The First American Financial Corporation announces third quarter 1994 results


October 26, 1994, SANTA ANA, CALIFORNIA

The First American Financial Corporation (NYSE: FAF) announced today a decline in quarterly revenues and profits due to rising interest rates.

The company realized revenues of $334,870,000 for the third quarter 1994, down from $376,811,000 for the same period last year. Net income for the third quarter 1994 was $4,790,000, compared with last year's record third-quarter earnings of $19,579,000. Third quarter 1994 per share earnings were $0.42, compared with $1.72 per share for the same period last year.

Revenues for the first nine months of 1994 totaled $1,076,317,000, an increase of 9 percent over $989,272,000 for the prior year. Net income year-to-date in 1994 was $21,822,000, compared with $45,784,000 for the same period 1993, which included a $4,200,000 tax benefit. Year-to-date 1994 earnings per share of $1.91 compare with $4.04 last year.

Mortgage origination volumes have declined steadily in most areas since March of this year when mortgage interest rate increases began to cause a steep drop in refinance activity. New title orders in September 1994 were down 28 percent when compared to March 1994, and branch level title insurance personnel have been reduced by 19 percent, adjusted to exclude acquisitions. Total personnel levels in all segments combined have declined 16 percent since March 1994, adjusted similarly. Third quarter salary and personnel costs were $102,311,000, down from $109,678,000 the previous quarter. Expense declines lag behind personnel declines due to costs associated with terminations.

"Continued and anticipated action by the Federal Reserve Board has had a dampening effect on mortgage originations across the country," President Parker S. Kennedy said. "These conditions are likely to persist through the first quarter 1995 as we experience expected seasonal order count adjustments commencing with the fourth quarter. In anticipation of these events, the company continues to monitor new order/personnel ratios and to implement cost controls to meet current market conditions."

On the bright side, commercial and subdivision activity continues to increase, providing a boost to title insurance revenues. Resale transactions have improved over last year, although they have declined in recent months with mortgage rate increases. Title insurance issued in connection with commercial, subdivision and resale transactions provides a higher profit margin on a per order basis than in the case of refinance transactions.

"Our focus remains on profitable growth through strategic acquisitions and gains in market share," continued Kennedy. "We continue to work toward our fundamental corporate objective of providing our customers with a single source for all their real estate information needs."

The First American Financial Corporation, based in Santa Ana, California, is a leading provider of real estate financial services, including title insurance, tax monitoring, home warranty, credit reporting and property information services, to real property buyers and mortgage lenders. The company also operates a trust and banking business in Southern California. The company offers its title services through a network of more than 300 offices and 4,000 agents throughout the United States. It also provides title services abroad in the Bahama Islands, Bermuda, Canada, Guam, Mexico, Puerto Rico, the U.S. Virgin Islands and the United Kingdom.

 
Synopsis-- 
 
Quarter ended September 30:                   1994              1993 
 
Revenues                                $ 334,870,000      $ 376,811,000 
Income before income taxes              $   7,090,000      $  33,299,000 
Net income                              $   4,790,000	   $  19,579,000 
Net income per share	                $         .42	   $        1.72 
 
Nine months ended September 30:	 
 
Revenues	                        $1,076,317,000      $  989,272,000 
Income before income taxes	        $   37,022,000	    $   69,084,000 
Net income before accounting change     $   21,822,000	    $   41,584,000 
Accounting change--FASB 109	        $          --       $    4,200,000 
Net income	                        $   21,822,000      $   45,784,000 
Per share data: 
 Net income before accounting change	$          1.91	    $         3.67 
 Accounting change	                $          --       $          .37 
 Net income	                        $          1.91     $         4.04 
Average shares outstanding	             11,453,000         11,341,000 
SELECTED FINANCIAL DATA
(Unaudited)

For the Three Months EndedFor the Year Ended
June 30June 30







1994199319941993


RESULTS OF OPERATIONS
Revenues
Operating revenues $ 329,802,000 $ 373,213,000 $ 1,062,537,000 $ 978,506,000
Investment and other income5,068,000 3,598,000 13,780,000 10,766,000









334,870,000 376,811,000 1,076,317,000 989,272,000









Expenses
Salaries and other personnel costs102,311,000 103,239,000 322,309,000 284,659,000
Premiums retained by agents131,292,000 138,075,000 420,984,000 360,857,000
Other operating expenses55,945,000 58,081,000 173,591,000 158,591,000
Provision for title losses and other claims27,232,000 32,601,000 88,830,000 84,783,000
Depreciation and amortization5,238,000 4,110,000 14,846,000 11,966,000
Interest1,430,000 1,269,000 4,405,000 3,732,000
Minority interests719,000 1,604,000 2,521,000 4,043,000









324,167,000 338,979,000 1,027,486,000 908,631,000









Income (loss) before premium and income taxes10,703,000 37,832,000 48,831,000 80,641,000
Premium taxes3,613,000 4,533,000 11,809,000 11,557,000









Income (loss) before income taxes $ 7,090,000 $ 33,299,000 $ 37,022,000 $ 69,084,000









OPERATING REVENUES
Title Insurance:
Direct operations $ 133,825,000 $ 167,755,000 $ 438,882,000 $ 443,829,000
Agency operations163,108,000 169,884,000 518,948,000 442,656,000
296,933,000 337,639,000 957,830,000 886,485,000
Tax Service22,444,000 26,867,000 75,546,000 67,445,000
Home Warranty7,548,000 5,867,000 20,572,000 16,331,000
Trust and Banking2,877,000 2,840,000 8,589,000 8,245,000









Total operating revenues $ 329,802,000 $ 373,213,000 $ 1,062,537,000 $ 978,506,000









INCOME BEFORE INCOME TAXES
Title Insurance $ 9,441,000 $ 30,234,000 $ 37,209,000 $ 64,666,000
Tax Service2,755,000 11,107,000 17,735,000 25,607,000
Home Warranty1,413,000 1,460,000 4,642,000 4,059,000
Trust and Banking571,000 769,000 1,789,000 1,928,000









Total before corporate expenses and
premium taxes14,180,000 43,570,000 61,375,000 96,260,000









Corporate expenses3,477,000 5,738,000 12,544,000 15,619,000
Premium taxes3,613,000 4,533,000 11,809,000 11,557,000









Income (loss) before income taxes $ 7,090,000 $ 33,299,000 $ 37,022,000 $ 69,084,000









TITLE INSURANCE ORDER COUNTS
FROM DIRECT OPERATIONS
Title orders opened204,200 344,800 695,500 916,000
Title orders closed165,300 248,500 572,100 662,100

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