**
 

 

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

 

**FORM 10-K**

 

 

**(Mark One)**
****☒********
**ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For fiscal year ended December 31, 2018**

**OR**

 
****☐********
**TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the transition period from                     to                    **

**Commission File Number of Issuing Entity: 333-209738-01**

**Central Index Key of Issuing Entity: 0001396730**

 

 

**FIRST NATIONAL MASTER NOTE TRUST**

**(Exact name of Issuing Entity as specified in its charter)**

**Commission File Number of Depositor: 333-209738**

**Central Index Key of Depositor: 0001171040**

**FIRST NATIONAL FUNDING LLC**

**(Exact name of Depositor as specified in its charter)**

**Central Index Key of Sponsor: 0000036644**

**FIRST NATIONAL BANK OF OMAHA**

**(Exact name of Sponsor as specified in its charter)**

 

 

 
**Nebraska** **Not Applicable**
**(State or other jurisdiction of incorporation**

**or organization of Issuing Entity)**
 
**(IRS Employer Identification**

**No. of Issuing Entity)**

 
**1620 Dodge Street, Stop Code 3271, Omaha, Nebraska** **68197****(Address of principal executive offices of Issuing Entity)** **(Zip Code)**
**(402) 341-0500**

**(Issuing Entity’s telephone number, including area code)**

**Securities Registered Pursuant to Section 12(b) of the Act: None**

**Securities Registered Pursuant to Section 12(g) of the Act: None**

**Title of Each Class**

 

 

Indicate bycheck mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    YES  ☐    NO  ☒ 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of theAct.    YES  ☐    NO  ☒ 

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant toRule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles).    YES  ☒    NO  ☐ 

Indicate by check mark if disclosureof delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitiveproxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): 

 
Large accelerated filer ☐  Accelerated filer ☐Non-accelerated filer ☒  Smaller reporting company ☐Emerging Growth company ☐   
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extendedtransition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐ 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).    YES  ☐    NO  ☒ 

State the aggregate marketvalue of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bidand asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. 

Registrant does not have any voting or non-voting common equity held bynon-affiliates as of the date of this report, has not been involved in bankruptcy proceedings during the past five years and is not a corporate registrant. 

**DOCUMENTS INCORPORATED BY REFERENCE**

Nodocuments have been incorporated by reference into this Form 10-K.

 

 

 
**

**PART I**

**THE FOLLOWING ITEMS HAVE BEEN OMITTED IN ACCORDANCE WITH GENERAL INSTRUCTION J TO FORM 10-K:**

 
**(A)**  **Item 1:**  **Business****(B)**  **Item 1A:**  **Risk Factors****(C)**  **Item 2:**  **Properties****(D)**  **Item 3:**  **Legal Proceedings**
**Item 1B. Unresolved Staff Comments.**

Not Applicable. 

**Item 4. Mine SafetyDisclosures**

Not Applicable. 

**PART II**

**THE FOLLOWING ITEMS HAVE BEENOMITTED IN ACCORDANCE WITH GENERAL INSTRUCTION J TO FORM 10-K:**

 
**(F)**  **Item 5:**  **Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities****(G)**  **Item 6:**  **Selected Financial Data****(H):**  **Item 7:**  **Management’s Discussion and Analysis of Financial Condition and Results of Operation****(I)**  **Item 7A:**  **Quantitative and Qualitative Disclosures About Market Risk****(J)**  **Item 8:**  **Financial Statements and Supplementary Data****(K)**  **Item 9:**  **Changes in and Disagreements With Accountants on Accounting and Financial Disclosure****(L)**  **Item 9A:**  **Controls and Procedures**
**Item 9B. Other Information.**

None. 

**PART III**

**THE FOLLOWING ITEMS HAVE BEEN OMITTED IN ACCORDANCE WITH GENERAL INSTRUCTION J TO FORM 10-K:**

 
**(M)**  **Item 10:**  **Directors, Executive Officers and Corporate Governance****(N)**  **Item 11:**  **Executive Compensation****(O)**  **Item 12:**  **Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters****(P)**  **Item 13:**  **Certain Relationships and Related Transactions, and Director Independence****(Q)**  **Item 14:**  **Principal Accountant Fees and Services**

**PART IV**

**Item 15. Exhibits and Financial Statement Schedules.**

a)    Listed below are the documents filed as part of this report: 

 
 1)
Financial Statements. None. In accordance with General Instruction J to Form10-K, the Financial Statements required by Item 8 of Form 10-K have been omitted. 

 
 2)
Financial Schedules. None. In accordance with General Instruction J to Form10-K, any Financial Schedules required by Item 8 of Form 10-K have been omitted. 

 
 3)
Exhibits. See Item 15(b) below. 

b)    The exhibits listed on the Exhibit Index are filed as part of, or incorporated by reference into, this report on Form10-K.

c)    See Item 15(a) above. 

**Item 16. Form 10–K Summary**

None. 

**SUBSTITUTE INFORMATION PROVIDED IN ACCORDANCE WITH GENERAL INSTRUCTION J TO FORM 10-K:**

**Item 1112(b) of Regulation AB. Significant Obligors of Pool Assets (Financial Information).**

Not applicable. 

**Item 1114(b)(2) ofRegulation AB. Credit Enhancement and Other Support, Except for Certain Derivatives Instruments (Financial Information Regarding Significant Enhancement Providers).**

Not applicable. 

**Item 1115(b) of RegulationAB. Certain Derivatives Instruments (Financial Information).**

Not applicable. 

 
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**Item 1117 of Regulation AB. Legal Proceedings.**

*In re: Payment Card Fee and Merchant Discount Antitrust Litigation*

Beginning in June 2005, several retail merchants filed lawsuits in federal courts, claiming to represent a class of similarly situatedmerchants, and alleging that MasterCard and VISA USA, together with their members, conspired to charge retailers excessive interchange in violation of federal antitrust laws. In October 2005, these suits were consolidated in In re: Payment Card Feeand Merchant Discount Antitrust Litigation (“MDL 1720”) and venued in the United States District Court for the Eastern District of New York. The plaintiffs seek unspecified treble damages, injunctive relief, attorneys’ fees and costs.

On April 24, 2006, plaintiffs filed a first consolidated and amended complaint, naming First National Bank of Omaha (the“Bank”) and others as defendants. The plaintiffs realleged the claims in their original complaints and further claimed that defendants violated federal and California antitrust laws by combining to impose certain fees and to adopt rulesand practices of VISA USA and MasterCard that the plaintiffs contend constitute unlawful restraints of trade. In July 2007, the Bank entered into judgment and loss sharing agreements (the sharing agreements) with VISA USA and certain financialinstitutions to apportion financial responsibilities arising from any potential adverse judgment or settlement. In 2010, the Bank entered into additional contracts among the defendants relating to the apportionment of financial responsibilitieswhich may arise from any potential adverse judgment or settlement. The Bank and other defendants signed amendments to the above-referenced agreements, including the most recent in October 2015, to clarify and further define the scope of coverage forpotential adverse judgments or settlements. 

On October 19, 2012, the parties entered into a settlement agreement to resolve theseclaims. The court granted preliminary approval of the settlement agreement on November 9, 2012. The court entered the formal Class Settlement Order and Final Judgment on January 14, 2014 (the “Order”). A series of appealswere filed in response to the Order and on June 30, 2016, the U.S. Court of Appeals for the Second Circuit reversed the Order, vacated the lower court’s certification of the merchant class and remanded the case to the lower court forfurther proceedings not inconsistent with the Second Circuit’s order. On November 23, 2016 Class Plaintiffs filed a Petition for Writ of Certiorari with the U.S. Supreme Court seeking a review of the Second Circuit’s decision. OnMarch 27, 2017, the U.S. Supreme Court issued an Order denying Class Plaintiffs’ Petition for Writ of Certiorari. 

Infurtherance of the Second Circuit’s reversal and remand order, the district court in MDL 1720 appointed separate interim co-lead counsel for a Rule 23(b)(2) Putative Injunctive Relief Class and aRule 23(b)(3) Putative Damages Class, and the parties resumed litigation activities. On September 17, 2018, certain of the parties entered into the Superseding and Amended Definitive Class Settlement Agreement of the Rule 23(b)(3)Class Plaintiffs and the Defendants (“Amended Settlement Agreement”). The terms of the Amended Settlement Agreement include: (a) a comprehensive release from the Rule 23(b)(3) Damages Class members (“DamagesClass”) for liability arising out of the claims asserted in the litigation; (b) certain settlement payments to the Damages Class; and (c) distribution to the Damages Class merchants of a portion of interchange across all creditrate categories for a prior period of eight consecutive 

 
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months. On September 10, 2018, the Rule 23(b)(3) Class Plaintiffs filed a Motion for Preliminary Approval of the Amended Settlement Agreement. The Court granted Preliminary Approval ofthe Amended Settlement Agreement on January 24, 2019. The hearing for final approval of the Amended Settlement Agreement is set for November 7, 2019. 

Litigation relating specifically to the injunctive relief claims raised by the Rule 23(b)(2) Putative Injunctive Relief Class in MDL 1720is ongoing. The parties are concluding discovery activities to supplement the record evidence established through the initial discovery period which concluded in November 2008, and proceeding to the expert report phase. 

Pursuant to accounting guidance on guarantees, the Bank, as part of the contingent litigation accrual, has recorded on its books the fairvalue of its potential obligations under the additional contracts it entered into in 2010, as amended and referred to above. This liability is subject to significant estimation risk and may materially change. Furthermore, management cannot predictwith any degree of certainty how the final outcome of MDL 1720 may impact the broader credit card industry, and in this regard, the Bank. 

*OtherLitigation Concerning the Credit Card Industry*

Other antitrust lawsuits have been filed against VISA and MasterCard from time to time,including cases filed by merchants who elected to be excluded from/opt out of the initial 2012 settlement agreement referenced above. The Bank has not been a party to any material suits; however, the Bank is a member of the MasterCard and VISA USAassociations and these suits have been covered in the sharing agreements referred to above. While a number of these suits are ongoing, in each of these covered matters that have been settled to date, the VISA portion of the settlement payments havebeen made from the escrow created by VISA’s stock offerings, and the MasterCard portion has been paid in accordance with the MasterCard sharing agreements referenced above. The Bank has not had any direct liability with respect to suchsettlements. 

U.S. Bank National Association, in its capacity as Indenture Trustee, has provided the following information for thepurposes of complying with the requirements of Regulation AB: 

“Since 2014 various plaintiffs or groups of plaintiffs, primarilyinvestors, have filed claims against U.S. Bank National Association (“U.S. Bank”), in its capacity as trustee or successor trustee (as the case may be) under certain residential mortgage backed securities (“RMBS”) trusts. Theplaintiffs or plaintiff groups have filed substantially similar complaints against other RMBS trustees, including Deutsche Bank, Citibank, HSBC, Bank of New York Mellon and Wells Fargo. The complaints against U.S. Bank allege the trustee causedlosses to investors as a result of alleged failures by the sponsors, mortgage loan sellers and servicers for these RMBS trusts and assert causes of action based upon the trustee’s purported failure to enforce repurchase obligations of mortgageloan sellers for alleged breaches of representations and warranties concerning loan quality. The complaints also assert that the trustee failed to notify securityholders of purported events of default allegedly caused by breaches of servicingstandards by mortgage loan servicers and that the trustee purportedly failed to abide by a heightened standard of care following alleged events of default. 

 
4 

Currently U.S. Bank is a defendant in multiple actions alleging individual or class actionclaims against the trustee with respect to multiple trusts as described above. Previously, U.S. Bank disclosed that the most substantial case was: BlackRock Balanced Capital Portfolio et al v. U.S. Bank National Association, No. 605204/2015(N.Y. Sup. Ct.) (class action alleging claims with respect to approximately 770 trusts) and its companion case BlackRock Core Bond Portfolio et al v. U.S Bank National Association, No.14-cv-9401 (S.D.N.Y.) (collectively, the “BlackRock cases”). U.S. Bank has entered into a settlement agreement that will resolve the BlackRock cases followingapproval of the dismissals by the applicable court. Some of the trusts implicated in the aforementioned Blackrock cases, as well as other trusts, are involved in actions brought by separate groups of plaintiffs related to no more than 100 trusts percase. 

U.S. Bank cannot assure you as to the outcome of any of the litigation, or the possible impact of these litigations on the trusteeor the RMBS trusts. However, U.S. Bank denies liability and believes that it has performed its obligations under the RMBS trusts in good faith, that its actions were not the cause of losses to investors and that it has meritorious defenses, and itintends to contest the plaintiffs’ claims vigorously.” 

**Item 1119 of Regulation AB. Affiliations and Certain Relationships and RelatedTransactions.**

The information required by Item 1119 of Regulation AB has been omitted from this report on Form 10-K in reliance on the Instruction to Item 1119. 

**Item 1122 of Regulation AB. Compliance with Applicable ServicingCriteria.**

Each of FNBO and U.S. Bank National Association (the “Trustee”) (each, a “Servicing Participant”), hasbeen identified by the registrant as a party participating in the servicing function during the reporting period with respect to more than 5% of the pool assets held by the Trust. Each of the Servicing Participants has completed a report on anassessment of compliance with the servicing criteria applicable to such Servicing Participant (each, a “Report on Assessment”) during the Trust’s fiscal year ending December 31, 2018, which Reports on Assessment are attached asexhibits to this Form 10-K. In addition, each of the Servicing Participants has provided an attestation report (each, an “Attestation Report”) by a registered independent public accounting firmregarding its related Report on Assessment. Each Attestation Report is attached as an exhibit to this Form 10-K. Neither the Reports on Assessment nor the Attestation Reports have identified any materialinstances of noncompliance with the servicing criteria applicable to the Servicing Participants. 

**Item 1123 of Regulation AB. Servicer ComplianceStatement.**

FNBO has been identified by the registrant as a servicer during the reporting period with respect to the pool assets heldby the Trust. FNBO has provided a Servicer Compliance Statement, signed by an authorized officer, and such Servicer Compliance Statement is attached as an exhibit to this Form 10-K.

 
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**EXHIBIT INDEX**

 
Exhibit 3.1  Articles of Organization of First National Funding LLC (incorporated by reference to registrants’ registration statement filed on April 18, 2002, file no. 333-86574-01)Exhibit 3.2  Operating Agreement of First National Funding LLC, dated as of October 24, 2002 (incorporated by reference to registrants’ Form 8-K filed on November 4, 2002, file no. 333-86574-01)Exhibit 4.1  Second Amended and Restated Master Indenture, dated as of September 23, 2016, between First National Master Note Trust and U.S. Bank National Association (incorporated by reference from registrants’ Form 8-K filed on September 28, 2016, file no. 333- 209738) Exhibit 4.2  Omnibus Instrument of Appointment and Acceptance of U.S. Bank National Association As Successor Indenture Trustee, dated as of June 18, 2013, among U.S. Bank National Association, The Bank of New York Mellon Trust Company, N.A. and First National Master Note Trust and acknowledged and accepted by First National Funding LLC and First National Bank of Omaha (incorporated by reference from registrants’ Form S-3 filed on July 24, 2013, file no. 333-190096)Exhibit 4.3  Form of Indenture Supplement, including form of Notes (incorporated by reference from registrants’ Form 8-K filed on September 28, 2016, file no. 333- 209738) Exhibit 4.4  Series 2017-1 Indenture Supplement dated as of April 25, 2017 between First National Master Note Trust and U.S. Bank National Association, as indenture trustee (incorporated by reference from registrants’ Form 8-K filed on April 26, 2017, file no. 333-209738)Exhibit 4.5  Risk Retention Agreement dated as of April 25, 2017 by and among First National Bank of Omaha, First National Funding LLC and First National Master Note Trust (incorporated by reference from registrants’ Form 8-K filed on April 26, 2017, file no. 333-209738)Exhibit 4.6  Series 2017-2 Indenture Supplement dated as of October 19, 2017 between First National Master Note Trust and U.S. Bank National Association, as indenture trustee (incorporated by reference from registrants’ Form 8-K filed on October 19, 2017, file no. 333-209738)Exhibit 4.7  Risk Retention Agreement dated as of October 19, 2017 by and among First National Bank of Omaha, First National Funding LLC and First National Master Note Trust (incorporated by reference from registrants’ Form 8-K filed on October 19, 2017, file no. 333-209738)Exhibit 4.8  Series 2018-1 Indenture Supplement dated as of October 17, 2018 between First National Master Note Trust and U.S. Bank National Association, as indenture trustee (incorporated by reference from registrants’ Form 8-K filed on October 17, 2018, file no. 333-209738)Exhibit 4.9  Risk Retention Agreement dated as of October 17, 2018 by and among First National Bank of Omaha, First National Funding LLC and First National Master Note Trust (incorporated by reference from registrants’ Form 8-K filed on October 17, 2018, file no. 333-209738)Exhibit 4.10  Second Amended and Restated Transfer and Servicing Agreement, dated as of September 23, 2016, among First National Funding LLC, First National Bank of Omaha and First National Master Note Trust (incorporated by reference from registrants’ Form 8-K filed on September 28, 2016, file no. 333- 209738) Exhibit 4.11  Second Amended and Restated Trust Agreement of First National Master Note Trust, dated as of September 23, 2016, between First National Funding LLC and Wilmington Trust Company (incorporated by reference from registrants’ Form 8-K filed on September 28, 2016, file no. 333- 209738) Exhibit 4.12  Second Amended and Restated Administration Agreement, dated as of September 23, 2016, between First National Master Note Trust and First National Bank of Omaha (incorporated by reference from registrants’ Form 8-K filed on September 28, 2016, file no. 333- 209738) Exhibit 4.13  Second Amended and Restated Receivables Purchase Agreement, dated as of September 23, 2016, between First National Bank of Omaha and First National Funding LLC (incorporated by reference from registrants’ Form 8-K filed on September 28, 2016, file no. 333- 209738) 
Exhibit 4.14  Asset Representations Review Agreement, dated as of September 23, 2016, among First National Bank of Omaha, First National Funding LLC, First National Master Note Trust and FTI Consulting, Inc. (incorporated by reference from registrants’ Form 8-K filed on September 28, 2016, file no. 333- 209738) Exhibit 23.1  Consent of Independent Registered Public Accounting Firm. Exhibit 31.1  Certification pursuant to Rule 13a-14(a)/ 15d–14(a) of the Securities Exchange Act of 1934 (Section 302 Certification). Exhibit 33.1  Report on Assessment of Compliance with Servicing Criteria (pursuant to Item 1122 of Regulation AB) concerning servicing activities of FNBO for the year ended December 31, 2018.Exhibit 33.2  Report on Assessment of Compliance with Servicing Criteria (pursuant to Item 1122 of Regulation AB) concerning servicing activities of the Trustee for the year ended December 31, 2018.Exhibit 34.1  Independent Registered Public Accounting Firm Attestation Report concerning servicing activities of FNBO for the year ended December 31, 2018. Exhibit 34.2  Independent Registered Public Accounting Firm Attestation Report concerning servicing activities of the Trustee for the year ended December 31, 2018. Exhibit 35.1  Servicer Compliance Statement (pursuant to Item 1123 of Regulation AB) of FNBO for the year ended December 31, 2018. 

**SIGNATURES**

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Issuing Entity has duly caused thisreport to be signed on its behalf by the undersigned, thereunto duly authorized. 

 
Dated: March 27, 2019  FIRST NATIONAL MASTER NOTE TRUST  By: 
First National Bank of Omaha,

As Servicer ofFirst National Master Note Trust
  By: /s/ Timothy D. Hart   Timothy D. Hart, Senior Vice President

**SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OFTHE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT.**

No annual report, proxy statement,form of proxy or other proxy soliciting material has been sent to Noteholders during the period covered by this Annual Report on Form 10-K and the registrant does not intend to furnish such materials toNoteholders subsequent to the filing of this report.