Fitch Downgrades First National Bank of Omaha to 'BB+'; Places FNNI & Subs on Watch Negative

NEW YORK--()--Fitch Ratings has downgraded First National of Nebraska, Inc.'s (FNNI) banking subsidiaries as follows:

First National Bank of Omaha

First National Bank (Fort Collins)

First National Bank (North Platte)

--Long-term IDR to 'BB+' from 'BBB-';

--Short-term IDR to 'B' from 'F3';

--Subordinated debt to 'BB' from 'BB+';

--Long-term deposits to 'BBB-' from 'BBB'; and

--Individual to 'C/D' from 'C'.

Fitch has also placed the ratings for FNNI and all of its rated subsidiaries on Rating Watch Negative. A complete list of rating actions is detailed at the end of this release. Approximately $12.1 billion of subordinated debt and deposits are affected by these actions.

The rating downgrade of the subsidiary banks reflects increased pressure on the parent company's liquidity profile and a reduced ability to serve as a source of strength for the subsidiaries should the need arise.

The placement on Rating Watch Negative reflects reduced liquidity balances at FNNI, given required amortization payments on its term loan and a reduction in dividend upstream potential from subsidiary banks, due to reduced earnings and capital preservation. At March 31, 2010, cash balances of $26.3 million compared to $15 million of quarterly amortization requirements and a note balance of $138.8 million. The term loan is scheduled to mature in June 2011, and Fitch believes that absent a capital raise and/or extension/refinancing of the bank note, the parent company may be unable to meet its debt obligations. Still, Fitch recognizes that efforts are underway to address the issues at the holding company and that there is excess capital at the metro bank subsidiaries that could, potentially, be up-streamed to the parent company with regulatory approval.

Resolution of the Rating Watch will be dependent upon the outcome of liquidity initiatives at the parent. If FNNI is able to raise sufficient capital to comfortably service debt obligations and operating expenses over the medium-term (12 to 24 months) without relying on dividend capacity from subsidiary banks, Fitch could affirm current ratings. Conversely, an inability to increase liquidity at the parent company and/or extend the maturity of the term note, would likely result in a multi-notch downgrade of the ratings of FNNI and its subsidiaries.

FNNI operates 10 commercial bank subsidiaries in Nebraska, Kansas, South Dakota, Colorado, Texas, and Illinois. Credit card operations are housed in the lead bank, First National Bank of Omaha, and a credit card bank charter in Atlanta, Infibank, N.A. FNNI became a private company in 2002 and is controlled by the Lauritzen family. At March 31, 2010, the bank had $16.6 billon of assets and $11.4 billion in managed loans.

Fitch has downgraded and placed the following on Rating Watch Negative:

First National Bank of Omaha

--Long-term IDR to 'BB+' from 'BBB-';

--Short-term IDR to 'B' from 'F3';

--Subordinated debt to 'BB' from 'BB+';

--Long-term deposits to 'BBB-' from 'BBB'; and

--Individual to 'C/D' from 'C'.

First National Bank (Fort Collins)

--Long-term IDR to 'BB+' from 'BBB-';

--Short-term IDR to 'B' from 'F3';

--Long-term deposits to 'BBB-' from 'BBB'; and

--Individual to 'C/D' from 'C'.

First National Bank (North Platte)

--Long-term IDR to 'BB+' from 'BBB-';

--Short-term IDR to 'B' from 'F3';

--Long-term deposits to 'BBB-' from 'BBB'; and

--Individual to 'C/D' from 'C'.

Fitch has placed the following on Rating Watch Negative:

First National of Nebraska, Inc.

--Long-term IDR 'BB+';

--Short-term IDR 'B'; and

--Individual 'C/D'.

First National Bank of Omaha

--Short-term deposits 'F3'.

First National Bank (Fort Collins)

--Short-term deposits 'F3'.

First National Bank (North Platte)

--Short-term deposits 'F3'.

Fitch has affirmed the following ratings:

First National Bank of Omaha

--Support rating '5';

--Support Floor rating 'NF'.

First National Bank (Fort Collins)

--Support rating '5';

--Support Floor rating 'NF'.

First National Bank (North Platte)

--Support rating '5';

--Support Floor rating 'NF'.

First National of Nebraska, Inc.

--Support rating '5';

--Support Floor rating 'NF'.

This rating action reflects the application of Fitch's current criteria which is available on Fitch's web site at 'www.fitchratings.com' and specifically includes:

--'Global Financial Institutions Criteria', dated Dec. 29, 2009;

--'Bank Holding Companies' dated Dec. 30, 2009.

Additional information is available at 'www.fitchratings.com'.

Related Research:

Bank Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=493324

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=493146

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Contacts

Fitch Ratings, New York
Meghan (Crowe) Neenan, CFA, +1-212-908-9121
Doriana Gamboa, +1-212-908-0865
Media Relations
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com

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Contacts

Fitch Ratings, New York
Meghan (Crowe) Neenan, CFA, +1-212-908-9121
Doriana Gamboa, +1-212-908-0865
Media Relations
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com