First National reins in growth

Jun 19, 2008 (Omaha World-Herald - McClatchy-Tribune Information Services via COMTEX) -- FINN | Quote | Chart | News | PowerRating -- First National of Nebraska probably will have record profits in 2008 but is tempering its growth plans because consumers are spending less, the Omaha bank company's executives said Wednesday.

"We're scaling back some of these ambitious plans," said Rajive Johri, president of the company's flagship First National Bank of Omaha, which brings in about 60 percent of the company's profits.

A three-year growth plan will become a four-year plan, he said, and some expansion to have occurred by 2009 may not happen until 2010.

First National had planned to open a branch office in Des Moines this summer, Johri said, but recent floods are pushing the opening date to the fall.

Bruce Lauritzen, chairman and chief executive of the holding company owned mostly by his family members, said First National hasn't been hurt directly by the national troubles in the financial markets, sparked by defaults among borrowers and investors who took part in the subprime lending business.

But the indirect impact, such as reduced credit-card spending and lower sales of home-related retail goods, affects every bank, Lauritzen said.

First National's commercial loans, especially related to agriculture, are up strongly this year, but consumers' credit card purchases are up only slightly, he said.

"The consumer is pulling back."

As a result, he said, the bank will focus more on building its reserves and capital than increasing its spending to attract new customers. The bank recently decided not to try to purchase a troubled bank elsewhere in the country, he said.

Adding money to reserves will dampen net income, he said, and today's lower interest rates are squeezing the profit that the bank makes on loans.

Daniel O'Neill, president of First National of Nebraska, said the company did not participate in subprime lending or invest in the questionable securities tied to those loans.

"We stayed within our culture of strong, disciplined lending," he said.

Yet First National is not immune to the effects of the financial sector's problems, O'Neill said. About one-third of its bank loans are in real estate.

"A long-term slump has an adverse effect on our customers," he said.

The men spoke to about 100 people at the 40th annual meeting of First National of Nebraska, the holding company formed in 1968. The meeting was at the company's newer headquarters building, the 40-story First National Tower.

The bank celebrated its 150th anniversary over the past year and posted official net income of $80.2 million in 2007. Lauritzen said the earnings would have been a record $142.4 million if not for money set aside because of three antitrust lawsuits against Visa Inc., of which First National is a shareholder.

Lauritzen said it may take five years to settle the remaining Visa lawsuits. Visa shares owned by First National, worth about $300 million, probably would be enough to pay the company's portion of a settlement, if one is reached, he said.

The company's record net income was $120.4 million in 2006. Lauritzen said he expects to surpass that in part because of one-time gains due to the settlement earlier this year of one of the Visa lawsuits.

During the meeting, Philip Milner, representing the Buttonwood Tree Value Partners investment group of Costa Mesa, Calif., asked Lauritzen whether the bank has received buyout offers. The group owns some First National stock, which is not widely traded on public markets.

Lauritzen said he has not received any offers lately and has no interest in selling. Two of his children, Margaret Lauritzen Dodge and Clarkson Lauritzen, are directors of the holding company.

Also at the meeting, Lauritzen said three independent directors have joined the company's board, forming an audit committee to meet an increasing need for auditing expertise. They are J. William Henry, who retired in 2002 as president of First National Bank, and accountants John Reed and George Behringer.

--Contact the writer: 444-1080, steve.jordon@owh.com

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