First National Master Note Trust Navigates Complex Antitrust Litigation

TL;DR

**First National Master Note Trust is mired in complex, high-stakes antitrust litigation that could reshape credit card interchange fees and merchant practices, demanding investor vigilance.**

AI Summary

First National Master Note Trust's 2025 10-K filing primarily details ongoing significant legal proceedings, particularly the 'In re: Payment Card Fee and Merchant Discount Antitrust Litigation' involving First National Bank of Omaha and affiliates. The filing indicates that a 2018 Amended Settlement Agreement for the Rule 23(b)(3) Damages Class received final approval on December 13, 2019, with the Second Circuit affirming this partial final judgment on March 15, 2023. Separately, a 2024 Rule 23(b)(2) Class Settlement Agreement for injunctive relief, which included reduced credit interchange rates and a $21 million Merchant Education Program fund, was denied preliminary approval on June 25, 2024. A Superseding and Amended Class Settlement Agreement (the "2025 Proposed Settlement") was entered into on November 10, 2025, proposing further interchange rate reductions, rule modifications for merchants, a $21 million merchant education fund, a $4.5 million independent auditor fund, and up to $206 million for attorneys' fees. Management notes significant estimation risk regarding the Bank's proportionate obligation for this litigation. Additionally, U.S. Bank National Association, as Indenture Trustee, is involved in RMBS and student loan-backed securities litigation, denying liability in both cases.

Why It Matters

This filing is critical for investors as it details the substantial and ongoing antitrust litigation impacting First National Bank of Omaha and, by extension, the First National Master Note Trust. The proposed 2025 settlement, if approved, could significantly alter credit interchange rates and merchant flexibility, directly affecting the profitability of card-issuing banks and the operational costs for merchants. The competitive landscape in payment processing could shift, influencing other financial institutions and payment networks like Visa and Mastercard. Employees involved in card services may see changes in their operational directives, while customers could benefit from enhanced payment options and potentially lower merchant costs.

Risk Assessment

Risk Level: high — The risk level is high due to the extensive and protracted 'In re: Payment Card Fee and Merchant Discount Antitrust Litigation' which has been ongoing since June 2005. The filing explicitly states that the Bank's proportionate obligation for this litigation is 'subject to significant estimation risk and may materially change,' indicating potential for substantial financial impact. Furthermore, the 2025 Proposed Settlement includes up to '$206 million for attorneys’ fees and expenses,' highlighting the considerable financial exposure.

Analyst Insight

Investors should closely monitor the progress of the 2025 Proposed Settlement and its potential approval, as it could significantly impact the profitability of First National Bank of Omaha and the broader credit card industry. Evaluate the Bank's exposure to the 'significant estimation risk' mentioned for litigation liabilities and consider how potential changes to interchange rates might affect future revenue streams.

Key Numbers

• $206 million — Attorneys' fees and expenses (Proposed in the 2025 Settlement for the Rule 23(b)(2) Class Plaintiffs and Defendants)
• $21 million — Merchant Education Program fund (Proposed in the 2025 Settlement to educate small businesses about payment options)
• $4.5 million — Independent auditor expenses fund (Proposed in the 2025 Settlement for monitoring interchange rate reductions)
• 2005 — Start year of antitrust litigation (Indicates the long-standing nature of the 'Payment Card Fee and Merchant Discount Antitrust Litigation')
• 2025 — Fiscal year ended (Reporting period for the 10-K filing)

Key Players & Entities

• First National Master Note Trust (company) — Issuing Entity
• First National Funding LLC (company) — Depositor
• First National Bank of Omaha (company) — Sponsor and defendant in antitrust litigation
• U.S. Bank National Association (company) — Indenture Trustee and defendant in RMBS and student loan litigation
• Mastercard (company) — Defendant in antitrust litigation
• VISA USA (company) — Defendant in antitrust litigation
• U.S. Court of Appeals for the Second Circuit (regulator) — Appellate court for antitrust litigation
• Target Corporation (company) — Plaintiff in 'Other Covered Litigation'
• 7-Eleven, Inc. (company) — Plaintiff in 'Other Covered Litigation'
• Grubhub Holdings Inc. (company) — Plaintiff in 'Other Covered Litigation'

FAQ

Risk Factors

• Antitrust Litigation Exposure [high — legal]: The Trust faces significant financial exposure from the 'In re: Payment Card Fee and Merchant Discount Antitrust Litigation'. A 2019 settlement for damages was affirmed, but a 2024 settlement for injunctive relief was denied preliminary approval. A new '2025 Proposed Settlement' is under consideration, which includes substantial interchange rate reductions and up to $206 million for attorneys' fees, highlighting ongoing legal risks and potential financial impact.
• RMBS and Student Loan Litigation [medium — legal]: U.S. Bank National Association, as Indenture Trustee, is involved in separate litigation concerning RMBS and student loan-backed securities. While the Trustee denies liability in both cases, these ongoing legal actions represent additional potential financial and reputational risks for the Trust.
• Interchange Rate Regulation [medium — regulatory]: The '2025 Proposed Settlement' includes further interchange rate reductions and rule modifications for merchants. This indicates a trend towards increased regulatory scrutiny and potential limitations on revenue streams derived from payment card interchange fees, impacting the Trust's core business model.
• Estimation Risk for Litigation Obligations [high — operational]: Management explicitly notes significant estimation risk regarding the Bank's proportionate obligation for the ongoing antitrust litigation. This uncertainty in quantifying potential liabilities makes financial forecasting and capital allocation challenging.
• Cybersecurity Risks [medium — operational]: While specific details are not provided in the excerpt, cybersecurity is listed as a distinct risk factor. Given the nature of financial institutions and the increasing frequency of cyber threats, this represents a potential operational risk that could lead to financial losses and reputational damage.

Industry Context

The payment card industry is characterized by intense competition among card networks, issuers, and processors. Trends include increasing regulatory scrutiny over interchange fees and merchant practices, as well as ongoing litigation concerning alleged anticompetitive behavior. Fintech innovation and evolving consumer payment preferences also shape the competitive landscape.

Regulatory Implications

The ongoing antitrust litigation and proposed settlements highlight significant regulatory and legal risks related to interchange fees and merchant practices. Potential judicial decisions or settlement terms could lead to mandated changes in business practices, reduced revenue streams, and substantial financial penalties for the Trust.

What Investors Should Do

1. Monitor developments in the '2025 Proposed Settlement' and any subsequent judicial decisions.
2. Assess the Trust's ability to manage estimation risk related to litigation obligations.
3. Evaluate the impact of proposed interchange rate reductions on future revenue streams.

Key Dates

• 2019-12-13: Final approval of 2018 Amended Settlement Agreement for Rule 23(b)(3) Damages Class — Established a precedent for resolving a portion of the antitrust litigation, though subsequent settlements faced challenges.
• 2023-03-15: Second Circuit affirmed partial final judgment for the 2018 settlement — Upheld the previous settlement, reinforcing the legal framework for resolving past claims but not preventing future litigation.
• 2024-06-25: Preliminary approval denied for 2024 Rule 23(b)(2) Class Settlement Agreement — Indicates judicial skepticism towards the proposed injunctive relief and settlement terms, leading to further negotiation and a revised proposal.
• 2025-11-10: Entry into Superseding and Amended Class Settlement Agreement ('2025 Proposed Settlement') — Represents the latest attempt to resolve the antitrust litigation, proposing significant concessions and substantial funds for fees and programs, with ongoing estimation risk.

Glossary

Rule 23(b)(3) Damages Class

A class action settlement focused on compensating class members for monetary damages suffered. (This type of settlement was approved in 2019 for a portion of the antitrust litigation, addressing financial harm to merchants.)

Rule 23(b)(2) Class Settlement Agreement

A class action settlement focused on providing injunctive or equitable relief to class members, rather than primarily monetary damages. (The Trust attempted this type of settlement in 2024, which was denied preliminary approval, leading to the '2025 Proposed Settlement' which includes both injunctive relief and monetary components.)

Interchange rates

Fees paid by a merchant's bank to the cardholder's bank for each credit card transaction. (These rates are central to the antitrust litigation, and proposed reductions in the settlements directly impact the Trust's revenue potential.)

RMBS

Residential Mortgage-Backed Securities, which are mortgage loans bundled together and sold to investors. (The Trust is involved in litigation related to these securities, indicating exposure to risks within the structured finance market.)

Indenture Trustee

A trustee appointed to represent the interests of bondholders in a debt issuance. (U.S. Bank National Association serves in this role for the Trust in certain litigations, highlighting its fiduciary responsibilities and potential liabilities.)

Year-Over-Year Comparison

The 2025 10-K filing is heavily dominated by the ongoing antitrust litigation, with the '2025 Proposed Settlement' representing a significant development compared to the previous year's filing. While specific financial metrics like revenue growth and margin changes are not detailed in the provided excerpt, the increased focus on potential liabilities and proposed concessions suggests a shift towards managing and resolving these legal challenges, potentially impacting future financial performance and risk profiles.

Key Financial Figures

• $21 million — ain amount; (iv) provisions requiring a $21 million fund for a third party to educate merch
• $4.5 million — ying groups, (v) provisions requiring a $4.5 million fund for independent auditor expenses i
• $206 million — ve, and (vi) provisions requiring up to $206 million for attorneys’ fees and expenses.

Filing Documents

• tm261182d1_10k.htm (10-K) — 94KB
• tm261182d1_ex31-1.htm (EX-31.1) — 7KB
• tm261182d1_ex33-1.htm (EX-33.1) — 7KB
• tm261182d1_ex33-2.htm (EX-33.2) — 48KB
• tm261182d1_ex34-1.htm (EX-34.1) — 7KB
• tm261182d1_ex34-2.htm (EX-34.2) — 7KB
• tm261182d1_ex35-1.htm (EX-35.1) — 6KB
• tm261182d1_ex34-1img001.jpg (GRAPHIC) — 4KB
• tm261182d1_ex34-1img002.jpg (GRAPHIC) — 5KB
• tm261182d1_ex34-1img003.jpg (GRAPHIC) — 4KB
• tm261182d1_ex34-2img001.jpg (GRAPHIC) — 3KB
• tm261182d1_ex34-2img002.jpg (GRAPHIC) — 6KB
• 0001104659-26-033717.txt ( ) — 208KB

Business

Business (B) Item 1A:

Risk Factors

Risk Factors (C) Item 1C: Cybersecurity (D) Item 2:

Properties

Properties (E) Item 3:

Unresolved Staff Comments

Item 1B. Unresolved Staff Comments . Not Applicable.

Mine Safety Disclosures

Item 4. Mine Safety Disclosures Not Applicable. PART II THE FOLLOWING ITEMS HAVE BEEN OMITTED IN ACCORDANCE WITH GENERAL INSTRUCTION J TO FORM 10-K: (F) Item 5: Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (G) Item 6:

Selected Financial Data

Selected Financial Data (H) Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operation (I) Item 7A:

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk (J) Item 8:

Financial Statements and Supplementary Data

Financial Statements and Supplementary Data (K) Item 9: Changes in and Disagreements With Accountants on Accounting and Financial Disclosure (L) Item 9A:

Controls and Procedures

Controls and Procedures

Other Information

Item 9B. Other Information . None.

Disclosure Regarding Foreign Jurisdiction that Prevent

Item 9C. Disclosure Regarding Foreign Jurisdiction that Prevent Inspections. Not applicable. PART III THE FOLLOWING ITEMS HAVE BEEN OMITTED IN ACCORDANCE WITH GENERAL INSTRUCTION J TO FORM 10-K: (M) Item 10: Directors, Executive Officers and Corporate Governance (N) Item 11:

Executive Compensation

Executive Compensation (O) Item 12:

Security Ownership of Certain Beneficial Owners and Management

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters (P) Item 13: Certain Relationships and Related Transactions, and Director Independence (Q) Item 14: Principal Accountant Fees and Services PART IV

Exhibits and Financial Statement Schedules

Item 15. Exhibits and Financial Statement Schedules . a) Listed below are the documents filed as part of this report: 1) Financial Statements. None. In accordance with General Instruction J to Form 10-K, the Financial Statements required by Item 8 of Form 10-K have been omitted. 2) Financial Schedules. None. In accordance with General Instruction J to Form 10-K, any Financial Schedules required by Item 8 of Form 10-K have been omitted. 3) Exhibits. See Item 15(b) below. b) The exhibits listed on the Exhibit Index are filed as part of, or incorporated by reference into, this report on Form 10-K. c) See Item 15(a) above. Item 16. Form 10 – K Summary None. SUBSTITUTE INFORMATION PROVIDED IN ACCORDANCE WITH GENERAL INSTRUCTION J TO FORM 10-K:

(b) of Regulation AB. Significant Obligors of Pool

Item 1112(b) of Regulation AB. Significant Obligors of Pool Assets (Financial Information) . Not applicable.

(b)(2) of Regulation AB. Credit Enhancement and Other

Item 1114(b)(2) of Regulation AB. Credit Enhancement and Other Support, Except for Certain Derivatives Instruments (Financial Information Regarding Significant Enhancement Providers) . Not applicable.

(b) of Regulation AB. Certain Derivatives Instruments

Item 1115(b) of Regulation AB. Certain Derivatives Instruments (Financial Information) . Not applicable. 2

of Regulation AB . Legal Proceedings

Item 1117 of Regulation AB . Legal Proceedings . In re: Payment Card Fee and Merchant Discount Antitrust Litigation Beginning in June 2005, several retail merchants filed lawsuits in federal courts, claiming to represent a class of similarly situated merchants, and alleging that Mastercard and VISA USA, together with their members, conspired to charge retailers excessive interchange in violation of federal antitrust laws. In October 2005, these suits were consolidated in re: Payment Card Fee and Merchant Discount Antitrust Litigation. The plaintiffs seek treble damages, injunctive relief, attorneys’ fees and costs. On April 24, 2006, plaintiffs filed a first consolidated and amended complaint, naming First National Bank of Omaha and affiliates (the “Bank”), and others as defendants. The plaintiffs realleged the claims in their original complaints and further claimed that defendants violated federal and California antitrust laws by combining to impose certain fees and to adopt rules and practices of VISA USA and Mastercard that the plaintiffs contend constitute unlawful restraints of trade. In July 2007, the Bank entered into judgment and loss sharing agreements (the sharing agreements) with VISA USA and certain financial institutions to apportion financial responsibilities arising from any potential adverse judgment or settlement. In 2010, the Bank entered into additional contracts among the defendants relating to the apportionment of financial responsibilities which may arise from any potential adverse judgment or settlement. In 2015, the Bank and other defendants signed amendments to the above-referenced agreements to clarify and further define the scope of coverage for potential adverse judgments or settlements. On October 19, 2012, the parties entered into a settlement agreement to resolve these claims. The court granted preliminary approval of the settlement agreement on November 9, 2012. The court entered the formal Class Settlement Orde

of Regulation AB. Affiliations and Certain Relationships

Item 1119 of Regulation AB. Affiliations and Certain Relationships and Related Transactions . The information required by Item 1119 of Regulation AB has been omitted from this report on Form 10-K in reliance on the Instruction to Item 1119.

of Regulation AB. Compliance with Applicable Servicing

Item 1122 of Regulation AB. Compliance with Applicable Servicing Criteria . Each of FNBO and U.S. Bank Trust Company, National Association (the “Trustee”) (each, a “Servicing Participant”), has been identified by the registrant as a party participating in the servicing function during the reporting period with respect to more than 5% of the pool assets held by the Trust. Each of the Servicing Participants has completed a report on an assessment of compliance with the servicing criteria applicable to such Servicing Participant (each, a “Report on Assessment”) during the Trust’s fiscal year ending December 31, 2025, which Reports on Assessment are attached as exhibits to this Form 10-K. In addition, each of the Servicing Participants has provided an attestation report (each, an “Attestation Report”) by a registered independent public accounting firm regarding its related Report on Assessment. Each Attestation Report is attached as an exhibit to this Form 10-K. Neither the Reports on Assessment nor the Attestation Reports have identified any material instances of noncompliance with the servicing criteria applicable to the Servicing Participants.

of Regulation AB. Servicer Compliance Statement

Item 1123 of Regulation AB. Servicer Compliance Statement . FNBO has been identified by the registrant as a servicer during the reporting period with respect to the pool assets held by the Trust. FNBO has provided a Servicer Compliance Statement, signed by an authorized officer, and such Servicer Compliance Statement is attached as an exhibit to this Form 10-K. 6 EXHIBIT INDEX Exhibit 3.1 Articles of Organization of First National Funding LLC (incorporated by reference to registrants’ registration statement filed on April 18, 2002, file no. 333-86574-01) Exhibit 3.2 Operating Agreement of First National Funding LLC, dated as of October 24, 2002 (incorporated by reference to registrants’ Form 8-K filed on November 4, 2002, file no. 333-86574-01) Exhibit 4.1 Second Amended and Restated Master Indenture, dated as of September 23, 2016, between First National Master Note Trust and U.S. Bank National Association (incorporated by reference from registrants’ Form 8-K filed on September 28, 2016, file no. 333-140273-01) Exhibit 4.2 First Amendment to Second Amended and Restated Master Indenture, dated as of April 27, 2023, between First National Master Note Trust and U.S. Bank Trust Company, National Association, as indenture trustee (incorporated by reference from registrants’ Form 8-K filed on April 27, 2023, file no. 333-140273-01) Exhibit 4.3 Second Amendment to Second Amended and Restated Master Indenture, dated as of September 22, 2023, between First National Master Note Trust and U.S. Bank Trust Company, National Association, as indenture trustee (incorporated by reference from registrants’ Form 8-K filed on September 22, 2023, file no. 333-140273-01) Exhibit 4.4 Omnibus Instrument of Appointment and Acceptance of U.S. Bank National Association As Successor Indenture Trustee, dated as of June 18, 2013, among U.S. Bank National Association, The Bank of New York Mellon Trust Company, N.A. and First National Master Note

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