SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(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, 1999
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, NC 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
------------------- ------------------------------------
Common Stock, $3.33 1/3 par value New York Stock Exchange, Inc.
(including rights attached thereto) (the "NYSE")
Securities registered pursuant to Section 12(g) of the Exchange Act: None
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 [ ]
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
As of January 31, 2000, there were 984,981,528 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 $33.5625 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 $32.8 billion.
DOCUMENTS INCORPORATED BY REFERENCE IN FORM 10-K
INCORPORATED DOCUMENTS WHERE INCORPORATED IN FORM 10-K
---------------------- --------------------------------
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, 1999 ("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 18, 2000 ("Proxy Statement").
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 financial holding company and 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 80 banking-related acquisitions. In 1999, the Corporation
acquired EVEREN Capital Corporation ("EVEREN"), a Chicago-based broker dealer.
Additional information with respect to the EVEREN acquisition and certain other
acquisitions is set forth in Note 2 on pages C-11 through C-15 in the Annual
Report and incorporated herein by reference.
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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.
Additional information relating to the business of the Corporation and its
subsidiaries is included in the information set forth on pages 13 through 19,
Table 2 on pages T-2 through T-7 and in Note 9 on pages C-24 through C-26 in the
Annual Report and incorporated herein by reference. Information relating to the
Corporation only is set forth in Note 16 on pages C-37 through C-40 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 FINANCIAL HOLDING COMPANIES AND 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 financial holding company and a bank holding company, the Corporation is
subject to regulation under the BHCA and its examination and reporting
requirements. 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 Federal Deposit Insurance Corporation
(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, 1999,
the Corporation's subsidiaries, without obtaining affirmative governmental
approvals, could pay aggregate dividends of $1.5 billion to the Corporation
during 2000. In 1999, the Corporation's subsidiaries paid $2.6 billion 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 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
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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, 1999, the Corporation's tier 1 capital and
total capital ratios were 7.08 percent and 10.87 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 percent. The Corporation's
leverage ratio at December 31, 1999, was 5.97 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 12 on page T-16 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.
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
4
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, 1999, 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.
FINANCIAL MODERNIZATION ACT OF 1999
The Gramm-Leach-Bliley Financial Modernization Act of 1999 was enacted on
November 12, 1999. The Modernization Act:
o allows bank holding companies meeting management, capital and CRA
standards to engage in a substantially broader range of nonbanking
activities than was permissible prior to enactment, including
insurance underwriting and making merchant banking investments in
commercial and financial companies;
o allows insurers and other financial services companies to acquire
banks;
o removes various restrictions that applied to bank holding company
ownership of securities firms and mutual fund advisory companies;
and
o establishes the overall regulatory structure applicable to bank
holding companies that also engage in insurance and securities
operations.
This part of the Modernization Act became effective on March 11, 2000. The
Federal Reserve Board has notified the Corporation that, effective March 13,
2000, the Corporation is authorized to operate as a financial holding company
and therefore is eligible to engage in
5
the broader range of activities that are permitted by the Modernization Act. The
Modernization Act will also modify other current financial laws, including laws
related to financial privacy and community reinvestment. The new financial
privacy provisions will generally prohibit financial institutions, including
First Union, from disclosing nonpublic personal financial information to
nonaffiliated third parties unless customers have the opportunity to "opt out"
of the disclosure.
ADDITIONAL INFORMATION
Additional information related to certain accounting and regulatory matters is
set forth on page 28 in the Annual Report and incorporated herein by reference.
ITEM 2. PROPERTIES.
As of December 31, 1999, the Corporation and its subsidiaries owned 1,287
locations and leased 3,402 locations in 48 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-35 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.
A number of purported class actions were filed in June through August 1999
against the Corporation in the United States District Courts for the Western
District of North Carolina and for the Eastern District of Pennsylvania. These
actions name the Corporation and certain of its executive officers as defendants
and are purported to be on behalf of persons who purchased shares of the
Corporation's common stock from August 14, 1998 through May 24, 1999. These
complaints allege various violations of federal securities law, including
violations of Section 10(b) of the Exchange Act, and that the defendants made
materially misleading statements and/or material omissions which artificially
inflated prices for the Corporation's common stock. Plaintiffs seek a judgment
awarding damages and other relief. The Corporation believes the allegations
contained in these actions are without merit and will vigorously defend them.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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 4 on page T-9 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, 1999, 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. As of December 31,
1999, there were 168,989 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-37 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
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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 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 pages C-21 through C-23 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 10 through 31 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.
7
In response to this Item, the information set forth on pages 24 through 27,
pages T-17 through T-24 and pages C-33 through C-35 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 4 on page T-9 and
on pages C-1 through C-40 in the Annual Report is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
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, 1999, 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 (58). Chairman and Chief Executive Officer. Also, a
director of the Corporation. Mr. Crutchfield is resigning as Chief Executive
Officer, effective as of the Annual Meeting of Stockholders on April 18,
2000, due to illness. Mr. Crutchfield will continue to hold the office of
Chairman.
G. Kennedy Thompson (49). President, since December 1999. Previously, Vice
Chairman, from October 1998 to December 1999, Executive Vice President, from
November 1996 to October 1998, and President, First Union-Florida, prior to
November 1996. Also, a director of the Corporation. Mr. Thompson will also
be Chief Executive Officer, effective as of the Annual Meeting of
Stockholders on April 18, 2000.
Donald A. McMullen, Jr. (51). Vice Chairman, since August 1999. Previously,
Executive Vice-President.
Benjamin P. Jenkins, III (55). Vice Chairman, since August 1999. Previously,
President, First Union-Florida, from June 1999 to August 1999, and
President, First Union-VA/MD/DC, prior to June 1999.
B. J. Walker (69). Vice Chairman.
Robert T. Atwood (59). Executive Vice President and Chief Financial Officer.
Mark C. Treanor (53). Executive Vice President, Secretary and General
Counsel, since August 1999. Previously, Senior Vice President and Senior
Deputy General Counsel, August 1998 to August 1999, and senior partner,
Treanor, Pope & Hughes, prior to August 1998.
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.
8
In response to this Item, the information set forth in the Proxy Statement under
the subheadings "General" and "Certain 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-40 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, 1999, no Current Reports on Form 8-K,
were filed by the Corporation with the Securities and Exchange Commission.
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 15, 2000
BY: /S/ JAMES H. HATCH
-----------------------
JAMES H. HATCH
SENIOR VICE PRESIDENT
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* Director
------------------
G. ALEX BERNHARDT
ERSKINE B. BOWLES* Director
------------------
ERSKINE B. BOWLES
W. WALDO BRADLEY* Director
-----------------
W. WALDO BRADLEY
ROBERT J. BROWN* Director
----------------
ROBERT J. BROWN
A. DANO DAVIS * Director
-------------
A. DANO DAVIS
NORWOOD H. DAVIS, JR.* Director
----------------------
NORWOOD H. DAVIS, JR.
R. STUART DICKSON* Director
------------------
R. STUART DICKSON
9
SIGNATURE CAPACITY
--------- --------
B. F. DOLAN* Director
------------
B. F. DOLAN
RODDEY DOWD, SR.* Director
-----------------
RODDEY DOWD, SR.
______________________ Director
ARTHUR M. GOLDBERG
WILLIAM H. GOODWIN, JR.* Director
------------------------
WILLIAM H. GOODWIN, JR.
FRANK M. HENRY* Director
---------------
FRANK M. HENRY
JAMES E. S. HYNES* Director
-----------------
JAMES E. S. HYNES
ERNEST E. JONES* Director
----------------
ERNEST E. JONES
HERBERT LOTMAN* Director
----------------
HERBERT LOTMAN
RADFORD D. LOVETT* Director
------------------
RADFORD D. LOVETT
MACKEY J. MCDONALD* Director
-------------------
MACKEY J. MCDONALD
PATRICIA A. MCFATE* Director
-------------------
PATRICIA A. MCFATE
__________________ Director
JOSEPH NEUBAUER
RANDOLPH N. REYNOLDS* Director
---------------------
RANDOLPH N. REYNOLDS
JAMES M. SEABROOK* Director
------------------
JAMES M. SEABROOK
______________ Director
RUTH G. SHAW
LANTY L. SMITH* Director
---------------
LANTY L. SMITH
G. KENNEDY THOMPSON* Director
--------------------
G. KENNEDY THOMPSON
*By Mark C. Treanor, Attorney-in-Fact
/s/ MARK C. TREANOR
-------------------
MARK C. TREANOR
Date: March 15, 2000
10
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION LOCATION
----------- ----------- --------
(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 1988 Master Stock Compensation Incorporated by reference to Exhibit (28)
Plan. to the Corporation's Registration
Statement No. 33-47447.
(10)(i) The Corporation's 1992 Master Stock Compensation Incorporated by reference to Exhibit (28)
Plan. to the Corporation's Registration
Statement No. 33-47447.
(10)(j) Employment Agreement between the Corporation and Incorporated by reference to Exhibit (10)(k)
Edward E. Crutchfield. to the Corporation's 1994 Annual Report on
Form 10-K.
(10)(k) Management Restricted Stock Award Agreement. Incorporated by reference to Exhibit (10)
to the Corporation's 1997 Second Quarter
Report on Form 10-Q.
(10)(l) 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)(m) 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)(n) The Corporation's Elective Deferral Plan. Incorporated by reference to Exhibit (4)
to the Corporation's Registration
Statement No. 33-60913.
11
EXHIBIT NO. DESCRIPTION LOCATION
----------- ----------- --------
(10)(o) 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)(p) 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.
(10)(q) Employment Agreement between the Corporation Filed herewith.
and G. Kennedy Thompson.
(10)(r) Form of Employment Agreement between the Filed herewith.
Corporation and certain officers of the Corporation
(including Austin A. Adams, Robert T. Atwood,
Benjamin P. Jenkins, III, Donald A. McMullen, Jr.,
and Mark C. Treanor).
(12) Computations of Consolidated Ratios of Earnings to Filed herewith.
Fixed Charges.
(13) The Corporation's 1999 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, 1999.
* 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.
12