FAF — Q3 2026 Financial Report Analysis
Q3 · Fiscal year 2026 · Published by Pham Hop
First American Q3 2026: revenue +5.3% to $2.08B on 13% higher revenue per title order and 21% commercial growth, but EPS fell to $1.72 from $1.84 as last year’s Offerpad gain didn’t repeat and opened orders dropped 8.2%.
At a glance
- Average revenue per closed title order rose 13.2% to $4,304 while the number of orders closed fell 4.9%. Revenue grew because of bigger deals, mainly commercial property (direct commercial revenue +20.9%), not because more homes changed hands.
- Pretax profit was down 7.9% at $227.6 million, but stripping out investment gains and losses in both years it was up about 4% ($229.2 million vs $220.7 million). The reported decline is mostly last year's one-off Offerpad gain.
- Stockholders' equity fell $112.6 million this year to $5.39 billion despite $520.6 million of nine-month profit, because the bond portfolio lost $364.0 million (after tax) of market value in Q3 alone. That loss doesn't go through net income.
- Revenue
- $2.1B
- +5.3% YoY
- Net income
- $177M
- -6.6% YoY
- Diluted EPS
- $1.72
- -6.5% YoY
- Operating margin
- 10.9%
This period vs a year ago
- Same period last year
- This period
Year-ago figures (≈) are worked out from the growth rate the company reported. Each row has its own scale.
First American's third quarter of 2026 (three months to September 30) brought in $2.08 billion of revenue, up 5.3%, but net income fell 6.6% to $177.0 million ($1.72 per diluted share, down from $1.84). The title business itself made slightly more money than a year ago. The drop came from below the operating line: last year's quarter had a $19.1 million gain on the company's stake in Offerpad, and this year the corporate segment took write-downs on venture investments instead. Underneath the earnings, the company's orders are falling. Domestic title orders closed fell 4.9%, and orders opened per day, which show what will close in the coming months, fell 8.2%.
How a title insurer makes money
When a home or commercial building is sold, or a mortgage is refinanced, the lender and usually the buyer buy title insurance. It protects them if someone later turns out to have a claim on the property. First American also runs the escrow: it holds the money until the deal closes and charges a fee for that. So its revenue follows the number and dollar size of property deals, and that depends heavily on mortgage rates. Higher rates mean fewer home sales and far fewer refinancings.
The company earns this money in two ways. Direct business comes from its own offices, and it keeps the whole premium. Agent business comes from independent title agents, who keep about 80% of the premium (80.1% this quarter). The company also earns investment income on its own portfolio and on customer escrow money parked at its bank, First American Trust.
The quarter in numbers
| Metric | Q3 2026 | Q3 2025 | YoY change |
|---|---|---|---|
| Total revenue | $2,084.6M | $1,978.9M | +5.3% |
| Net income attributable to company | $177.0M | $189.6M | −6.6% |
| Diluted EPS | $1.72 | $1.84 | −6.5% |
| Pretax margin (income before taxes ÷ revenue) | 10.9% | 12.5% | −1.6 pts |
| Title segment direct premiums & escrow fees | $642.8M | $601.5M | +6.9% |
| Agent premiums | $868.4M | $798.8M | +8.7% |
| Domestic title orders closed (direct) | 134,900 | 141,800 | −4.9% |
| Average revenue per order closed | $4,304 | $3,801 | +13.2% |
| Title segment pretax margin | 12.4% | 12.9% | −0.5 pts |
| Net investment income | $170.1M | $163.8M | +3.8% |
The site's "operating margin" figure for this report is the consolidated pretax margin above (income before income taxes as a share of total revenue). First American doesn't report an operating income line.
Title Insurance and Services: commercial carried it
The title segment (revenue $1,972.9 million, +7.5%) made $244.1 million before tax, up 3.3%. The breakdown by deal type in the MD&A shows where the growth came from. In direct operations, commercial premiums and escrow fees rose $51.5 million (+20.9%), residential purchase fell $6.4 million (−2.6%) and refinance slipped $0.4 million (−1.2%). The company says average revenue per order rose "primarily due to an increase in average revenue per order on commercial and purchase transactions, and a shift in mix to higher premium commercial transactions."
That matches the wider market. The 10-Q cites the Mortgage Bankers Association's forecast that U.S. mortgage originations (the dollar value of new home loans) fell 3.7% in Q3 2026, with purchase loans down 2.8% and refinancings down 6.1%. First American's residential revenue moved about in line with that.
Agent premiums (+8.7%) are booked when the agent pays, which usually lags the actual deal by about a quarter. The company says the increase "is generally consistent with the 14.8% increase in the Company's direct premiums and escrow fees in the second quarter of 2026." This matters for Q4 (see the outlook below).
Information and other revenue rose 5.8% to $292.2 million, which the company attributes to growth in mortgage subservicing, more demand for non-insured data products and more refinancing in Canada.
Investment income in the segment rose 10.6% to $169.3 million because the portfolio earned more interest, "partially offset by a decline in interest income from escrow balances." On the cost side, segment interest expense rose 26.7% to $31.3 million, "primarily attributable to higher interest expense on depositor funds." The bank is paying more to keep deposits.
Margins slipped because costs grew faster than revenue. Personnel costs rose 5.7% (higher incentive pay and salaries) and other operating expenses rose 11.2% ("higher production expenses on higher volumes and an increase in software expense"). The segment's pretax margin fell from 12.9% to 12.4%. Title claims were steady. The provision for policy losses was 3.0% of title premiums and escrow fees in both years: an expected 3.75% loss rate on 2026 policies, minus a 0.75% ($11.4 million) release of reserves set aside for older policy years that turned out not to be needed.
Home Warranty: flat sales, thinner margin
Home warranty revenue was flat at $114.7 million (+0.1%). Pretax income fell 30.2% to $11.3 million and the pretax margin fell from 14.1% to 9.9%. The claims ratio didn't change (46.9% of premiums in both quarters). The decline came from personnel and other operating costs, which rose 10.5% to $50.6 million on "higher advertising, software, legal, salaries and incentive compensation expenses." Over nine months the segment is in better shape: the loss ratio is 41.0% vs 41.8%, helped by "lower claims severity," and the pretax margin is 18.1% vs 19.0%.
Takeaway: First American's revenue is growing because each deal is bigger, not because there are more deals. Revenue per order rose 13.2% while closed orders fell 4.9% and opened orders per day fell 8.2%, with refinance openings down 16.4%. Commercial property is doing the work while residential shrinks. On the quarter-delayed agent book, growth is already slowing: direct premium growth fell from 14.8% in Q2 to 6.9% in Q3.
What the headline numbers hide
- The earnings decline is mostly a one-off from last year. Consolidated net investment gains swung from +$26.3 million to −$1.6 million. In the corporate segment, Q3 2025 had a $19.1 million gain "primarily related to changes in the fair values of the Company's investment in Offerpad," while Q3 2026 had a $2.0 million loss from "impairment charges on non-marketable equity investments within the Company's venture investment portfolio." Excluding these gains and losses, pretax income rose about 4%. Even so, the Q3 2025 title-segment gains of $6.4 million already included $12.5 million of software impairments. The reported profit figure swings with investment marks in both directions, so it's a noisy guide to the underlying business.
- A corporate wash. Corporate net investment income swung from +$9.3 million to −$0.8 million, and corporate personnel costs fell from $10.6 million to $0.8 million. Both lines track the deferred compensation plan, whose investment returns appear as income on one line and as pay owed to employees on the other. The two moves roughly cancel out.
- Equity went down this quarter even though the company was profitable. Other comprehensive loss was $361.2 million in Q3, almost all from a $364.0 million after-tax drop in the value of debt securities. Bond prices typically fall when market interest rates rise. Comprehensive income attributable to the company was −$184.2 million for the quarter. Stockholders' equity was $5,386.9 million at September 30 vs $5,499.5 million at December 31. That works out to about $52.71 per share on 102.2 million shares, vs $53.92 at year-end. These are paper losses (unrealized) and don't affect earnings unless the bonds are sold. The 10-Q says the portfolio is 95% debt securities, 98% of them investment grade.
- Cash conversion is fine. Operating cash flow for the nine months was $600.2 million vs net income of $520.5 million (about 1.15x), after paying $287.1 million in claims (vs $261.4 million).
- Buybacks and taxes made little difference to EPS. Diluted shares were 103.2 million vs 103.1 million, so share repurchases ($55.5 million for 0.9 million shares year to date) didn't move per-share figures. The effective tax rate fell slightly, to 22.4% from 23.1%.
- No guidance. The 10-Q gives no numerical outlook. The board raised the quarterly dividend 11% to $0.61, and management "expects that the Company will continue to pay quarterly cash dividends at or above the current level."
Year to date
Over nine months revenue rose 11.8% to $6,039.9 million and diluted EPS rose 27.6% to $5.04 from $3.95. The year-to-date comparison looks much better than Q3 because the first half of 2026 had strong refinance activity (refinance orders closed per day were up 20.9% for the nine months) and because the 2025 period carried $48.1 million of software impairments. Title-segment pretax margin is 12.7% vs 11.1%.
Outlook
The leading indicators are weak. Opened orders show what will close one to three months later. In Q3, domestic opened orders per day fell 8.2%: refinance −16.4%, residential purchase −5.1%, commercial +2.4%. Agent premiums trail direct business by about a quarter, and direct premium growth slowed from 14.8% in Q2 to 6.9% in Q3, so agent premium growth should slow in Q4 from Q3's 8.7%.
Our read: Q4 revenue growth probably slows further unless the commercial deals currently in the pipeline close at the same high values per order. The cushion is investment income, up 3.8% company-wide, though the bank is paying more to hold deposits and escrow interest is lower. The thing to watch in the Q4 report is whether commercial revenue per order keeps rising fast enough to offset falling residential volumes. A drop in mortgage rates would help refinance volumes first, since the company says refinancing is "highly impacted by changes in interest rates," while commercial volume is "less sensitive."
This is the first First American report on this site, so there is no previous outlook to check against.