First American Financial (NYSE:FAF) reported third-quarter adjusted earnings of $1.78 per share, up 5% from a year earlier, as strength in commercial title operations and investment income helped offset continued weakness in residential real estate activity.
GAAP earnings were $1.72 per diluted share for the quarter. Chief Executive Officer Mark Seaton said National Commercial Services posted its highest third-quarter revenue on record, supported by broad-based activity across commercial property types and a fifth consecutive quarterly record in average revenue per order.
Commercial Growth Offsets Residential Pressure
Title segment revenue totaled $2 billion, up 7% from the third quarter of 2025. Commercial revenue increased 21% to $297 million, driven by a 13% gain in average revenue per order and a 7% rise in closed orders, Chief Financial Officer Matt Wajner said.
Residential trends remained difficult. Purchase revenue fell 3%, reflecting a 5% decline in closed orders that was partly offset by a 2% increase in average revenue per order. Refinance revenue declined 1%, as a 4% drop in average revenue per order outweighed a 3% increase in closed orders. Refinance represented only 5% of direct revenue during the quarter.
Seaton said the 30-year fixed mortgage rate had risen by about 100 basis points over the prior six months to 7.5%, its highest level since the second quarter of 2024. He said higher rates reinforced the company’s expectation of a “lower for longer” residential origination environment.
For the first three weeks of October, First American’s open purchase orders were down 8%, refinance orders were down 35%, and commercial orders were down 7%. Despite the order decline, Seaton said the company remained bullish on commercial activity in the fourth quarter, citing a strong pipeline and three transactions already closed with more than $1 million in premium each.
Wajner said the company currently expects 2027 revenue to be roughly flat with 2026. It anticipates modest commercial growth and declining residential purchase and refinance revenue, while investment income is expected to provide a tailwind. He said title pre-tax margins are expected to be generally stable next year, though they could face modest pressure if market conditions weaken.
Technology Rollout Focuses on Automation
Management said it is using the slower residential environment to accelerate development and deployment of its AI-native title and settlement platforms, Endpoint and Sequoia.
During the quarter, the company launched the second wave of its Washington Endpoint pilot, expanding to additional users in the Seattle metropolitan area. The automation rate for tasks required to close a transaction rose to 42% in the third quarter, from 34% in the second quarter and 30% in the first quarter.
Seaton said First American intends to accelerate a national Endpoint rollout next year and aims to have a majority of direct-division revenue processed through the platform by the end of 2027. He described change management and employee training, rather than technology development, as the principal execution challenge because employees have used the company’s legacy FAST system for roughly 25 years.
Sequoia, the company’s instant title decisioning platform, expanded during the quarter to three additional Southern California counties for purchase transactions and 33 Northern California counties for refinance transactions. Sequoia completed 17% of California purchase transactions processed through Endpoint, up from 11% in the previous quarter, and completed 34% of California refinance transactions processed through the platform.
The average human review time for Sequoia purchase transactions fell to 56 minutes in the third quarter, compared with 74 minutes in the second quarter and 83 minutes in the first quarter. Seaton said Sequoia already reduces processing time by about two-thirds versus the traditional process. The company plans to expand Sequoia purchase capabilities across Northern California and into Florida during the fourth quarter.
Management’s longer-term goal is to automate about 80% of refinance transactions and 70% of purchase transactions in markets where First American maintains title plants. Seaton said the company expects to begin realizing incremental efficiencies as Sequoia expands, while more substantial benefits from the Endpoint and Sequoia initiatives could emerge in 2028 if next year’s rollout is executed successfully.
Investment Income and Bank Deposits Rise
Title segment investment income rose 11% to $169 million, supported by higher deposit balances at First American Trust. Wajner said average deposits at the bank increased nearly 38% from the prior-year quarter, primarily due to deposits connected with ServiceMac and the company’s 1031 Exchange business.
First American Trust benefited from business outside the company’s captive title operations, including ServiceMac and 1031 Exchange balances. Seaton said the company has moved about $1 billion in 1031 Exchange deposits to the bank and is pursuing additional deposits from title agents. He said First American has moved approximately 95% of internal deposits that it can place with the bank.
Information and other revenue increased 6% to $292 million, largely due to a 31% increase in ServiceMac fee revenue related to growth in its loan portfolio. Personnel costs rose 6% to $574 million, while other operating expenses increased 11% to $306 million, driven primarily by software and production expenses.
Capital Actions and Other Segment Results
The title segment generated a 12.4% pre-tax margin, or 12.7% on an adjusted basis. The provision for policy losses and other claims was $45 million, or 3% of title premiums and escrow fees, unchanged from a year earlier. Wajner said the company is reserving 3.75% for the current policy year, with releases from prior-year reserves reducing the reported rate to 3%.
Home Warranty revenue was flat at $115 million, while pre-tax income fell 30% to $11 million, primarily because of higher marketing spending aimed at expanding the direct-to-consumer channel.
First American raised its common dividend 11% during the quarter to an annualized rate of $2.44 per share. The company repurchased 23,000 shares for $1 million during the third quarter and repurchased another 143,000 shares for $9 million in October through the date of the call.
About First American Financial (NYSE:FAF)
First American Financial Corporation (NYSE: FAF) is a provider of title insurance, settlement services and financial technology solutions for the real estate and mortgage industries. Through its First American Title operations, the company helps protect property owners, lenders and other parties against title defects and related risks during real estate transactions.
The company’s services include title searches and examination, title insurance policies, escrow and closing services, and transaction coordination.
