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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (THE "EXCHANGE ACT") for the fiscal year ended
December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
for the transition period from to
Commission file number 1-10000
FIRST UNION CORPORATION
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-0898180
(State of incorporation) (I.R.S. Employer Identification No.)
ONE FIRST UNION CENTER
CHARLOTTE, NORTH CAROLINA 28288-0013
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (704) 374-6565
Securities registered pursuant to Section 12(b) of the Exchange Act:
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
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Common Stock, $3.33 1/3 par value (including rights New York Stock Exchange, Inc. (the "NYSE")
attached thereto)
Securities registered pursuant to Section 12(g) of the Exchange Act: None
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act
subsequent to the distribution of securities under a plan confirmed by a court.
Yes No
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(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
As of January 31, 1999, there were 966,915,734 shares of the registrant's
common stock outstanding, $3.33 1/3 par value per share, and based on the last
reported sale price of $52.50 per share on the NYSE on such date, the aggregate
market value of the registrant's common stock held by those persons deemed by
the registrant to be nonaffiliates was approximately $50 billion.
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DOCUMENTS INCORPORATED BY REFERENCE IN FORM 10-K
INCORPORATED DOCUMENTS WHERE INCORPORATED IN FORM 10-K
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1. Certain portions of the Corporation's Annual Part I -- Items 1 and 2; Part II -- Items 5, 6, 7, 7A
Report to Stockholders for the year ended and 8.
December 31, 1998 ("Annual Report").
2. Certain portions of the Corporation's Proxy Part III -- Items 10, 11, 12 and 13.
Statement for the Annual Meeting of Stockholders
to be held on April 20, 1999 ("Proxy Statement").
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PART I
FIRST UNION CORPORATION (THE "CORPORATION") MAY FROM TIME TO TIME MAKE
WRITTEN OR ORAL "FORWARD-LOOKING STATEMENTS", INCLUDING STATEMENTS CONTAINED IN
THE CORPORATION'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION
(INCLUDING THIS ANNUAL REPORT ON FORM 10-K AND THE EXHIBITS HERETO AND
THERETO), IN ITS REPORTS TO STOCKHOLDERS AND IN OTHER COMMUNICATIONS BY THE
CORPORATION, WHICH ARE MADE IN GOOD FAITH BY THE CORPORATION PURSUANT TO THE
"SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995.
THESE FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHERS, STATEMENTS WITH
RESPECT TO THE CORPORATION'S BELIEFS, PLANS, OBJECTIVES, GOALS, EXPECTATIONS,
ANTICIPATIONS, ESTIMATES AND INTENTIONS THAT ARE SUBJECT TO SIGNIFICANT RISKS
AND UNCERTAINTIES AND ARE SUBJECT TO CHANGE BASED ON VARIOUS FACTORS (MANY OF
WHICH ARE BEYOND THE CORPORATION'S CONTROL). THE WORDS "MAY", "COULD",
"SHOULD", "WOULD", "BELIEVE", "ANTICIPATE", "ESTIMATE", "EXPECT", "INTEND",
"PLAN" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. THE FOLLOWING FACTORS, AMONG OTHERS, COULD CAUSE THE CORPORATION'S
FINANCIAL PERFORMANCE TO DIFFER MATERIALLY FROM THAT EXPRESSED IN SUCH
FORWARD-LOOKING STATEMENTS: THE STRENGTH OF THE UNITED STATES ECONOMY IN
GENERAL AND THE STRENGTH OF THE LOCAL ECONOMIES IN WHICH THE CORPORATION
CONDUCTS OPERATIONS; THE EFFECTS OF, AND CHANGES IN, TRADE, MONETARY AND FISCAL
POLICIES, INCLUDING INTEREST RATE POLICIES OF THE BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM (THE "FEDERAL RESERVE BOARD"); INFLATION; INTEREST RATE,
MARKET AND MONETARY FLUCTUATIONS; THE TIMELY DEVELOPMENT OF COMPETITIVE NEW
PRODUCTS AND SERVICES BY THE CORPORATION AND THE ACCEPTANCE OF SUCH PRODUCTS
AND SERVICES BY CUSTOMERS; THE WILLINGNESS OF CUSTOMERS TO SUBSTITUTE
COMPETITORS' PRODUCTS AND SERVICES FOR THE CORPORATION'S PRODUCTS AND SERVICES
AND VICE VERSA; THE IMPACT OF CHANGES IN FINANCIAL SERVICES' LAWS AND
REGULATIONS (INCLUDING LAWS CONCERNING TAXES, BANKING, SECURITIES AND
INSURANCE); TECHNOLOGICAL CHANGES; FUTURE ACQUISITIONS; THE GROWTH AND
PROFITABILITY OF THE CORPORATION'S NONINTEREST OR FEE INCOME BEING LESS THAN
EXPECTED; UNANTICIPATED REGULATORY OR JUDICIAL PROCEEDINGS; CHANGES IN CONSUMER
SPENDING AND SAVING HABITS; AND THE SUCCESS OF THE CORPORATION AT MANAGING THE
RISKS INVOLVED IN THE FOREGOING.
THE CORPORATION CAUTIONS THAT THE FOREGOING LIST OF IMPORTANT FACTORS IS
NOT EXCLUSIVE. THE CORPORATION INCORPORATES BY REFERENCE THOSE FACTORS INCLUDED
IN THE CORPORATION'S PREVIOUSLY FILED CURRENT REPORTS ON FORM 8-K. THE
CORPORATION DOES NOT UNDERTAKE TO UPDATE ANY FORWARD-LOOKING STATEMENT, WHETHER
WRITTEN OR ORAL, THAT MAY BE MADE FROM TIME TO TIME BY OR ON BEHALF OF THE
CORPORATION.
ITEM 1. BUSINESS.
GENERAL
The Corporation was incorporated under the laws of North Carolina in 1967
and is registered as a bank holding company under the Bank Holding Company Act
of 1956, as amended (the "BHCA"). Pursuant to a corporate reorganization in
1968, a predecessor of First Union National Bank ("FUNB") and First Union
Mortgage Corporation, a mortgage banking firm acquired by such predecessor in
1964, became subsidiaries of the Corporation.
The Corporation provides a wide range of commercial and retail banking and
trust services through full-service banking offices in Connecticut, Delaware,
Florida, Georgia, Maryland, New Jersey, New York, North Carolina, Pennsylvania,
South Carolina, Tennessee, Virginia and Washington, D.C. Such offices are
operated by FUNB, based in Charlotte, North Carolina, except in Delaware, where
such offices are operated by First Union Bank of Delaware. The Corporation also
provides various other financial services, including mortgage banking, credit
card, investment banking, investment advisory, home equity lending, asset-based
lending, leasing, insurance, international and securities brokerage services,
through other subsidiaries.
The Corporation's principal executive offices are located at One First
Union Center, Charlotte, North Carolina 28288-0013 (telephone number (704)
374-6565).
Since the 1985 Supreme Court decision upholding regional interstate
banking legislation, the Corporation has concentrated its efforts on building a
large, diversified financial services organization, primarily doing business in
the eastern region of the United States. Since November 1985, the Corporation
has completed over 75 banking-related acquisitions. In 1998, the Corporation
acquired Wheat First Butcher Singer, Inc., a Virginia-based broker-dealer,
CoreStates Financial Corp ("CoreStates"), a Pennsylvania-based bank holding
company, Bowles Hollowell Conner & Co., a North Carolina-based investment bank,
and The Money Store, Inc. ("TMSI") a California-based sub-prime lender.
Additional information with respect to the CoreStates acquisition, the
TMSI acquisition and certain other acquisitions is set forth in the Annual
Report on page 9 and in Note 2 on pages C-12 through C-14 and incorporated
herein by reference.
1
The Corporation is continually evaluating acquisition opportunities and
frequently conducts due diligence activities in connection with possible
acquisitions. As a result, acquisition discussions and, in some cases,
negotiations frequently take place and future acquisitions involving cash, debt
or equity securities can be expected. Acquisitions typically involve the
payment of a premium over book and market values, and therefore some dilution
of the Corporation's book value and net income per common share may occur in
connection with future transactions.
Additional information relating to the business of the Corporation and its
subsidiaries is set forth on pages 9 through 13, Table 4 on pages T-3 through
T-6 and in Note 9 on page C-22 in the Annual Report and incorporated herein by
reference. Information relating to the Corporation only is set forth in Note 16
on pages C-34 through C-37 in the Annual Report and incorporated herein by
reference.
COMPETITION
The Corporation's subsidiaries face substantial competition in their
operations from banking and nonbanking institutions, including savings and loan
associations, credit unions, money market funds and other investment vehicles,
mutual fund advisory companies, brokerage firms, insurance companies, leasing
companies, credit card issuers, mortgage banking companies, investment banking
companies, finance companies and other types of financial services providers.
SUPERVISION AND REGULATION
THE FOLLOWING DISCUSSION SETS FORTH CERTAIN OF THE MATERIAL ELEMENTS OF
THE REGULATORY FRAMEWORK APPLICABLE TO BANK HOLDING COMPANIES AND THEIR
SUBSIDIARIES AND PROVIDES CERTAIN SPECIFIC INFORMATION RELEVANT TO THE
CORPORATION. THE REGULATORY FRAMEWORK IS INTENDED PRIMARILY FOR THE PROTECTION
OF DEPOSITORS AND THE FEDERAL DEPOSIT INSURANCE FUNDS AND NOT FOR THE
PROTECTION OF SECURITY HOLDERS. TO THE EXTENT THAT THE FOLLOWING INFORMATION
DESCRIBES STATUTORY AND REGULATORY PROVISIONS, IT IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE PARTICULAR STATUTORY AND REGULATORY PROVISIONS. A CHANGE IN
APPLICABLE STATUTES, REGULATIONS OR REGULATORY POLICY MAY HAVE A MATERIAL
EFFECT ON THE BUSINESS OF THE CORPORATION.
GENERAL
As a bank holding company, the Corporation is subject to regulation under
the BHCA and its examination and reporting requirements. Under the BHCA, bank
holding companies may not directly or indirectly acquire the ownership or
control of more than five percent of the voting shares or substantially all of
the assets of any company, including a bank, without the prior approval, or a
waiver of the requirement for such approval, by the Federal Reserve Board. In
addition, bank holding companies are generally prohibited under the BHCA from
engaging in nonbanking activities, subject to certain exceptions.
The earnings of the Corporation's subsidiaries, and therefore the earnings
of the Corporation, are affected by general economic conditions, management
policies and the legislative and governmental actions of various regulatory
authorities, including the Federal Reserve Board, the Comptroller of the
Currency (the "Comptroller") and the FDIC. In addition, there are numerous
governmental requirements and regulations which affect the activities of the
Corporation and its subsidiaries.
PAYMENT OF DIVIDENDS
The Corporation is a legal entity separate and distinct from its banking
and other subsidiaries. A major portion of the revenues of the Corporation
result from amounts paid as dividends to the Corporation by its national bank
subsidiaries. The prior approval of the Comptroller is required if the total of
all dividends declared by a national bank in any calendar year will exceed the
sum of such bank's net profits for that year and its retained net profits for
the preceding two calendar years, less any required transfers to surplus.
Federal law also prohibits national banks from paying dividends which would be
greater than the bank's undivided profits after deducting statutory bad debt in
excess of the bank's allowance for loan losses.
Under the foregoing dividend restrictions and certain restrictions
applicable to certain of the Corporation's nonbanking subsidiaries, as of
December 31, 1998, the Corporation's subsidiaries, without obtaining
affirmative governmental approvals, could pay aggregate dividends of $1.3
billion to the Corporation during 1999. In 1998, the Corporation's subsidiaries
paid $251 million in cash dividends to the Corporation.
In addition, the Corporation and its banking subsidiaries are subject to
various general regulatory policies and requirements relating to the payment of
dividends, including requirements to maintain adequate capital above regulatory
minimums. The appropriate federal regulatory authority is authorized to
determine under certain circumstances relating to the
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financial condition of a bank or bank holding company that the payment of
dividends would be an unsafe or unsound practice and to prohibit payment
thereof. The appropriate federal regulatory authorities have indicated that
paying dividends that deplete a bank's capital base to an inadequate level
would be an unsound and unsafe banking practice and that banking organizations
should generally pay dividends only out of current operating earnings.
BORROWINGS BY THE CORPORATION
There are also various legal restrictions on the extent to which the
Corporation and its nonbank subsidiaries can borrow or otherwise obtain credit
from its banking subsidiaries. In general, these restrictions require that any
such extensions of credit must be secured by designated amounts of specified
collateral and are limited, as to any one of the Corporation or such nonbank
subsidiaries, to ten percent of the lending bank's capital stock and surplus,
and as to the Corporation and all such nonbank subsidiaries in the aggregate,
to 20 percent of such lending bank's capital stock and surplus.
CAPITAL ADEQUACY
Under the risk-based capital requirements for bank holding companies, the
minimum requirement for the ratio of capital to risk-weighted assets (including
certain off-balance-sheet activities, such as standby letters of credit) is
eight percent. At least half of the total capital is to be composed of common
stockholders' equity, retained earnings, a limited amount of qualifying
perpetual preferred stock and minority interests in the equity accounts of
consolidated subsidiaries, less goodwill and certain intangibles ("tier 1
capital" and together with tier 2 capital "total capital"). The remainder of
total capital may consist of mandatory convertible debt securities and a
limited amount of subordinated debt, qualifying preferred stock and loan loss
allowance ("tier 2 capital"). At December 31, 1998, the Corporation's tier 1
capital and total capital ratios were 6.94 percent and 11.12 percent,
respectively.
In addition, the Federal Reserve Board has established minimum leverage
ratio guidelines for bank holding companies. These requirements provide for a
minimum leverage ratio of tier 1 capital to adjusted average quarterly assets
less certain amounts ("leverage ratio") equal to three percent for bank holding
companies that meet certain specified criteria, including having the highest
regulatory rating. All other bank holding companies will generally be required
to maintain a leverage ratio of from at least four to five percent. The
Corporation's leverage ratio at December 31, 1998, was 6.02 percent. The
guidelines also provide that bank holding companies experiencing internal
growth or making acquisitions will be expected to maintain strong capital
positions substantially above the minimum supervisory levels without
significant reliance on intangible assets. Furthermore, the guidelines indicate
that the Federal Reserve Board will continue to consider a "tangible tier 1
leverage ratio" (deducting all intangibles) in evaluating proposals for
expansion or new activity. The Federal Reserve Board has not advised the
Corporation of any specific minimum leverage ratio or tier 1 leverage ratio
applicable to it.
Each of the Corporation's subsidiary banks is subject to similar capital
requirements adopted by the Comptroller or other applicable regulatory agency.
Neither the Comptroller nor such applicable regulatory agency has advised any
of the Corporation's subsidiary banks of any specific minimum leverage ratios
applicable to it. The capital ratios of the bank subsidiaries of the
Corporation are set forth in Table 17 on page T-19 in the Annual Report and
incorporated herein by reference.
SUPPORT OF SUBSIDIARY BANKS
The Federal Deposit Insurance Act, as amended ("FDIA"), among other
things, imposes liability on an institution the deposits of which are insured
by the FDIC, such as the Corporation's subsidiary banks, for certain potential
obligations to the FDIC incurred in connection with other FDIC-insured
institutions under common control with such institution.
Under the National Bank Act, if the capital stock of a national bank is
impaired by losses or otherwise, the Comptroller is authorized to require
payment of the deficiency by assessment upon the bank's stockholders, pro rata,
and to the extent necessary, if any such assessment is not paid by any
stockholder after three months notice, to sell the stock of such stockholder to
make good the deficiency. Under Federal Reserve Board policy, the Corporation
is expected to act as a source of financial strength to each of its subsidiary
banks and to commit resources to support each of such subsidiaries. This
support may be required at times when, absent such Federal Reserve Board
policy, the Corporation may not find itself able to provide it.
Any capital loans by a bank holding company to any of its subsidiary banks
are subordinate in right of payment to deposits and to certain other
indebtedness of such subsidiary banks. In the event of a bank holding company's
bankruptcy, any commitment by the bank holding company to a federal bank
regulatory agency to maintain the capital of a subsidiary bank will be assumed
by the bankruptcy trustee and entitled to a priority of payment.
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PROMPT CORRECTIVE ACTION
The FDIA, among other things, requires the federal banking agencies to
take "prompt corrective action" in respect of depository institutions that do
not meet minimum capital requirements. FDIA establishes five capital tiers:
"well capitalized", "adequately capitalized", "undercapitalized",
"significantly undercapitalized" and "critically undercapitalized". A
depository institution's capital tier will depend upon where its capital levels
compare to various relevant capital measures and certain other factors, as
established by regulation.
Federal regulatory authorities have adopted regulations establishing
relevant capital measures and relevant capital levels applicable to
FDIC-insured banks. The relevant capital measures are the total capital ratio,
the tier 1 capital ratio and the leverage ratio. Under the regulations, an
FDIC-insured bank will be: (i) "well capitalized" if it has a total capital
ratio of ten percent or greater, a tier 1 capital ratio of six percent or
greater and a leverage ratio of five percent or greater and is not subject to
any order or written directive by any such regulatory authority to meet and
maintain a specific capital level for any capital measure; (ii) "adequately
capitalized" if it has a total capital ratio of eight percent or greater, a
tier 1 capital ratio of four percent or greater and a leverage ratio of four
percent or greater (three percent in certain circumstances) and is not "well
capitalized"; (iii) "undercapitalized" if it has a total capital ratio of less
than eight percent, a tier 1 capital ratio of less than four percent or a
leverage ratio of less than four percent (three percent in certain
circumstances); (iv) "significantly undercapitalized" if it has a total capital
ratio of less than six percent, a tier 1 capital ratio of less than three
percent or a leverage ratio of less than three percent; and (v) "critically
undercapitalized" if its tangible equity is equal to or less than two percent
of average quarterly tangible assets. An institution may be downgraded to, or
deemed to be in, a capital category that is lower than is indicated by its
capital ratios if it is determined to be in an unsafe or unsound condition or
if it receives an unsatisfactory examination rating with respect to certain
matters. As of December 31, 1998, all of the Corporation's deposit-taking
subsidiary banks had capital levels that qualify them as being "well
capitalized" under such regulations.
The FDIA generally prohibits an FDIC-insured depository institution from
making any capital distribution (including payment of a dividend) or paying any
management fee to its holding company if the depository institution would
thereafter be "undercapitalized". "Undercapitalized" depository institutions
are subject to growth limitations and are required to submit a capital
restoration plan. The federal banking agencies may not accept a capital plan
without determining, among other things, that the plan is based on realistic
assumptions and is likely to succeed in restoring the depository institution's
capital. In addition, for a capital restoration plan to be acceptable, the
depository institution's parent holding company must guarantee that the
institution will comply with such capital restoration plan. The aggregate
liability of the parent holding company is limited to the lesser of (i) an
amount equal to five percent of the depository institution's total assets at
the time it became "undercapitalized", and (ii) the amount which is necessary
(or would have been necessary) to bring the institution into compliance with
all capital standards applicable with respect to such institution as of the
time it fails to comply with the plan. If a depository institution fails to
submit an acceptable plan, it is treated as if it is "significantly
undercapitalized".
"Significantly undercapitalized" depository institutions may be subject to
a number of requirements and restrictions, including orders to sell sufficient
voting stock to become "adequately capitalized", requirements to reduce total
assets and cessation of receipt of deposits from correspondent banks.
"Critically undercapitalized" institutions are subject to the appointment of a
receiver or conservator. A bank that is not "well capitalized" is subject to
certain limitations relating to so-called "brokered" deposits.
DEPOSITOR PREFERENCE STATUTE
Under federal law, deposits and certain claims for administrative expenses
and employee compensation against an insured depository institution would be
afforded a priority over other general unsecured claims against such an
institution, including federal funds and letters of credit, in the "liquidation
or other resolution" of such an institution by any receiver.
INTERSTATE BANKING AND BRANCHING LEGISLATION
The Reigle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "IBBEA"), authorized interstate acquisitions of banks and bank holding
companies without geographic limitation beginning one year after enactment. In
addition, it authorized, beginning June 1, 1997, a bank to merge with a bank in
another state as long as neither of the states opted out of interstate
branching between the date of enactment of the IBBEA and May 31, 1997. In
addition, a bank may establish and operate a DE NOVO branch in a state in which
the bank does not maintain a branch if that state expressly permits DE NOVO
branching. It was pursuant to authority from IBBEA that the Corporation
reorganized certain of its subsidiary banks in 1997 and in February 1998, as a
result of which FUNB, based in Charlotte, North Carolina, operates in 11 states
and Washington, D.C.
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ADDITIONAL INFORMATION
Additional information related to certain accounting and regulatory
matters is set forth on pages 25 and 26 in the Annual Report and incorporated
herein by reference.
ITEM 2. PROPERTIES.
As of December 31, 1998, the Corporation and its subsidiaries owned 1,372
locations and leased 2,352 locations in 44 states, Washington, D.C., and 29
foreign countries from which their business is conducted, including a
multi-building office complex in Charlotte, North Carolina, which serves as the
administrative headquarters of the Corporation and most of its subsidiaries.
Additional information relating to the Corporation's lease commitments is set
forth in Note 14 on page C-31 in the Annual Report and incorporated herein by
reference.
ITEM 3. LEGAL PROCEEDINGS.
The Corporation and certain of its subsidiaries have been named as
defendants in various legal actions arising from their normal business
activities in which varying amounts are claimed. Although the amount of any
ultimate liability with respect to such matters cannot be determined, in the
opinion of management, based upon the opinions of counsel, any such liability
will not have a material effect on the consolidated financial position of the
Corporation and its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Corporation's common stock is listed on the NYSE. Table 6 on page T-8
in the Annual Report sets forth information relating to the quarterly prices
of, and quarterly dividends paid on, the common stock for the two-year period
ended December 31, 1998, and incorporated herein by reference. Prices shown
represent the high, low and quarter-end sale prices of the common stock as
reported on the NYSE Composite Transactions tape for the periods indicated.
Such prices have been adjusted to reflect a two-for-one stock split effected in
the form of a 100 percent common stock dividend paid on July 31, 1997, to
stockholders of record on July 1, 1997. As of December 31, 1998, there were
146,775 holders of record of the common stock.
Subject to the prior rights of holders of any outstanding shares of the
Corporation's preferred stock or Class A preferred stock, holders of common
stock are entitled to receive such dividends as may be legally declared by the
Board of Directors of the Corporation (the "Board") and, in the event of
dissolution and liquidation, to receive the net assets of the Corporation
remaining after payment of all liabilities, in proportion to their respective
holdings. Additional information concerning certain limitations on the payment
of dividends by the Corporation and its subsidiaries is set forth above under
"Business -- Supervision and Regulation; PAYMENT OF DIVIDENDS" and in Note 16
on page C-34 in the Annual Report and incorporated herein by reference.
Each outstanding share of common stock currently has attached to it one
right (a "Right") issued pursuant to an Amended and Restated Shareholder
Protection Rights Agreement (the "Rights Agreement"). Each Right entitles its
registered holder to purchase one one-hundredth of a share of a junior
participating series of the Corporation's Class A preferred stock designed to
have economic and voting terms similar to those of one share of common stock,
for $105.00, subject to adjustment (the "Rights Exercise Price"), but only
after the earlier to occur (the "Separation Time") of: (i) the tenth business
day (subject to extension) after any person (an "Acquiring Person") (x)
commences a tender or exchange offer, which, if consummated, would result in
such person becoming the beneficial owner of 15 percent or more of the
outstanding shares of common stock, or (y) is determined by the Federal Reserve
Board to "control" the Corporation within the meaning of the BHCA, subject to
certain exceptions; and (ii) the tenth business day after the first date (the
"Flip-in Date") of a public announcement by the Corporation that a person has
become an Acquiring Person. The Rights will not trade separately from the
shares of common stock unless and until the Separation Time occurs.
The Rights Agreement provides that a person will not become an Acquiring
Person under the BHCA control test described above if either (i) the Federal
Reserve Board's control determination would not have been made but for such
person's failure to make certain customary passivity commitments, or such
person's violation of such commitments made, to the Federal Reserve Board, so
long as the Federal Reserve Board determines that such person no longer
controls the Corporation within 30 days (or 60 days in certain circumstances),
or (ii) the Federal Reserve Board's control determination was not based on such
a failure or violation and such person (x) obtains a noncontrol determination
within three years, and (y) is using its best efforts to allow the Corporation
to make any acquisition or engage in any legally permissible activity
notwithstanding such person's being deemed to control the Corporation for
purposes of the BHCA.
The Rights will not be exercisable until the business day following the
Separation Time. The Rights will expire on the earliest of: (i) the Exchange
Time (as defined below); (ii) the close of business on December 28, 2000; and
(iii) the date on which the Rights are redeemed or terminated as described
below (in any such case, the "Expiration Time"). The Rights Exercise Price and
the number of Rights outstanding, or in certain circumstances the securities
purchasable upon exercise of the Rights, are subject to adjustment upon the
occurrence of certain events.
In the event that prior to the Expiration Time a Flip-in Date occurs, the
Corporation will take such action as shall be necessary to ensure and provide
that each Right (other than Rights beneficially owned by an Acquiring Person or
any affiliate, associate or transferee thereof, which Rights shall become void)
shall constitute the right to purchase, from the Corporation, shares of common
stock having an aggregate market price equal to twice the Rights Exercise Price
for an amount in cash equal to the then current Rights Exercise Price. In
addition, the Board may, at its option, at any time after a Flip-in Date, elect
to exchange all of the then outstanding Rights for shares of common stock, at
an exchange ratio of two shares of common stock per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the Separation Time (the "Rights Exchange Rate"). Immediately
upon such action by the Board (the "Exchange Time"), the right to exercise the
Rights will terminate, and each Right will thereafter represent only the right
to receive a number of
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shares of common stock equal to the Rights Exchange Rate. If the Corporation
becomes obligated to issue shares of common stock upon exercise of or in
exchange for Rights, the Corporation, at its option, may substitute therefor
shares of junior participating Class A preferred stock upon exercise of each
Right at a rate of two one-hundredths of a share of junior participating Class
A preferred stock upon the exchange of each Right.
The Rights may be canceled and terminated without any payment to holders
thereof at any time prior to the date they become exercisable and are
redeemable by the Corporation at $0.01 per right, subject to adjustment upon
the occurrence of certain events, at any date between the date on which they
become exercisable and the Flip-in Date. The Rights have no voting rights and
are not entitled to dividends.
The Rights will not prevent a takeover of the Corporation. The Rights,
however, may cause substantial dilution to a person or group that acquires 15
percent or more of the common stock (or that acquires "control" of the
Corporation within the meaning of the BHCA) unless the Rights are first
redeemed or terminated by the Board. Nevertheless, the Rights should not
interfere with a transaction that is in the best interests of the Corporation
and its stockholders because the Rights can be redeemed or terminated, as
hereinabove described, before the consummation of such transaction.
The complete terms of the Rights are set forth in the Rights Agreement.
The foregoing description of the Rights and the Rights Agreement is qualified
in its entirety by reference to such document. A copy of the Rights Agreement
can be obtained upon written request to the Rights Agent, First Union National
Bank, 1525 West W. T. Harris Blvd., 363, Charlotte, North Carolina 28288-1153.
Additional information relating to the Corporation's common stock is set
forth in Note 8 on page C-20 in the Annual Report and incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA.
In response to this Item, the information set forth in Table 1 on page T-1
in the Annual Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
In response to this Item, the information set forth on pages 7 through 27
and pages T-1 through T-27 in the Annual Report is incorporated herein by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
In response to this Item, the information set forth on pages 22 through
24, pages T-20 through T-25 and pages C-29 through C-31 in the Annual Report is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
In response to this Item, the information set forth in Table 6 on page T-8
and on pages C-1 through C-37 in the Annual Report is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
7
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The executive officers of the Corporation are elected to their offices for
one year terms at the meeting of the Board in April of each year. The terms of
any executive officers elected after such date expire at the same time as the
terms of the executive officers elected on such date. The names of each of the
executive officers of the Corporation in office on December 31, 1998, their
ages, their positions with the Corporation on such date, and, if different,
their business experience during the past five years, are as follows:
Edward E. Crutchfield (57). Chairman and Chief Executive Officer. Also, a
director of the Corporation.
John R. Georgius (54). President, since January 1998, and Chief Operating
Officer, since October 1998. Previously, Vice Chairman, from January 1996
to January 1998, and President, from June 1990 to January 1996. Also, a
director of the Corporation.
Charles L. Coltman (56). Vice Chairman, since October 1998. Previously,
Executive Vice President from April 1998 to October 1998. Formerly, Vice
Chairman, CoreStates, from April 1996 to April 1998, and President and
Chief Operating Officer, CoreStates, from August 1994 to April 1996.
G. Kennedy Thompson (48). Vice Chairman, since October 1998. Previously,
Executive Vice President, from November 1996 to October 1998, and
President, First Union-Florida, prior to November 1996.
B. J. Walker (68). Vice Chairman.
Robert T. Atwood (58). Executive Vice President and Chief Financial
Officer.
Marion A. Cowell, Jr. (64). Executive Vice President, Secretary and
General Counsel.
In addition to the foregoing, the information set forth in the Proxy
Statement under the heading "General Information and Nominees", and under the
subheading "Section 16(a) Beneficial Ownership Reporting Compliance" under the
heading "Other Matters Relating to Executive Officers and Directors " is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
In response to this Item, the information set forth in the Proxy Statement
under the heading "Executive Compensation", excluding the information under the
subheadings "HR Committee Report on Executive Compensation" and "Performance
Graph", is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
In response to this Item, the information set forth in the Proxy Statement
relating to the ownership of Common Stock by the directors, executive officers
and principal stockholders of the Corporation under the headings "Voting
Securities and Principal Holders" and "General Information and Nominees" is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In response to this Item, the information set forth in the Proxy Statement
under the subheadings "General" and "Certain Other Relationships" under the
heading "Other Matters Relating to Executive Officers and Directors" is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The consolidated financial statements of the Corporation, including
the notes thereto and independent auditors' report thereon, are set forth on
pages C-1 through C-37 of the Annual Report, and are incorporated herein by
reference. All financial statement schedules are omitted since the required
information is either not applicable, is immaterial or is included in the
consolidated financial statements of the Corporation and notes thereto. A list
of the exhibits to this Form 10-K is set forth on the Exhibit Index immediately
preceding such exhibits and is incorporated herein by reference.
(b) During the quarter ended December 31, 1998, no Current Reports on Form
8-K, were filed by the Corporation with the Securities and Exchange Commission.
8
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.
FIRST UNION CORPORATION
Date: March 16, 1999
By: MARION A. COWELL, JR.
-------------------------------------
MARION A. COWELL, JR.
EXECUTIVE VICE PRESIDENT,
SECRETARY AND GENERAL COUNSEL
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated and on the date indicated.
SIGNATURE CAPACITY
- ------------------------------------ ----------------------------------------------------------
EDWARD E. CRUTCHFIELD* Chairman and Chief Executive Officer and Director
- ----------------------------------
EDWARD E. CRUTCHFIELD
ROBERT T. ATWOOD* Executive Vice President and Chief Financial Officer
- ----------------------------------
ROBERT T. ATWOOD
JAMES H. HATCH* Senior Vice President and Corporate Controller (Principal
- ---------------------------------- Accounting Officer)
JAMES H. HATCH
EDWARD E. BARR* Director
- ----------------------------------
EDWARD E. BARR
G. ALEX BERNHARDT, SR.* Director
- ----------------------------------
G. ALEX BERNHARDT, SR.
W. WALDO BRADLEY* Director
- ----------------------------------
W. WALDO BRADLEY
ROBERT J. BROWN* Director
- ----------------------------------
ROBERT J. BROWN
Director
- ----------------------------------
A. DANO DAVIS
NORWOOD H. DAVIS, JR.* Director
- ----------------------------------
NORWOOD H. DAVIS, JR.
R. STUART DICKSON* Director
- ----------------------------------
R. STUART DICKSON
Director
- ----------------------------------
B. F. DOLAN
9
SIGNATURE CAPACITY
- ------------------------------------ ---------
RODDEY DOWD, SR.* Director
- ----------------------------------
RODDEY DOWD, SR.
JOHN R. GEORGIUS* Director
- ----------------------------------
JOHN R. GEORGIUS
ARTHUR M. GOLDBERG* Director
- ----------------------------------
ARTHUR M. GOLDBERG
WILLIAM H. GOODWIN, JR.* Director
- ----------------------------------
WILLIAM H. GOODWIN, JR.
FRANK M. HENRY* Director
- ----------------------------------
FRANK M. HENRY
ERNEST E. JONES* Director
- ----------------------------------
ERNEST E. JONES
Director
- ----------------------------------
TERRENCE A. LARSEN
HERBERT LOTMAN* Director
- ----------------------------------
HERBERT LOTMAN
Director
- ----------------------------------
RADFORD D. LOVETT
MACKEY J. MCDONALD* Director
- ----------------------------------
MACKEY J. MCDONALD
MALCOLM S. MCDONALD* Director
- ----------------------------------
MALCOLM S. MCDONALD
PATRICIA A. MCFATE* Director
- ----------------------------------
PATRICIA A. MCFATE
JOSEPH NEUBAUER* Director
- ----------------------------------
JOSEPH NEUBAUER
RANDOLPH N. REYNOLDS* Director
- ----------------------------------
RANDOLPH N. REYNOLDS
JAMES M. SEABROOK* Director
- ----------------------------------
JAMES M. SEABROOK
10
SIGNATURE CAPACITY
- ------------------------------------ ---------
RUTH G. SHAW* Director
- ------------------------------------
RUTH G. SHAW
CHARLES M. SHELTON, SR.* Director
- ------------------------------------
CHARLES M. SHELTON, SR.
LANTY L. SMITH* Director
- ------------------------------------
LANTY L. SMITH
*By Marion A. Cowell, Jr., Attorney-in-Fact
MARION A. COWELL, JR.
- ------------------------------------
MARION A. COWELL, JR.
Date: March 16, 1999
11
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION LOCATION
- ------------- -------------------------------------------------------- ------------------------------------------
(2) CoreStates acquisition agreement. Incorporated by reference to Exhibit (2)
to the Corporation's Current Report on
Form 8-K dated November 28, 1997.
Omitted exhibits to be filed upon request
of the Securities and Exchange
Commission.
(3)(a) Restated Articles of Incorporation of the Corporation. Incorporated by reference to Exhibit (4)
to the Corporation's 1998 Third Quarter
Report on Form 10-Q.
(3)(b) Bylaws of the Corporation, as amended. Incorporated by reference to Exhibit
(3)(b) to the Corporation's 1995 Annual
Report on Form 10-K.
(4)(a) Instruments defining the rights of the holders of the *
Corporation's long-term debt.
(4)(b) The Corporation's Amended and Restated Shareholder Incorporated by reference to Exhibit (4)
Protection Rights Agreement. to the Corporation's Current Report on
Form 8-K dated October 16, 1996.
(10)(a) The Corporation's Amended and Restated Management Incorporated by reference to Exhibit
Incentive Plan. (10)(a) to the Corporation's 1995 Annual
Report on Form 10-K.
(10)(b) The Corporation's Deferred Compensation Plan for Incorporated by reference to Exhibit
Officers. (10)(b) to the Corporation's 1988 Annual
Report on Form 10-K.
(10)(c) The Corporation's Deferred Compensation Plan for Incorporated by reference to Exhibit
Non-Employee Directors. (10)(c) to the Corporation's 1989 Annual
Report on Form 10-K.
(10)(d) The Corporation's Contract Executive Deferred Incorporated by reference to Exhibit
Compensation Plan. (10)(d) to the Corporation's 1997 Annual
Report on Form 10-K.
(10)(e) The Corporation's Supplemental Executive Long-Term Incorporated by reference to Exhibit
Disability Plan. (10)(d) to the Corporation's 1988 Annual
Report on Form 10-K.
(10)(f) The Corporation's Supplemental Retirement Plan. Incorporated by reference to Exhibit
(10)(f) to the Corporation's 1988 Annual
Report on Form 10-K.
(10)(g) The Corporation's Retirement Plan for Non-Employee Incorporated by reference to Exhibit
Directors. (10)(g) to the Corporation's 1988 Annual
Report on Form 10-K.
(10)(h) The Corporation's 1984 Master Stock Compensation Incorporated by reference to Exhibit (28)
Plan. to the Corporation's Registration
Statement No. 33-47447.
(10)(i) The Corporation's 1988 Master Stock Compensation Incorporated by reference to Exhibit (28)
Plan. to the Corporation's Registration
Statement No. 33-47447.
(10)(j) The Corporation's 1992 Master Stock Compensation Incorporated by reference to Exhibit (28)
Plan. to the Corporation's Registration
Statement No. 33-47447.
(10)(k) Employment Agreement between the Corporation and Incorporated by reference to Exhibit
Edward E. Crutchfield. (10)(k) to the Corporation's 1994 Annual
Report on Form 10-K.
(10)(l) Management Restricted Stock Award Agreement. Incorporated by reference to Exhibit (10)
to the Corporation's 1997 Second Quarter
Report on Form 10-Q.
(10)(m) The Corporation's Management Long-Term Cash Incorporated by reference to Exhibit
Incentive Plan. (10)(m) to the Corporation's 1992 Annual
Report on Form 10-K.
(10)(n) Employment Agreement between the Corporation and Incorporated by reference to Exhibit
Anthony P. Terracciano. (99)(c) to the Corporation's Registration
Statement No. 33-62307.
(10)(o) Employment Agreement between the Corporation and Incorporated by reference to Exhibit (10)
John R. Georgius. to Amendment No. 1 to the Corporation's
Registration Statement No. 33-60835.
(10)(p) The Corporation's Elective Deferral Plan. Incorporated by reference to Exhibit (4)
to the Corporation's Registration
Statement No. 33-60913.
(10)(q) The Corporation's 1996 Master Stock Compensation Incorporated by reference to Exhibit (10)
Plan. to the Corporation's 1996 First Quarter
Report on Form 10-Q.
(10)(r) Employment Agreement between the Corporation and Incorporated by reference to Exhibit
Malcolm S. McDonald. (99)(d) to the Corporation's Registration
Statement No. 333-36839.
(10)(s) Employment Agreement between the Corporation and Incorporated by reference to Exhibit
Terrance A. Larsen. (99)(c) to the Corporation's Registration
Statement No. 333-44015.
(10)(t) The Corporation's 1998 Stock Incentive Plan. Incorporated by reference to Exhibit (10)
to the Corporation's 1998 Second Quarter
Report on Form 10-Q.
(12) Computations of Consolidated Ratios of Earnings to Filed herewith.
Fixed Charges.
(13) The Corporation's 1998 Annual Report to Filed herewith.
Stockholders.**
(21) List of the Corporation's subsidiaries. Filed herewith.
(23) Consent of KPMG LLP. Filed herewith.
(24) Power of Attorney. Filed herewith.
(27) The Corporation's Financial Data Schedule.***
(99) Business Segments for each of the eight quarters ended Filed herewith.
December 31, 1998.
- ---------
* The Corporation agrees to furnish to the Securities and Exchange Commission
upon request, copies of the instruments, including indentures, defining the
rights of the holders of the long-term debt of the Corporation and its
subsidiaries.
** Except for those portions of the Annual Report which are expressly
incorporated by reference in this Form 10-K, the Annual Report is furnished
for the information of the Securities and Exchange Commission only and is
not to be deemed "filed" as part of such Form 10-K.
*** Filing by Electronic Data Gathering, Analysis and Retrieval System only.