New York, February 08, 2017 -- Moody's Investors Service has affirmed all of the ratings of First National
Bank of Omaha (FNBO). FNBO is the primary operating subsidiary
of unrated and privately-held First National of Nebraska,
Inc. FNBO has deposit ratings of A2/Prime-1 and a standalone
baseline credit assessment (BCA) of baa1. The bank also has a Baa2
issuer rating and its counterparty risk assessments are A3(cr)/Prime-2(cr).
FNBO's rating outlook remains stable.
Issuer: First National Bank of Omaha
..Affirmations:
.... LT Bank Deposits, Affirmed A2,
Stable
.... LT Issuer Rating, Affirmed Baa2,
Stable
.... ST Bank Deposits, Affirmed P-1
.... Adjusted Baseline Credit Assessment,
Affirmed baa1
.... Baseline Credit Assessment, Affirmed
baa1
.... LT Counterparty Risk Assessment,
Affirmed A3(cr)
.... ST Counterparty Risk Assessment,
Affirmed P-2(cr)
..Outlook Actions:
....Outlook, Remains Stable
RATINGS RATIONALE
The affirmation considers FNBO's continued strong asset quality and healthy
core deposit base, which supports its liquidity. However,
FNBO's primary rating challenge remains, which is its longstanding
concentration in credit cards. Regarding capital, FNBO's
position is comparatively robust. Nonetheless, as a privately-held
entity, FNBO's access to incremental capital may be constrained,
in Moody's view.
FNBO manages a direct retail and commercial banking franchise centered
on Nebraska, where it is the market share leader as measured by
deposits. This strong core deposit franchise funds not only FNBO's
direct in-footprint loan portfolio, but also its national
credit card book. In the past, FNBO had been more reliant
on credit card securitizations for a portion of its funding base,
but this was reduced through a concerted effort on deposit gathering in
recent years, particularly from commercial customers.
With regard to asset risk, Moody's views FNBO's credit card
business as both a lending concentration and a profitability concentration.
At year-end 2016, credit card loans accounted for around
40% of FNBO's total loan portfolio. Although the business'
earnings are not broken out, given that credit cards are a high-yielding
asset and its loan losses are currently low, Moody's believes
that FNBO's overall earnings are highly reliant on the credit card
business.
Favorably, over the last decade, FNBO has diversified its
credit card business away from a dependence on cards that are broadly
marketed to consumers nationwide, where it has little competitive
advantage, and more towards co-branded and agent bank relationships,
where credit losses are comparatively low. Nonetheless, FNBO's
concentration in credit cards, where losses tend to spike significantly
in times of rising unemployment, is a rating constraint, in
Moody's opinion.
Moody's added that as a function of its geographic footprint,
FNBO has an above-average exposure to the agricultural sector,
which has weakened notably from its peak a few years ago, reflected
in declining commodity prices. However, FNBO has significant
and long-term experience lending to the sector and its underwriting
is conservative, in Moody's view. Also, FNBO's
total agriculture portfolio is less than its capital base. Nonetheless,
an increase in the sector's credit costs would not be surprising
over the next year.
What Could Change the Rating Up
For upward movement on FNBO's standalone BCA to emerge, a more diversified
business mix and earnings stream are required.
What Could Change the Rating Down
Downward movement on FNBO's standalone BCA would result if Moody's
believes that the bank's asset risk or capital ratios will materially
weaken.
The principal methodology used in these ratings was Banks published in
January 2016. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Allen H. Tischler
Senior Vice President
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Robert Young
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
