First American Financial (NYSE:FAF) reported first-quarter 2026 results that management said reflected continued momentum, led by strength in commercial title and growing investment income from its bank subsidiary, while residential purchase activity remained weak.
Earnings rise as commercial sets Q1 record
Chief Executive Officer Mark Seaton said the company generated adjusted earnings per share of $1.33 in the quarter, up 58% from the prior year. On a GAAP basis, Chief Financial Officer Matthew Wajner reported earnings of $1.21 per diluted share.
Commercial revenue increased 48% to $271 million, which Seaton called “a record for a Q1.” Seaton highlighted 20 orders that generated more than $1 million in premium, double the number from the prior year. Wajner added that closed commercial orders rose 9% year-over-year, while average revenue per order increased 36%.
Seaton said National Commercial Services posted broad-based strength with nine of 11 asset classes higher year-over-year. He pointed to data centers as “a meaningful tailwind,” with revenue tied to that sector up 76% from last year, and said the energy group grew 250% and ranked as a top five asset class during the quarter.
On the question of large-deal mix, Seaton told Barclays that energy was the biggest asset class among the quarter’s “mega deals,” followed by industrial and data centers, with some multifamily and retail also included. He added that several large transactions had already closed early in the second quarter and that the pipeline “is looking very good.”
Purchase revenue lags; refinance gets a temporary lift
Residential purchase revenue declined 4% year-over-year, matching Seaton’s more cautious view of the market versus “most public forecasts.” Wajner said the decline was driven by a 6% drop in closed orders, partially offset by a 3% increase in average revenue per order.
Refinance revenue rose 76% from last year, driven by a 57% increase in closed orders and a 13% increase in average revenue per order, according to Wajner. Seaton said refinance benefited modestly during the quarter when mortgage rates dipped into the low 6% range, but activity has since softened as rates moved higher again. Wajner noted refinance accounted for 8% of direct revenue, underscoring how subdued the market remains versus historical levels.
In the agency business, revenue increased 16% to $759 million, reflecting an approximately one-quarter reporting lag in agent remittances, Wajner said. Information and other revenues increased 14% to $269 million, driven by growth in subservicing, demand for non-insured information products and services, and refinance activity in Canadian operations.
On Canada, Wajner said the market differs from the U.S. because it lacks the 30-year fixed-rate mortgage; instead, mortgages typically reset every three to five years, requiring refinancing. He said the company is “coming to a refi wave or a refi wall” that began last year and is expected to persist through this year and into next year.
Bank deposits and investment income grow despite Fed cuts
Seaton and Wajner emphasized investment income and bank deposit growth as key earnings drivers. Wajner reported investment income of $154 million, up 12% year-over-year, despite three Federal Reserve rate cuts. The increase was attributed to higher average balances driven by commercial activity, 1031 exchange deposits, subservicing, and warehouse lending activity, as well as a shift in the bank subsidiary’s asset mix toward fixed income securities that earn higher yields and are less sensitive to changes in short-term rates.
Seaton said First American Trust posted average deposits of $6.8 billion, up 19% from last year, driven by commercial deposits and deposits from outside of the company’s captive title business. He said 29% of deposits came from non-captive sources, including $1.4 billion from ServiceMac and $300 million from 1031 exchange deposits. Seaton also said the company’s agent banking strategy is gaining traction, with 284 agents banking with First American Trust, up 26% from last year.
Asked about room to utilize more escrow deposits at the bank, Wajner said the company has capacity to grow deposits and capital available at the bank, adding the company keeps some escrow deposits at its own bank and some at third-party banks while focusing on growing deposits outside the captive title business.
AI, Endpoint, and Sequoia: automation and rollout plans
Seaton said First American’s primary strategic focus is leveraging AI “to amplify the talents of our team” and strengthen operational capabilities. He described an enterprise AI platform launched over the past year to help teams develop, govern, and deploy secure and compliant AI systems.
Seaton outlined several operational applications discussed during the call:
- In the agency division, AI-driven tools that expand quality control capacity by more than sixfold.
- AI-assisted examination capabilities that reduce order processing time by roughly 30 minutes per file.
- Extending AI-driven tools into AgentNet, the company’s title agent-facing platform.
- Training progress in software development, with 25% of engineers trained in “agentic AI development,” moving from concept to production in weeks rather than months.
On Endpoint, Seaton reiterated a plan to scale the platform across First American Title’s local branch network by the end of 2027. Endpoint is live in Seattle, where Seaton said the company has opened about 310 orders and closed 150 orders on the system, with roughly 30% of tasks automated in the pilot. Seaton said the pilot will expand this quarter to escrow officers across Washington state, and he expects about 80% to 85% of the local branch network to be on Endpoint by the end of next year. In response to an analyst question, Seaton said automation could ultimately reach “80%-90%” over a few years.
For Sequoia, the company’s AI-powered title decisioning platform, Seaton said it is live for refinance transactions in eight counties across California and Arizona in the direct division, with title decisioning fully automated 35% of the time. He also said the company launched Sequoia for purchase transactions last month, with three counties currently automating title decisioning for 13% of purchase transactions at order open. Over time, Seaton said the company believes it can deliver instant title decisioning for 70% of purchase and 80% of refinance orders in markets where it has title plants. He said the company plans to expand Sequoia across California and Florida by the end of this year, with a national rollout plan for 2027.
Margins, expenses, capital returns, and outlook
Wajner reported title segment pre-tax margin of 9.6%, or 10.4% on an adjusted basis. He also said personnel costs increased 13% to $546 million, driven mainly by incentive compensation from improved performance and higher salary expense, while other operating expenses rose 13% to $277 million due to higher production expense from volumes and increased software expense. The success ratio was 58%, in line with the company’s target of 60%, Wajner said.
The provision for policy losses and other claims was $40 million, or 3.0% of title premiums and escrow fees, unchanged from the prior year. Interest expense increased 34% to $27 million, due to higher interest expense in warehouse lending and on deposit balances at the bank subsidiary. The effective tax rate was 22.9%, slightly below the company’s normalized 24% rate, Wajner said.
In home warranty, Wajner reported revenue of $110 million, up 2%, with a loss ratio of 36% compared with 37% a year ago. Pre-tax margin was 23.5%, or 23.8% adjusted. He told KBW that the company typically targets mid-teens margins for home warranty over the year, with Q1 and Q4 seasonally stronger and Q2 and Q3 seeing higher claims.
On capital management, Wajner said the company repurchased 556,000 shares in the first quarter for $33 million at an average price of $60.21, and repurchased an additional 296,000 shares in April for $18 million at an average price of $61.61. He said $248 million remained under the repurchase program after those purchases. Seaton said the company has taken advantage of the stock pullback to buy shares as earnings and outlook strengthened, while maintaining a disciplined approach to acquisitions.
Looking ahead, Seaton said the company expects commercial strength to continue, citing a sizable pipeline and reiterating the view that 2026 will be a record year for its commercial business. For the first three weeks of April, opened commercial orders were down 4% year-over-year, but Seaton emphasized that fee per file has been more important than order count in the current commercial environment. For residential purchase, Seaton said open purchase orders were down 3% so far in April and reiterated his cautious stance as “the sluggish home sale trend continues.”
On the competitive landscape, Seaton said the company is “all in on AI” and believes it needs to “win in our industry with AI.” He argued First American has advantages that are difficult to replicate, including distribution through thousands of local relationships and an 800-office footprint, title plant data, the company’s balance sheet backing underwriting decisions, and technology capabilities. Seaton said First American has title plants in 1,850 counties, representing roughly 82% of real estate transactions, and described additional expansion as incremental rather than a “big wave.”
Regarding regulation, Seaton said the state environment is “fairly benign,” and noted that the federal title waiver pilot has been extended to November 2027, which he characterized as not new and immaterial.
About First American Financial (NYSE:FAF)
First American Financial Corporation is a leading provider of title insurance, settlement services and diversified real estate-related data and analytics. Headquartered in Santa Ana, California, the company serves customers throughout the United States as well as in Canada, Europe, Latin America and Asia. Its business is built on the underwriting capabilities of its title insurance operations combined with comprehensive closing and escrow services for homebuyers, sellers, mortgage lenders and real estate professionals.
The company’s title insurance segment issues policies that protect property owners and mortgage lenders against defects in titles, liens or encumbrances that can arise during real property transactions.
