The First American Financial Corporation reports record-breaking second quarter 1994 income


July 27, 1994, SANTA ANA, CALIFORNIA

The First American Financial Corporation (NYSE: FAF), a leading provider of real estate financial services, today reported second quarter 1994 net income of $7.6 million, or $.67 per share, compared with second quarter 1993 which produced net income of $17.5 million, or $1.55 per share, the highest net income produced in any second quarter of the company's history. Revenues for the quarter totaled $369.0 million, an increase of 11 percent when compared to the second quarter 1993 revenues of $333.5 million.

For the six-month period ended June 30, 1994, net income was $17.0 million, compared with $26.2 million for the same period 1993, which included a one-time tax benefit of $4.2 million. During the first half of 1994, revenues increased to $741.4 million from $612.5 million, an increase of 21 percent.

The increase in second quarter gross revenues was due largely to an increase in lower-margin agency business, primarily in the Midwest and East Coast regions. Reduced order counts in the company's direct operations have been met with significant personnel reductions. However, there is an inherent lag time in realizing the adjustment to the company's overall cost structure due to severance payments and other separation costs. It is anticipated that this period of adjustment will continue into the third quarter.

"During the second quarter, actions by the Federal Reserve Board and resulting higher mortgage interest rates have caused a significant decline in refinance activity and a slowdown in new orders when compared to the record order counts experienced during the same period last year," said President Parker S. Kennedy. "Our anticipation of this slowdown has prompted personnel reductions and attendant separation costs which have adversely affected our margins in our direct title operations. We are constantly monitoring our new order/personnel ratios in light of all phases of our current markets, including resales, new home sales and commercial transactions."

"We continue to concentrate on market share and cost control and believe that strong, steady cash flows from operations will enable us to support our overall corporate growth strategy," Kennedy continued. "Every day we get closer to our long-term goal of sharing information among our various business segments and providing our customers a cost-efficient menu of services."

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 June 30:                       1994            1993     
 
Revenues                                $369,011,000    $333,495,000 
Net income                              $  7,634,000    $ 17,521,000 
Net income per share                    $        .67    $       1.55 
 
Six months ended June 30:	 
 
Revenues                                $741,447,000    $612,461,000 
Net income before accounting change     $ 17,032,000    $ 22,005,000 
Accounting change                       $        --     $  4,200,000		 
Net income                              $ 17,032,000    $ 26,205,000 
Per share data: 
 Net income before accounting change    $       1.49	$       1.95 
 Accounting change                               --     $        .37		 
 Net income per share                   $       1.49    $       2.32	 
Average shares outstanding                11,447,000      11,309,000 
SELECTED FINANCIAL DATA
(Unaudited)

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







1994199319941993


RESULTS OF OPERATIONS
Revenues
Operating revenues $ 364,261,000 $ 328,931,000 $ 733,285,000 $ 604,536,000
Investment and other income4,750,000 4,564,000 8,162,000 7,925,000









369,011,000 333,495,000 741,447,000 612,461,000









Expenses
Salaries and other personnel costs109,678,000 96,659,000 219,998,000 181,420,000
Premiums retained by agents143,780,000 113,059,000 289,692,000 222,782,000
Other operating expenses59,055,000 55,363,000 117,646,000 100,510,000
Provision for title losses and other claims31,935,000 29,402,000 61,598,000 52,182,000
Depreciation and amortization4,998,000 4,010,000 9,608,000 7,856,000
Interest1,407,000 1,118,000 2,975,000 2,463,000
Minority interests853,000 1,592,000 1,802,000 2,439,000









351,706,000 301,203,000 703,319,000 569,652,000









Income (loss) before premium and income taxes17,305,000 32,292,000 38,128,000 42,809,000
Premium taxes3,871,000 3,801,000 8,196,000 7,024,000









Income (loss) before income taxes $ 13,434,000 $ 28,491,000 $ 29,932,000 $ 35,785,000









OPERATING REVENUES
Title Insurance:
Direct operations $ 151,929,000 $ 161,700,000 $ 305,607,000 $ 275,317,000
Agency operations177,029,000 139,077,000 355,840,000 272,772,000
328,958,000 300,777,000 661,447,000 548,089,000
Tax Service25,639,000 20,199,000 53,102,000 40,578,000
Home Warranty6,889,000 5,388,000 13,024,000 10,464,000
Trust and Banking2,775,000 2,567,000 5,712,000 5,405,000









Total operating revenues $ 364,261,000 $ 328,931,000 $ 733,285,000 $ 604,536,000









INCOME BEFORE INCOME TAXES
Title Insurance $ 13,376,000 $ 29,561,000 $ 27,768,000 $ 34,432,000
Tax Service5,412,000 6,650,000 14,980,000 14,500,000
Home Warranty1,830,000 1,343,000 3,229,000 2,599,000
Trust and Banking541,000 513,000 1,218,000 1,159,000









Total before corporate expenses and
premium taxes21,159,000 38,067,000 47,195,000 52,690,000









Corporate expenses3,854,000 5,775,000 9,067,000 9,881,000
Premium taxes3,871,000 3,801,000 8,196,000 7,024,000









Income (loss) before income taxes $ 13,434,000 $ 28,491,000 $ 29,932,000 $ 35,785,000









TITLE INSURANCE ORDER COUNTS
FROM DIRECT OPERATIONS
Title orders opened231,600 314,900 491,300 571,200
Title orders closed194,000 248,300 406,800 413,600

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