      $  1,763       $  1,716
     Income taxes                                                               13,062        12,708         12,140
</TABLE>

Q.  DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial  Accounting  Standards  No. 107 (SFAS 107),  "Disclosures
about  Fair  Value of  Financial  Instruments,"  requires  certain  entities  to
disclose the estimated fair value of its financial instruments. For the Company,
as with most financial institutions,  most of its assets and its liabilities are
considered  financial  instruments as defined in SFAS 107. Many of the Company's
financial   instruments,   however,   lack  an  available   trading   market  as
characterized  by a willing  buyer and  willing  seller  engaging in an exchange
transaction.  It is also the Company's  general practice and intent to hold most
of its  financial  instruments  to  maturity  and not engage in trading or sales
activities.  Therefore,  significant  estimations and present value calculations
were used by the Company for purposes of this disclosure. Changes in assumptions
or estimation  methodologies  may have a material effect on these estimated fair
values.

<PAGE>



The fair value  estimates  presented  herein are based on pertinent  information
available to management as of December 31, 1998 and 1997. Although management is
not aware of any factors  that would  significantly  affect the  estimated  fair
value amounts, such amounts have not been comprehensively  revalued for purposes
of these financial statements since that date and, therefore,  current estimates
of fair value may differ significantly from the amounts presented herein.
<TABLE>
<CAPTION>
                                                                   December 31, 1998            December 31, 1997
                                                                  ------------------           -------------------
                                                                              Estimated                   Estimated
                                                                 Carrying       Fair         Carrying       Fair
                                                                  Amount        Value         Amount        Value
                                                                  -------      -------        -------      -------
Assets:
<S>                                                            <C>          <C>            <C>           <C>       
   Cash and cash equivalents                                   $  167,596   $  167,596     $  193,159    $  193,159
   Mortgage loans held for sale                                    66,178       66,388         31,360        31,427
   Securities available for sale                                  452,301      452,301        328,376       328,376
   Securities held to maturity                                    295,543      300,502        362,768       367,489
   Net loans                                                    1,259,715    1,261,759      1,213,985     1,215,790
   Other financial instruments                                     48,371       48,371         48,303        48,303

Liabilities:
   Demand deposits with no stated maturities                      879,711      879,711        814,437       814,437
   Time deposits                                                  848,789      851,084        835,057       837,194
   Short-term borrowings                                          213,470      213,470        198,395       198,395
   Federal Home Loan Bank borrowings                              143,625      143,711        120,450       120,565
   Long-term debt                                                  13,500       13,500         16,170        16,330
   Other financial instruments                                     26,295       26,295         21,850        21,850
</TABLE>

Cash and Cash Equivalents. For cash and cash equivalents, the carrying amount is
considered a reasonable estimate of fair value.

Mortgage Loans Held For Sale.  The estimated fair value of these  instruments is
based upon current quoted prices for the instrument or similar instruments.

Securities.  The  estimated  fair value of  securities is based on quoted market
prices, dealer quotes and prices obtained from independent pricing services.

Loans. For those loans with floating interest rates,  carrying value was used as
approximate  fair value.  For all other loans, the estimated fair value is based
on the  discounted  value of projected  cash flows.  When using the  discounting
method,  loans are gathered by homogeneous  groups and discounted at a rate that
would be used for similar loans at December 31, 1998 and 1997. In addition, when
computing  the  estimated  fair value for all loans,  general  reserves for loan
losses are subtracted from the calculated fair value for consideration of credit
issues.

Deposits. The estimated fair value of deposits with no stated maturity,  such as
noninterest  bearing,  savings,  NOW and money market checking accounts,  is the
amount payable on demand.  The estimated fair value of time deposits is based on
the discounted  value of projected  cash flows.  The discount rate is the market
rate currently offered for deposits with similar original maturities.

Short-term  Borrowings.  Due to the  short-term  nature of repricing  and matur-
ities of these instruments, fair value is considered carrying value.

Long-term  Debt.  The estimated  fair value of long-term  debt is based on rates
currently  believed to be available  to the Company for debt with similar  terms
and maturities.

Other  Financial  Instruments.  All other  financial  instruments  of a material
nature,  including  both  assets  and  liabilities  shown  above,  fall into the
definition of short-term and fair value is estimated as carrying value.

Off-Balance  Sheet  Financial  Instruments.  The  estimated  fair value of these
instruments such as loan commitments and standby letters of credit  approximates
their  off-balance  sheet carrying value because of repricing  ability and other
terms of the contracts.




<PAGE>



Independent Auditors' Report





Board of Directors and Stockholders
First Commerce Bancshares, Inc.
Lincoln, Nebraska


         We have audited the accompanying  consolidated  balance sheets of First
Commerce  Bancshares,  Inc., and  subsidiaries as of December 31, 1998 and 1997,
and the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended  December 31, 1998.  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, such consolidated  financial statements present fairly,
in all material respects,  the financial position of First Commerce  Bancshares,
Inc. and subsidiaries as of December 31, 1998 and 1997, and the results of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.

Deloitte & Touche LLP



Lincoln, Nebraska
February 5, 1999


<PAGE>

<TABLE>
<CAPTION>

Selected Quarterly Financial Data
(In Thousands Except Per Share Data)

                                               First       Second          Third          Fourth         Annual
                                              Quarter      Quarter        Quarter         Quarter       Total (2)
                                              --------    --------        --------       --------       --------
                                                                       (Unaudited)

1998
<S>                                           <C>          <C>             <C>            <C>           <C>     
Total interest income                         $39,504      $40,485         $40,251        $41,720       $161,960
Net interest income                            20,125       20,637          19,944         21,491         82,197
Provision for loan losses                       1,496        1,484           1,531          3,147          7,658
Gains on securities sales                         839        1,457           1,915            424          4,635
Noninterest income                             14,153       14,554          15,306         17,066         61,079
Noninterest expense                            21,841       22,574          23,838         27,033         95,286
Net income                                      7,620        8,105           7,601          5,709         29,035

Basic net income per share                        .56          .60            .56             .43           2.15
Common stock trading range (1)
   Class A voting
       high                                     32.00        31.50          29.75           28.50          32.00
       low                                      29.00        27.00          25.00           24.75          24.75
   Class B nonvoting
       high                                     32.50        30.50          33.50           31.00          33.50
       low                                      27.50        25.88          24.75           24.00          24.00
Dividends declared per share                      .085         .085           .085            .085           .34


1997
Total interest income                         $35,518      $37,266         $37,979        $39,406       $150,169
Net interest income                            18,234       19,094          19,126         20,132         76,586
Provision for loan losses                       2,584        1,640           1,840          2,233          8,297
Gains (losses) on securities sales              3,255        1,358             389           (141)         4,861
Noninterest income                             11,936       11,303          12,535         13,204         48,978
Noninterest expense                            19,149       19,398          20,223         22,333         81,103
Net income                                      7,563        6,900           6,379          5,755         26,597

Basic net income per share                        .56          .51            .47             .43           1.96
Common stock trading range (1)
   Class A voting
       high                                     28.50        31.00          26.00           33.00          33.00
       low                                      21.00        20.00          21.00           22.50          20.00
   Class B nonvoting
       high                                     20.00        23.50          23.50           32.50          32.50
       low                                      16.00        16.75          19.00           21.25          16.00
Dividends declared per share                      .075         .075           .075            .075           .30

</TABLE>

(1) The Company's  common stock is traded in the  over-the-counter  market under
the NASDAQ  symbol  "FCBIA" for the Class A voting  common stock and "FCBIB" for
the Class B nonvoting  common stock.  The market value ranges are based upon the
high and low trading  prices per share for the  calendar  quarters  indicated as
released  by NASDAQ.  As of  December  31,  1998,  the  Company  had 474 Class A
shareholders of record and 1,044 Class B shareholders  of record.  (2) Quarterly
per share amounts may not add to annual total due to rounding.


<PAGE>


Selected Financial Data
Three-Year Average Balance Sheets / Yields and Rates
<TABLE>
<CAPTION>

                                                                                      Year Ended December 31,
                                                                                  -------------------------------
                                                                                               1998
                                                                                  -------------------------------
                                                                               Average                       Average
                                                                               Balance       Interest         Rate
                                                                              -------         -------        -------
                                                                                      (Amounts in thousands)
                                                                Assets
Interest-earning assets:
<S>                                                                         <C>              <C>              <C>  
   Loans, including non-accrual loans                                       $1,231,931       $111,395         9.04%
   Taxable investment securities                                               610,135         41,635         6.82
   Nontaxable investment securities (non-taxable basis)                         29,475          1,503         5.10
   Federal funds sold                                                           34,500          1,898         5.50
   Mortgage loans held for sale                                                 47,949          3,419         7.13
   Equity securities                                                            68,105          1,431         2.10
   Federal Home Loan Bank stock                                                  8,981            679         7.56
                                                                             --------         -------
     Total interest-earning assets                                           2,031,076        161,960         7.97

   Less allowance for loan losses                                              (22,735)
   Cash and due from banks                                                     116,870
   Premises and equipment                                                       57,917
   Other assets                                                                 71,923
                                                                             --------
     Total assets                                                           $2,255,051
                                                                             ========

                                                        Liabilities AND EQUITY
Interest-bearing liabilities:
   Interest-bearing demand                                                 $   385,760         11,347         2.94%
   Savings                                                                      97,227          2,776         2.86
   Time                                                                        856,274         48,779         5.70
                                                                             --------          ------
     Total interest-bearing deposits                                         1,339,261         62,902         4.70

   Short-term borrowings                                                       182,922          9,181         5.02
   Federal Home Loan Bank borrowings                                           116,166          6,313         5.43
   Long-term debt                                                               14,489          1,367         9.43
                                                                             --------          ------
     Total interest-bearing liabilities                                      1,652,838         79,763         4.83
                                                                                               ------

   Noninterest bearing demand deposits                                         320,619
   Other liabilities                                                            42,595
                                                                             --------
     Total liabilities                                                       2,016,052

Total stockholders' equity                                                     238,999
                                                                             --------
     Total liabilities and stockholders' equity                             $2,255,051
                                                                             ========
Net interest income                                                                          $ 82,197
                                                                                              ======
Net interest spread                                                                                           3.14%
                                                                                                               ====
Net yield on interest-earning assets                                                                          4.05%
                                                                                                               ====
</TABLE>



<PAGE>


Selected Financial Data
Three-Year Average Balance Sheets / Yields and Rates
<TABLE>
<CAPTION>

                                               Year Ended December 31,
                         -------------------------------------------------------------------
                                  1997                                        1996
                     -------------------------------             -------------------------------
                  Average                      Average        Average                      Average
                  Balance       Interest        Rate          Balance       Interest        Rate
                 -------         -------       -------        -------        -------       -------
                                               (Amounts in thousands)


<S>              <C>            <C>             <C>         <C>            <C>              <C>  
                 $1,140,439     $104,018        9.12%       $1,066,896     $  97,228        9.11%
                    576,735       39,463        6.84           510,800        32,485        6.36
                     26,698        1,381        5.17            29,190         1,483        5.08
                     34,282        1,980        5.78            34,863         2,037        5.84
                     20,679        1,674        8.10            24,860         1,953        7.86
                     57,760        1,104        1.91            37,269           913        2.45
                      8,031          549        6.84             6,283           400        6.37
                  --------      --------                     ---------       -------
                  1,864,624      150,169        8.05         1,710,161       136,499        7.98

                    (21,401)                                   (19,680)
                    116,196                                    102,269
                     51,400                                     48,146
                     59,245                                     46,467
                  ---------                                  ---------
                 $2,070,064                                 $1,887,363
                  =========                                  =========



                $   350,708        9,627        2.75%      $   325,590         8,332        2.56%
                     89,666        2,558        2.85            84,039         2,334        2.78
                    844,476       48,016        5.69           797,944        44,649        5.60
                  --------       -------                     --------        -------
                  1,284,850       60,201        4.69         1,207,573        55,315        4.58

                    174,759        8,706        4.98           144,654         7,256        5.02
                     53,596        3,206        5.98            43,225         2,153        4.98
                     17,102        1,470        8.60            19,683         1,669        8.48
                  --------       -------                     --------        -------
                  1,530,307       73,583        4.81         1,415,135        66,393        4.69
                                 -------                                     -------

                    293,474                                    265,013
                     33,237                                     20,786
                  ---------                                  --------
                  1,857,018                                  1,700,934

                    213,046                                    186,429
                  ---------                                 ---------
                 $2,070,064                                 $1,887,363
                  =========                                 =========
                               $  76,586                                   $  70,106
                                =======                                      =======
                                                3.24%                                       3.29%
                                                ====                                        ====
                                                4.11%                                       4.10%
                                                ====                                        ====

</TABLE>


<PAGE>

<TABLE>
<CAPTION>

Selected Financial Data
(In Thousands Except Per Share Data)
                                                          1998           1997           1996            1995
                                                          ------        ------         ------          ------
At December 31,
<S>                                                   <C>             <C>            <C>            <C>       
   Assets                                             $2,384,745      $2,251,100     $2,028,012     $1,815,575
   Investments                                           747,844         691,144        642,700        561,183
   Loans                                               1,284,007       1,236,443      1,121,239      1,017,367
   Deposits                                            1,728,500       1,649,494      1,574,544      1,463,205
   Federal Home Loan Bank borrowings                     143,625         120,450         73,069         31,500
   Long-term debt                                         13,500          16,170         18,704         21,250
   Stockholders' equity                                  248,646         232,580        197,398        180,021
Year Ended December 31,
   Net interest income                                   $82,197         $76,586        $70,106        $60,889
   Provision for loan losses                               7,658           8,297          6,839          3,495
   Total noninterest income                               65,714          53,839         44,030         33,850
   Total noninterest expenses                             95,286          81,103         73,912         64,393
   Net income                                             29,035          26,597         21,756         17,420
Per share data:
   Net income                                            $  2.15        $  1.96         $  1.60        $  1.29
   Dividends                                                 .34            .30             .26            .227
   Stockholders' equity before net unrealized gains
     and losses on available for sale securities           17.36          15.57           13.92          12.58
   Total stockholders' equity                              18.40          17.19           14.57          13.27
Selected Ratios:
   Rate of return on average:
     Total assets                                           1.29%          1.28%           1.15%          1.02%
     Stockholders' equity(1)                               13.05          13.28           12.14          10.52
   Average total stockholders' equity
     to average total assets(1)                            10.43          10.33            9.49           9.46
   Common dividends payout ratio                           15.84          15.29           16.21          17.58
   Allowance for loan
     losses to total loans                                  1.89           1.82            1.80           1.87
   Nonaccrual and restructured
     loans as a percentage of total loans                    .16            .25             .45            .29
   Net charge-offs to
     average total loans                                     .47            .53             .53            .27
Capital Ratios:
   Core capital (Tier I) (2)                               13.97%         13.50%          13.31%         13.39%
   Total risk based capital (3)                            15.35          14.89           14.72          14.82
   Leverage (4)                                            10.02           9.74            9.40           9.16
</TABLE>

(1)  Stockholders'  equity before net unrealized  gains and losses on securities
available for sale
(2)  Stockholders'  equity before net unrealized  gains and losses on securities
available  for  sale,  plus  minority   interest,   less  goodwill  and  deposit
intangibles  to  risk-weighted  assets  (using  1998  requirements).  (3) Tier I
capital  plus  allowance  for loan  losses  (limited  to 1.25% of  risk-weighted
assets) to risk-weighted assets (using 1998 requirements). (4) Tier I capital to
quarterly average assets less goodwill. .



<PAGE>

<TABLE>

<CAPTION>
                       
                                    
            1994             1993              1992             1991              1990             1989
           ------           ------            ------           ------            ------           ------

<S>     <C>               <C>              <C>               <C>              <C>               <C>       
        $1,624,138        $1,572,298       $1,452,058        $1,309,613       $1,106,354        $1,019,288
           535,136           520,176          495,784           384,951          375,624           354,865
           850,292           777,695          674,352           631,713          538,056           489,537
         1,355,965         1,324,196        1,196,111         1,123,728          938,881           864,011
            10,000                 -                -                 -                -                 -
            23,000            25,000           26,500            11,725           10,583            10,757
           149,354           137,293          116,335            99,702           95,576            88,578

           $57,793           $57,727          $55,303           $47,547          $37,933           $34,648
               332             1,143            3,152             3,810            1,770             1,630
            31,363            33,345           33,767            27,722           24,293            22,378
            59,663            60,806           57,304            52,239           44,896            40,930
            19,032            19,760           19,150            12,980           10,672            10,025

           $  1.46          $  1.52             $1.47        $  .93            $  .75            $  .69
               .216             .20               .188             .136              .112              .102
             11.49            10.24              8.93             7.65              6.78              6.13
             11.26            10.53              8.93             7.65              6.78              6.13


              1.22%            1.33%             1.41%            1.06%             1.02%             1.04%
             13.37            15.77             17.69            12.84             11.49             11.75

              9.15             8.46              7.96             8.23              8.88              8.82
             14.83            13.19             12.79            14.25             15.05             14.76

              2.02             2.37              2.74             2.68              2.74              2.94

               .30              .34               .50              .73               .43               .85

               .24              .16               .25              .48               .37               .26

             14.78%           13.43%            12.70%           10.05%            11.16%
             16.26            14.90             13.95            11.30             12.41
              9.23             8.31              7.98             7.40              8.59
</TABLE>


<PAGE>


MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------------------------------------------
CORPORATE RESULTS SUMMARY (Columnar amounts are in thousands)

The Company's net income during 1998 was  $29,035,000 as compared to $26,597,000
in 1997 and $21,756,000 during 1996. On a per share basis this equates to $2.15,
$1.96, and $1.60, for 1998, 1997 and 1996, respectively. The Company experienced
moderate  growth as  year-end  assets  reached  $2,384,745,000  as  compared  to
$2,251,100,000, in 1997. The Company continued its history of raising its annual
dividend rate. The 1998 cash dividend was $0.34 per share versus $0.30 per share
in 1997 and $0.26 per share in 1996. In December  1998,  the Company  raised its
annualized dividend to 36 cents.

The $2.4 million or 9% increase in net income in 1998 from 1997 can be primarily
attributed  to an  increase  in net  interest  income,  combined  with a  slight
decrease in the  provision  for loan losses.  The net yield on interest  earning
assets decreased slightly from 4.11% in 1997 to 4.05% in 1998. However,  average
earning  assets  increased  $166 million during 1998 compared to $154 million in
1997.  This resulted in a $5.6 million or 7% increase in net interest  income in
1998.

Although  year-end loans  increased $48 million in 1998 from 1997, this increase
is down from the $115 million  increase in 1997 from 1996,  and the $104 million
increase  during 1996.  Average  deposit  growth  continues to lag earning asset
growth.  Average deposits increased 5.2% or $82 million in 1998 and 7.2% or $106
million in 1997.  Therefore,  the Company  has  utilized  other  non-traditional
methods to fund some of its earning  asset growth.  In 1996 the Company  started
securitizing part of its credit card portfolio.  Total  securitized  assets were
$98 million at the end of 1998. Short-term borrowings that are made up primarily
of securities sold under repurchase agreements have increased on the average $38
million since 1996.  Average Federal Home Loan Bank borrowings were $116 million
in 1998, as compared to $54 million in 1997 and $43 million in 1996.

EARNING ASSETS
Average  earning assets in 1998 were $2.03  billion,  an 8.9% increase over 1997
primarily  caused by loan  growth of $91  million  and an  increase  in  taxable
investment securities of $33 million.  Average earning assets were $1.86 billion
in 1997, a 9.0% increase over 1996.  Average loans were $1,232  million,  $1,140
million and $1,067 million in 1998, 1997 and 1996, respectively,  an 8.0%, 6.9%,
and 16.3%  increase over each  respective  previous  year.  Loan demand has been
strong during the past three years as shown by these increases in average loans.
Loan growth in 1998 was  primarily  in the real  estate  market.  Average  loans
accounted  for 61% of  average  earning  assets  during  1998 and 1997.  Average
investment securities were $717 million during 1998, a $47 million increase over
1997.  Investment  securities accounted for 35% of average earning assets during
1998 and 36% during 1997.

SECURITY PORTFOLIO
The  Company's   investment   securities  portfolio  consists  of  high  quality
securities  with  primarily  short to medium  maturities.  The Company  utilized
buying opportunities during the last two years to extend the average life of its
investment  portfolio.  The Company has purchased  high yielding  callable U. S.
Government  agencies  with  stated  maturities  much longer than the call dates.
These  securities  are  classified  on  the  following   maturity   schedule  by
contractual maturity,  but the Company anticipates that these securities will be
called when they reach their call date. The Company  expects that  approximately
$100 million of U. S. Treasury and Agency securities will mature or be called in
1999 at an average yield of approximately  7.2%. The Company's  average yield on
its taxable security portfolio was approximately 6.8% for the last two years.

The following  table presents the amortized cost of the securities  portfolio by
type of security as of December 31, for the years indicated.
                                                 December 31,
                                          ---------------------------
                                        1998         1997         1996
                                       ------       ------       ------
U.S. Treasury                      $  77,069     $103,366      $172,533
U.S. Agency                          158,290      239,389       188,986
State and municipal                   36,802       27,448        28,747
Mortgage-backed securities           401,782      243,614       205,244
Marketable equity securities          52,057       43,217        32,835
Other securities                         290          425           687
                                     -------      -------       -------
                                    $726,290     $657,459      $629,032
                                     =======      =======       =======

<PAGE>

The following  tables present the amortized cost of each investment  category by
maturity  range and the  weighted  average  yield  for each  range  (except  for
mortgage-backed securities and marketable equity securities).
<TABLE>
<CAPTION>

                                                                            December 31, 1998
                                                           --------------------------------------------------
                                                                    After 1      After 5
                                                        Under       through      through       After
                                                       1 Year       5 Years     10 Years     10 Years       Total
                                                       ------       ------       ------       ------       ------
Securities held to maturity:
<S>                                                     <C>         <C>          <C>         <C>           <C>     
   U.S. Treasury and Agency                             $1,500      $21,511      $79,016      $     -      $102,027
   State and municipal                                   2,755        7,490       10,315       16,242        36,802
   Other securities                                          -          100           79          111           290
                                                        ------      -------        -----        -----       -------
                                                        $4,255      $29,101      $89,410      $16,353      $139,119
                                                         =====       ======       ======       ======       =======

Weighted average yield to maturity:
   U.S. Treasury and Agency                                4.7%         7.2%         7.1%           - %        7.1%
   State and municipal (1)                                 3.1          4.3          4.8          4.8          4.6
   Other securities                                          -          8.6          8.6          7.1          8.0

Securities available for sale:
   U.S. Treasury and Agency                            $35,653      $46,646      $51,033     $      -      $133,332
                                                        ======       ======       ======         ====       =======

Weighted average yield to maturity:
   U.S. Treasury and Agency                                7.2%         6.9%         7.0%            -%        7.0%
</TABLE>

(1) Not based on taxable equivalents.

The Company  owned $402 million in  mortgage-backed  securities  at December 31,
1998.  Yields in these  securities can be reduced due to early  prepayment.  The
prepayment  risk  associated  with   mortgage-backed   securities  is  monitored
continuously by updating the analytics concerning prepayment speeds.

A large portion of the  mortgage-backed  securities are collateralized  mortgage
obligations (CMO's) which are planned  amortization class (PAC) bonds. Under the
terms of a PAC contract,  if the  collateral  prepays  faster or slower than the
defined range,  the contract is suspended until the collateral  prepayment speed
returns to the defined range. In addition,  high premium CMO's are avoided.  The
Company has not experienced any significant  adverse prepayment  characteristics
in the last two years.

LOANS
The following table presents the amount of loans by categories and percentage of
loans by categories as of December 31, for the years indicated.
<TABLE>
<CAPTION>
                                                                              December 31,
                                                       ----------------------------------------------------------
                                                        1998         1997         1996         1995         1994
                                                       ------       ------       ------       ------       ------

<S>                                                <C>          <C>           <C>          <C>            <C>     
Real estate mortgage                               $   408,380  $   375,044   $  332,913   $  295,268     $270,603
Consumer                                               276,837      281,697      271,906      263,320      228,332
Commercial and financial                               258,898      259,045      245,873      201,910      166,682
Agricultural                                           180,029      180,310      130,071      126,414       87,758
Credit card                                            109,176      106,737       98,895      108,641       80,135
Real estate construction                                50,687       33,610       41,581       21,814       16,782
                                                     ---------    ---------    ---------     --------      -------
                                                     1,284,007    1,236,443    1,121,239    1,017,367      850,292
Less allowance for loan losses                         (24,292)     (22,458)     (20,157)     (19,017)     (17,190)
                                                     ---------    ---------    ---------     --------      -------
                                                    $1,259,715   $1,213,985   $1,101,082   $  998,350     $833,102
                                                   -----------    ---------    ---------     --------      -------
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                                                              December 31,
                                                        ---------------------------------------------------------
                                                        1998         1997         1996         1995         1994
                                                       ------       ------       ------       ------       ------
As a percentage of total loans:
<S>                                                     <C>          <C>          <C>          <C>          <C>  
   Real estate mortgage                                 31.8%        30.3%        29.7%        29.0%        31.8%
   Consumer                                             21.6         22.8         24.3         25.9         26.9
   Commercial and financial                             20.2         21.0         21.9         19.9         19.6
   Agricultural                                         14.0         14.6         11.6         12.4         10.3
   Credit card                                           8.5          8.6          8.8         10.7          9.4
   Real estate construction                              3.9          2.7          3.7          2.1          2.0
                                                       ------       ------       ------       ------        ------
                                                       100.0%       100.0%       100.0%       100.0%       100.0%
                                                       ======       ======       ======       ======        ======
</TABLE>
The Company has no foreign loans.

The following  table presents loan  maturities by ranges (except for real estate
mortgage loans,  credit card loans and consumer loans).  Also included for loans
due after one year are the amounts that have  predetermined  interest  rates and
floating or adjustable rates.
<TABLE>
<CAPTION>
                                                                         As of December 31, 1998
                                                           --------------------------------------------------
                                                                                                Due after 1 year
                                                                                               ------------------
                                                                                               Pre-       Floating
                                                         Due         Due 1         Due      determined       or
                                                       within       through       after      interest    adjustable
                                                       1 Year       5 Years      5 Years       rate         rate
                                                       ------       -------      -------      -------      -------

<S>                                                   <C>           <C>          <C>          <C>          <C>    
Commercial and financial                              $175,212      $71,371      $12,315      $55,859      $27,827
Agricultural                                           133,392       44,176        2,461       39,199        7,438
Real estate construction                                33,604       16,764          319        7,737        9,346
</TABLE>

RISK MANAGEMENT
Overall risk  management is an essential  part of the operation of any financial
services organization.  There are three primary financial risk exposures: credit
quality,  interest rate  sensitivity or market risk, and liquidity risk.  Credit
quality risk involves the risk of either not collecting  interest when it is due
or not receiving the principal balance of the loan or investment when it matures
or is due.  Interest rate  sensitivity  risk is the risk of reduced net interest
income  because of differences  in the repricing  characteristics  of assets and
liabilities, as well as the change in the market value of assets and liabilities
as interest  rates  fluctuate.  Liquidity risk is the risk that the Company will
not be able to fund its obligations.

Asset Quality
A key measure of the  effectiveness  of credit risk management is the percentage
of the loan portfolio that is classified as nonperforming.  Nonperforming  loans
include nonaccrual loans, loans 90 days or more past due and restructured loans.
The Company's  nonperforming loans totaled $3.6 million at December 31, 1998, as
compared to $4.2  million at the end of 1997.  As a  percentage  of total loans,
nonperforming  loans  represent  only .3% of the loan  portfolio at December 31,
1998 and 1997.

Virtually  all of the  Company's  loans,  except  credit card  loans,  which are
concentrated in the Midwest, are to Nebraska-based  organizations.  The Nebraska
economy  is  partially  dependent  upon the  general  state of the  agricultural
economy.  The agricultural  economy is dependent upon commodity prices,  weather
and input costs.  Crop yields were generally  fair  throughout the region during
1998.  The  prices  for crops  were not as high as they were in 1997.  Commodity
prices  during  1998 were such that all  agricultural  related  business  groups
(i.e., ranchers, cattle feeders, hog producers and grain farmers) lost money for
a part or all of 1998. Loans to cattle feeders  represent the Company's  largest
loan  segment  concentration,  but the Company  applies  selective  underwriting
criteria  to this  segment.  In addition to the  Company's  direct  agricultural
loans,  some  of its  nonagricultural  borrowers  are  affected  by the  overall
agricultural economy in Nebraska. The Company's borrowers are to a lesser extent
affected  by the  overall  national  economy.  Watch  list loans  (loans  with a
potential  or  known  repayment  weakness)  related  to  agriculture   increased
significantly  in the fourth quarter of 1998.  Because of the volatility in this
sector,  inherent  losses in the loan  portfolio may be greater than  historical
experience,  and a prudent evaluation  requires the allowance for loan losses to
be greater  than would  otherwise  be the case.  Farm  income  represents  7% of
Nebraska's  personal  income.  In 1999,  grain  prices are  expected to be below
"breakeven" levels.  This situation will result in additional  financial stress
for many agricultural
borrowers.

<PAGE>

Another  area of loan  concentration  of the Company is in real  estate  related
activities.  This is normally  one of the first areas  affected by a downturn in
the  economy,  but the Company  applies  selective  underwriting  in  evaluating
projects . Another area of  significant  risk in a downturn of the economy would
be in the consumer and credit card areas. Credit card loans traditionally have a
higher ratio of net  charge-offs  to loans  outstanding  than other areas in the
loan portfolio.  The Company had seen an increase in credit card  charge-offs in
1997 and 1996 but credit card charge-offs  stabilized in 1998. Credit card loans
had $4.8 million in net  charge-offs  during 1998, $5.0 million in 1997 and $4.2
million in 1996. Nationally,  credit card charge-offs also increased during 1996
and 1997.  The Company's  credit card  charge-offs  are slightly  below industry
averages.  Consumer loan  charge-offs  showed an increase in 1998 from 1997, but
were lower than the levels seen in 1996.  Consumer  loan  charge-offs  are below
industry levels.

Management reviews loans regularly, placing them on nonaccrual when it considers
the collection of principal or interest questionable.  Thereafter, income is not
recorded  unless  it is  received  in cash or until  such  time as the  borrower
demonstrates  an ability to pay interest and  principal.  During 1998,  1997 and
1996,  the Company  received  approximately  $491,000,  $398,000 and $457,000 in
interest on loans which had been previously charged-off or placed on nonaccrual.
This  interest was  included in interest  and fees on loans in the  consolidated
statements  of income.  As a general  rule,  credit card and consumer  loans are
evaluated for charge-off once the delinquency period reaches 90 days.

For other loans,  specific  reserves are  established  for any impaired loan for
which the recorded  investment exceeds the measured value of the loan.  Impaired
loans are  measured  based on either the present  value of expected  future cash
flows discounted at the loan's effective rate, the market price of the loan, or,
the method  predominately used by the Company,  the fair value of the underlying
collateral if the loan is collateral dependent.

Management is not aware of any significant risks in the current  commercial loan
portfolio due to concentrations  within any particular industry other than those
previously  discussed.  Loans  classified  as  commercial  could be  affected by
downturns in the real estate,  agricultural and consumer  economies due to being
directly or indirectly related to these areas.

Management believes that it carries adequate loan loss reserves.  However,  such
reserves  are  estimates  and a change in the  economy  can  quickly  affect the
financial  status of  borrowers  and loan  quality.  Such  changes  can  require
significant  adjustments  in the  loan  loss  reserve  on short  notice  and are
possible in the future.

The following table presents the amount of  nonperforming  loans for the periods
indicated:
<TABLE>
<CAPTION>

                                                              1998       1997       1996       1995       1994
                                                             ------     ------     ------     ------     ------
1.       Nonaccrual, Past Due and Restructured Loans
<S>                                                          <C>          <C>       <C>        <C>        <C>   
     (a)  Loans accounted for on a nonaccrual basis          $    538     $1,581    $3,429     $1,700     $1,150

(b)      Accruing loans which are contractually past
          due 90 days or more as to principal or
          interest payments                                     1,584      1,106       846        690        384

     (c)  Loans not included above which are
          "troubled debt restructurings"                        1,465      1,530     1,597      1,256      1,377

       i. Gross interest income that would have been
          recorded in the period then ended if the loans 
          listed in categories (a) and (c) had been
          current in accordance with their original terms         202        529       628        350        285
       ii.Amount of interest income on loans listed in
          categories (a) and (c) that was included in net
          income for the period.                                  150        244       395        155        153
2.   Potential Problem Loans(1)                                19,980      4,631     6,660      7,953      6,265
3.   Foreign Outstandings                                           -          -         -          -          -
4.   Loan Concentrations                                            -          -         -          -         -
</TABLE>

(1) Balances shown are loans in which the primary source of repayment may not be
sufficient  to meet the present terms of the loan.  The Company  believes it has
sufficient  security  collateral to support the current loan balance.  
<PAGE>

PROVISION FOR LOAN LOSSES 
The Company  maintains an  allowance  for loan losses at a level  considered  by
management to be adequate to provide for the risk of possible  loan losses.  The
amount of the provision  charged to operating expense is determined on the basis
of several factors,  including  reviews of individual loans and an evaluation of
their impairment,  past due and nonaccruing loans outstanding,  the level of the
allowance for losses in relation to loans, actual loss experience, appraisals of
the loan  portfolio  conducted  by the  Company's  internal  audit  staff and by
Federal bank examiners,  and management's  estimate of the impact of the current
and future economic conditions. The Company expensed $7,658,000,  $8,297,000 and
$6,839,000 for estimated loan losses in 1998, 1997 and 1996, respectively.

Average loans  increased  8.0% in 1998,  6.9% during 1997 and 16.3% in 1996. Net
charge-offs  were $5.8 million,  $6.0 million and $5.7 million during 1998, 1997
and 1996,  respectively.  The  increase in net  charge-offs  over the past three
years is primarily in credit card charge-offs, although the Company's charge-off
ratios are comparable to national averages.  Consumer loan charge-offs increased
significantly in 1996 due to increased consumer  bankruptcies,  but they trended
back down in 1997 and 1998.  Management  believes the overall  credit quality of
the Company's loan portfolio remains very good,  although it is concerned by the
number of  agricultural  loans it has had to add to the Company's  watch list in
the fourth  quarter of 1998.  Potential  problem  loans were  approximately  $20
million at the end of 1998 as compared to $4.6  million at the end of 1997.  The
Company  takes a proactive  stance in  identifying  potential  problem loans and
developing  appropriate  credit  enhancement  plans.  The loan loss reserve as a
percentage  of loans was 1.89%,  1.82% and 1.80% at December 31, 1998,  1997 and
1996, respectively.

The following table presents an analysis of loan loss experience.
<TABLE>
<CAPTION>

                                                        1998         1997         1996         1995         1994
                                                       ------       ------       ------       ------       ------
<S>                                                 <C>          <C>          <C>            <C>           <C>              
Average loans and leases for the year               $1,231,931   $1,140,439   $1,066,896     $917,742      $797,369        ,
                                                     =========    =========     ========      =======       =======
Reserve for loan losses:
Balance, beginning of year                             $22,458      $20,157      $19,017      $17,190       $18,461
   Provision charged to expense                          7,658        8,297        6,839        3,495           332
   Bank acquisitions                                         -            -            -          843           326
Loans charged off:
   Real estate construction                                  -            -            -            -             -
   Real estate mortgage                                    (50)        (100)         (43)         (66)          (27)
   Agricultural                                           (243)        (158)         (73)         (98)         (120)
   Commercial and financial                               (782)      (1,159)        (734)         (70)          (64)
   Consumer                                             (1,541)      (1,452)      (2,117)      (1,168)         (631)
   Credit card                                          (5,885)      (5,760)      (4,827)      (3,255)       (2,881)

Loan recoveries:
   Real estate construction                                  -            -            -            -             -
   Real estate mortgage                                     81           84          282          185           245
   Agricultural                                            225          225           77          186           176
   Commercial and financial                                725          839          193          438           397
   Consumer                                                604          736          897          636           431
   Credit card                                           1,042          749          646          701           545
                                                       -------      -------      -------      -------       -------
   Net loans charged off                                (5,824)      (5,996)      (5,699)      (2,511)       (1,929)
                                                       -------      -------      -------      -------       -------

Balance, end of year                                   $24,292      $22,458      $20,157      $19,017       $17,190
                                                       =======      =======      =======      =======       =======

Ratio of net charge-offs to average loans                  .47%         .53%         .53%         .27%         .24%
                                                           ===          ===          ===          ===           ===
</TABLE>
<PAGE>





This table  presents an allocation of loan losses by loan  categories;  however,
the breakdown is based on a number of  qualitative  factors,  and the amounts as
such  are  not  necessarily  indicative  of  actual  future  charge-offs  in any
particular category.
<TABLE>
<CAPTION>
                                                         1998         1997         1996         1995        1994
                                                        ------       ------       ------       ------      ------
<S>                                                    <C>          <C>          <C>          <C>          <C>      
Real estate construction                               $   718      $   330      $   628      $   419      $   331
Real estate mortgage                                     3,514        3,009        2,493        2,902        2,927
Agricultural                                             3,700        3,286        3,169        3,941        2,658
Commercial and financial                                 5,020        4,690        4,896        3,781        3,887
Consumer                                                 3,387        3,478        3,302        3,152        2,472
Credit card                                              7,607        7,175        5,398        4,623        3,511
Unallocated                                                346          490          271          199        1,404
                                                        ------       ------       ------       ------       ------
                                                       $24,292      $22,458      $20,157      $19,017      $17,190
                                                        ======       ======       ======       ======       ======
</TABLE>

MARKET RISK
The Company's principal objective for interest rate risk management is to manage
exposure  of  net  interest  income  to  risks  associated  with  interest  rate
movements.  The Company tries to limit this exposure by matching the  maturities
of its assets and  liabilities,  along with the use of floating  rate assets and
liabilities that will move with interest rate movements.

Interest rate risk is measured and reported to the Company's Asset and Liability
Management Committee (ALCO),  which includes senior management  representatives.
Measurement  and  reporting  methods  include  traditional  gap  analysis  which
measures the difference  between assets and liabilities  that reprice in a given
time period,  simulation  modeling  which  produces  projections of net interest
income under various interest rate scenarios and balance sheet  strategies,  and
economic  valuation  modeling which measures the  sensitivity of equity value to
changes in interest rates.  Significant  assumptions include rate sensitivities,
prepayment  risks, and the timing of changes in prime and deposit rates compared
with changes in money market rates.

The Company's exposure to interest rate risk is reviewed on at least a quarterly
basis by the Board of Directors and the ALCO. In addition,  each subsidiary bank
has its own  ALCO  committee,  which  reviews  the  interest  rate  risk of each
subsidiary bank. If interest rate risk  measurements are not within  established
guidelines,  the Board may direct  management  to adjust its asset and liability
mix to bring interest rate risk within Board-approved limits. In order to manage
the exposure to interest rate fluctuations, the Company has developed strategies
to manage its liquidity,  shorten its effective  maturities of  interest-earning
assets,  and increase  the  interest  rate  sensitivity  of its asset base.  The
Company has almost $400 million of assets where interest  rates are  adjustable,
primarily in a 30-day time frame.

One measure of interest rate  sensitivity is an evaluation of the sensitivity of
the Economic Value of Equity (EVE).  The interest rate risk is measured from the
dispersion of equity values above and below the value  produced using current or
base  rates.  EVE is the  difference  between the total  present  values of cash
flowing into the Company and the total present values of cash flowing out of the
Company in the future.  The analysis  performed by the Company assesses the risk
of loss in  interest  rate  sensitive  instruments  in the event of a sudden and
sustained  50 to 200 basis  points  increase or decrease in the market  interest
rates. The Company's Board of Directors has adopted an interest rate risk policy
which establishes  maximum decreases in EVE of 6%, 12%, 18% and 25% in the event
of a sudden and sustained 50 to 200 basis points  increase or decrease in market
interest rates.



<PAGE>

The  following  table  presents the Company's  projected  change in EVE, for all
assets and liabilities  except for the Company's  marketable equity  securities,
for the various rate shock levels:
<TABLE>
<CAPTION>

As of December 31, 1998
-----------------------                                                                Percent Change
                                                                                     -----------------       
       Change in                               Economic Value      Actual                        Board
     Interest Rates                              Of Equity         Change            Actual      Limit
                                               -------------      ---------         -------      -----
<S>                                                <C>            <C>                <C>          <C>  
     200 basis point increase                      $222,998       $(30,480)          (12.0)%      (25)%
     150 basis point increase                       230,033        (23,445)           (9.2)       (18)
     100 basis point increase                       238,150        (15,328)           (6.0)       (12)
     50 basis point increase                        246,200         (7,278)           (2.9)        (6)
     Base scenario                                  253,478              -             -            -
     50 basis point decrease                        257,332          3,854             1.5         (6)
     100 basis point decrease                       259,256          5,778             2.3        (12)
     150 basis point decrease                       261,947          8,469             3.3        (18)
     200 basis point decrease                       264,680         11,202             4.4        (25)

As of December 31, 1997
-----------------------                                                               Percent Change
                                                                                     -----------------       
       Change in                               Economic Value      Actual                        Board
     Interest Rates                              Of Equity         Change            Actual      Limit
                                                ------------     ---------           ------      -----
     200 basis point increase                      $190,367       $(46,388)          (19.6)%      (25)%
     150 basis point increase                       204,005        (32,750)          (13.8)       (18)
     100 basis point increase                       217,815        (18,940)           (8.0)       (12)
     50 basis point increase                        231,273         (5,482)           (2.3)        (6)
     Base scenario                                  236,755              -             -            -
     50 basis point decrease                        245,840          9,085             3.8         (6)
     100 basis point decrease                       252,409         15,654             6.6        (12)
     150 basis point decrease                       259,315         22,560             9.5        (18)
     200 basis point decrease                       265,741         28,986            12.2        (25)
</TABLE>

The preceding  table  indicates that at December 31, 1998 and 1997, in the event
of a sudden and sustained increase in prevailing market rates, the Company's EVE
would be expected to decrease,  and that in the event of a sudden and  sustained
decrease  in  prevailing  market  interest  rates,  the  Company's  EVE would be
expected to increase.  At December 31, 1998 and 1997,  the  Company's  estimated
changes in EVE were within the targets established by the Board of Directors.

Computation of  prospective  effects of  hypothetical  interest rate changes are
based on numerous  assumptions,  including  relative  levels of market  interest
rates,  loan  prepayments and deposits  decay,  and should not be relied upon as
indicative of actual results.  Further,  the computations do not contemplate any
actions the ALCO could  undertake  in  response  to changes in  interest  rates.
Certain  shortcomings  are  inherent  in the method of analysis  presenting  the
computation of EVE. Actual values may differ from those  projections  presented,
should market  conditions vary from  assumptions used in the calculation of EVE.
Further,  in the  event of a change  in  interest  rates,  prepayment  and early
withdrawal levels would likely deviate  significantly from those assumed in EVE.
Finally,  the ability of many  borrowers,  with  adjustable rate loans, to repay
their loans may decrease in the event of interest rate increases.


<PAGE>

Below is a gap analysis, which is another means of analyzing interest rate risk,
showing  the  Company's  interest  rate-sensitive  assets  (excluding  assets on
nonaccrual and  overdrafts)  and  liabilities  for various time periods in which
they either mature, are repriceable or are callable (in thousands):
<TABLE>
<CAPTION>

                                          1 to          91 to       181 to       1 to 5        Over
                                         90 Days      180 Days     360 Days       Years       5 Years      Total
                                        --------      --------     --------     --------     --------     --------
Assets:
<S>                                     <C>          <C>           <C>          <C>         <C>          <C>       
   Investments                          $  80,049    $  50,543     $120,184     $386,249    $  89,962    $  726,987
   Loans                                  578,769      182,876      130,591      366,571       20,027     1,278,834
   Mortgage loans held for sale            66,178            -            -            -            -        66,178
   Federal funds sold                      31,865            -            -            -            -        31,865
   Federal Home Loan Bank stock                 -            -            -            -        9,347         9,347
                                          -------      -------      -------      -------      -------      --------
                                          756,861      233,419      250,775      752,820      119,336     2,113,211
Liabilities:
   Interest-bearing
     demand deposits                      100,400            -       54,181      258,444            -       413,025
   Savings deposits                        18,731            -            -       82,173            -       100,904
   Time deposits                          289,732      185,163      243,432      130,459            3       848,789
   Short-term
     borrowings                           213,470            -            -            -            -       213,470
   Federal Home Loan Bank borrowings       51,225        1,000       23,000       68,400                    143,625
   Long-term debt                               -       13,500            -            -            -        13,500
                                          -------      -------      -------      -------      -------      --------
                                          673,558      199,663      320,613      539,476            3     1,733,313
                                          -------      -------      -------      -------      -------      --------
Repricing gap                           $  83,303    $  33,756     $(69,838)    $213,344     $119,333    $  379,898
                                          =======      =======      =======      =======      =======      ========
Cumulative repricing gap                $  83,303     $117,059    $  47,221     $260,565     $379,898    $  379,898
                                          =======      =======      =======      =======      =======      ========

GAP as a % of earning assets                  3.9%         5.5%         2.2%        12.3%        18.0%        18.0%
                                              ===         ====         ====         ====         ====          ====
</TABLE>

This  table  estimates  the  repricing  maturities  of  the  Company's  interest
sensitive  assets and  liabilities,  based upon the Company's  assessment of the
repricing  characteristics  of  contractual  and  non-contractual   instruments.
Non-contractual  deposit  liabilities are allocated  among the various  maturity
ranges based upon the Company's analysis of the repricing characteristics of the
non-contractual deposit liability.

The above gap analysis indicates that the Company's  one-year  cumulative gap is
positive  by $47.2  million  dollars.  Generally,  during a  period  of  falling
interest  rates,  a positive gap would  adversely  effect net  interest  income.
Conversely,  during a period of rising  interest  rates,  a  positive  gap would
result in an increase in net interest income. Management's goal is to maintain a
reasonable balance between exposure to interest rate fluctuations and earnings.

The Company owns $72 million and $74 million of marketable  equity securities at
December 31, 1998 and 1997,  respectively.  The fair value of this portfolio has
exposure  to price  risk.  The  following  table shows the effect of stock price
fluctuations of plus or minus 5%, plus or minus 10% and plus or minus 15%. These
were selected based upon the probability of their occurrence.

<TABLE>
<CAPTION>
                                                          December 31, 1998               December 31, 1997
                                                          --------------------            -----------------
                                                           Fair         Actual            Fair            Actual
       Change in Prices                                  Value          Change            Value           Change
       ----------------                                  -----          ------           --------         ------
<S>                                                      <C>            <C>             <C>              <C>     
       15% increase                                      $83,097        $ 10,839        $85,000          $ 11,087
       10% increase                                       79,484           7,226         81,304             7,391
       5% increase                                        75,871           3,613         77,609             3,696
       Current fair value                                 72,258               -         73,913                 -
       5% decrease                                        68,645          (3,613)        70,217            (3,696)
       10% decrease                                       65,032          (7,226)        66,522            (7,391)
       15% decrease                                       61,419         (10,839)        62,826           (11,087)
</TABLE>

Within the Company's public equity investment  portfolio,  a 5% or less increase
in the value of the  portfolio has occurred in 33% of the quarters over the past
three years;  a 5% to 10% increase in the value of the portfolio has occurred in
17% of the  quarters  over the past three  years;  a 10% to 15%  increase in the
value of the  portfolio  has  occurred in 25% of the  quarters in the past three
years;  a 5% or less  decrease  has  occurred in 17% of the quarters in the last
three years;  and a 5% to 10% decrease has occurred in one quarter over the past
three years.  In  conclusion,  the analysis of the above data indicates that the
Company's  earnings could be adversely effected by a decrease in interest rates.
All of the estimated  changes fall within the guidelines of the Company's  Board
of Directors and the risks they are willing to take in order to generate profits
for the Company.
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES
The  Company's  primary  business  is  ownership  of  banks.  The  assets of any
commercial  bank are primarily  funded through the use of borrowings in the form
of demand and time deposits,  negotiable certificates of deposit, and short-term
funds. The Banks have demonstrated the ability to acquire  short-term funds when
needed and rely  primarily upon  negotiable  certificates  of deposit,  brokered
certificates  of deposit,  federal  funds  acquired  from  correspondent  banks,
securities  sold under  agreement to  repurchase,  and  borrowed  funds from the
Federal Home Loan Bank (FHLB). These sources should remain accessible as long as
the Banks offer  competitive  rates.  In addition,  the Company has utilized the
securitization  of credit card  receivables  to provide  liquidity  and fund the
receivable growth in the Cabela's, LLC credit cards.

The Company relies primarily on the Banks for its source of cash needs. The cash
flow from the Banks to the Company comes in the form of dividends,  tax benefits
and rental  payments.  Total  dividends  that can be declared by the  subsidiary
banks without  receiving prior approval from regulatory  authorities are limited
to each  Bank's  defined  net  income of that year  combined  with its  retained
defined net income from the  previous  two years  subject to minimum  regulatory
capital  requirements.  For the  calendar  year 1999,  the Banks  have  retained
defined net income from the previous two years of  approximately  $21.0 million.
The  parent  company  holds  approximately  $81.0  million  in cash,  short-term
investments  and marketable  securities as of December 31, 1998. The Company has
the ability to issue commercial paper,  which could be used to provide liquidity
to subsidiary banks. The Company has issued $10.0 million in commercial paper as
of December 31, 1998. Long-term debt at December 31, 1998 includes $13.5 million
of capital  notes  which have a payment of $2.5  million  due in 1999 and $141.0
million of FHLB borrowings (at subsidiary  banks) which have a payment of or are
callable in the amount of $73 million due in 1999.  The Company's  capital notes
are  callable  at the  Company's  option  on or  after  May 1,  1999.  It is the
Company's   intention  to  exercise  this  call  option  and  refinance  with  a
combination  of  term  debt  and a line of  credit.  Although  most of the  FHLB
borrowings  have call dates much  shorter than the  maturity  date,  if interest
rates  stay  stable,  these  call  options  by the  FHLB  will  probably  not be
exercised.

The Company's  risk-based capital ratios,  which take into account the different
credit risks among banking  organizations' assets, have remained strong over the
past three  years.  Tier 1 and total  risk-based  capital  ratios were 14.0% and
15.4%,  respectively,  at December 31, 1998.  These ratios are up slightly  from
13.5% and  14.9%,  respectively,  at  December  31,  1997,  and 13.3% and 14.7%,
respectively,   at  December  31,  1996.  In  accordance   with  the  regulatory
guidelines,  unrealized  gains and losses on the available  for sale  securities
portfolio are excluded from the risk-based capital calculations.

The Company's  leverage  ratio,  the ratio of Tier 1 capital to total  quarterly
average assets, was 10.0% at December 31, 1998 and 9.7% at December 31, 1997.

The Office of the  Comptroller  of the Currency  typically  defines a bank to be
"well  capitalized"  if it  maintains a Tier 1 capital  ratio of a least 6.0%, a
total  risk-based  capital  ratio of at least  10.0% and a leverage  ratio of at
least 5.0%. It is the Company's intention to maintain sufficient capital in each
of its  subsidiary  banks  to  permit  them  to  maintain  a  "well-capitalized"
designation.  All of the Company's bank subsidiaries met the  "well-capitalized"
designation at December 31, 1998.

LEVERAGE RATIOS
These  ratios  measure  the extent to which the  Company  has been  financed  by
long-term debt (before net unrealized  gains and losses on securities  available
for sale).
                                                  1998       1997       1996
                                                -------    -------    -------
Long-term debt to long-term debt plus equity     39.8%      20.5%      21.9%
Total long-term debt to equity                   66.0       25.7       28.1
Long-term debt to equity (parent only)            5.8        7.7        9.9
<PAGE>

FUNDING SOURCES
Average  deposits were $1.66 billion in 1998 as compared to $1.58 billion during
1997 and $1.47 billion in 1996, a 5.2% and 7.2% increase, respectively.  Average
interest-bearing  deposits  increased  from  $1,208  million  in 1996 to  $1,285
million  in  1997,  to  $1,339  million  in  1998,  a 6.4%  and  4.2%  increase,
respectively.  Noninterest-bearing  demand  deposits  increased $27.1 million or
9.2% in 1998 from 1997 and  increased  10.7% or $28.5 million in 1997 from 1996.
The increase in noninterest-bearing  demand deposits can be primarily attributed
to growth in public and business account  relationships  combined with a decline
in  short-term  interest  rates  in 1998,  which  causes  customers  who pay for
services by maintaining  balances, to increase the balances they keep on deposit
with subsidiary banks.

Average  time  deposits  increased  1.4%  during  1998  and  5.8%  during  1997.
Interest-bearing demand and savings deposits increased 9.7% during 1998 compared
to 7.5% during  1997.  The Company  uses time  deposits of $100,000 or more as a
significant  funding  source.  The  following  table  presents  time deposits of
$100,000 or more by time remaining until maturity.

                       As of December 31, 1998
               ---------------------------------------------------
                             Over 3     Over 6
                  3 Months  through   through     Over
                  or Less  6 Months  12 Months  12 Months    Total
                 --------- --------- ---------  ---------   -------
                  $129,372  $54,021   $53,324    $10,322   $247,039

On July 18, 1996,  the Company  closed on the National  Bank of Commerce  Master
Credit Card Trust (Trust).  The initial pooling and servicing  agreement allowed
the  National  Bank of  Commerce  to  sell up to  $100,000,000  of  credit  card
receivables  to the  Trust.  As these  loan  receivables  are  securitized,  the
Company's  on-balance  sheet  funding  needs are  reduced by the amount of loans
securitized.  As of December 31, 1998 and 1997, the Company had sold $98 million
and $75 million,  respectively,  of credit card  receivables  to the Trust.  The
National  Bank  of  Commerce  is  in  the  process  of  increasing  the  maximum
securitization level to $120 million.

EARNINGS PERFORMANCE

The Company's net income was  $29,035,000,  up 9.2% or $2,438,000 from 1997. The
Company's net income for 1997 was  $26,597,000,  up  $4,841,000  from 1996's net
income  of  $21,756,000.  The  increase  in net  income in 1998 from 1997 can be
attributed  to  several  factors.  The net  yield  on  interest  earning  assets
decreased  from  4.11%  in 1997 to 4.05% in 1998,  but  average  earning  assets
increased $166 million during 1998,  resulting in a $5.6 million increase in net
interest income.  Loan loss expense decreased $.6 million,  which resulted a net
increase in net  interest  income  after the  provision  for loan losses of $6.3
million.

The increase in income in 1997 over 1996 was due primarily to an increase in net
interest  income,  due to a  significant  increase  in interest  earning  assets
combined with an increase in gains on securities  transactions  of $3.2 million.
The increase in net interest  income and gains on  securities  transactions  was
partially  offset  by an  increase  in the  provision  for loan  losses  of $1.5
million.

NET INTEREST INCOME
Net interest income, the principal source of earnings, is the difference between
the  interest  income  generated  by  earning  assets  and the total cost of the
liabilities obtained to fund the earning assets. Net interest income in 1998 was
$82.2  million as  compared  $76.6  million  and $70.1  million in the prior two
years.

The Company's  net yield on  interest-earning  assets (net interest  income as a
percent of average earning assets) was 4.10% in 1996, increased to 4.11% in 1997
and  decreased  slightly  to  4.05%  in  1998.  The  Federal  Reserve  decreased
short-term  rates in the fourth  quarter of 1998,  which could help decrease the
Company's  cost of funds if they  remain  at  current  levels.  Competition  for
quality loan growth could hurt the yield on earning assets.

The impact of these strategies can be seen in the table shown on following page.
The tables attribute changes in net interest income either to changes in average
balances or to changes in average rates for earning assets and  interest-bearing
liabilities.  The  change in  interest  due  jointly to volume and rate has been
allocated to volume and rate in proportion to the  relationship  of the absolute
dollar amount of change in each.


<PAGE>
<TABLE>
<CAPTION>


                                                    1998/97                                   1997/96
                                        -------------------------------           ------------------------------
                                            Amounts                                  Amounts
                                         Attributable                             Attributable
                                         to Changes in                            to Changes in
                                       -----------------                        -----------------
                                                                Total                                       Total
                                     Volume        Rate        Change          Volume          Rate        Change
                                     ------       ------       ------          ------         ------       ------
<S>                                 <C>           <C>          <C>            <C>            <C>           <C>     
Interest on loans                   $  8,280      $   (903)    $  7,377       $  6,708       $     82      $  6,790
Interest on taxable securities         2,279          (107)       2,172          4,394          2,584         6,978
Interest on nontaxable securities        142           (20)         122           (129)            27          (102)
Interest on fed funds sold                13           (95)         (82)           (33)           (24)          (57)
Interest on mortgage loans
    held for sale                      1,918          (173)       1,745           (341)            62          (279)
Equity securities                        210           117          327            318           (127)          191
FHLB stock                               131            (1)         130            122             27           149
                                      ------        ------       ------         ------          -----         -----
Total interest income                 12,973        (1,182)      11,791         11,039          2,631        13,670
                                      ------        ------       ------         ------          -----         -----
Interest on deposits:
   Interest-bearing demand             1,205           515        1,720          1,448           (153)        1,295
   Savings deposits                      216             2          218            163             61           224
   Other time deposits                   672            91          763          2,662            705         3,367
Interest on short-term borrowings        410            65          475          1,500            (50)        1,450
Interest on FHLB borrowings            3,425          (318)       3,107          1,155           (102)        1,053
Interest on long-term debt              (238)          135         (103)          (222)            23          (199)
                                      ------        ------       ------         ------          -----         -----
Total interest expense                 5,690           490        6,180          6,706            484         7,190
                                      ------        ------       ------         ------          -----         -----
Net interest income                 $  7,283       $(1,672)    $  5,611       $  4,333         $2,147      $  6,480
                                      ------        ------       ------         ------          -----       -------
                                      ------        ------       ------         ------          -----        ------
</TABLE>

Nonaccruing  loans have been included in average  total loans.  Loan fees on new
loans have been  included in interest  income,  but the amounts of such fees are
not considered material to total interest income.  Tax-exempt interest is not on
a tax-equivalent basis.

NONINTEREST INCOME
Noninterest income continues to be a significant source of revenues.  Management
has  stressed  the  importance  of growth of  noninterest  income to enhance the
Company's  profitability.  As a percentage of net revenues (net interest  income
plus noninterest income),  noninterest income was 44%, 41%, and 39% during 1998,
1997 and  1996,  respectively.  The  following  table  shows  the  breakdown  of
noninterest income and the percentage changes.
<TABLE>
<CAPTION>
                                                                                             Percent Increase
                                                                                                (Decrease)
                                                                                            ------------------
                                                          1998       1997       1996        1998/97      1997/96
                                                         ------     ------     ------       -------      -------
<S>                                                      <C>        <C>        <C>           <C>          <C>  
Credit card                                              $15,759    $13,047    $10,591       20.8%        23.2%
Computer services                                         11,427      8,904      8,491       28.3          4.9
Other service charges and fees                            10,682      7,829      6,217       36.4         25.9
Mortgage banking                                           8,853      5,425      4,868       63.2         11.4
Trust services                                             6,085      6,469      5,840       (5.9)        10.8
Service charges on deposits                                5,427      5,562      5,231       (2.4)         6.3
Gains on securities sales                                  4,635      4,861      1,672       (4.6)       190.7
Other income                                               2,846      1,742      1,120       63.4         55.5
                                                          ------     ------     ------
   Total noninterest income                              $65,714    $53,839    $44,030       22.1         22.3
                                                          ======     ======     ======
</TABLE>

Noninterest  income in 1998 was  $65,714,000  compared to $53,839,000 in 1997, a
22.1%  increase.  If securities  gains of $4,635,000  and $4,861,000 in 1998 and
1997,  respectively,  were  excluded,  noninterest  income would have been $61.1
million in 1998  compared to $49.0  million in 1997, a 24.7%  increase.  In both
1998 and 1997, the securities gains were primarily the result of selling certain
positions  held  in the  Company's  Global  Fund.  Credit  card  fees  increased
$2,712,000 or 20.8% due to increased credit card activity including  interchange
and  merchant  income,  and fees  generated  by an  increased  card holder base.
Computer fees increased $2,523,000 or 28.3% due to an increase in conversion and
annual  processing  fees. In September  1997,  the Company  converted its common
trust funds to mutual  funds,  the "Great  Plains  Family of Funds." Fees earned
from these  mutual  funds are included in other  service  charges and fees,  and
explain the $2,853,000 or 36.4% increase in this  noninterest  income  category.
This also  accounts for the 5.9%  decrease in trust  services  income.  Mortgage
banking income increased 63.2% over 1997 because of the large volume of mortgage
refinancings in 1998.  Other income  increased 63.4% in 1998 primarily due to an
increase in the gain on sale of mortgages  held for sale.  As a normal course of
business,  First Commerce  Mortgage Company holds mortgages from the time funded
until the time delivered.

Noninterest  income  increased  $9,809,000  or  22.3%  in  1997  from  1996.  If
securities  gains of $4,861,000 and  $1,672,000 in 1997 and 1996,  respectively,
were excluded, noninterest income would have been $49.0 million in 1997 compared
to $42.4 million in 1996, a 15.6%  increase.  Credit card income  increased $2.5
million due to increased credit card activity. Discount brokerage fee income and
bond  investment  fees on  bonds  sold by the  National  Bank  of  Commerce  are
primarily  responsible  for a 25.9% increase in other service  charges and fees.
Trust services fees increased 10.8% due primarily to an increase in activity and
an increase in the value of assets  being  managed.  Mortgage  banking  revenues
increased  due  to  an  increase  in  servicing  income,  origination  fees  and
underwriting  fee  income,  all due to an  increase in  activity.  Other  income
increased  primarily  due to gains on the  sale of  mortgages  held for sale and
profit sharing payments received on some other real estate owned (which had been
previously sold) based on the earnings being generated from the real estate.


NONINTEREST EXPENSE
The  emphasis  on  growth  in  fee-based  service  income  requires  significant
investments in staff,  training and  technology.  The following  table shows the
breakdown of noninterest  expense and the percentage  change for 1998,  1997 and
1996.
<TABLE>
<CAPTION>
                                                                                             Percent Increase
                                                                                                (Decrease)
                                                                                            -------------------
                                                          1998       1997       1996        1998/97      1997/96
                                                         ------     ------     ------       -------      -------
<S>                                                      <C>        <C>        <C>          <C>           <C>  
Salaries and employee benefits                           $44,123    $39,475    $35,808       11.8%        10.2%
Credit card fees                                          11,403      7,921      7,055       44.0         12.3
Equipment expense                                          6,289      5,538      5,523       13.6           .3
Amortization of mortgage servicing rights                  4,782      2,067      1,537      131.3         34.5
Communications                                             4,447      4,221      4,159        5.4          1.5
Net occupancy expense                                      4,353      4,496      3,980       (3.2)        13.0
Business development                                       4,343      3,695      3,990       17.5         (7.4)
Fees and insurance                                         4,266      3,802      3,770       12.2           .8
Supplies                                                   2,786      2,539      2,404        9.7          5.6
Other expenses                                             6,919      5,297      4,330       30.6         22.3
Minority interest                                          1,064      1,541        845      (31.0)        82.4
Goodwill amortization                                        511        511        511        -            -
                                                          ------     ------     ------
     Total noninterest expense                           $95,286    $81,103    $73,912       17.5          9.7
                                                          ======     ======     ======
Efficiency ratio (1)                                         65.4%      63.1%      64.5%
Average number of full-time equivalent employees           1,211      1,108      1,035
Personnel expense per employee (in dollars)              $36,435    $35,627    $34,597
</TABLE>

(1) Computed as  noninterest  expense  (excluding net cost of real estate owned,
minority interest and goodwill  amortization) divided by the sum of net interest
income and noninterest income (excluding securities gains).

Noninterest  expenses were  $95,286,000 in 1998 compared to $81,103,000 in 1997.
This is an increase of $14.2  million or 17.5%.  Salaries and employee  benefits
increased  $4,648,000  or 11.8%  generally due to increases in the levels of pay
and number of employees.  Credit card fees increased  $3,482,000 or 44.0% due to
increased activity and an increase in Cabela's bucks expense, points earned from
using the Cabela's credit card in the joint venture with Cabela's,  which can be
redeemed for merchandise at Cabela's.  Equipment  expenses increased $751,000 or
13.6%  due  to  additional  equipment  purchases,  primarily  computer  related.
Amortization of mortgage servicing rights increased  $2,715,000 or 131.3% due to
an increase in the volume of mortgages serviced by First Commerce  Mortgage.  In
addition  to the  increase in volume,  a  significant  increase in  refinancings
during  1998  resulted  in the early  write-off  of $2  million  of  capitalized
mortgage  servicing rights on refinanced loans.  Business  development  expenses
increased 17.5% due primarily to increased  marketing for new  solicitations  at
Cabela's. Fees and insurance increased $464,000 or 12.2% due to increased credit
report and filing fees. Other expenses  increased 30.6%.  Additional  consulting
fees relating  primarily to the Company's  computer  service  company  increased
$747,000.  Additional  software  expense  increased  $596,000  due  primarily to
upgrading  software  to be Year 2000  ready.  A decrease  in  minority  interest
expense is related to the decrease in profits in the Cabela's  credit card joint
venture.

Noninterest  expenses were  $81,103,000 in 1997 compared to $73,912,000 in 1996.
Salaries and employee benefits  increased $3.7 million or 10.2% generally due to
increases  in the  levels  of pay and  the  number  of  employees.  Credit  card
processing fees increased  $866,000 due to increased activity and an increase in
Cabela's bucks expense.  Net occupancy  expense increased 13.0% generally due to
building new and remodeling existing facilities. The increase in amortization of
mortgage  servicing  rights is due to the  adoption of  Statement  of  Financial
Accounting  Standards No. 122 in 1995,  and the related costs being  capitalized
and amortized  over the the life of the related  servicing  income.  The largest
components in the increase in other expenses are increases in minority  interest
expense because of the Cabela's joint venture,  additional  consulting  expenses
and increased  travel  expenses  primarily  relating to the  Company's  computer
service company.


INCOME TAXES
The provision for income taxes was $15,932,000 in 1998,  $14,428,000 in 1997 and
$11,629,000 in 1996.  The changes from year to year can be primarily  attributed
to the increase in income before income taxes.

IMPACT OF INFLATION
The assets and liabilities of a financial  institution are primarily monetary in
nature.  As such,  future changes in prices do not affect the obligations to pay
or receive fixed and determinable amounts of money. During periods of inflation,
monetary  assets  lose  value  in  terms  of  purchasing  power  while  monetary
liabilities have  corresponding  purchasing  power gains.  Since banks generally
have an excess of monetary assets over monetary liabilities,  inflation will, in
theory,  cause a loss of purchasing power in the value of shareholders'  equity.
However,  the concept of  purchasing  power is not an adequate  indicator of the
effect of  inflation on banks  because it does not take into account  changes in
interest rates, which are a more important  determinant of bank earnings.  Other
sections of the  Management's  Discussion  and Analysis  discuss how the Company
monitors the effect of changing interest rates on the Company's earnings.

Noninterest  related  expenses  are  also  influenced  by the  current  rate  of
inflation since they represent the Company's purchase of goods and services from
others.  It is  difficult to assess the true effect of inflation on the Company.
The  Company  believes,  however,  that based on past  history,  it has and will
continue to react to minimize any adverse effects of inflation.


TRENDS AND UNCERTAINTIES
ECONOMY.  Recent  economic  data shows that the  economy  remains  strong in the
Omaha/Lincoln  metro areas,  but there are some signs of  weaknesses,  mostly in
businesses engaged in agricultural  services and wholesale trade, in some of the
rural counties.  A lack of qualified  applicants  hinders economic growth across
the state.  Construction  activity has been solid, while retail sales growth has
been  favorable.  The  manufacturing  base in the state  continues to operate at
expanding  levels.  Motor  vehicle  sales have been strong.  The state's  fiscal
position is favorable  from the  standpoint of the amount of excess tax receipts
being received over budgeted expenditures.  The U. S. economy should continue to
realize  moderate  growth as the  Federal  Reserve  Board  attempts  to maintain
balance between growth and inflation. Agricultural exports have been reduced due
to the Asian and other markets' economic uncertainties.

The  financial  results of the 1998  Nebraska  farm sector  were not good.  Crop
prices are approximately 25% lower relative to last year, while crop yields were
average to above average. Preliminary results would indicate that grain farmers,
at best,  broke even in 1998.  Loan  deficiency  payments and market  transition
payments helped to soften the impact of lower grain prices.  Cattle feeders lost
money  throughout all of 1998.  Ranch operations  reflected  profits  throughout
1998,  but at a much lower level in the last half of the year.  Beef cow numbers
continue  to  decline.  Hog  producers  lost  money  for most of 1998.  Personal
bankruptcy filings have stabilized but remain at high levels.

Commodity  prices remain at historically  low levels.  Current cash grain prices
will not allow grain  farmers to turn a profit in 1999.  Current cash hog prices
will keep hog producers  selling at a loss. On the positive side, cattle feeders
recorded a profit in January 1999, for the first time in twenty months.

ENVIRONMENTAL. Many environmental issues are being discussed on the national and
local level. In Nebraska,  water is used to irrigate nearly six million acres of
semi-arid cropland.  The state continues to discuss issues relating to domestic,
agricultural,  and environmental uses of water. Legislation has been implemented
to  recognize  the   inter-relationship   between   ground  and  surface  water.
Discussions and regulations  have also focused on water quality,  moratoriums on
new irrigation  wells and preserving  wildlife  habitat.  These  discussions may
ultimately have an impact on the agricultural practices.

EXPANSION ACTIVITIES.  The Company is making efforts to expand activities and to
grow in order to increase net income. The Company has the capacity to expand its
computer  processing  business  and  continues  to pursue and obtain  additional
customers.  The Company has obtained  additional data  processing  business from
banks,  and the acquisition of additional  data processing  centers is possible.
The Company has actively attempted to increase its mortgage banking and mortgage
servicing business and is considering possible geographic expansion. The Company
may also  attempt to acquire  servicing  from other  servicing  companies in the
future. The Western Nebraska National Bank's loan production office in Valentine
was  converted  to a full  service  bank in order to  provide  complete  banking
services to the growing  client  base.  The  Company  has  obtained  preliminary
regulatory  approval to charter a new bank in Colorado  Springs,  Colorado.  The
National Bank of Commerce and Cabela's, a catalog sales company, created a joint
company in 1995 for the  purpose of issuing a  "co-branded"  credit  card.  This
joint  company has been  successful  in obtaining  90,000  active  accounts from
Cabela's  clients.  In 1999,  the joint  company  will  continue  to solicit new
cardholders.  The Company  expects to make  further  acquisitions  in the future
although there are no identified  opportunities  at this time. The Company could
make  further  use of loan  production  offices  to expand  geographically.  The
Company has minority  ownership  interests in seven early stage venture  capital
companies. One of these companies successfully completed an initial public stock
offering  in  1997.  The  Company  will  continue  to  explore  venture  capital
investment opportunities.

YEAR 2000. THE COMPANY'S STATE OF READINESS.  A significant  technological issue
impacting  all  companies  worldwide  is  the  need  to  modify  their  computer
information systems to properly process  transactions  relating to the Year 2000
and beyond.  The Company has implemented a formal program to evaluate,  monitor,
review  and  manage the  risks,  solutions  and costs and  update  its  software
programs and other time sensitive systems for Year 2000 compliance.  The Federal
Financial  Institutions  Examination Council has issued regulatory guidelines on
the Year 2000 problem.  The Company has  incorporated  these guidelines into its
Year 2000 plan.  Certain  subsidiaries of the Company have been examined by both
regulators  and the  Company's  own internal  audit staff and will be subject to
ongoing examinations with regard to their Year 2000 readiness.

The Company's Year 2000 Project  includes four phases __ awareness,  assessment,
remediation  and  testing.  Executive  management  of the  Company  reviews  and
approves these various phases of the project as they are completed.  A report is
given to the Company's  Board of Directors on a quarterly basis on the status of
the Year 2000 project.

0    The Company  considers the  awareness  phase of its Year 2000 Project to be
     substantially  complete from an internal  standpoint.  Major  customers and
     vendors of the Company have been  contacted to establish the level of their
     awareness  concerning  Year 2000,  which  will be ongoing as  circumstances
     dictate.

0    The Company  considers the assessment  phase of its Year 2000 Project to be
     substantially complete for internal mission critical systems. Assessment of
     external  services  and  systems  has been  dependent,  in part,  on vendor
     management  surveys.  The Company has completed this survey process and has
     received a 100% response rate from mission critical vendors.

0    The  remediation  phase of the  Company's  project  includes the  analysis,
     planning  and  actual  remediation  necessary  to  bring  mission  critical
     internal systems, both software and other time sensitive systems, into Year
     2000  ready  status.  Remediation  may  include  upgrading,  renovating  or
     replacing  existing  systems.  The Company  believes that this phase of its
     Year 2000 Project was substantially  completed as of December 31, 1998 with
     respect to internal mission critical systems.

0    The testing phase of the project involves both Internal  Testing  conducted
     by programming and quality assurance staff, and Customer Acceptance Testing
     (CAT) conducted by customers of the Company.  Internal testing is performed
     on all internal and external  mission  critical  systems and services  with
     Year 2000 date  information  in  various  Year  2000  date  scenarios.  CAT
     testing, by the Company's financial  institution data processing customers,
     is  conducted  in a  simulated  banking  environment.  A detailed  customer
     acceptance  testing  program  has been  designed to test key aspects of all
     core  banking  applications  being  provided  to banking  customers  by the
     Company.  The Company has begun both types of tests  related to its project
     and to the extent  feasible,  plans to  substantially  complete  testing of
     mission critical systems and services by March 31, 1999.

THE COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES.  Through December 31, 1998,
cumulative  costs  relating  directly  to Year 2000 issues  since the  project's
inception have totaled  approximately  $5.5 million.  A portion of the estimated
total includes both the cost of existing staff that have been  redeployed to the
Year 2000  project  from other  projects and  consultants  or other  independent
programmers who have been hired to help the Company complete its project.  These
costs do 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,  unless the implementation  was accelerated.  The Company estimates
that  remaining  Year 2000 project costs will total  approximately  $7.0 million
and,  therefore,  the total  estimated  Year 2000 Project  costs from  inception
through completion should approximate $12.5 million.

THE RISKS OF THE COMPANY'S YEAR 2000 ISSUES.  As is the case with most financial
services  companies,  the Company is heavily  dependent on internal and external
computer systems and services. If those systems or services are interrupted, the
Company's  ability to serve its retail,  commercial  banking and its credit card
customers could be directly effected.  Some of the commercial financial services
that could be effected  are credit card  merchant  processing,  commercial  cash
management  services and financial  institution data processing  services.  Year
2000 failures  associated with internal and external  systems and services could
generate claims or create other material  adverse effects for the Company.  Even
though the Company's Year 2000 Project will include  contingency plans for third
party Year 2000 failures, there can be no assurances that mission critical third
party vendors or other significant third parties (such as  telecommunications or
utilities  industries,  the  Federal  Reserve  System or  national  credit  card
processing  associations)  will  adequately  address  their  Year  2000  issues.
Increased  credit  losses  associated  with possible Year 2000 failures of major
borrowers or increased consumer cash demands resulting from publicity concerning
Year 2000 problems could also have a material adverse effect on the Company. The
Company is unable to quantify, in any reasonable manner, the financial impact of
these possible adverse  effects,  due to the uncertainty  involved.  The Company
generally advises commercial entities with which it does business that it cannot
guarantee  that they or the Company will be  completely  unaffected  by the Year
2000.  The Company  nonetheless  continues to monitor these issues on an ongoing
basis and will strive to minimize their impact.

THE  COMPANY'S  CONTINGENCY  PLANS.  The Company is in the process of developing
contingency plans to address  potential Year 2000  interruptions of its internal
and external mission critical systems and services.  For example, the Company is
developing  plans to provide the liquidity that would be needed to meet possible
unusually high cash demands generated by the publicity concerning potential Year
2000 issues for financial institutions. The initial contingency planning process
is well  under way as of  December  31,  1998.  These  plans  will be subject to
ongoing  review,  testing and  adjustment.  Contingency  plans may be limited or
problematic  for some  systems or services  because  there may be no  reasonable
economic  alternatives for these systems or services.  There can be no assurance
that contingency plans will fully mitigate Year 2000 problems.

The  foregoing  Year  2000  discussion  contains   forward-looking   statements,
including  without  limitation,  anticipated  costs  and the  dates by which the
Company expects to substantially complete the remediation and testing of systems
and are  based on  management's  best  current  estimates,  which  were  derived
utilizing  numerous  assumptions  about future  events,  including the continued
availability  of certain  resources,  representations  received from third party
service  providers and other  factors.  However,  there can be no guarantee that
these  estimates will be achieved,  and actual  results could differ  materially
form  those  anticipated.  Specific  matters  that  might  cause  such  material
differences  include,  but are not  limited  to,  the  availability  and cost of
personnel trained in this area, the ability to identify and convert all relevant
computer systems, results of Year 2000 testing, adequate resolution of Year 2000
issues by governmental agencies, business or other third parties who are service
providers,  suppliers,  borrowers or  customers  of the  Company,  unanticipated
systems costs,  the need to replace  hardware and the adequacy of and ability to
implement contingency plans and similar uncertainties.

REGULATORY.  During  1992  the  FDIC  (Federal  Deposit  Insurance  Corporation)
implemented a new  risk-based  assessment  system where each insured  depository
institution  pays an assessment rate based on the combination of its capital and
supervisory condition. The FDIC Board intends to review the rate schedules every
six  months to ensure  that the  assigned  rates are  consistent  with  economic
conditions and allow the funds to maintain the statutory-mandated  1.25% reserve
ratio.  All of the Company's  subsidiary  banks  presently  meet the  conditions
required  under the new  system to pay the lowest  possible  rate.  The  banking
industry has been  assessed a portion of the FICO bond debt service  costs.  The
plethora of bank  regulations  has resulted in the employment of greater company
resources  to  ensure  regulatory  compliance.   Risk-based  capital  guidelines
established by regulatory  agencies set minimum  capital  standards based on the
level of risk associated with a financial  institution's  assets. As of December
31,  1998,  the  Company  and all of its bank  subsidiaries  exceed the  minimum
capital requirements as mandated by regulatory agencies (See Footnote O).

STOCK  REPURCHASE  PROGRAM.  During 1994,  the Board of Directors  announced its
intentions of purchasing  shares of its common stock when  appropriate  and at a
price management believes advantageous to the Company.  During 1998, the Company
acquired  8,017  shares of its Class A stock  and  10,000  shares of its Class B
stock at an average price of $26.81. All outstanding  treasury stock was retired
as of December 31, 1998.

FORWARD LOOKING INFORMATION
When used or  incorporated  by  reference  in  disclosure  documents,  the words
"anticipate,"  "estimate,"  "expect,"  "project,"  "target," "goal," and similar
expressions  are  intended to  identify  forward-looking  statements  within the
meaning of  Section  27A of the  Securities  Act of 1933.  Such  forward-looking
statements are subject to certain risks,  uncertainties and assumptions.  Should
one or more of these risks or uncertainties  materialize,  or should  underlying
assumptions  prove  incorrect,  actual  results may vary  materially  from those
anticipated,  estimated, expected or projected. These forward-looking statements
speak only as of the date of the document.  The Company expressly  disclaims any
obligation or  undertaking  to publicly  release any updates or revisions to any
forward-looking  statement  contained  herein  to  reflect  any  change  in  the
Company's expectation with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.


<PAGE>
<TABLE>


                                                            SENIOR OFFICERS

<S>                                       <C>
                                          * James Stuart Jr.
                                            Chairman and Chief Executive Officer

                                          * Stuart Bartruff
                                            Executive Vice President and Secretary

                                          * Brad Korell
                                            Executive Vice President

                                          * Mark Hansen
                                            Senior Vice President

                                            Thomas L. Alexander
                                            Senior Vice President, Human Resources

                                            Joan Cromwell
                                            Senior Vice President and Senior Auditor

                                            Donald D. Kinley
                                            Vice President and Treasurer

                                            Leland Poppe
                                            Senior Vice President and Senior Agricultural Banking Officer

                                            James R. Richardson
                                            Senior Vice President and Loan Services Manager

                                          * Executive Officer


                                                               DIRECTORS

                  David Calhoun                                        Kenneth W. Staab
                  Chairman and Chief Executive Officer                 Staab Restaurant Management
                  Jacob North Printing

                  Connie Lapaseotes                                    James Stuart, Jr.
                  Lapaseotes, Ltd.                                     Chairman and Chief Executive Officer
                  Cattle Feeding, Ranching and Farming                 First Commerce Bancshares, Inc.

                  John G. Lowe, III                                    James Stuart, III
                  Owner, Lowe Investment Co.                           Chairman and Chief Executive Officer
                  Investment Firm                                      First Commerce Investors, Inc.

                  John C. Osborne                                      Scott Stuart
                  President, Industrial Irrigation Services            Director, First Commerce Bancshares, Inc.


                  Richard C. Schmoker                                  Councelor to the Board
                  Attorney and Partner, Faegre & Benson                James Stuart, Sr.
                                                                       Chairman, Stuart Management Co.

                  William C. Schmoker                                  Advisory Director
                  Assistant Vice President                             Harold Wimmer
                  Norwest Investment Management, Inc.                  Chairman, Wimmers Meat Products, Inc.










                                      SUBSIDIARY SENIOR OFFICERS

                  James Stuart, Jr., Chairman                          Mary C. Gerdes, President and
                      and Chief Executive Officer                         Chief Executive Officer
                  Brad Korell, President                               Western Nebraska National Bank
                  National Bank of Commerce                            North Platte - Alliance - Bridgeport, Nebraska
                  Lincoln, Nebraska

                  Brad Korell, Chairman                                Mary C. Gerdes, Chairman
                  Patric J. Jerge, President                           Jan Lallman, President
                     and Chief Executive Officer                          and Chief Executive Officer
                  First Commerce Technologies, Inc.                    Western Nebraska National Bank
                  Lincoln, Nebraska                                    Valentine, Nebraska

                  Jeffrey Holmberg, President                          Allen McClure,  Chairman
                     and Chief Executive Oficer                        Paul Bachman, President
                  First Commerce Mortgage Company                         and Chief Executive Officer
                  Lincoln, Nebraska                                    First National Bank
                                                                       West Point, Nebraska

                  Robert Morris, President                             Rick Harbaugh, President
                     and Chief Executive Officer                          and Chief Executive Officer
                  City National Bank                                   The Overland National Bank
                  Hastings, Nebraska                                   Grand Island, Nebraska

                  Larry L. Jepson, Chairman                            James Stuart, III, Chairman
                     and Chief Executive Officer                          and Chief Executive Officer
                  John Cannon, President                               H. Cameron Hinds, President
                  First National Bank                                  First Commerce Investors, Inc.
                  Kearney, Nebraska                                    Lincoln, Nebraska

                  Kenneth W. Foster, Chairman                          Jerry Pesek, Manager
                  Mark Jepson, President                               Community Mortgage Company
                     and Chief Executive Officer                       Lincoln, Nebraska
                  First National Bank
                  McCook, Nebraska



</TABLE>




<PAGE>


                                                            CORPORATE FACTS


                                          Corporate Office:
                                            NBC Center
                                            1248 O Street
                                            Lincoln, NE 68508
                                            Telephone:  (402) 434-4110
                                            Fax: (402) 434-4181
                                            E-mail Address:  dbrown@fcbcorp.com
                                            Website:  www.fcbi.com


                                          Transfer Agent:
                                            Chase-Mellon Shareholder Services
                                            Mellon Bank, N.A.
                                            4 Station Square, 3rd Floor
                                            Pittsburgh, PA 15219
                                            Telephone:  (412) 236-8173
                                            Website:  www.chasemellon.com


                                          Stock:
                                            The Company's common stock is traded
                                            on  the   over-the-counter   market.
                                            Quotations  are  furnished by NASDAQ
                                            Symbol FCBIA and FCBIB.


                                          Form 10-K Available:
                                            A  copy  of  the  Company's   Annual
                                            Report  on Form  10-K  for the  year
                                            ended  December 31,  1998,  as filed
                                            with  the  Securities  and  Exchange
                                            Commission  may be obtained  without
                                            charge by any shareholder requesting
                                            it in  writing.  Please  direct your
                                            request  to  Donald   Kinley,   Vice
                                            President  and  Treasurer,   at  the
                                            Corporate office.


                                          Annual Shareholders Meeting:
                                            April 20, 1999
                                            Country Club of Lincoln
                                            Lincoln, Nebraska


                                          Dividend    Reinvestment   Plan:   The
                                            Company     offers    a     dividend
                                            reinvestment  plan  as a  convenient
                                            method of investing  cash  dividends
                                            paid  and  to  make   optional  cash
                                            contributions  in additional  shares
                                            of  Class B  non-voting  stock.  For
                                            information  on  enrolling,  contact
                                            the   plan   administrator   at  the
                                            following address:
                                                    ATTN.: Dividend Reinvestment
                                                    Plan Administration
                                                    Mellon Bank, N.A.
                                                    P.O. Box 750
                                                    Pittsburgh, PA 15230