---

---




SECURITIES AND EXCHANGE COMMISSION


Washington D.C. 20549











FORM 10-Q











(Mark One)





QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)


x


OF THE SECURITIES EXCHANGE ACT OF 1934





For the Quarterly Period Ended September 30, 1999





OR





TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)


 ̈


OF THE SECURITIES EXCHANGE ACT OF 1934





For the Transition period from to





Commission File No. 03502





First National of Nebraska, Inc.


(Exact name of registrant as specified in its
   charter)





|Nebraska
   (State or other jurisdiction of
   incorporation or organization)
   
   One First National Center
   Omaha, NE
   (Address of principal executive offices) |  | 47-0523079
   (I.R.S. Employer
   
   Identification No.)
   
   68102
   (Zip Code) | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------ | 




Registrants telephone number, including area
   code: (402) 341-0500





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





As of November 5, 1999, the number of outstanding shares of
   the registrants common stock ($5.00 par value) was 334,500.





---

---




PART I. FINANCIAL INFORMATION


Part I. Item 1. Financial Statements





FIRST NATIONAL OF NEBRASKA, INC.


Consolidated Statements of Financial Condition





|                                                                                                                                                                  |  | September 30,
   
   1999 |   | December 31,
   
   1998
|----------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | - | ------------------------
|                                                                                                                                                                 
|
|
|                                                                                                                                                                 
|ASSETS                                                                                                                                                            |  |                           |   |                         
|Cash and due from
      banks                                                                                                                                     |  | $  
        295,954       |   |                         
|Federal funds
      sold and other short-term investments                                                                                                         |  | 90,618                    |   |                         
|                                                                                                                                                                 
|Total cash and cash
      equivalents                                                                                                                             |  | 386,572                   |   |                         
|Securities
      available-for-sale (amortized cost $1,034,786 and $852,374)                                                                                      |  | 1,025,399                 |   |                         
|Securities
      held-to-maturity (fair value $206,376 and $423,554)                                                                                              |  | 206,785                   |   |                         
|Loans                                                                                                                                                             |  | 5,843,848                 |   |                         
|Less: Allowance for
      loan losses                                                                                                                             |  | 102,427                   |   |                         
|Unearned income                                                                                                                                                   |  | 13,092                    |   |                         
|                                                                                                                                                                 
|Net loans                                                                                                                                                         |  | 5,728,329                 |   |                         
|Premises and
      equipment, net                                                                                                                                 |  | 142,704                   |   |                         
|Other assets                                                                                                                                                      |  | 368,203                   |   |                         
|                                                                                                                                                                 
|Total assets                                                                                                                                                      |  | $7,857,992                |   |                         
|                                                                                                                                                                 
|                                                                                                                                                                 
|LIABILITIES
      AND STOCKHOLDERS EQUITY                                                                                                                        |  |                           |   |                         
|Deposits:                                                                                                                                                         |  |                           |   |                         
|Noninterest-bearing                                                                                                                                               |  | $  
        767,975       |   |                         
|Interest-bearing                                                                                                                                                  |  | 5,823,638                 |   |                         
|                                                                                                                                                                 
|Total deposits                                                                                                                                                    |  | 6,591,613                 |   |                         
|Federal funds
      purchased and securities sold under repurchase agreements                                                                                     |  | 224,272                   |   |                         
|Other liabilities                                                                                                                                                 |  | 93,659                    |   |                         
|Federal Home Loan
      Bank advances and other borrowings                                                                                                        |  | 227,590                   |   |                         
|Capital notes                                                                                                                                                     |  | 92,070                    |   |                         
|                                                                                                                                                                 
|Total liabilities                                                                                                                                                 |  | 7,229,204                 |   |                         
|Stockholders
      equity:                                                                                                                                       |  |                           |   |                         
|Common stock, $5 par
      value, 346,767 shares authorized, 334,500 and 335,000
    
               
          shares issued and outstanding,
      respectively |  | 1,673                     |   |                         
|Additional paid-in
      capital                                                                                                                                  |  | 2,511                     |   |                         
|Retained earnings                                                                                                                                                 |  | 630,591                   |   |                         
|Accumulated other
      comprehensive income (loss)                                                                                                               |  | (5,987                    | ) |                         
|                                                                                                                                                                 
|Total stockholders
      equity                                                                                                                                  |  | 628,788                   |   |                         
|                                                                                                                                                                 
|Total liabilities and
      stockholders equity                                                                                                                  |  | $7,857,992                |   |                         
|                                                                                                                                                                 
|                                                                                                                                                                 




See notes to consolidated financial statements.





FIRST NATIONAL OF NEBRASKA, INC.


Consolidated Statements of Income


(unaudited)





|                                                                                                                                    |  | Quarter Ended
    
    September 30, |   | Nine Months
      Ended
    
    September 30,
|----------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | - | ----------------------------------------------
|                                                                                                                                   
|
|                                                                                                                                   
|
|                                                                                                                                   
|Interest income:                                                                                                                    |  |                                      |   |                                               
|Interest and
       fees on loans and lease financing                                                                               |  | $188,425                             |   |                                               
|Interest on
       securities:                                                                                                      |  |                                      |   |                                               
|Taxable interest income                                                                                                             |  | 16,786                               |   |                                               
|Nontaxable interest income                                                                                                          |  | 286                                  |   |                                               
|Interest on
       federal funds sold
     
                
           and other short-term investments                            |  | 2,476                                |   |                                               
|                                                                                                                                   
|Total interest
       income                                                                                                        |  | 207,973                              |   |                                               
|                                                                                                                                   
|Interest expense:                                                                                                                   |  |                                      |   |                                               
|Interest on
       deposits                                                                                                         |  | 70,093                               |   |                                               
|Interest on
       federal funds purchased and
     
                
           securities sold under repurchase
       agreements |  | 2,270                                |   |                                               
|Interest on
       Federal Home Loan Bank advances                                                                                  |  | 2,283                                |   |                                               
|Interest on
       other borrowings and capital notes                                                                               |  | 1,848                                |   |                                               
|                                                                                                                                   
|Total interest
       expense                                                                                                       |  | 76,494                               |   |                                               
|                                                                                                                                   
|Net interest
       income                                                                                                          |  | 131,479                              |   |                                               
|Provision for
       loan losses                                                                                                    |  | 35,495                               |   |                                               
|                                                                                                                                   
|Net interest
       income after provision for loan losses                                                                          |  | 95,984                               |   |                                               
|Noninterest
       income:                                                                                                          |  |                                      |   |                                               
|Processing
       services                                                                                                          |  | 18,275                               |   |                                               
|Credit card
       securitization income                                                                                            |  | 15,867                               |   |                                               
|Deposit services                                                                                                                    |  | 7,228                                |   |                                               
|Trust and
       investment services                                                                                                |  | 5,448                                |   |                                               
|Commissions                                                                                                                         |  | 2,794                                |   |                                               
|Miscellaneous                                                                                                                       |  | 12,214                               |   |                                               
|                                                                                                                                   
|Total
       noninterest income                                                                                                     |  | 61,826                               |   |                                               
|                                                                                                                                   
|Noninterest
       expense:                                                                                                         |  |                                      |   |                                               
|Salaries and
       employee benefits                                                                                               |  | 54,100                               |   |                                               
|Communications
       and supplies                                                                                                  |  | 15,808                               |   |                                               
|Loan servicing
       expense                                                                                                       |  | 7,473                                |   |                                               
|Processing
       expense                                                                                                           |  | 6,952                                |   |                                               
|Net occupancy
       expense of premises                                                                                            |  | 7,730                                |   |                                               
|Equipment
       rentals, depreciation and maintenance                                                                              |  | 10,449                               |   |                                               
|Professional
       services                                                                                                        |  | 8,365                                |   |                                               
|Miscellaneous                                                                                                                       |  | 10,230                               |   |                                               
|                                                                                                                                   
|Total
       noninterest expense                                                                                                    |  | 121,107                              |   |                                               
|                                                                                                                                   
|Income before
       income taxes                                                                                                   |  | 36,703                               |   |                                               
|Income tax
       expense(benefit):                                                                                                 |  |                                      |   |                                               
|Current                                                                                                                             |  | 15,062                               |   |                                               
|Deferred                                                                                                                            |  | (1,285                               | ) |                                               
|                                                                                                                                   
|Total income tax
       expense                                                                                                     |  | 13,777                               |   |                                               
|                                                                                                                                   
|Net income                                                                                                                          |  | $  
       22,926                    |   |                                               
|                                                                                                                                   
|                                                                                                                                   
|Average number
       of common shares outstanding                                                                                  |  | 334,500                              |   |                                               
|                                                                                                                                   
|                                                                                                                                   
|Net income per
       common share                                                                                                  |  | $  
         68.54                   |   |                                               
|                                                                                                                                   
|                                                                                                                                   
|Cash dividends
       declared per common share                                                                                     |  | $  
           8.75                  |   |                                               
|                                                                                                                                   
|                                                                                                                                   




See notes to consolidated financial statements.





FIRST NATIONAL OF NEBRASKA, INC.


Consolidated Statements of Cash Flows


(unaudited)





|                                                                                                                                            |  | Nine Months
       Ended
     
     September 30,
|------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------
|                                                                                                                                           
|
|                                                                                                                                           
|
|                                                                                                                                           
|CASH FLOWS
        FROM OPERATING ACTIVITIES                                                                                                |  |                                                  
|Net Income                                                                                                                                  |  | $  
          66,166                             
|Adjustments to
        reconcile net income to net cash flows from operating
      
                 
                 
        activities: |  |                                                  
|Provision for
        loan losses                                                                                                           |  | 106,705                                          
|Depreciation
        and amortization                                                                                                       |  | 38,695                                           
|Provision for
        deferred taxes                                                                                                        |  | 998                                              
|Origination of
        mortgage loans for resale                                                                                            |  | (114,565                                         
|Proceeds from
        the sale of mortgage loans for resale                                                                                 |  | 126,504                                          
|Other asset and
        liability activity, net                                                                                             |  | (180,935                                         
|                                                                                                                                           
|Net cash flows
        from operating activities                                                                                            |  | 43,568                                           
|CASH FLOWS
        FROM INVESTING ACTIVITIES                                                                                                |  |                                                  
|Acquisitions,
        net of cash received                                                                                                  |  | (3,525                                           
|Maturities and
        sales of securities available-for-sale                                                                               |  | 350,736                                          
|Purchases of
        securities available-for-sale                                                                                          |  | (531,849                                         
|Maturities of
        securities held-to-maturity                                                                                           |  | 221,361                                          
|Purchases of
        securities held-to-maturity                                                                                            |  | (7,132                                           
|Net change in
        loans                                                                                                                 |  | (200,562                                         
|Credit card
        securitization activities                                                                                               |  |                                                 
|Purchases of
        loan portfolios                                                                                                        |  | (40,237                                          
|Purchases of
        premises and equipment                                                                                                 |  | (27,914                                          
|Other, net                                                                                                                                  |  | 1,091                                            
|                                                                                                                                           
|Net cash flows
        from investing activities                                                                                            |  | (238,031                                         
|CASH FLOWS
        FROM FINANCING ACTIVITIES                                                                                                |  |                                                  
|Net change in
        deposits                                                                                                              |  | (319,707                                         
|Assumption of
        deposits, net                                                                                                         |  | 39,712                                           
|Net change in
        federal funds purchased and securities sold under repurchase
      
                 
            agreements          |  | (134,703                                         
|Issuance of
        Federal Home Loan Bank advances and other borrowings                                                                    |  | 292,924                                          
|Principal
        repayments of Federal Home Loan Bank advances, other borrowings
      
                 
            and capital notes    |  | (99,167                                          
|Repurchase of
        common stock                                                                                                          |  | (1,575                                           
|Cash dividends
        paid                                                                                                                 |  | (12,958                                          
|                                                                                                                                           
|Net cash flows
        from financing activities                                                                                            |  | (235,474                                         
|                                                                                                                                           
|Net change in
        cash and cash equivalents                                                                                             |  | (429,937                                         
|Cash and cash
        equivalents at beginning of period                                                                                    |  | 816,509                                          
|                                                                                                                                           
|Cash and cash
        equivalents at end of period                                                                                          |  | $  
        386,572                              
|                                                                                                                                           
|                                                                                                                                           
|Cash paid
        during the period for:                                                                                                    |  |                                                  
|Interest                                                                                                                                    |  | $  
        229,332                              
|Income taxes                                                                                                                                |  | $  
          37,737                             
|                                                                                                                                           
|                                                                                                                                           




See notes to consolidated financial statements.





NOTES TO CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS


(Unaudited)


September 30, 1999





Note A: Basis of Presentation





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





The preparation of financial statements in
      conformity with generally accepted accounting principles requires
      management to make estimates and assumptions that affect the
      reported amounts of assets and liabilities as of the date of the
      financial statements and the reported amounts of revenues and
      expenses during the reporting period. Actual results could differ
      from those estimates. In the opinion of management, all
      adjustments (consisting of normal recurring accruals) considered
      necessary for a fair presentation of the financial statements
      have been included. Operating results for the nine months ended
      September 30, 1999 are not necessarily indicative of the results
      that may be expected for the year ending December 31, 1999. The
      notes to the consolidated financial statements contained in the
      Annual Report on Form 10-K for the year ended December 31, 1998
      should be read in conjunction with these consolidated financial
      statements.





Note B: Earnings per Common Share





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





Note C: Comprehensive Income





Comprehensive income is defined as the change
      in equity of a business enterprise during a period from
      transactions and other events or circumstances from nonowner
      sources. Comprehensive income includes net income and other items
      of comprehensive income meeting the above criteria. The Company
      s only component of other comprehensive income is the
      change in unrealized appreciation or depreciation of
      available-for-sale securities. The following table reflects
      consolidated statements of comprehensive income for the quarter
      ended and nine months ended September 30, 1999 and September 30,
      1998.





|                                                                                                                   |  | Quarter Ended
      
      September 30, |  | Nine Months Ended
      
      September 30,
|------------------------------------------------------------------------------------------------------------------ |  | ---------------------------------------- |  | --------------------------------------------
|                                                                                                                  
|
|                                                                                                                  
|
|                                                                                                                  
|Net Income                                                                                                         |  | $22,926                                  |  | $22,964                                     
|Other
         comprehensive income (loss), before tax                                                             |  |                                          |  |                                             
|Net unrealized holding gains (losses)
         arising during the period                                           |  | 1,420                                    |  | 4,321                                       
|Less: Reclassification adjustment for net
         gains realized in net
       
                 
         income |  | 5                                        |  | 166                                         
|                                                                                                                  
|Other
         comprehensive gain (loss), before tax                                                               |  | 1,415                                    |  | 4,155                                       
|Less: Income
         tax benefit (expense) for other comprehensive loss                                           |  | 506                                      |  | 1,505                                       
|                                                                                                                  
|Other
         comprehensive gain (loss), net of tax                                                               |  | 909                                      |  | 2,650                                       
|                                                                                                                  
|Comprehensive
         income                                                                                      |  | $23,835                                  |  | $25,614                                     
|                                                                                                                  
|                                                                                                                  




Note D. New Accounting Pronouncements





In June 1999, the FASB issued SFAS No. 137,
       Accounting for Derivative Instruments and Hedging
       ActivitiesDeferral of the Effective Date of FASB Statement
       No. 133. SFAS No. 137 postponed the effective date for
       SFAS No. 133, Accounting for Derivative Instruments and
       Hedging Activities to all fiscal quarters of all fiscal
       years beginning after June 15, 2000. SFAS No. 133 establishes
       accounting and reporting standards requiring that every
       derivative (including certain derivatives embedded in contracts)
       be recorded in the balance sheet as either an asset or liability
       measured at its fair value. The statement requires that changes
       in the fair value of derivatives be recognized currently in
       earnings unless specific hedge accounting criteria are met.
       Special accounting for qualifying hedges allows a derivative
       s gain or loss to offset related results on the hedged
       item in the income statement, and requires that a company must
       formally document, designate and assess the effectiveness of
       transactions that receive hedge accounting treatment. The
       Company currently has no derivatives that would materially
       impact its financial statements.





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





Managements discussion and analysis
       contains forward-looking statements which reflect management
       s current views and estimates of future economic
       circumstances, industry conditions, company performance and the
       financial results. The statements are based on many assumptions
       and factors, including general economic conditions, consumer
       behavior, competitive environment and related market conditions,
       operating efficiencies and actions of governments. Any changes
       in such assumptions or factors could produce different results.





Results of Operations:





Overview:





Net income for the quarter ended September
       30, 1999 was $22.9 million, or $68.54 per common share, compared
       to $23 million, or $68.55 per common share, for the same period
       ended in 1998. Net income for the nine months ended September
       30, 1999 was $66.2 million, or $197.71 per common share,
       decreasing 8.8% from $72.5 million, or $216.44 per common share,
       for the same period ended in 1998. The decline in net income for
       the nine months ended September 30, 1999 compared to the same
       period in 1998 relates primarily to proceeds received by the
       Company for the settlement of litigation recognized in the first
       quarter of 1998. The decline is also due to increased
       noninterest expense offset by increased net interest income
       after provision for loan losses for the nine months ended
       September 30, 1999.





Net interest income:





The Companys primary source of income
       is net interest income which is defined as the difference
       between interest income and fees derived from interest-earning
       assets and interest expense on interest-bearing liabilities.
       Interest income and expense are affected by changes in the
       volume and mix of interest-earning assets and interest-bearing
       liabilities, in addition to changes in interest rates. The
       following table presents a summary of net interest income on a
       tax-equivalent basis, related average earning assets and net
       interest margin.





|                                                        |  | Quarter Ended
       
       September 30, |   | Nine Months Ended
       
       September 30,
|------------------------------------------------------- |  | ------------------------------------------ | - | ----------------------------------------------
|                                                       
|
|                                                       
|
|                                                       
|Net interest
          income on a tax-equivalent basis |  | $  
          131,631                      |   |                                               
|Average
          earning assets                        |  | 7,104,295                                  |   |                                               
|Net interest
          margin (annualized)              |  | 7.35                                       | % |                                               




The decreases in net interest margins relate
        to declines in higher yielding outstanding credit card and
        related plan average balances net of increases in outstanding
        non-credit card loan average balances. Net interest margin
        decreases also relate to asset yields repricing downward in
        response to market conditions at a faster rate than the
        repricing of deposits.





Provision for loan losses:





On a monthly basis, the Company evaluates
        its allowance for loan losses based upon a review of collateral
        values, delinquencies, nonaccruals, payment histories and
        various other analytical and subjective measures relating to
        its loans. For the quarter ended September 30, 1999, the
        provision for loan losses decreased $6.3 million, or 15.1%, to
        $35.5 million compared to $41.8 million for the same period in
        1998. For the nine months ended September 30, 1999, the
        provision for loan losses decreased $12.7 million, or 10.7%, to
        $106.7 million compared to $119.4 million for the same period
        in 1998. The reduction in the provision for loan losses for the
        quarter ended and the nine months ended September 30, 1999 is
        due to improved delinquency and charge-off rates and a
        reduction in credit card loans and related plans outstanding
        balances relative to the entire portfolio. This reduction
        resulted in a decline in the allowance for loan losses as a
        percentage of loans. Although the level of net charge-offs as a
        percentage of average loans has improved, it remains high
        primarily due to delinquencies on consumer credit card loans
        and consumer bankruptcies which continue to adversely affect
        the credit card industry.





Noninterest income:





Noninterest income for the quarter ended
        September 30, 1999, increased $2.8 million, or 4.7%, to $61.8
        million compared to the same period in 1998. For the nine
        months ended September 30, 1999, noninterest income decreased
        $11.6 million, or 6%, to $183.1 million compared to the same
        period in 1998. The decrease is primarily attributable to
        miscellaneous income recognized in the first quarter of 1998
        which included proceeds received from the settlement of
        litigation. In addition, processing services decreased $2.7
        million, or 13.1%, to $18.3 million for the quarter ended
        September 30, 1999 and decreased $4.4 million, or 7.5%, to
        $54.3 million for the nine months ended September 30, 1999 due
        to changes in the Companys merchant processing client
        base. These decreases were partially offset by an increase in
        credit card securitization income of $3.6 million, or 8.2%, to
        $47.1 million for the nine months ended September 30, 1999 when
        compared to the same period in 1998. This increase in credit
        card securitization income resulted from the net impact of a $3
        million, or 8.4%, increase in net servicing income to $38.8
        million from $35.8 million and a $500,000, or 7.1%, increase in
        securitization gains to $8.3 million from $7.8 million. Income
        related to commissions and deposit services increased generally
        as a result of growth in the Companys customer base and
        overall transaction volume.





Noninterest expense:





For the quarter ended September 30, 1999,
        noninterest expense increased $8 million, or 7.1%, to $121.1
        million compared to the same period in 1998. For the nine
        months ended September 30, 1999, noninterest expense increased
        $18 million, or 5.3%, to $356.1 million compared to the same
        period in 1998. A portion of the increase in noninterest
        expense is due to salaries and employee benefits which
        increased $8.7 million, or 19.2%, for the quarter ended
        September 30, 1999 and $24.2 million, or 18%, for the nine
        months ended September 30, 1999 as a result of growth in
        certain areas of the Company. Loan servicing expense increased
        $3.5 million, or 19.1%, for the nine months ended September 30,
        1999 due to the Companys increased collection efforts and
        associated costs as well as increased costs for credit
        applications and acquiring additional agent bank relationships.
        Communication and supplies expense increased $3.8 million, or
        31.3%, for the quarter ended September 30, 1999 and decreased
        $400,000, or 1%, for the nine months ended September 30, 1999
        as compared to the same period in 1998 primarily due to
        fluctuations in marketing expenses. Professional services
        decreased $4.3 million, or 33.8%, for the quarter ended
        September 30, 1999 and decreased $11.9 million, or 31.3%, for
        the nine months ended September 30, 1999 largely due to
        decreased fees paid to merchant sales representatives and
        organizations. Increases in remaining expense categories
        related to the acquisition of new customer relationships and
        loan portfolios, continued investments in technology and
        addressing Year 2000 issues.





Credit Card Loan Activities:





The Company securitizes credit card loans on
        a revolving basis as a funding vehicle to supplement its use of
        core deposits as its primary source of funding. These
        securitizations are accounted for as sales in accordance with
        SFAS No. 125, Accounting for Transfers and Servicing of
        Financial Assets and Extinguishments of Liabilities.
        Since the Company continues to service these securitized loans,
        it takes the role of a loan servicer rather than a lender. As
        loans are securitized, gains which represent the present value
        of retained cash flows are recorded, and the loans along with
        the related allowance for credit losses are removed from the
        balance sheet. The securitizations result in differences in the
        amount of reported loans versus managed loans. Reported loans
        reflect the removal of these securitized loans from the balance
        sheet in accordance with generally accepted accounting
        principles while managed loans include both securitized loans
        and reported loans. The following table reflects the
        reconciliation of the loan portfolio between reported and
        managed loans at September 30, 1999 and December 31, 1998.





|                                                                                                      |  | September 30, 1999 |  | December 31, 1998
|----------------------------------------------------------------------------------------------------- |  | ------------------ |  | -----------------
|
|                                                                                                      | 
|
|Managed Loan
          Data                                                                           |  |                    |  |                  
|                                                                                                      |  |                    |  |                  
|As of Period
          End:                                                                           |  |                    |  |                  
|Total loans
          outstanding                                                                     |  | $5,830,756         |  | $653,022         
|Total credit
          cards and related
        
                  
               plans outstanding |  | $2,500,732         |  | $653,022         
|Year-to-Date
          Average:                                                                      
|Total loans
          outstanding                                                                     |  | $5,660,842         |  | $653,022         
|Total credit
          cards and related
        
                  
               plans outstanding |  | $2,536,241         |  | $653,022         




In addition to credit card securitization
        activities, the Company acquired credit card loan portfolios
        totaling $37.1 million during the nine months ended September
        30, 1999.





Asset Quality





The Companys loan delinquency rates
        and net charge-off activity reflect, among other factors,
        general economic conditions, the quality of the loans, the
        average seasoning of the loans and the success of the Company
        s collection efforts. The Companys objective in
        managing its loan portfolio is to balance and optimize the
        profitability of the loans within the context of acceptable
        risk characteristics. The Company continually monitors the
        risks embedded in the credit cards and related plans loan
        portfolio with the use of statistically-based computer
        simulation models.





While delinquencies as a percentage of loans
        have improved since December 31, 1998, the consumer credit
        industry and the Companys credit card portfolio continue
        to experience high levels of delinquencies and charge-offs. The
        Companys management cannot predict whether this downward
        trend in delinquency and charge-off rates will continue. It is
        likely that selected segments of consumers may continue to
        experience declines in credit quality. Therefore, management
        continues to closely evaluate and monitor consumer behavior,
        credit standards and marketing strategies.





The following table reflects the delinquency
        rates for the Companys overall loan portfolio as well as
        a breakdown of the credit cards and related plans component. An
        account is contractually delinquent if the minimum payment is
        not received by the specified billing date. The overall
        delinquency rate as a percentage of
      total loans improved to a level of 2.80% at September 30, 1999
        compared with 3.37% at December 31, 1998. The delinquency rate
        as a percentage of total credit card loans and related plans
        was 5.27% at September 30, 1999 down from 5.94% at December 31,
        1998.





Delinquent Loans:





|                                            |  | September 30, 1999         |  | December 31, 1998
|------------------------------------------- |  | -------------------------- |  | -----------------
|                                            | 
|
|                                            | 
|
|                                           
|Total
           Loans                      |  |                            |  |                  
|                                            |  |                            |  |                  
|Loans
           outstanding                |  | $5,830,756                 |  |                  
|Loans
           delinquent:                |  |                            |  |                  
|3089
           days                       |  | $  
             101,302   |  | 1.74             
|90 days or
           more & still accruing |  | 61,765                     |  | 1.06             
|                                            | 
|Total
           delinquent loans           |  | $  
             163,067   |  | 2.80             
|                                            | 
|                                            | 
|Nonaccrual
           loans                 |  | $  
                 7,081 |  | .12              
|                                            | 
|                                            | 
|Credit
           Cards and Related Plans   |  |                            |  |                  
|                                            |  |                            |  |                  
|Loans
           outstanding                |  | $2,500,732                 |  |                  
|Loans
           delinquent:                |  |                            |  |                  
|3089
           days                       |  | $  
               77,639  |  | 3.10             
|90 days or
           more & still accruing |  | 54,270                     |  | 2.17             
|                                            | 
|Total
           delinquent loans           |  | $  
             131,909   |  | 5.27             
|                                            | 
|                                            | 
|Nonaccrual
           loans                 |  |                           |  |                 
|                                            | 
|                                            | 




The Companys policy is to charge off
         credit card and related loans when they become 180 days
         contractually past due. Net loan charge-offs include the
         principal amount of losses resulting from borrowers
         unwillingness or inability to pay, in addition to bankrupt and
         deceased borrowers, less current period recoveries of
         previously charged-off loans. The allowance for loan losses is
         intended to cover losses inherent in the Companys loan
         portfolio as of the reporting date. The provision for loan
         losses is charged against earnings to cover both current
         period net charge-offs and to maintain the allowance at an
         acceptable level to cover losses inherent in the portfolio as
         of the reporting date. Net charge-offs for the Companys
         overall portfolio were $127.2 million for the nine months
         ended September 30, 1999 compared to $134 million for the same
         period in 1998. Net charge-offs as a percentage of average
         loans has improved to 2.25% for the nine months ended
         September 30, 1999 compared to 2.49% for the same period last
         year.





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





Allowance for Loan Losses:





|                                                                   |  | For the Nine Months Ended September 30,
|------------------------------------------------------------------ |  | ---------------------------------------
|                                                                   | 
|
|                                                                   | 
|
|                                                                  
|Balance
            at January 1                                   |  | $ 
             121,877                
|Addition
            due to loan purchases                         |  | 1,091                                  
|Reduction
            due to sales of loans                        |  |                                       
|Provision
            for loan losses                              |  | 106,705                                
|Loans
            charged off:                                     |  |                                        
|Credit
            cards and related plans                         |  | (145,910                               
|All other
            loans                                        |  | (2,970                                 
|Loans
            recovered:                                       |  |                                        
|Credit
            cards and related plans                         |  | 20,107                                 
|All other
            loans                                        |  | 1,527                                  
|                                                                   | 
|Total net
            charge-offs                                  |  | (127,246                               
|                                                                   | 
|Balance
            at September 30                                |  | $ 
             102,427                
|                                                                   | 
|                                                                   | 
|Allowance
            as a percentage of loans                     |  | 1.76                                   
|Total net
            charge-offs as a percentage of average loans |  | 2.25                                   




Capital Resources





The Company and its banking
          subsidiaries are required to maintain minimum capital in
          accordance with regulatory guidelines. Under capital adequacy
          guidelines and the regulatory framework for prompt corrective
          action, the Company and its banking subsidiaries must meet
          specific capital guidelines that involve quantitative
          measures of assets, liabilities, and certain off-balance
          sheet items as calculated under regulatory accounting
          practices. These quantitative measures require the Company
          and its banking subsidiaries to maintain minimum amounts and
          ratios of total and Tier I capital (as defined in the
          regulations) to risk-weighted assets (as defined), and of
          Tier I capital (as defined) to average assets (as defined).
          The Company and its banking subsidiaries capital
          amounts and classifications are also subject to qualitative
          judgements by the regulators about components, risk
          weightings and other factors.





As of September 30, 1999, 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 Companys category.
          To be categorized as well capitalized, the Companys
          banking subsidiaries must maintain minimum total risk-based
          capital of 10%, Tier I risk-based capital of 6% and Tier I
          leverage capital of 5%.





During the nine months ended
          September 30, 1999, the Company repurchased 500 shares of the
          Companys common stock. These shares were retired
          decreasing the total number of shares issued and outstanding
          to 334,500. The purchase price of these transactions were
          negotiated at arms length and reflected the fair value
          of the Companys common stock.





In 1995, First National Bank
          of Omaha issued $75 million in 15 year subordinated capital
          notes. These subordinated capital notes, along with $17.1
          million in capital notes outstanding as of September 30, 1999
          issued in connection with the Companys previous
          acquisitions, count towards meeting the required capital
          standards, subject to certain limitations. The Company has
          historically retained approximately 85% of net income in
          capital to fund the growth of future operations and to
          maintain minimum capital standards.





Liquidity Management





Adequate liquidity levels are
          necessary to ensure that sufficient funds are available for
          loan growth and deposit withdrawals. These funding needs are
          offset by funds generated from loan repayments, investment
          maturities, and core deposit growth. The Companys
          Asset/Liability Committee is responsible for monitoring the
          current and forecasted balance sheet structure to ensure
          anticipated funding needs can be met at a reasonable cost.
          Contingency plans are in place to meet unanticipated funding
          needs or loss of funding sources.





Domestic retail deposits are
          used as the primary source of funding for all banking
          subsidiaries. In order to maintain flexibility and diversity
          in liquidity management, the Company also has access to a
          variety of other funding sources. These other sources include
          securities sold under repurchase agreements, federal funds
          purchased, credit card-backed securitizations, Federal Home
          Loan Bank advances, other debt agreements and subordinated
          capital notes. The parent companys cash flows are
          dependent upon the receipt of dividends from its banking
          subsidiaries which are subject to regulatory restrictions.





The Company utilizes credit
          card-backed securitization vehicles to assist in its
          management of liquidity, interest rate risk and capital. At
          September 30, 1999 and 1998, $653 million and $655 million,
          respectively, of the Companys managed credit card
          portfolio was securitized with an additional $275 million and
          $295 million, respectively, in unused securitization lines
          available. The Company had Federal Home Loan Bank advances of
          $223.6 million as of September 30, 1999 and $28.5 million as
          of December 31, 1998. Federal Home Loan Bank advances at
          September 30, 1999 included an advance for $100 million which
          will mature in February 2000. At September 30, 1999, the
          parent company had no balance outstanding under a $100
          million syndicated revolving credit facility.





Year 2000 Readiness





The Companys State
          of Readiness. As is the case for most financial services
          companies that are heavily dependent on computer systems, the
          Year 2000 computer problem presents significant issues for
          the Company. The Company began working on Year 2000
          challenges in 1994 and has established a Year 2000 Project
          Management Office (PMO) to monitor, evaluate and manage the
          risks, solutions and costs associated with Year 2000 issues.
          The PMO has developed a project plan for the Company and
          served as a resource to assist the Companys various
          business units in assessment, remediation and testing for
          Year 2000 readiness. The PMO also monitors and incorporates
          into the Companys plans the numerous regulatory
          guidelines issued by the Federal Financial Institutions
          Examination Council. The Companys various business
          units have been examined and will be subject to ongoing
          examinations with regard to their Year 2000 readiness by
          appropriate regulatory authorities and internal auditors. The
          Companys Year 2000 project includes internal
          information technology (IT) systems, internal non-IT systems
          (such as microcontrollers in telephone, security and alarm
          equipment) and external services and systems that are
          necessary to carry on the Companys business.





The Companys Year 2000
          Project includes four phasesawareness, assessment,
          remediation and testing. Executive management of the Company
          reviewed and approved these various phases of the project
          plan as they were completed.





| | The Company considers the awareness
            phase of its Year 2000 Project to be complete from an
            internal standpoint. Awareness efforts with regard to the
            Companys customers and vendors will be ongoing as
            circumstances dictate.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | The Company considers the assessment
            phase of its Year 2000 Project to be complete for internal
            mission critical systems (IT and non-IT). Assessment of
            external services and systems has been dependent, in part,
            on vendor management surveys. The Company has substantially
            completed this survey process and has received a 100%
            response rate from mission critical vendors. The Company
            s assessment phase also included a review of its
            business processes, with the goal being an identification
            of the Companys key operational tasks, risks and
            priorities for mission critical systems.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | The remediation phase of the Company
            s project included the analysis, planning and actual
            remediation necessary to bring mission critical internal
            systems (both IT and non-IT) into a Year 2000 ready status.
            Remediation includes upgrading, renovating or replacing
            existing systems. The Company has completed this phase of
            its Year 2000 Project with respect to internal mission
            critical systems. In limited situations, completion of
            remediation is dependent on the performance of third party
            vendors, which is not completely within the control of the
            Company.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | The testing phase of the Companys
            project involved various types of testing of internal and
            external mission critical systems and services with Year
            2000 date information in various Year 2000 date scenarios.
            The Company completed testing and implementation of mission
            critical systems on June 30, 1999.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




As remediated and tested
          internal mission critical systems were brought into
          production, the Company implemented additional quality
          control management practices to avoid the re-introduction of
          Year 2000-related problems. This is important because normal
          operations and regulatory considerations may require that
          modifications continue to be made to the Companys
          systems in 1999. To some extent, therefore, all four phases
          of the Companys project will continue on an ongoing
          basis throughout 1999 and beyond.





The Costs to Address the
          Companys Year 2000 Issues. Through September 30,
          1999, cumulative costs relating directly to Year 2000 issues
          since the projects inception have totaled approximately
          $10.6 million. A significant portion of this estimated total
          includes the cost of existing staff that have been redeployed
          to the Year 2000 project from other technology development
          plans. 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. The Company estimates that remaining Year 2000
          costs will total approximately $2.4 million and therefore,
          the total estimated Year 2000 Project costs from inception
          through completion should approximate $13 million.





The Risks of the Company
          s Year 2000 Issues. As is the case with many
          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 banking customers
          and its nationwide base of credit card customers could be
          directly affected. System failures could also directly affect
          the Companys ability to fulfill its service commitments
          to commercial customers. Many of the Companys
          commercial financial services are either dependent upon
          computerized data processing, or are financial data
          processing services in and of themselves. Some of these
          services include the Companys national credit card
          merchant processing business, commercial cash management
          services, financial institution data processing services and
          marketing and support of financial software products. 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 includes 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 the telecommunications or utilities
          industries, the Federal Reserve System or national credit
          card 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. Uncertainty prevents the Company from identifying
          any of these events as a reasonably likely worst case
          scenario or quantifying their financial impact in any
          reasonable manner. 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, through its Year 2000
          Project, strives to minimize their impact.





The Companys
          Contingency Plans. The Company is substantially complete
          in developing contingency plans to address potential Year
          2000 interruptions of its internal and external mission
          critical systems and services. For example, the Company has
          developed plans designed to meet possible unusually high cash
          demands generated by the publicity concerning potential Year
          2000 issues for financial institutions. The contingency
          planning process is well under way. These plans are subject
          to ongoing review, testing and adjustment. Contingency plans
        are limited or problematic for some systems or services because
          there are 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 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 from 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, results of Year 2000 testing, adequate resolution
          of Year 2000 issues by governmental agencies, businesses or
          other third parties who are service providers, suppliers,
          borrowers or customers of the Company, unanticipated system
          costs, the need to replace hardware and the adequacy of and
          ability to implement contingency plans and similar
          uncertainties.





Item 3. Market Risk





The Companys primary
          component of market risk is interest rate volatility. It is
          the goal of the Company to maximize profits while effectively
          managing rather than eliminating interest rate risk. Two
          primary measures are used to measure and manage interest rate
          risk: Net Interest Income Simulation Modeling and Interest
          Rate Sensitivity Gap Analysis.





Net Interest Income Simulation:





The Company uses a simulation
          model to analyze net interest income sensitivity to movements
          in interest rates. The simulation model projects net interest
          income based on both upward and downward interest rate shifts
          over a twelve month period. Alternative scenarios are
          simulated by applying immediate shifts in interest rates
          (rate shocks) and gradual shifts in interest rates (rate
          ramps). These interest rate shifts are applied to a projected
          balance sheet for the Company for the twelve month simulation
          period. Based on the information and assumptions in effect at
          September 30, 1999, management believes that a 200 basis
          point rate shock or rate ramp over a twelve month period, up
          or down, would not significantly affect the Companys
          annualized net interest income.





The Company has established
          guidelines that limit the acceptable potential change in net
          interest margin and net income under these interest rate and
          balance sheet scenarios. Given the minimal potential for
          significant risk exposure relating to potential losses in
          future earnings, fair values or cash flows of
          interest-rate-sensitive instruments illustrated by the
          simulations, the Company does not engage in derivative
          transactions such as hedges, swaps, or futures.





Interest Rate Sensitivity Gap Analysis:





The Company uses interest
          rate sensitivity gap analysis to monitor the relationship
          between the maturity and repricing of its interest-earning
          assets and interest-bearing liabilities, while maintaining an
          acceptable interest rate spread. Interest rate sensitivity
          gap is defined as the difference between the amount of
          interest-earning assets maturing or repricing within a
          specific time period and the amount of interest-bearing
          liabilities maturing or repricing within that time period. A
          gap is considered positive when the amount of
          interest-rate-sensitive assets exceeds the amount of
          interest-rate-sensitive liabilities, and is considered
          negative when the amount of interest-rate-sensitive
          liabilities exceeds the amount of interest-rate-sensitive
          assets. Generally, during a period of rising interest rates,
          a negative gap would adversely affect net interest income,
          while a positive gap would result in an increase in net
          interest income. Conversely, during a period of falling
          interest rates, a negative gap would result in an increase in
          net interest income, while a positive gap would negatively
          affect net interest income. Managements goal is to
          maintain a reasonable balance between exposure to interest
          rate fluctuations and earnings.





PART II. OTHER INFORMATION





Items 1, 2, 3, 4 and 5:


| | Not applicable or negative response.
| | ------------------------------------




Item 6: Exhibits and Reports on Form 8-K








|(a)
             Exhibits |  |          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | 
|------------------------- |  | -------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|                          |  | 3(i)(ii) |  | Amended and
            Restated Articles of Incorporation and Amended and Restated
            Bylaws
          
          of the Parent Company (previously filed as Exhibits to form
            10-Q filed with the
          
          Securities and Exchange Commission by the Company on June 30,
            1997) are
          
          incorporated herein by reference.                                                                                                                                                            |  | 
|                          | 
|                          |  | 4        |  | Fiscal and
             Paying Agency Agreement entered into in connection with
             the issuance
           
           of $75 million of Subordinated Notes by First National Bank
             of Omaha (the
           
           Bank) dated December 7, 1995 between the Bank as
             Issuer and the Bank as
           
           Fiscal and Paying Agent incorporated by
             reference to the Companys Report on
           
           Form 8-K, filed December 12, 1995.                               |  | 
|                          | 
|                          |  | 10(a)    |  | Deferred
              Compensation and Consultative Services Agreement between
              the Bank and
            
            John R. Lauritzen and Amendment to Deferred Compensation
              and Consultative
            
            Services Agreement between the Bank and John R. Lauritzen,
              incorporated by
            
            reference to Exhibit 10(a) of the Companys Annual
              Report on Form 10-K for the
            
            fiscal year ended December 31, 1992.                  |  | 
|                          | 
|                          |  | 10(b)    |  | Deferred
               Compensation and Consultative Services Agreement between
               the Bank and
             
             F. Phillips Giltner and Amendment to Deferred Compensation
               and Consultative
             
             Services Agreement between the Bank and F. Phillips
               Giltner, incorporated by
             
             reference to Exhibit 10(b) of the Companys Annual
               Report on Form 10-K for the
             
             fiscal year ended December 31, 1992. |  | 
|                          | 
|                          |  | 10(c)    |  | First
                National of Nebraska Senior Management Long Term
                Incentive Plan,
              
              incorporated by reference to Exhibit 10(c) of the Company
                s Annual Report on
              
              Form 10-K for the fiscal year ended December 31, 1992.                                                                                                                                                                                                                              |  | 
|                          | 
|                          |  | 10(d)    |  | Management Incentive Plan, incorporated by reference
                 to Exhibit 10(d) of the
               
               Companys Annual Report on Form 10-K for the fiscal
                 year ended December 31,
               
               1992.                                                                                                                                                                                                                                                                                     |  | 
|                          | 
|                          |  | 10(e)    |  | Employment Contract between the Parent Company and
                 Bruce R. Lauritzen,
               
               incorporated by reference to Exhibit 10(i) of the Company
                 s Annual Report on Form
               
               10-K for the fiscal year ended December 31, 1992.                                                                                                                                                                                                                                        |  | 
|                          | 
|                          |  | 27       |  | Financial Data Schedule (EDGAR filing only).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | 




(b) Reports on Form
               8-K


| | No reports on Form 8-K were
                 filed during the quarter for which this report was
                 filed.
| | -----------------------------------------------------------------------------------------------------------------------




SIGNATURES





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





FIRST
             NATIONAL OF
             NEBRASKA
             , INC
             .





|/S
               /    DENNIS
               A. ONEAL
               By:
               Dennis A. ONeal
               Executive Vice
                 President and Treasurer,
               Principal Financial
                 Officer |  | November 4, 1999
               Date: | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------- |