First American Financial (NYSE:FAF) held its first-quarter earnings conference call on Thursday. Below is the complete transcript from the call.
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The full earnings call is available at https://events.q4inc.com/attendee/748719981
Summary
First American Financial reported a strong financial performance with adjusted earnings per share of $1.33, a 58% increase from the prior year, driven by robust growth in commercial revenue which increased by 48%.
The company is leveraging AI to enhance operational efficiency, launching platforms like Endpoint and Sequoia, which have shown significant improvements in automating title decisioning and reducing order processing times.
Future outlook remains optimistic for commercial business, with expectations for 2026 to be a record year, although caution is advised in the residential market due to sluggish home sales.
Operational highlights include strong performance in the National Commercial Services Division, with notable growth in asset classes like data centers and energy, and an increase in deposits at First American Trust.
Management emphasized strategic focus on AI to maintain competitive advantages and expressed confidence in the company’s technology, distribution, and data capabilities against potential industry disruptions.
Full Transcript
OPERATOR
Greetings and welcome to the First American Financial Corporation first quarter 2026 earnings conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press Star 0 on your telephone keypad. A copy of today’s press release is available on First American’s website at www.firstam.com/investor. Please note that the call is being recorded and will be available for replay from the Company’s investor website and for a short time by dialing 877-660-6853 or 201-612-7415. and by entering the conference. ID 1375-9993 we will now turn the call over to Craig Barbario, Vice President, Investor Relations, to make an introductory statement.
Craig Barbario (Vice President, Investor Relations)
Good morning everyone and again, welcome to First American’s earnings conference call for the first quarter of 2026. Joining us today on the call will be our Chief Executive Officer Mark Seaton and Matt Wagner, Chief Financial Officer. Some of the statements made today may contain forward looking statements that do not relate strictly to historical or current fact. These forward looking statements speak only of as of the date they are made and the Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made. Risks and uncertainties exist that may cause results to differ materially from those set forth in these forward looking statements. For more information on these risks and uncertainties, please refer to yesterday’s earnings release and the risk factors discussed in our Form 10K and subsequent SEC filings. Our presentation today contains certain non-GAAP financial measures that we believe provide additional insight into the operational efficiency and performance of the Company relative to earlier periods and relative to the Company’s competitors. For more details on these non-GAAP financial measures, including presentation with and reconciliation to the most directly comparable GAAP financials, please refer to yesterday’s earnings release which is available on our website@www.firstam.com I’ll now turn the call over to Mark Seaton.
Mark Seaton (Chief Executive Officer)
Thank you Craig. We are pleased to report continued momentum in the first quarter, generating adjusted earnings per share of $1.33. A 58% increase from the prior year in commercial revenue grew 48%, achieving a record for a first quarter. Notably, we closed 20 orders generating more than 1 million in premium, double the amount from last year. In our National Commercial Services Division we are seeing broad base strength with nine of our 11 asset classes up year over year Data centers remain a meaningful tailwind with revenue tied to this sector increasing 76% relative to last year. We are also seeing strong activity in our energy group, which grew 250% and was a top five asset class during the quarter. Residential purchase revenue continues to lag we have been more bearish on the purchase market this year than most public forecasts and that view is proving accurate as purchase revenue declined 4% year over year. On the refinance side, we saw a modest benefit during the quarter when mortgage rates dipped into the low 6% range. While this provided some lift in the first quarter, volumes have since softened as rates moved higher again. Another key earnings driver is our bank First American Trust, which continues to provide a steady stream of investment income. During Q1, average deposits totaled 6.8 billion, up 19% from last year. Growth has been driven by both commercial deposits and deposits from our outside of our captive title business. During the quarter, 29% of deposits came from sources beyond our captive title business, including 1.4 billion from ServiceMac and an additional 300 million from 1031 exchange deposits. Our agent banking strategy is also gaining traction with 284 agents currently banking with First American Trust, up 26% from last year. These balances are expected to grow as the market recovers. The bank continues to serve as a countercyclical earnings driver with meaningful long term growth potential as we expand servicing 1031 Exchange and agent banking deposits. Our primary strategic focus is to leverage AI across our business to amplify the talents of our team, better serve our customers and strengthen our operational capabilities. Over the past year we launched an enterprise AI platform that helps product teams develop, govern and deploy secure compliant AI systems. This platform is an internal system that will allow us to deploy products faster and at scale. While we regularly discuss our two major enterprise initiatives, Endpoint and Sequoia, we are also seeing incremental gains across the company. One example is in our agency division where we are deploying AI driven tools that expand our quality control capacity by more than six fold. We have also introduced AI assisted examination capabilities that reduce order processing time by roughly 30 minutes per file. Importantly, these examination capabilities are not confined to our internal operations. This quarter we are extending these same AI driven tools into Agent Net, our title agent facing platform, leveraging our proprietary data domain expertise and proven production performance to deliver value to our customers. AI driven efficiency improvements like these not only enhance our operating leverage, allowing us to scale efficiently as volumes recover, but also provide revenue opportunities by enabling us to deliver new solutions to our clients. We are also redefining how we build software. Today, 25% of our engineers are trained in agentic AI development and are moving from concepts to production in weeks rather than months. Productivity will continue to improve as the rest of our product engineering teams complete training this quarter. The impact goes beyond speed. Our teams are spending more time solving customer challenges and ensuring every investment drives real value. We are embracing this transformation and believe we are on the leading edge of our industry in adopting these capabilities. Turning to Endpoint, we have outlined a plan to scale the platform across First American Title’s local branch network by the end of 2027 and we remain on track. Endpoint is live in Seattle where we have opened around 310 orders and closed 150 orders on the new system. With each transaction we continue to learn and improve. In this pilot we have automated approximately 30% of the tasks required to close a transaction, allowing our people to focus more on customer facing activities and complex issues. These automation rates will only increase over time. We are expanding the Endpoint pilot this quarter to First American Title’s escrow officers across the state of Washington, an important milestone. We expect approximately 80 to 85% of our local branch network to be on Endpoint by the end of next year. This represents a significant transformation, not just a technology rollout, but a standardization of workflows that shifts the nature of work from executing tasks to verifying them. The real value of AI lies not only in the tools themselves, but in how workflows evolve to fully leverage them. While substantial work remains, we are confident and energized by the opportunities ahead with Sequoia. We also continue to make strong progress. As a reminder, Sequoia is our AI powered title decisioning platform. We are currently live with refinance transactions in eight counties across California and Arizona in our Direct division where we have fully automated title decisioning 35% of the time. The more complex challenge has been purchase transactions and last month we reached a key milestone by launching Sequoia for purchase transactions. Today in three counties we are automating title decisioning for 13% of purchase transactions, instantly determining insurability at order open. Over time our automation rates will improve and ultimately we believe we can deliver instant title decisioning for 70% of purchase and 80% of refinance orders in markets that we have title plants. This is made possible by our industry leading title plant data underwriting expertise and innovative technology. By the end of this year we plan to expand Sequoia across California and Florida with a national Rollout planned for 2027 Looking ahead, we are optimistic about our earnings trajectory. Our commercial business remains strong. For the first three weeks in April, our opened commercial orders are down 4% relative to last year. But as we experienced this quarter, the fee profile matters more in commercial than the number of orders. And given our strong pipeline of sizable commercial transactions, we still believe 2026 will be a record year in our commercial business. On the purchase market, we remain more cautious than the consensus view. So far in April, open Purchase orders are down 3% as the sluggish home sale trend continues. While the residential market remains at trough levels, we are focused on rolling out our new AI powered title and escrow platforms which will provide greater operating leverage when the market recovers. From a capital management perspective, we continue to deploy earnings into opportunities with the most attractive risk adjusted returns. We are taking a disciplined approach to acquisitions, focusing on the right partners rather than growth for its own sake. As our stock has pulled back while our earnings and outlook have strengthened, we have taken the opportunity to repurchase shares. Matt will discuss our financial results and capital management in more detail and with that, I’ll turn the call over to him.
Matt Wagner (Chief Financial Officer)
Thank you, Mark. This quarter we generated GAAP earnings of $1.21 per diluted share. Our adjusted earnings, which exclude the impact of net investment losses and purchase related intangible amortization, were $1.33 per diluted share. Focusing on the title segment, adjusted revenue was $1.7 billion, up 17% compared with the same quarter of 2025. Looking at the components of title revenue, we saw strong growth in commercial and refinance, partially offset by weakness in purchase. Commercial revenue was $271 million, a 48% increase over last year, reflecting both increased transaction volumes and significantly higher average revenue per order. Our closed orders increased 9% from the prior year and our average revenue per order was up 36%. Purchase revenue was down 4% during the quarter, driven by a 6% decline in closed orders, partially offset by a 3% improvement in the average revenue per order. This reflects continued weakness in home sale activity. Refinance revenue was up 76% compared with last year, driven by a 57% increase in closed orders and a 13% increase in the average revenue per order. This growth was supported by a temporary decline in mortgage rates during the quarter, though activity has since softened as rates have moved higher. Refinance accounted for just 8% of our direct revenue this quarter and highlights how challenged this market continues to be Compared to historic levels in the agency business. Revenue was $759 million, up 16% from last year given the reporting lag in agent revenues of approximately one quarter. These results primarily reflect remittances related to fourth quarter economic activity. Information and other revenues were $269 million during the quarter, up 14% compared with last year. The increase was driven by revenue growth at the company’s subservicing business, higher demand for non insured information products and services and refinance activity in the company’s Canadian operations. Investment income was $154 million in the first quarter, up 12% compared with the same quarter last year despite the Fed cutting rates three times. The increase in investment income was primarily due to higher average balances driven by commercial 1031 exchange subservicing and warehouse lending activity. Investment income fitted from our bank subsidiary shifting its asset mix to fixed income …
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