ITEM 1. Business.
The First National Master Note Trust (the "Trust") was formed for the purpose of issuing, from time to time, asset-backed notes under the Master Indenture dated as of October 24, 2002 (as supplemented from time to time, the "Indenture") between the Trust and The Bank of New York (the "Indenture Trustee") and one or more supplements thereto. The property of the Trust includes, and will include, a portfolio of receivables and/or collateral certificates representing a beneficial interest in receivables (collectively, the "Receivables") generated from time to time by certain designated eligible VISA and Mastercard credit card accounts (collectively, the "Accounts") owned by First National Bank of Omaha, all monies due or to become due in payment of the Receivables, all proceeds of such Receivables and any series credit enhancement provided for any particular series or class of notes.
On October 24, 2002, the Trust issued: $332,000,000 Class A Notes, Series 2002-1 Asset Backed Notes; $31,000,000 Class B Notes, Series 2002-1 Asset Backed Notes; and $37,000,000 Class C Notes, Series 2002-1 Asset Backed Notes. These notes were publicly issued pursuant to the prospectus supplement dated October 16, 2002 and the prospectus dated October 16, 2002. These notes were retired in October 2005.
On December 30, 2002, the Trust issued: $136,125,000 Series 2002-2 Floating Rate Class A Asset Backed Notes and $13,875,000 Series 2002-2 Floating Rate Class B Asset Backed Notes. These notes were privately placed. These notes were retired in December 2003.
On March 20, 2003, the Trust issued: $415,000,000 Class A Notes, Series 2003-1 Asset Backed Notes; $38,750,000 Class B Notes, Series 2003-1 Asset Backed Notes; and $46,250,000 Class C Notes, Series 2003-1 Asset Backed Notes. These notes were publicly issued pursuant to the prospectus supplement dated March 13, 2003 and the prospectus dated March 13, 2003. These notes were retired in March 2006.
On November 17, 2003, the Trust issued: $411,250,000 Class A Notes, Series 2003-2 Asset Backed Notes; $40,000,000 Class B Notes, Series 2003-2 Asset Backed Notes; and $48,750,000 Class C Notes, Series 2003-2 Asset Backed Notes. These notes were publicly issued pursuant to the prospectus supplement dated November 4, 2003 and the prospectus dated November 4, 2003.
On December 17, 2003, the Trust issued the VFN Series 2003-3 Asset Backed Notes. These notes were privately placed. The outstanding principal amount of these Notes may vary from time to time, up to $224,375,000 for the Class A-1 Notes, up to $89,750,000 for the Class A-2 Notes, up to $25,625,000 for the Class B-1 Notes and up to $10,250,000 for the Class B-2 Notes.
On June 15, 2004, the Trust issued the VFN Series 2004-1 Asset Backed Notes. These notes were privately placed. The outstanding principal amount of these notes may vary from time to time, up to $246,750,000 for the Class A Notes, up to $24,000,000 for the Class B Notes and up to $29,250,000 for the Class C Notes.
On October 17, 2005, the Trust issued the VFN Series 2005-1 Asset Backed Notes. These notes were privately placed. The outstanding principal amount of these notes may vary from time to time, up to $541,500,000 for the Class A Notes and up to $58,500,000 for the Class B Notes.
ITEM 2.
ITEM 2. Properties.
The property of the Trust includes, and will include, a portfolio of Receivables and/or collateral certificates representing a beneficial interest in Receivables generated from time to time by certain designated eligible Accounts owned by First National Bank of Omaha, all monies due or to become due in payment of the Receivables, all proceeds of such Receivables and any series credit enhancement provided for any particular series or class of notes. Pursuant to the Indenture and pursuant to the related amended and restated pooling and servicing agreement and transfer and servicing agreement, each month the servicer prepares a monthly report (the "Monthly Report") containing information regarding the Trust's notes and assets for the prior month and the related payment dates for the notes. First National Bank of Omaha, as servicer, has executed the Annual Servicer's Certificate regarding its servicing activities which is attached hereto as Exhibit 99.1.
ITEM 3.
ITEM 3. Legal Proceedings.
There is nothing to report with regard to this item.
ITEM 4.
ITEM 4. Submission of Matters to a Vote of Security Holders.
There is nothing to report with regard to this item.
PART II
ITEM 5.
ITEM 5. Market for the Registrant's Common Equity and Related Stockholder Matters.
To the best knowledge of the Trust, there are secondary sales of the Trust's Series 2003-2 Asset Backed Notes, Class A Notes; Series
2003-2 Asset Backed Notes, Class B Notes; and Series 2003-2 Asset Backed Notes, Class C Notes, although the frequency of transactions varies substantially over time.
Each of the publicly offered classes of notes is represented by one or more notes registered in the name of Cede & Co. ("Cede"), the nominee of The Depository Trust Company ("DTC").
ITEM 6.
ITEM 6. Selected Financial Data.
The selected financial data has been omitted since the required information is included in the financial statements.
ITEM 7.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Omitted pursuant to the no-action letters referred to in the first paragraph of Part I of this report.
ITEM 7A.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.
There is nothing to report with regard to this item.
ITEM 8.
ITEM 8. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the First National Master Note Trust and its Note Holders First National Bank of Omaha Omaha, Nebraska
We have audited the accompanying statements of assets and liabilities arising from cash transactions of the First National Master Note Trust (the "Trust") as of December 31, 2005 and 2004, and the related statements of distributable income arising from cash transactions for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 1 to the financial statements, these financial statements are prepared on the basis of cash receipts and disbursements, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America.
In our opinion, such financial statements present fairly, in all material respects, the assets and liabilities of the Trust at December 31, 2005 and 2004, and its distributable income for each of the three years in the period ended December 31, 2005 on the basis of accounting described in Note 1.
/s/ Deloitte & Touche LLP Omaha, Nebraska March 22, 2006
FIRST NATIONAL MASTER NOTE TRUST
STATEMENTS OF ASSETS AND LIABILITIES ARISING FROM CASH TRANSACTIONS DECEMBER 31, 2005 AND 2004
See notes to cash basis financial statements.
FIRST NATIONAL MASTER NOTE TRUST
STATEMENTS OF DISTRIBUTABLE INCOME ARISING FROM CASH TRANSACTIONS YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
See notes to cash basis financial statements.
FIRST NATIONAL MASTER NOTE TRUST
NOTES TO CASH BASIS FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2005, 2004, AND 2003
1. GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
First National Master Note Trust (the "Trust") was created to acquire interests in credit card receivables and related assets for the purpose of issuing asset-backed notes under the Master Indenture dated October 24, 2002 between First National Master Note Trust and The Bank of New York, and one or more supplements thereto.
First National Bank of Omaha retains servicing responsibility pursuant to the Second Amended and Restated Pooling and Servicing Agreement dated as of October 24, 2002 and the Transfer and Servicing Agreement dated as of October 24, 2002 and receives annual servicing compensation for acting as servicer. In order to facilitate its servicing functions and minimize administrative burdens and expenses, the Bank retains physical possession of the documents relating to the receivables as custodian for the trustee of the Receivables Trust and the Trust. The Trust and the Receivables Trust have no employees.
The financial statements of the Trust are prepared on a cash basis of accounting. Such financial statements differ from financial statements prepared in accordance with accounting principles generally accepted in the United States of America in that interest income and the related assets are recognized when received rather than when earned and distributions are recognized when paid rather than when the obligation is incurred. The statement of assets and liabilities arising from cash transactions as of December 31, 2005 and 2004 reflects the amounts to be distributed on January 15, 2006 and 2005, respectively, which represents the distribution of income received by the Trust for the period December 1, 2005 through December 31, 2005 and December 1, 2004 through December 31, 2004, respectively.
2. CREDIT CARD RECEIVABLES
Credit card receivables for the Trust is in the form of a Collateral Certificate issued by First Bankcard Master Credit Card Trust (the "Receivables Trust") representing an undivided interest in Visa and Mastercard credit card receivables and the earnings thereon originated by First National Bank of Omaha (the "Bank"), an affiliate of the Bank or acquired by the Bank or an affiliate. The Collateral Certificate serves as collateral for the asset-backed notes issued by the Trust.
3. PRINCIPAL AND INTEREST PAYMENT
Collections of principal from the undivided interest in the receivables are used to make principal distributions to note holders and to purchase new credit card receivables on a daily basis.
Collections of finance charges, which includes interest, late fees, non-sufficient funds check fees, annual fees, recoveries of amounts previously written off, and association interchange, are used to pay interest to the note holders, pay servicing fees, purchase new credit card receivables equal to amounts written off during the month and maintain certain reserve and spread accounts. Excess finance charge collections, if any, are distributed to First National Funding LLC, a subsidiary of the Bank. The distribution date is the 15th day of each month (or the next following business day).
4. ASSET-BACKED NOTES
The Trust may issue from time to time asset-backed notes in one or more series, which will consist of one or more classes of notes, secured by the Collateral Certificate. As of December 31, 2005 and 2004, the Trust had issued and had outstanding the following floating rate notes:
Series are either publicly issued or privately placed. The following table summarizes the method of issuance for each series:
The following table summarizes the maturity dates and interest rates as of December 31:
- ----------
(1) In a conduit securitization, the Company's loans are converted into securities and sold to commercial paper issuers which pool the securities with those of other issuers. The amount securitized in a conduit structure is allowed to fluctuate within the terms of the facility. Term securitization structures are for a fixed amount and a fixed term.
(2) Collections of the underlying principal receivables required to pay the Notes on the expected principal payment date were scheduled to be deposited into a trust account for the note holders beginning on March 1, 2005, except that these deposits have been delayed until January 1, 2006 as permitted by Section 4.14 of the Series 2003-1 Indenture Supplement.
(3) Collections of the underlying principal receivables required to pay the Notes on the expected principal payment date were scheduled to be deposited into a trust account for the note holders beginning on November 1, 2005, except that these deposits may begin at a later date if permitted by Section 4.14 of the Series 2003-2 Indenture Supplement.
(4) The Class A and B notes of Series 2003-3 are paid sequentially with a twelve-month scheduled amortization period beginning December 1, 2007.
(5) The Class A, B, and C notes of Series 2004-1 are paid sequentially with a twelve-month scheduled amortization period beginning July 1, 2009.
(6) The Class A and C notes of Series 2005-1 are paid sequentially with a twelve-month scheduled amortization period beginning October 1, 2010.
* London Interbank Offered Rate
** Commercial Paper
5. FEDERAL INCOME TAXES
The Trust is not taxable as a corporation for Federal income tax purposes. Accordingly, no provision for income taxes is reflected in the accompanying financial statements.
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument is the current amount that would be exchanged between willing parties. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Trust's various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.
The following table presents the carrying amounts and fair values of the specified assets and liabilities held by the Trust at December 31, 2005 and 2004. The information presented is based on pertinent information available to management as of December 31, 2005 and 2004. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued since that time, and the current estimated fair value of these financial instruments may have changed since that point in time.
The following methods and assumptions were used in estimating fair value disclosures for the Trust's financial instruments:
CASH AVAILABLE FOR DISTRIBUTION AND INCOME TO BE DISTRIBUTED - The carrying amounts of these financial instruments approximate fair values due to the short-term nature of these instruments.
CREDIT CARD RECEIVABLES - The fair values of the Trust's undivided interest in credit card receivables have been estimated using two methods: 1) the carrying amounts of short-term and variable rate loans approximate fair values excluding certain credit card loans
which are tied to an index floor; and 2) for all other loans, discounting of projected future cash flows. When using the discounting method, loans are pooled in homogeneous groups with similar terms and conditions and discounted at a target rate at which similar loans would be made to borrowers at year end.
ASSET-BACKED NOTES - The carrying amounts of asset-backed notes approximate the fair values because the notes carry variable interest rates.
ITEM 9.
ITEM 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
There is nothing to report with regard to this item.
ITEM 9A.
ITEM 9A. Controls and Procedures.
Not required by Items 307 and 308 of Regulation S-K.
PART III
ITEM 10.
ITEM 10. Directors and Executive Officers of the Registrant.
Omitted pursuant to the no-action letters referred to in the first paragraph of Part I of this report and not required by Instruction 3 to Item 406 of Regulation S-K.
ITEM 11.
ITEM 11. Executive Compensation.
Omitted pursuant to the no-action letters referred to in the first paragraph of Part I of this report.
ITEM 12.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
a) Each publicly offered class of the Trust's notes is represented by one or more notes registered in the name of Cede, the nominee of DTC. An investor holding an interest in such classes of notes is not entitled to receive a note representing such interest except in limited circumstances set forth in the Indenture. Accordingly, Cede is the sole holder of record of such notes, which it holds on behalf of brokers, dealers, banks, and other direct participants in the DTC system. Such direct participants may hold notes for their own accounts or for the accounts of their customers. The name and address of Cede is Cede & Co., c/o The Depository Trust Company, 55 Water Street, New York, NY 10041.
b) Omitted pursuant to the no-action letters referred to in the first paragraph of Part I of this report.
c) Omitted pursuant to the no-action letters referred to in the first paragraph of Part I of this report.
Information required by Item 201(d) of Regulation S-K omitted because the notes are not issued under equity compensation plans.
ITEM 13.
ITEM 13. Certain Relationships and Related Transactions.
There is nothing to report with regard to this item.
ITEM 14.
ITEM 14. Principal Accounting Fees and Services.
Omitted pursuant to the Instruction to Item 14 of Form 10-K.
PART IV
ITEM 15.
ITEM 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
a) Listed below are the documents filed as part of this report:
1) All financial statements are included in Item 8 of this report.
2) Exhibit 23.1 Consent of Independent Registered Public Accounting Firm
Exhibit 31.1 Certification pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.
Exhibit 32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 99.1 Annual Servicer's Certificate.
Exhibit 99.2 Monthly Reports for the due periods beginning in January 2005 and ending in December 2005 are incorporated by reference from the Trust's Current Reports on Form 8-K filed with the Commission on the following dates: February 28, 2005; March 30, 2005; April 26, 2005; May 24, 2005; June 24, 2005; July 29, 2005; August 23, 2005; September 26, 2005; October 27, 2005; November 30, 2005; December 28, 2005 and January 31, 2006 (Commission File No. 000-50139).
b) Reports on Form 8-K:
The following Current Reports on Form 8-K were filed during the fourth quarter of 2005:
c) Included in Item 15(a)(2) of this report pursuant to Items 15(a)(3) and 15(c) of Form 10-K.
d) Omitted pursuant to the no-action letters referred to in the first paragraph of Part I of this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 29, 2006 FIRST NATIONAL MASTER NOTE TRUST
By: First National Bank of Omaha, As Servicer of First National Master Note Trust
By: /s/ Timothy D. Hart --------------------------------------- Timothy D. Hart, Senior Vice President, Treasurer and Assistant Secretary
Dated: March 29, 2006 FIRST NATIONAL FUNDING LLC, as Transferor
By: First National Funding Corporation, Managing Member
By: /s/ Karlyn Knieriem --------------------------------------- Karlyn Knieriem, Senior Vice President and Treasurer