1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the Fiscal Year Ended December 31, 1997.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACTION OF 1934
Commission File Number: 0-6198
Full Title of Plan: FIRST AMERICAN CORPORATION
FIRST INCENTIVE REWARD SAVINGS THRIFT PLAN
Name of issuer of the securities held pursuant to the plan and the address of
its principal office:
FIRST AMERICAN CORPORATION
FIRST AMERICAN CENTER
NASHVILLE, TENNESSEE 37237
Required Information:
Items 1 - 3. Financial Statements and Schedules
The following documents are filed as required for this Annual Report:
A. Financial Statements and Schedules
(1) Independent Auditors' Report
(2) Statements of Net Assets Available for Benefits with Fund
Information
(3) Statements of Changes in Net Assets Available for Benefits
with Fund Information
(4) Notes to Financial Statements
(5) Item 27a - Schedule of Assets Held for Investment Purposes
B. Exhibits
EXHIBIT
NUMBER DESCRIPTION
(1) Consent of KPMG Peat Marwick LLP
2
FIRST AMERICAN CORPORATION
FIRST INCENTIVE REWARD SAVINGS
THRIFT PLAN
Financial Statements and Schedules
December 31, 1997 and 1996
(With Independent Auditors' Report Thereon)
3
INDEPENDENT AUDITORS' REPORT
----------------------------
First American Corporation
Benefit Plan Administrative Committee:
We have audited the accompanying statements of net assets available for benefits
with fund information of First American Corporation First Incentive Reward
Savings Thrift Plan as of December 31, 1997 and 1996, and the related statements
of changes in net assets available for benefits with fund information for each
of the years in the three-year period ended December 31, 1997. These financial
statements are the responsibility of the Benefit Plan Administrative Committee
(Committee). Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Committee, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of First American
Corporation First Incentive Reward Savings Thrift Plan as of December 31, 1997
and 1996, and the changes in net assets available for benefits for each of the
years in the three-year period ended December 31, 1997, in conformity with
generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information included in
Schedule 1 is presented for the purpose of additional analysis and is not a
required part of the basic financial statements, but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The fund information in the statements of net assets available for
benefits and the statements of changes in net assets available for benefits is
presented for purposes of additional analysis rather than to present the net
assets available for benefits and changes in net assets available for benefits
of each fund. The supplementary information in Schedule 1 and the fund
information have been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
June 29, 1998
1
4
FIRST AMERICAN CORPORATION
FIRST INCENTIVE REWARD SAVINGS THRIFT PLAN
Statements of Net Assets Available for Benefits with Fund Information
December 31, 1997 and 1996
AMERISTAR AMERISTAR
EB AMERISTAR CAPITAL
STABLE LIMITED FOUNDERS GROWTH
VALUE DURATION BALANCED PORTFOLIO
FUND FUND FUND FUND
1997 1997 1997 1997
---- ---- ---- ----
Assets:
Investments at fair value (note 3) :
First American Corporation stock (cost of
$33,024,721 and $28,928,411 at
December 31, 1997 and 1996, respectively $ - - - -
Mutual funds (cost of $15,000,370 and $7,343,917
at December 31, 1997 and 1996, respectively 3,972,804 2,251,989 368,834 8,871,433
Money market fund (cost of $3,157,806) - - - -
Participant loans (cost of $659,810) - - - -
--------- --------- ------- ---------
Total investments 3,972,804 2,251,989 368,834 8,871,433
Receivables:
Employer's contributions - - - -
Participants - - - -
Dividends and interest - 45 - 19,815
Due from brokers 16,184 7,059 - 21,687
--------- --------- ------- ---------
Total receivables 16,184 7,104 - 41,502
--------- --------- ------- ---------
Cash 68,513 17,661 31,123 104,239
--------- --------- ------- ---------
Total assets 4,057,501 2,276,754 399,957 9,017,174
Liabilities:
Due to brokers 876 125 626 130
Other - - - -
--------- --------- ------- ---------
Total liabilities 876 125 626 130
--------- --------- ------- ---------
Net assets available for benefits $ 4,056,625 2,276,629 399,331 9,017,044
========= ========= ======= =========
See accompanying notes to financial statements.
Page 2
5
VANGUARD FIRST FUND A
INTER- AIM AMERICAN FIRST
NATIONAL CONSTEL- CORPORATION PARTIC- AMERICAN
STOCK LATION STOCK IPANT CORPORATION
FUND FUND FUND LOANS TOTAL STOCK
1997 1997 1997 1997 1997 1996
---- ---- ---- ---- ---- ----
Assets:
Investments at fair value (note 3) :
First American Corporation stock (cost of
$33,024,721 and $28,928,411 at
December 31, 1997 and 1996, respectively - - 107,503,290 - 107,503,290 63,655,791
Mutual funds (cost of $15,000,370 and $7,343,917
at December 31, 1997 and 1996, respectively 119,049 533,184 - - 16,117,293 -
Money market fund (cost of $3,157,806) - - - - - 20,923
Participant loans (cost of $659,810) - - - 659,810 659,810 -
------- ------- ----------- ------- ----------- ----------
Total investments 119,049 533,184 107,503,290 659,810 124,280,393 63,676,714
Receivables:
Employer's contributions - - 3,276,531 - 3,276,531 2,810,471
Participants - - 111,117 - 111,117 -
Dividends and interest - 30,181 - - 50,041 628
Due from brokers 14 15 213,218 - 258,117 -
------- ------- ----------- ------- ----------- ----------
Total receivables 14 30,196 3,600,866 - 3,695,886 2,811,099
------- ------- ----------- ------- ----------- ----------
Cash 17,215 63,666 68,814 - 371,231 222,042
------- ------- ----------- ------- ----------- ----------
Total assets 136,278 627,046 111,172,970 659,810 128,347,490 66,709,855
Liabilities:
Due to brokers 3,904 638 - - 6,299 -
Other - - 2,147 - 2,147 -
------- ------- ----------- ------- ----------- ----------
Total liabilities 3,204 638 2,147 - 8,446 -
------- ------- ----------- ------- ----------- ---------
Net assets available for benefits 132,374 626,408 111,170,823 659,810 128,339,044 66,709,855
======= ======= =========== ======= =========== ==========
Page 2
6
FUND B FUND C FUND D
BOND EQUITY MARKET TOTAL
1996 1996 1996 1996
---- ---- ---- ----
Assets:
Investments at fair value (note 3) :
First American Corporation stock (cost of
$33,024,721 and $28,928,461 at
December 31, 1997 and 1996, respectively - - - 63,655,791
Mutual funds (cost of $15,000,370 and $7,343,917
at December 31, 1997 and 1996, respectively 2,019,660 5,987,551 - 8,007,211
Money market fund (cost of $3,157,806) 3,037 142 3,133,704 3,157,806
Participant loans (cost of $659,810) - - - -
--------- --------- --------- ----------
Total investments 2,022,697 5,987,693 3,133,704 74,820,808
Receivables:
Employer's contributions - - - 2,810,471
Participation - - - -
Dividends and interest 10,874 40 13,230 24,772
Due from brokers - - - -
--------- --------- --------- ----------
Total receivables 10,874 40 13,230 2,835,243
--------- --------- --------- ----------
Cash 17,291 53,214 14,567 307,114
--------- --------- --------- ----------
Total assets 2,050,862 6,040,947 3,161,501 77,963,165
Liabilities:
Due to brokers - - - -
Other - 3,255 - 3,255
--------- --------- --------- ----------
Total liabilities - 3,255 - 3,255
--------- --------- --------- ----------
Net assets available for benefits 2,050,862 6,037,692 3,161,501 77,959,910
========= ========= ========= ==========
Page 2
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FIRST AMERICAN CORPORATION
FIRST INCENTIVE REWARD SAVINGS THRIFT PLAN
Statements of Changes in Net Assets Available for Benefits with Fund Information
Years ended December 31, 1997, 1996 and 1995
AMERISTAR AMERISTAR
EB AMERISTAR CAPITAL VANGUARD
STABLE LIMITED FOUNDERS GROWTH INTERNATIONAL AIM
VALUE DURATION BALANCED PORTFOLIO STOCK CONSTELLATION
FUND FUND FUND FUND FUND FUND
1997 1997 1997 1997 1997 1997
---- ---- ---- ---- ---- ----
Additions to net assets attributed to:
Investment income:
Net appreciation (depreciation) in
fair value of investments (note 3) $ 1,702 20,278 (17,717) (939,116) (3,278) (16,167)
Interest 69,652 - - - - -
Dividends - cash - 13,039 18,529 1,220,313 3,278 -
---------- --------- ------- --------- ------- -------
Total investment income (loss) 71,354 33,317 812 281,197 - (16,167)
Contributions:
Participants 96,644 105,901 3,867 363,150 2,903 10,231
Employer - cash 28 55 1,558 1,558 110 3,117
Employer - stock - - - - - -
---------- --------- ------- --------- ------- -------
Total contributions 96,672 105,956 5,425 364,708 3,013 13,348
---------- --------- ------- --------- ------- -------
Total additions (deductions) 168,026 139,273 6,237 645,905 3,013 (2,819)
---------- --------- ------- --------- ------- -------
Deductions from net assets attributed to:
Benefits paid to participants 133,150 56,585 - 251,848 - -
Other deductions - - - - - -
---------- --------- ------- --------- ------- -------
Total deductions 133,150 56,585 - 251,848 - -
---------- --------- ------- --------- ------- -------
Net increase (decrease) prior to interfund
transfers 34,876 82,688 6,237 394,057 3,013 (2,819)
Interfund transfers 4,021,749 2,193,941 393,094 8,622,987 129,361 629,227
---------- --------- ------- --------- ------- -------
Net increase (decrease) 4,056,625 2,276,629 399,331 9,017,044 132,374 626,408
Net assets available for benefits:
Beginning of year - - - - - -
---------- --------- ------- --------- ------- -------
End of year $4,056,625 2,276,629 399,331 9,017,044 132,374 626,408
========== ========= ======= ========= ======= =======
See accompanying notes to financial statements.
3
8
FIRST FUND A
AMERICAN FIRST
CORPORATION PARTICIPANT AMERICAN
STOCK FUND LOANS CORPORATION
1997 1997 1997 1996 1995
---- ---- ---- ---- ----
Additions to net assets attributed to:
Investment income:
Net appreciation (depreciation) in
fair value of investments (note 3) 1,845,137 - 44,565,532 11,346,559 22,271,954
Interest - - 10,291 10,090 21,112
Dividends - cash 445,983 - 1,258,528 1,333,929 1,157,966
----------- ------- ----------- ---------- ----------
Total investment income (loss) 2,291,120 - 45,834,351 12,690,578 23,451,032
Contributions:
Participants 976,666 - 2,907,082 3,332,347 2,736,730
Employer - cash 3,596,185 - 978,234 3,904,696 2,425,758
Employer - stock - - - - 1,099,975
----------- ------- ----------- ---------- ----------
Total contributions 4,572,851 - 3,885,316 7,237,043 6,262,463
----------- ------- ----------- ---------- ----------
Total additions (deductions) 6,863,971 - 49,719,667 19,927,621 29,713,495
----------- ------- ----------- ---------- ----------
Deductions from net assets attributed to:
Benefits paid to participants 2,643,122 - 7,002,892 6,935,764 5,067,459
Other deductions - - - 8,581 -
----------- ------- ----------- ---------- ----------
Total deductions 2,643,122 - 7,002,892 6,944,345 5,067,459
----------- ------- ----------- ---------- ----------
Net increase (decrease) prior to interfund
transfers 4,220,849 - 42,716,775 12,983,276 24,646,036
Interfund transfers 106,949,974 659,810 (109,426,630) (207,026) (537,465)
------------ ------- ----------- ---------- ----------
Net increase (decrease) 111,170,823 659,810 (66,709,855) 12,776,250 24,108,571
Net assets available for benefits:
Beginning of year - - 66,709,855 53,933,605 29,825,034
------------ ------- ----------- ---------- ----------
End of year 111,170,823 659,810 - 66,709,855 53,933,605
============ ======= =========== ========== ==========
See accompanying notes to financial statements.
3
9
FUND B FUND C
BOND EQUITY
------------------------------- -------------------------------
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
Additions to net assets attributed to:
Investment income:
Net appreciation (depreciation) in
fair value of investments (note 3) 9,349 (28,425) 96,637 1,886,579 1,023,274 884,724
Interest 117,449 117,573 76,823 67,657 23,313 1,634
Dividends - cash - - - - - -
--------- --------- --------- --------- --------- ---------
Total investment income (loss) 126,798 89,148 173,460 1,954,236 1,046,587 886,358
Contributions:
Participants 397,871 597,024 379,727 1,167,187 1,260,210 930,775
Employer - cash - - - - - -
Employer - stock - - - - - -
--------- --------- --------- --------- --------- ---------
Total contributions 397,871 597,024 379,727 1,167,187 1,280,210 930,775
--------- --------- --------- --------- --------- ---------
Total additions (deductions) 524,669 686,172 553,187 3,121,423 2,326,797 1,817,133
--------- --------- --------- --------- --------- ---------
Deductions from net assets attributed to:
Benefits paid to participants 301,237 351,595 232,327 628,784 700,772 460,680
Other deductions - 411 - - 5,934 -
--------- --------- --------- --------- --------- ---------
Total deductions 301,237 352,006 232,327 628,784 706,706 460,680
--------- --------- --------- --------- --------- ---------
Net increase (decrease) prior to interfund
transfers 223,432 334,166 320,860 2,492,639 1,620,091 1,356,453
Interfund transfers (2,274,294) (12,183) (14,226) (8,530,331) 388,259 63,335
--------- --------- --------- --------- --------- ---------
Net increase (decrease) (2,050,862) 321,983 306,634 (6,037,692) 2,008,350 1,419,788
Net assets available for benefits:
Beginning of year 2,050,862 1,728,879 1,422,245 6,037,692 4,029,342 2,609,554
--------- --------- --------- --------- --------- ---------
End of year - 2,050,862 1,728,879 - 6,037,692 4,029,342
========= ========= ========= ========= ========= =========
See accompanying notes to financial statements.
3
10
FUND D
MONEY
MARKET TOTAL
--------------------------- -----------------------------
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
Additions to net assets attributed to:
Investment income:
Net appreciation (depreciation) in
fair value of investments (note 3) - - - 47,352,299 12,341,408 23,253,315
Interest 158,513 160,645 152,450 423,562 311,621 252,019
Dividends - cash - - - 2,959,670 1,333,929 1,157,966
--------- --------- --------- ----------- ---------- ----------
Total investment income (loss) 158,513 160,645 152,450 50,735,531 13,986,958 24,663,300
Contributions:
Participants 297,103 863,952 387,702 6,328,605 6,073,533 4,434,934
Employer - cash - - - 4,580,845 3,904,696 2,425,758
Employer - stock - - - - - 1,099,975
--------- --------- --------- ----------- ---------- ----------
Total contributions 297,103 863,952 387,702 10,909,450 9,978,229 7,960,667
--------- --------- --------- ----------- ---------- ----------
Total additions (deductions) 455,616 1,024,597 540,152 61,644,981 23,965,187 32,623,967
--------- --------- --------- ----------- ---------- ----------
Deductions from net assets attributed to:
Benefits paid to participants 248,229 778,800 451,434 11,265,847 8,766,931 6,211,900
Other deductions - 156 - - 15,082 -
--------- --------- --------- ----------- ---------- ----------
Total deductions 248,229 778,956 451,434 11,265,847 8,782,013 6,211,900
--------- --------- --------- ----------- ---------- ----------
Net increase (decrease) prior to interfund
transfers 207,387 245,641 88,718 50,379,134 15,183,174 26,412,067
Interfund transfers (3,268,888) (169,050) 488,356 - - -
--------- --------- --------- ----------- ---------- ----------
Net increase (decrease) (3,161,501) 76,591 577,074 50,379,134 15,183,174 26,412,067
Net assets available for benefits:
Beginning of year 3,161,501 3,084,910 2,507,836 77,959,910 62,776,736 36,364,669
--------- --------- --------- ----------- ---------- ----------
End of year - 3,161,501 3,084,910 128,339,044 77,959,910 62,776,736
========= ========= ========= =========== ========== ==========
See accompanying notes to financial statements.
3
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FIRST AMERICAN CORPORATION
FIRST INCENTIVE REWARD SAVINGS THRIFT PLAN
Notes to Financial Statements
December 31, 1997 and 1996
(1) DESCRIPTION OF PLAN
-------------------
The following description of the First American Corporation First
Incentive Reward Savings Thrift Plan (the Plan) provides only general
information. Participants should refer to the Plan and the summary plan
description for a more complete description of the Plan's provisions.
(A) GENERAL
-------
The Plan is a defined contribution plan sponsored by First
American Corporation and is also adopted by certain subsidiaries
(collectively, the Corporation) and administered by the
Corporation's Benefit Plan Administrative Committee (the
Committee). Each participant has an account with dollars invested
and stock shares credited. These amounts represent the current
value of the Plan's net assets including reinvested dividends and
interest. The Plan is subject to the applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended
(ERISA). The Plan is exempt from the minimum funding rules of
ERISA.
Effective December 1, 1997, Committee outsourced the
administrative and record-keeping functions of the Plan to Mid
Atlantic Pension Group (MAPG).
(B) CONTRIBUTIONS
-------------
All employees (excluding hourly paid or special exempt salaried
employees who are regularly scheduled to work less than 20 hours
per week) of First American Corporation or any of its
participating subsidiaries are eligible to participate in the
Plan. Participants may contribute between 1% and 10% of their
compensation up to $150,000 (indexed for inflation) on a matched
pre-tax or matched after-tax basis, at their election. Pre-tax
contributions are made by the employer pursuant to a salary
reduction agreement with the participant.
The Corporation may make two other types of contributions to the
Plan, employer matching contributions and employer profit
contributions, subject to certain limits set by law. Employer
match contributions match participant contributions and salary
reduction contributions in amounts ranging from 25% to 100% and
are based upon the Corporation's performance, which is currently
measured by its productivity ratio for each year. The Corporation
must match participant contributions and salary reduction
contributions at 25%, subject to sufficient net profits, and the
basis for any additional matching, at the Corporation's
discretion, is determined each year. The Corporation's matching
contribution in excess of 25% is contingent on being a participant
on December 31 of that year, except employees terminated for
death, disability, retirement and certain reductions in work
force. Employer profit contributions range from 0% to 2% of a
participant's compensation up to $150,000 (indexed for inflation)
each year and are determined solely at the Corporation's
discretion based on the performance of the Corporation during the
year. The Corporation's contributions to the Plan are invested in
its common stock on behalf of the Plan and are subject to certain
nondiscrimination rules.
(Continued)
4
12
FIRST AMERICAN CORPORATION
FIRST INCENTIVE REWARD SAVINGS THRIFT PLAN
Notes to Financial Statements
Employees may contribute a maximum of an additional 6% of their
base pay in unmatched after-tax deposits each plan year. All
employee contributions are subject to certain nondiscrimination
rules and maximum contribution limits.
(C) PARTICIPANT ACCOUNTS
--------------------
Each participant's account is credited with the (a) participant's
contributions and the Corporation's contributions on his or her
behalf, (b) Plan earnings, and (c) forfeitures of terminated
participants' nonvested accounts which are used to reduce the
Corporation's contributions. Plan earnings are allocated based
upon individual account balances, and forfeitures are allocated on
the basis of the contributions they reduce.
(D) BENEFITS
--------
Under the terms of the Plan, participants are eligible for
distributions upon retirement, disability, termination of service,
or death. The Plan provides various options to certain
participants or their beneficiaries as to the manner of
distribution. Special provisions allow for earlier distributions
of certain participants' deposits and Corporation vested benefits.
Employees are immediately 100% vested in their contributions and
salary reduction contributions and the Corporation's employer
profit contributions plus earnings thereon. The Corporation's
employer match contributions become vested at a rate of 25% per
year of Plan participation.
(E) TRUST FUNDS MANAGED BY FIRST AMERICAN NATIONAL BANK
---------------------------------------------------
Under terms of an agreement between First American National Bank,
the Trustee and a subsidiary of the Corporation, and the Plan, the
Trustee managed four trust funds on behalf of the Plan during
1995, 1996 and through September 30, 1997. These funds included:
Fund A - First American Corporation Common Stock, Fund B - Bond,
Fund C - Equity, and Fund D - Money Market securities.
A participant elected to have the portions of his or her account
that are attributable to participant contributions and salary
reduction contributions made on his or her behalf invested in one
or more of the funds. The following is a description of those
funds.
Fund A - This fund was fully invested, to the extent
practicable, in shares of common stock of the Corporation.
Fund B - This fund was invested by the trustee only in
fixed-income securities, including units of participation in
any fixed-income fund maintained by the Trustee for
tax-qualified plans, commercial bank savings accounts or
certificates of deposit bearing a reasonable rate of interest,
short-term money market instruments and U.S. Treasury
obligations, and including, as may be directed from time to
time by the Trustee, insurance company contracts that provide a
guaranteed rate of return, in which case the Trustee is
expressly authorized to the extent allowed by law to invest in
a single class of assets without any requirement to diversify
the class of assets held in Fund B.
(Continued)
5
13
FIRST AMERICAN CORPORATION
FIRST INCENTIVE REWARD SAVINGS THRIFT PLAN
Notes to Financial Statements
Fund C - This fund was invested in a diversified portfolio of
corporate common stocks, including units of participation in
any equity-type fund maintained by the Trustee for
tax-qualified plans, whether or not the same is authorized by
law for the investment of trust funds.
Fund D - This fund was invested only in short-term money market
securities, including units of participation in any short-term
fund maintained by the Trustee for tax-qualified plans,
commercial bank savings accounts, or certificates of deposit
bearing a reasonable rate of interest, short-term money market
instruments, and U.S. Treasury obligations.
Effective October 1, 1998, the Plan began providing the following
seven investment options:
First American Corporation Stock Fund - Contributions are
invested in shares of First American common stock.
AmeriStar EB Stable Value Fund - The AmeriStar EB Stable Value
Fund is a collective investment fund offering investors current
income and stability of principal. It primarily invests in
insurance contracts with large, high quality, well-known life
insurance companies.
AmeriStar Limited Duration Fund - The AmeriStar Limited
Duration Fund is a mutual fund that seeks to provide investors
with high current income without assuming undue risk. It
primarily invests in obligations of high quality domestic
corporations, as well as U.S. Government securities. In normal
conditions, the average life of the bonds in the portfolio will
be under four years.
Founders Balanced Fund - The Founders Balanced Fund is for
investors seeking current income and capital appreciation. It
primarily invests in a portfolio that, under normal conditions,
is comprised of 65 percent equities and 35 percent bonds. The
equities are generally stocks of large, well-known corporations
that have a long record of earnings and dividend growth.
AmeriStar Capital Growth Portfolio Fund - The AmeriStar Capital
Growth Portfolio Fund is a mutual fund that seeks to provide
investors with growth of capital. It invests primarily in
stocks of large, well-known domestic corporations that have a
record of above-average growth in earnings.
Vanguard International Stock Fund - The Vanguard International
Fund is a mutual fund that invests in stocks of companies
located outside the United States and with an emphasis on those
with above-average growth potential. It invests in up to thirty
(30) foreign stock markets.
AIM Constellation Fund - The AIM Constellation Fund is a mutual
fund that seeks to provide capital appreciation through
investments in common stocks with emphasis on medium and
smaller emerging growth companies. It invests primarily in the
stock of companies with strong growth and earnings momentum
with market capitalization of less than $5 billion.
(F) DISTRIBUTIONS
-------------
Upon termination, retirement, disability, or death, distributions
from the First American Corporation Stock Fund are made in cash or
common stock of the Corporation, at the discretion of the
participant. Distributions from other funds are made in cash.
Distributions from the Plan of common stock of the Corporation are
made in full shares to the extent possible, and are reflected in
the accompanying statements of changes in net assets available for
benefits with fund information at the fair value of such shares at
the distribution date. The value of any fractional shares are paid
in cash at the fair value of such stock on the first day of the
month next preceding the date of such distribution.
(Continued)
6
14
FIRST AMERICAN CORPORATION
FIRST INCENTIVE REWARD SAVINGS THRIFT PLAN
Notes to Financial Statements
(G) PARTICIPANT LOANS
-----------------
During 1997, the Plan was amended to allow participant loans.
Participants may borrow from their fund accounts a minimum of
$1,000 up to a maximum equal to the lesser of $50,000 or 50
percent of their vested account balance. Loan transactions are
treated as a transfer to (from) the investment fund from (to) the
Participant Loans fund. Loan terms range from 6 months to 4 1/2
years. The loans are secured by the balance in the participant's
account and bear interest at a rate equal to the First American
National Bank's prime rate plus one percent. Principal and
interest is paid ratably through monthly payroll deductions.
(H) ADMINISTRATIVE EXPENSES
--------------------
The trust agreement provides that all necessary expenses of the
Plan can be paid by the Corporation, or out of the assets of the
trust. The Corporation presently pays all expenses of the Plan,
and while it is not legally obligated to do so, it is the
intention of the Corporation to continue this practice.
(I) FEDERAL INCOME TAXES
--------------------
The Internal Revenue Service issued its latest determination
letter on May 3, 1995 which stated that the plan and its
underlying trust qualify under the applicable provisions of the
Internal Revenue Code and therefore are exempt from Federal income
taxes. In the opinion of the Plan Administrator, the Plan and its
underlying trust have operated within the terms of the plan and
remain qualified under the applicable provisions of the Internal
Revenue Code.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------
(A) BASIS OF PRESENTATION
---------------------
The accompanying financial statements have been prepared on the
accrual basis of accounting and present the Plan's net assets
available for benefits and changes in net assets available for
benefits.
(B) BASIS OF FAIR VALUE AND RECORDING OF INVESTMENT TRANSACTIONS
------------------------------------------------------------
The fair value of common stock investments is based upon
quotations obtained from national securities exchanges; where
investments are not listed on an exchange, quotations are obtained
from brokerage firms. Mutual funds are valued at the unit value of
the fund at the valuation date which is based on the quoted fair
values of the underlying investments within the funds. Purchase
and sales of investment securities are recorded on a trade-date
basis. The average cost method is used in determining the cost of
investments sold.
(Continued)
7
15
FIRST AMERICAN CORPORATION
FIRST INCENTIVE REWARD SAVINGS THRIFT PLAN
Notes to Financial Statements
(C) USE OF ESTIMATES
----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires the Plan
Administrator to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of related changes
in net assets available for benefits during the reporting period.
Actual results could differ from those estimates.
(3) INVESTMENTS
-----------
Investments in each of the funds at December 31, 1997 and 1996, were as
follows:
1997
------------------------------------------------
UNREALIZED
FAIR VALUE COST APPRECIATION
---------- ---- ------------
INVESTMENTS IN SECURITIES OF PARTICIPATING EMPLOYER
---------------------------------------------------
First American Corporation Stock Fund
(2,160,870 shares) $107,503,290 33,024,721 74,478,569
------------ ---------- ----------
INVESTMENTS IN COMMON TRUST FUNDS AND MUTUAL
FUNDS ADMINISTERED BY PARTICIPATING EMPLOYER
--------------------------------------------
Ameristar Limited Duration Fund (225,650 units) 2,251,989 2,238,583 13,406
Ameristar Capital Growth Portfolio Fund (699,089 units) 8,871,433 7,720,202 1,151,231
Ameristar EB Stable Value Fund (157,988 units) 3,972,804 3,947,933 24,871
------------ ---------- ----------
Total investments in mutual funds administered
by participating employer 15,096,226 13,906,718 1,189,508
------------ ---------- ----------
INVESTMENTS IN MUTUAL FUNDS ADMINISTERED BY OTHERS
--------------------------------------------------
Founders Balance Fund (32,496 units) 368,834 387,609 (18,775)
Vanguard International Stock Fund (7,264 units) 119,049 122,285 (3,236)
AIM Constellation Fund (20,212 units) 533,184 583,758 (50,574)
------------ ---------- ----------
Total investments in mutual funds
administered by others 1,021,067 1,093,652 (72,585)
------------ ---------- ----------
Total investments in mutual funds 16,117,293 15,000,370 1,116,923
------------ ---------- ----------
Participant loans 659,810 659,810 -
------------ ---------- ----------
Total all investments $124,280,393 48,684,901 75,595,492
============ ========== ==========
(Continued)
8
16
FIRST AMERICAN CORPORATION
FIRST INCENTIVE REWARD SAVINGS THRIFT PLAN
Notes to Financial Statements
1996
--------------------------------------------
UNREALIZED
FAIR VALUE COST APPRECIATION
---------- ---- ------------
INVESTMENTS IN SECURITIES OF PARTICIPATING EMPLOYER
----------------------------------------
Fund A:
First American Corporation common stock
(1,104,656 shares) $63,655,791 28,928,411 34,727,380
----------- ---------- ----------
INVESTMENTS IN MUTUAL FUNDS
ADMINISTERED BY PARTICIPATING EMPLOYER
--------------------------------------
Fund B:
Valuestar Short-Int Duration Bond (202,777 units) 2,019,660 2,009,175 10,485
Fund C:
Valuestar Capital Growth Portfolio Fund
(528,680 units) 5,987,551 5,334,742 652,809
----------- ---------- ----------
Total investments in mutual funds
administered by participating employer 8,007,211 7,343,917 663,294
----------- ---------- ----------
INVESTMENTS IN MONEY MARKET FUNDS
ADMINISTERED BY PARTICIPATING EMPLOYER
--------------------------------------
Fund A:
Valuestar Prime Money Market Fund 20,923 20,923 -
Fund B:
Valuestar Prime Money Market Fund 3,037 3,037 -
Fund C:
Valuestar Prime Money Market Fund 142 142 -
Fund D:
Valuestar Prime Money Market Fund 3,133,704 3,133,704 -
----------- ---------- ----------
Total investments in money market funds 3,157,806 3,157,806 -
----------- ---------- ----------
Total all investments $74,820,808 39,430,134 35,390,674
=========== ========== ==========
(Continued)
9
17
FIRST AMERICAN CORPORATION
FIRST INCENTIVE REWARD SAVINGS THRIFT PLAN
Notes to Financial Statements
The net realized gains on investments for the years ended December 31 were
as follows:
1997 1996 1995
---- ---- ----
INVESTMENTS IN SECURITIES OF PARTICIPATING EMPLOYER
--------------------------------------------------
Aggregate proceeds from stock sold and
market value of stock distributed $11,153,508 6,262,436 4,221,065
Aggregate cost 5,408,436 3,387,181 2,469,112
----------- --------- ----------
Net realized gain on investments
in securities of participating employer $ 5,755,072 2,875,255 1,751,953
----------- --------- ----------
INVESTMENTS IN COMMON TRUST FUNDS AND MUTUAL
FUNDS ADMINISTERED BY PARTICIPATING EMPLOYER
--------------------------------------------
Aggregate proceeds $ 7,453,405 5,579,155 2,109,505
Aggregate cost 6,060,996 3,850,271 1,643,877
----------- --------- ----------
Net realized gain on investments in
common trust funds and mutual funds
administered by participating employer 1,392,409 1,728,884 465,628
----------- --------- ----------
Total realized gain on investments $ 7,147,481 4,604,139 2,217,581
=========== ========= ==========
The change in unrealized appreciation (depreciation) on investments for the
years ended December 31 were as follows:
1997 1996 1995
---- ---- ----
Investments in securities of participating employer $39,751,189 8,471,304 20,520,001
Investment in common trust funds and mutual funds 453,629 (734,035) 515,733
----------- --------- ----------
Total unrealized gain on investments $40,204,818 7,737,269 21,035,734
=========== ========= ==========
The following investments represent 5% or more of the Plan's net assets
available for benefits at December 31, 1997:
First American Corporation Stock Fund $107,503,290
Ameristar Capital Growth Portfolio Fund 8,871,433
------------
(Continued)
10
18
FIRST AMERICAN CORPORATION
FIRST INCENTIVE REWARD SAVINGS THRIFT PLAN
Notes to Financial Statements
(4) CONTRIBUTIONS
-------------
The Corporation matched qualifying participant contributions and salary
reduction contributions at 100% for the years ended December 31, 1997,
1996 and 1995 based on the Corporation's performance and achieved
productivity ratio in 1997 and 1996 and return on average assets in 1995.
During 1995, the Corporation's contributions included 25,035 shares of
First American Corporation common stock recorded at $1,099,975, the fair
value at the contribution date. All contributions in 1997 and 1996 were
cash.
(5) PARTICIPATION IN THE PLAN
-------------------------
At December 31, 1997, there were 2,873 active and 1,904 inactive
participants in the Plan for a total of 4,777 participants. At December
31, 1996, there were 2,658 active and 1,425 inactive participants in the
Plan for a total of 4,083 participants. At December 31, 1995, there were
2,623 active and 1,135 inactive participants in the Plan for a total of
3,758 participants.
Participants may elect to have the portions of their account balances
that are attributable to their contributions and salary reduction
contributions made on their behalf invested in more than one fund type
and may, at specified times, transfer amounts between funds. At December
31, the number of participants in each of the funds was as follows:
1997 1996 1995
---- ---- ----
Fund A - 2,317 2,717
Fund B - 659 627
Fund C - 1,177 920
Fund D - 617 632
Ameristar EB Stable Value Fund 577 - -
Ameristar Limited Duration Fund 618 - -
Founders Balanced Fund 57 - -
Ameristar Capital Growth Portfolio Fund 1,358 - -
Vanguard International Stock Fund 86 - -
AIM Constellation Fund 127 - -
First American Corporation Stock Fund 3,080 - -
====== ===== =====
(6) NONVESTED BENEFITS
------------------
Included in net assets available for benefits at December 31, 1997 and
1996, are nonvested employer contributions of $1,556,129 and $1,623,176,
respectively. Forfeitures of nonvested benefits are used to offset future
employer contributions to the Plan. Such forfeitures amounted to
$255,457, $185,106, and $147,697, in 1997, 1996 and 1995, respectively.
(Continued)
11
19
FIRST AMERICAN CORPORATION
FIRST INCENTIVE REWARD SAVINGS THRIFT PLAN
Notes to Financial Statements
(7) RELATED PARTY TRANSACTIONS
--------------------------
Due to the nature of the organization and funding of the Plan, all
investment transactions, except the Founders Balance Fund, Vanguard
International Stock Fund, and the AIM Constellation Fund, are
considered related party transactions with the Corporation.
(8) PLAN TERMINATION
----------------
The Corporation has voluntarily agreed to make contributions to the Plan.
Although the Corporation has not expressed any intent to terminate the
Plan, it may cease making contributions or terminate the Plan at any
time.
Upon termination, partial termination of the Plan, or the complete
discontinuance of the Corporation's contributions to the Plan, each
affected participant's account (after payment of all expenses and
proportional adjustment of participants' accounts to reflect expenses and
investment gains or losses) becomes nonforfeitable and each participant
or beneficiary would be entitled to receive any amounts then credited to
his/her account in the trust fund, provided that the Corporation may
elect to continue the trust and make payments therefrom, pursuant to the
terms of the Plan.
12
20
SCHEDULE 1
FIRST AMERICAN CORPORATION
FIRST INCENTIVE REWARD SAVINGS THRIFT PLAN
Item 27a - Schedule of Assets Held for Investment Purposes
December 31, 1997
(C)
DESCRIPTION OF
INVESTMENT INCLUDING
(A) (B) MATURITY DATE,
PARTY-IN- IDENTITY OF ISSUE, RATE OF INTEREST, (E)
INTEREST BORROWER, LESSOR COLLATERAL, PAR OR (D) CURRENT
IDENTIFICATION OR SIMILAR PARTY MATURITY VALUE COST VALUE
- -------------- ----------------- ------------------- ----- -----
* First American Corporation Common stock $33,024,721 107,503,290
* Ameristar Limited Duration Mutual fund
Fund administered by Ameristar 2,238,583 2,251,989
* Ameristar Capital Growth Mutual Fund
Fund administered by Ameristar 7,720,202 8,871,433
* Ameristar EB Stable Value Mutual Fund
Fund administered by Ameristar 3,947,933 3,972,804
Founders Balance Fund Mutual Fund 387,609 368,834
Vanguard International Stock Mutual Fund
Fund 122,285 119,049
AIM Constellation Fund Mutual Fund 583,758 533,184
* Participant Loans Rates at First American National
Bank prime rate plus 1% and
terms of 6 months to 4 1/2 years 659,810 659,810
----------- -----------
Total investments $48,684,901 124,280,393
=========== ===========
*Indicates a party-in-interest to the Plan.
See accompanying independent auditors' report.
13
21
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Trustee (or other persons who administer the employee benefit plan) has duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
FIRST AMERICAN CORPORATION
FIRST INCENTIVE REWARD SAVINGS THRIFT PLAN
Date: June 29, 1998 By:
/S/
------------------------------------------
MELISSA J. BUFFINGTON
Chairman, Benefit Plan
Administrative Committee
22
INDEX
Financial Statements and Exhibits
FINANCIAL STATEMENTS AND SCHEDULES
Independent Auditors' Report....................................................1
Statements of Net Assets Available for Benefits with Fund Information...........2
Statements of Changes in Net Assets Available for Benefits with
Fund Information..............................................................3
Notes to Financial Statements...................................................4
Schedule 1 - Item 27a - Schedule of Assets Held for Investment Purposes.........12
EXHIBIT
1 - Consent of KPMG Peat Marwick LLP