First American Financial reports record-breaking second quarter revenues


July 22, 1997, SANTA ANA, CALIFORNIA

The First American Financial Corporation (NYSE: FAF), the leading provider of real estate-related financial and information services, reported record-breaking second quarter revenues. Earnings per share, while exceeding analysts’ estimates, were impacted by the company’s information services segment which is experiencing higher overhead as it integrates acquisitions, adds new customers to its systems and continues to build and refine its framework to respond to the present and future needs of its customers.

Revenues for the quarter totaled $450.4 million, an increase of 9 percent when compared with the second quarter 1996 revenues of $413.4 million. Second quarter 1997 net income of $18.5 million, or $1.60 per share, compares with net income of $19.4 million, or $1.70 per share for the same period in 1996. (The current quarter included realized pretax investment losses of $500,000, or $.03 per share on an after-tax basis, compared with prior year quarter pretax gains of $2.2 million, or $.11 per share after tax.)

For the six-month period ended June 30, 1997, the company reported revenues of $833.3 million, an increase of 10 percent from the $760.8 million reported in the first half of 1996. Net income for the period was $21.4 million, or $1.85 per share, compared with $28.0 million, or $2.45 per share, for last year’s comparable first half.

"Our most recent acquisition, Strategic Mortgage Services, Inc., purchased in May, has expanded our leading position in credit reporting, provided a national presence for appraisal services and introduced a new information service – mortgage document preparation," said President Parker S. Kennedy.

"We are encouraged with the relative strength of new orders as we enter the third quarter," Kennedy continued. "Affordable interest rates, low unemployment and high consumer confidence have kept the demand for housing at a very steady pace. Residential transaction levels continue to be strong, benefiting all of our business segments, and higher-margin commercial title transaction levels are very positive. We currently anticipate a strong second half of 1997 as we continue to seek cost control measures to reduce overhead expenses.

"We remain committed to providing our customers with a cost-efficient menu of services and increasing market share in all of our primary businesses," Kennedy concluded.

The First American Financial Corporation, based in Santa Ana, California, is the nation’s leading provider of real estate-related financial and information services. The corporation’s subsidiaries include First American Title Insurance Company, a national and international title insurer; First American Real Estate Information Services, Inc., which offers tax monitoring, credit reporting, flood certification, mortgage loan servicing systems, appraisal services, mortgage document preparation and field inspection services nationally; First American Home Buyers Protection Corporation, a home warranty company; and First American Capital Management, an investment advisory firm. The Corporation also operates First American Trust Company and First Security Thrift Company in Southern California. First American Financial has more than 10,000 employees in over 400 branch offices in the United States and abroad. Information about the company’s subsidiaries and an archive of its press releases can be found at http://www.firstam.com on the Internet.

Any statements looking forward in time inherently involve risks and uncertainties, including but not limited to the effect of interest rate fluctuations, changes in the performance of the real estate markets and the effect of changing economic conditions.

Quarter ended June 30:		   1997			   1996
Revenues	              $ 450,374,000	      $ 413,374,000
Income before income taxes    $  30,216,000	      $  32,827,000
Net income	              $  18,516,000	      $  19,427,000
Net income per share	      $        1.60	      $        1.70
					
Six months ended June 30:					
Revenues	              $ 833,251,000	      $ 760,750,000
Income before income taxes    $  34,982,000	      $  47,809,000
Net income	              $  21,382,000	      $  28,009,000
Net income per share	      $        1.85	      $        2.45
Average shares outstanding	 11,581,000		 11,439,000


Selected Financial Data (Unaudited)

For the Three Months Ended For the Six Months Ended
June 30
June 30
1997 1996 1997 1996


RESULTS OF OPERATIONS
Revenues
Operating revenues $ 443,447,000 $ 404,878,000 $ 819,872,000 $ 745,757,000
Investment and other income 6,927,000
8,496,000
13,379,000
14,993,000
450,374,000
413,374,000
833,251,000
760,750,000
Expenses
Salaries and other personnel costs 157,812,000 132,742,000 298,599,000 252,982,000
Premiums retained by agents 128,962,000 128,218,000 251,155,000 238,090,000
Other operating expenses 96,198,000 84,011,000 180,668,000 157,475,000
Provision for title losses and other claims 22,457,000 23,488,000 41,049,000 42,463,000
Depreciation and amortization 6,647,000 5,558,000 13,122,000 10,007,000
Interest 2,538,000 1,281,000 3,660,000 2,510,000
Minority interests 983,000
864,000
1,294,000
1,484,000
415,597,000
376,162,000
789,547,000
705,011,000
Income before premium and income taxes 34,777,000 37,212,000 43,704,000 55,739,000
Premium taxes 4,561,000
4,385,000
8,722,000
7,930,000
Income before income taxes $ 30,216,000
$ 32,827,000
$ 34,982,000
$ 47,809,000
OPERATING REVENUES
Title Insurance:
Direct operations $ 186,876,000 $ 166,748,000 $ 334,550,000 $ 304,238,000
Agency operations 160,660,000 158,104,000 312,766,000 294,468,000
347,536,000 324,852,000 647,316,000 598,706,000
Real Estate Information 79,656,000 66,265,000 141,703,000 120,659,000
Home Warranty 11,214,000 9,761,000 21,282,000 18,500,000
Trust and Banking 5,041,000 4,000,000 9,571,000 7,892,000
Total operating revenues
$ 443,447,000

$ 404,878,000

$ 819,872,000

$ 745,757,000
INCOME BEFORE INCOME TAXES
Title Insurance $ 25,766,000 $ 23,581,000 $ 29,701,000 $ 31,740,000
Real Estate Information 13,144,000 16,628,000 20,967,000 30,410,000
Home Warranty 2,677,000 2,399,000 4,482,000 4,687,000
Trust and Banking 937,000
838,000
1,852,000
1,617,000
Total before corporate expenses and
premium taxes 42,524,000 43,446,000 57,002,000 68,454,000
Corporate expenses 7,747,000 6,234,000 13,298,000 12,715,000
Premium taxes 4,561,000 4,385,000 8,722,000 7,930,000
Income before income taxes
$ 30,216,000

$ 32,827,000

$ 34,982,000

$ 47,809,000
TITLE INSURANCE ORDER COUNTS
FROM DIRECT OPERATIONS
Title orders opened 306,600 259,100 565,000 531,600
Title orders closed 229,300 209,200 410,800 386,800

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