New York, March 01, 2021 -- Moody's Investors Service (Moody's) has affirmed the ratings of First
National of Nebraska, Inc. (First National, long-term
subordinate Baa2), including the baseline credit assessment (BCA)
of its bank subsidiary, First National Bank of Omaha (long-term
deposits A2, long-term issuer rating Baa2, BCA baa1).
The rating outlook remains stable.
Affirmations:
..Issuer: First National Bank of Omaha
.... 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)
....ST Counterparty Risk Rating, Affirmed
P-2
....LT Counterparty Risk Rating, Affirmed
Baa1
.... Issuer Rating, Affirmed Baa2;
outlook stable
....ST Deposit Rating, Affirmed P-1
....LT Deposit Rating, Affirmed A2;
outlook stable
..Issuer: First National of Nebraska, Inc.
....Subordinate Regular Bond/Debenture,
Affirmed Baa2
Outlook Actions:
..Issuer: First National Bank of Omaha
....Outlook, Remains Stable
RATINGS RATIONALE
The ratings affirmation reflects Moody's expectation that First
National's leading direct banking franchise in Omaha and Nebraska
will continue to support its profitability, and healthy core deposit
base. While Moody's views US banks as facing a weak though
improving operating environment, rising asset risk and ongoing profitability
pressures, the stable outlook on First National's ratings
reflects Moody's view that the bank will maintain its robust credit
profile over the next 12-18 months.
First National's good profitability and funding position is evidenced
by its market-leading direct retail and commercial banking business
in Nebraska. As of 30 June 2020, First National ranked first
in Nebraska with 18.5% statewide deposit share, which
lays the foundation for its direct banking revenue aside from its national
credit card business. The bank's funding profile is supported by
its core deposit base, which is sufficient to fully fund its loan
portfolio, resulting in limited reliance on confidence-sensitive
market funding and therefore limited refinancing risk. Although
First National has utilized credit-card securitization for its
funding needs, a funding source that is sensitive to sudden changes
in market conditions, the outstanding balance only represents 1.3%
of total liabilities as of 31 December 2020.
Moody's expects First National, like most US banks,
will face higher nonperforming loans and net charge-offs over the
next 12 months in its loan portfolios most vulnerable to the fallout from
the coronavirus pandemic. First National has a sizable concentration
in credit cards, which accounted for 37% of total loan as
of 31 December 2020, a comparatively large concentration compared
to its regional banks peer. Although earnings from the credit card
business are not disclosed, Moody's believes that it contributes
significantly to First National's overall earnings, particularly
in periods of low loan loss provisions. First National's
credit card portfolio was resilient in 2020 with net charge-off
rates at 4.2%. However, because of higher unemployment,
Moody's expects consumer asset quality to deteriorate moderately
over coming quarters, taking into consideration the benefits from
additional government stimulus and improved prospects for stronger economic
performance, against the backdrop of the successful rollout of a
coronavirus vaccine. Moody's expects bank credit card charge
offs to rise in coming quarters and peak at as much as 25%-50%
above 2019 levels. The bank continues to strategically expand on
its targeted niches including co-branding and agent bank relationships,
and shift away from the national direct market segment which is dominated
by the largest US banks.
First National's Moody's adjusted TCE as a percentage of risk-weighted
assets (Moody's TCE ratio) was 14.72% at 31 December
2020, much higher than similarly rated peer median. Moody's
views First National's closely-held ownership structure as
potentially constraining a capital raise in a distressed situation.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
First National's BCA could be upgraded if the bank sustains good
capital levels while maintaining strong asset quality and profitability.
Upward rating pressure would also emerge if the bank were to develop a
more diversified business mix and earning streams.
First National's BCA and ratings could be downgraded if the bank's
asset quality or capitalization materially weaken.
The principal methodology used in these ratings was Banks Methodology
published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147865.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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 credit rating action on the
support provider and in relation to each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK endorsement
status and on the Moody's office that issued the credit rating is
available on www.moodys.com.
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.
Sadia Nabi
Asst Vice President - Analyst
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
M. Celina Vansetti-Hutchins
MD - Banking
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
