Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1998 Commission File Number 1-2981
FIRSTAR CORPORATION
Wisconsin 39-1940778
(State of Incorporation) (I.R.S. Employer Identification No.)
777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
Telephone Number (414) 765-4321
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
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Common Stock, $0.01 par value New York Stock Exchange, Inc.
Preferred Share Purchase Rights New York Stock Exchange, Inc.
Securities Registered Pursuant to Section 12(g) of the 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 Securities Exchange
Act of 1934 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 the 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. [X]
As of March 1, 1999, 220,250,656 shares of common stock were outstanding,
and the aggregate market value of the shares (based upon the closing
price) held by nonaffiliates was approximately $17.3 billion.
Documents Incorporated by Reference:
Portions of the 1999 Notice of Annual Meeting and Proxy Statement are
incorporated by reference into Part III of the Form 10-K.
FORM 10-K TABLE OF CONTENTS
Part I Page
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Item 1 - Business.........................................................1
Item 2 - Properties.......................................................2
Item 3 - Legal Proceedings................................................2
Item 4 - Submission of Matters to a Vote of Security Holders..............2
Part II
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Item 5 - Market for Registrant's Common Equity and Related Stockholder
Matters..........................................................2
Item 6 - Selected Financial Data..........................................3
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................3
Item 7A - Quantitative and Qualitative Disclosures About Market Risk.......3
Item 8 - Financial Statements and Supplementary Data......................3
Item 9 - Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.........................................3
Part III
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Item 10 - Directors and Executive Officers of the Registrant...............3
Item 11 - Executive Compensation...........................................5
Item 12 - Security Ownership of Certain Beneficial Owners
and Management...................................................5
Item 13 - Certain Relationships and Related Transactions...................5
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Part IV
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Item 14 - Exhibits, Financial Statement Schedules and Reports
on Form 8-K......................................................5
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SIGNATURES.................................................................7
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PART I
ITEM 1. BUSINESS
General
Firstar Corporation ("Firstar") is the organization created by
the merger of Star Banc Corporation and Firstar Corporation("old
Firstar Corporation") on November 20, 1998. Firstar is a
regional, multi-state bank holding company headquartered in
Milwaukee, Wisconsin. Firstar owns 100 percent of the capital
stock of eight bank subsidiaries having over 700 banking offices
in Wisconsin, Ohio, Iowa, Minnesota, Illinois, Indiana,
Kentucky, Tennessee and Arizona. Firstar also owns various
nonbank and limited purpose bank subsidiaries engaged in related
financial services.
Firstar provides banking services throughout the midwestern
United States. Firstar's bank subsidiaries provide a broad
range of financial services for companies based in its market
region, national business organizations, governmental entities
and individuals. These commercial and consumer banking
activities include accepting demand, time and savings deposits;
making both secured and unsecured business and personal loans;
and issuing and servicing credit cards. The bank subsidiaries
also engage in correspondent banking and provide a full range of
trust and investment management services to individual and
corporate customers. International banking services consisting
of foreign trade financing, issuance and confirmation of letters
of credit, funds collection and foreign exchange transactions
are conducted. Nonbank subsidiaries provide retail brokerage
services, trust and investment management services, residential
mortgage banking activities, consumer financing, title
insurance, business insurance, consumer and credit related
insurance, and corporate operational services.
Firstar's operations include three primary business segments:
consumer banking, wholesale banking, and trust and private
banking. Information on these lines of business are included in
Note 25 of the Notes to Consolidated Financial Statements
included in Firstar's 1998 Annual Report to Shareholders which
is incorporated herein by reference.
Competition
Banking and bank-related services are highly competitive.
Firstar's subsidiaries compete primarily in the Midwestern
United States with numerous competitors, some of which are
larger and have greater financial resources. Firstar competes
with other commercial banks and financial intermediaries, such
as savings banks, savings and loan associations, credit unions,
mortgage companies, leasing companies and a variety of financial
services and advisory companies located throughout the country.
Supervision
Firstar's business activities as a bank holding company are
regulated by the Federal Reserve Board under the Bank Holding
Company Act of 1956, as amended. The activities of Firstar and
those of its banking and nonbanking subsidiaries are limited to
the business of banking and activities closely related or
incidental to banking.
The business of banking is highly regulated, and there are
various requirements and restrictions in the laws of the United
States and the states in which the subsidiary banks operate
including the requirement to maintain reserves against deposits
and adequate capital to support their operations, restrictions
on the nature and amount of loans which may be made by the
banks, restrictions relating to investment (including loans to
and investments in affiliates), branching and other activities
of the banks.
Firstar's subsidiary banks with national charters are
supervised and examined by the Comptroller of the Currency. The
subsidiary banks with state charters are supervised and
examined by their respective state banking agencies and either
by the Federal Reserve if a member bank of the Federal Reserve
or by the Federal Deposit Insurance Corporation("FDIC") if a
nonmember. All of the Firstar subsidiary banks are also subject
to examination by the FDIC.
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In recent years Congress has enacted significant legislation
which has substantially changed the federal deposit insurance
system and the regulatory environment in which depository
institutions and their holding companies operate. The Financial
Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA"), the Comprehensive Thrift and Bank Fraud Prosecution
and Taxpayer Recovery Act of 1990 and the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA") have
significantly increased the enforcement powers of the federal
regulatory agencies having supervisory authority over Firstar
and its subsidiaries. FIRREA also provides that all commonly
controlled FDIC insured depository institutions may be held
liable for any loss incurred by the FDIC resulting from a
failure of, or any assistance given by the FDIC, to any of such
commonly controlled institutions. Federal regulatory agencies
have implemented provisions of FDICIA with respect to taking
prompt corrective action when a depository institution's capital
falls to certain levels. Under the rules, five capital
categories have been established which range from "critically
undercapitalized" to "well capitalized". Failure of a
depository institution to maintain a capital level within the
top two categories will result in specific actions from the
federal regulatory agencies. These actions could include the
inability to pay dividends, restricting new business activity,
prohibiting bank acquisitions, asset growth limitations and
other restrictions on a case by case basis.
In addition to the impact of regulation, commercial banks are
affected significantly by the actions of the Federal Reserve
Board as it attempts to control the money supply and credit
availability in order to influence the economy. Changes to such
monetary policies have had a significant effect on operating
results of financial institutions in the past and are expected
to have such an effect in the future; however, the effect of
possible future changes in such policies on the business and
operations of Firstar cannot be determined.
ITEM 2. PROPERTIES
On December 31, 1998, Firstar had 705 banking locations, of
which 370 were owned and 335 were leased. All of these offices
are considered by management to be well maintained and adequate
for the purpose intended. See Note 8 of the Notes to
Consolidated Financial Statements included in Firstar's 1998
Annual Report to Shareholders which is incorporated herein by
reference for further information on properties.
ITEM 3. LEGAL PROCEEDINGS
Firstar and its subsidiaries are subject to various legal
actions and proceedings in the normal course of business, some
of which involve substantial claims for compensatory or punitive
damages. Although litigation is subject to many uncertainties
and the ultimate exposure with respect to these matters cannot
be ascertained, management does not believe that the final
outcomes will have a material adverse effect on the financial
condition of Firstar.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Special meetings of shareholders of old Firstar Corporation and
Star Banc Corporation were held on October 27, 1998 to approve
the merger of the two companies. The result of this vote was
previously reported in the Form 10Q of Firstar for the period
ended September 30, 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
See Note 28 of the Notes to the Consolidated Financial
Statements included in Firstar's 1998 Annual Report to
Shareholders which is incorporated by reference for information
on stock price ranges and dividends. The principal markets for
the quotations of stock prices is the New York Stock Exchange.
There were 21,558 holders of record of Firstar's $0.01 par value
Common Stock on March 1, 1999.
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ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is included on page 15 of
Firstar's 1998 Annual Report to Shareholders which is
incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by this item is included on pages 16
to 33 of Firstar's 1998 Annual Report to Shareholders which is
incorporated by reference.
ITEM 7A. QUATITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is included on pages 19
to 21 of Firstar's 1998 Annual Report to Shareholders which is
incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of Firstar, the
accompanying Notes to Consolidated Financial Statements and the
Report of Independent Auditors contained in Firstar's 1998
Annual Report to Shareholders are incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Form 8-K of Firstar dated March 9, 1999 is incorporated by
reference. This filing reported the dismissal of Arthur
Anderson LLP and the appointment of PricewaterhouseCoopers LLP
as Firstar's independent public accountants.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Notice of the 1999 Annual Meeting and Proxy Statement filed
pursuant to Regulation 14A is incorporated by reference.
Executive Officers of the Registrant
The following is a list of the twenty executive officers of
Firstar as of December 31, 1998. All of these officers are
elected annually by their respective boards of directors. All
of the officers have been employed by Firstar or Star Banc
Corporation and/or one or more of its subsidiaries during the
past five years with the exceptions of Messrs Arrigoni and Berta
who were previously employed by banking organizations acquired
by Firstar. There are no family relationships between any of
the executive officers.
Name Age Position
Jerry A Grundhofer 54 President and Chief Executive Officer
(Since June 1993)
Daniel A Arrigoni 48 Executive Vice President, Mortgage
Banking (Since December 1998)
John A Becker 56 Vice Chairman and Chief Operating Officer
(Since January 1990)
Kathy P. Beechem 47 Executive Vice President, Metro and
In-Store Banking (Since December 1998)
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Daniel B. Benhase 39 Executive Vice President, Trust and
Investments (Since 1994)
Vince A. Berta 40 Executive Vice President, Western
Kentucky Region (Since December 1998)
Joseph A. Campanella 56 Executive Vice President, Community
Banking (Since June 1991)
Richard K. Davis 40 Vice Chairman, Consumer
Banking (Since November 1993)
Roger L. Fitzimonds 60 Chairman of the Board
(Since February 1991)
Timothy J. Fogerty 41 Executive Vice President, Operations
(Since 1995)
Kenneth R. Griffith 51 Executive Vice President, Retail
Lending and Finance Company
(Since December 1998)
John R. Heistad 52 Executive Vice President, Credit
Administration (Since January 1992)
Jerome C. Kohlhepp 53 Executive Vice President, Specialized
Lending (Since 1994)
Mark J.Masuhr 55 Executive Vice President,
Commercial Products (Since December 1998)
David M. Moffett 46 Vice Chairman and Chief Financial Officer
(Since September 1993)
Ronald E. Roder 50 Executive Vice President, Information
Services (Since December 1988)
Stephen E. Smith 51 Executive Vice President, Human Resources
(Since 1995)
Mary Ellen Stanek 42 President and Chief Executive Officer,
Firstar Investment Research and Management
Company (Since April 1994)
Patricia A. Wesner 45 Executive Vice President, Credit Card/
Debit Card (Since December 1998)
Jay B. Williams 47 Executive Vice President, Sales and
Marketing (Since December 1998)
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ITEM 11. EXECUTIVE COMPENSATION
The Notice of the 1999 Annual Meeting and Proxy Statement filed
pursuant to Regulation 14A is incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The Notice of the 1999 Annual Meeting and Proxy Statement filed
pursuant to Regulation 14A is incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Notice of the 1999 Annual Meeting and Proxy Statement filed
pursuant to Regulation 14A is incorporated by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a)1. Financial Statements
The following financial statements of Firstar are incorporated
by reference from pages 34 to 58 of the 1998 Annual Report to
Shareholders.
Consolidated Balance Sheets as of December 31, 1998 and 1997
Consolidated Statements of Income for the Years Ended December
31, 1998, 1997 and 1996
Consolidated Statements of Shareholders' Equity for the Years
Ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
Independent Auditors' Report
(a)2. Financial Statement Schedules
All financial statement schedules have been included in the
consolidated financial statements or are either not applicable
or not significant.
(a)3. Exhibits
3.1 Articles of Incorporation of Firstar Corporation
(incorporated by reference to Exhibit 3.1 of the
Registration Statement No. 333-64099 of Firstar)
3.2 By-Laws of Firstar Corporation (incorporated by
reference to Exhibit 3.2 of the Registration
Statement No. 333-64099 Firstar)
4.1 Preferred Shares Purchase Rights Plan of Firstar
Corporation (incorporated by reference to Exhibit 4.1
of Form 8-K/A dated November 20, 1998 of Firstar)
10.1 1986 Stock Incentive Plan(previously filed as an
exhibit to Star Banc Corporation's Registration
Statement No. 33-9494 and incorporated by reference)
10.2 Amended 1991 Stock Incentive Plan (previosly filed
as an exhibit to Star Banc Corporation's 1993 Proxy
Statement and incorporated by reference)
10.3 1987 Deferred Compensation Plan (previously filed as an
exhibit to Star Banc Corporation's Registration Statement
No. 33-10085 and incorporated by reference)
10.4 1996 Stock Incentive Plan (previously filed as an exhibit
to Star Banc Corporation's 1996 Proxy Statement and
incorporated by reference)
10.5 Severence and Employment Agreements of Messrs. Fitzsimonds
and Becker (incorporated by reference to Exhibits 10.1
and 10.2 of the Registration Statement No. 333-64099
of Firstar)
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10.6 Severence and Employment Agreements of Mr. Grundhofer
13. 1998 Annual Report to Shareholders
21. Subsidiaries of Firstar Corporation
23. Consent of Independent Auditors
24. Powers of Attorney
27. Financial Data Schedule
Firstar will file with the Commission its long-term debt
indentures as exhibits upon request. Copies of exhibits
may be obtained at a cost of 30 cents per page upon
written request to the chief financial officer.
(b) A Form 8-K dated November 20, 1998 was filed relating to
the completed merger of Star Banc Corporation and Firstar
Corporation.
A Form 8-K/A dated November 20, 1998 was filed relating to the
adoption of the Preferred Shares Purchase Plan of Firstar
A Form 8-K dated March 9, 1999 was filed relating to the change
of Firstar's independent public accountants, the announcement of
a three-for-one stock split and the announcement of a stock
buyback plan.
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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, duly authorized as
of March 22, 1999.
FIRSTAR CORPORATION
/s/ Jerry A. Grundhofer
------------------------
Jerry A. Grundhofer
President, Chief Executive
Officer and Director
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 as of March 22, 1999.
/s/ Jerry A. Grundhofer /s/ Roger L. Fitzsimonds
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Jerry A. Grundhofer Roger L. Fitzsimonds
President, Chief Executive Chairman and Director
Officer and Director
/s/ David M. Moffett /s/ James D. Hogan
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David M. Moffett James D. Hogan
Vice Chairman and Chief Senior Vice President
Financial Officer and Controller
DIRECTORS
Paul M Baker*
Michael E. Batten*
James R. Bridgeland, Jr.*
Laurance L. Browning, Jr.*
Victoria B. Buyniski*
Robert C. Buchanan*
Samuel M. Cassidy*
George M. Chester, Jr*
V. Anderson Coombe*
John C. Dannemiller*
James L. Forbes*
David B. Garvin*
J. P. Hayden, Jr*
Joe F. Hladky*
Roger L. Howe*
Thomas J. Klinedinst, Jr.*
William H. Lacy*
Sheldon B. Lubar*
Kenneth P. Manning*
Daniel F. McKeithan, Jr.*
Charles S. Mechem, Jr.*
Daniel J. Meyer*
David B. O'Maley*
Robert J. O'Toole*
O'dell M. Owens, M.D.,M.P.H.*
Thomas E. Petry*
Judith D. Pyle
John J. Stollenwerk*
Oliver W. Waddell*
William W. Wirtz
*By: /s/ Jerry A. Grundhofer
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Jerry A. Grundhofer
Attorney-in-fact
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