Form 8-K - Current report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

__________________________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): November 2, 2023

INVESTORS TITLE COMPANY

(Exact Name of Registrant as Specified in Charter)

North Carolina	0-11774	56-1110199
(State or Other Jurisdiction	(Commission File Number)	(IRS Employer Identification No.)
of Incorporation)

121 North Columbia Street, Chapel Hill, North Carolina                                               27514

(Address of Principal Executive Offices)                                                    (Zip Code)

 Registrant's telephone number, including area code:  [phone]

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 ☐  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 ☐  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 ☐  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 ☐  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, no par value		ITIC		The Nasdaq Stock Market LLC
Rights to Purchase Series A Junior Participating Preferred Stock				The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company  ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

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Item 2.02.  Results of Operations and Financial Condition

Attached as Exhibit 99.1 and incorporated herein by reference is a copy of the press release of Investors Title Company, dated November 2, 2023, reporting Investors Title Company's financial results for the fiscal quarter ended September 30, 2023.

The information in this Current Report is being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act"), or otherwise subject to the liabilities of that Section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of any general incorporation language in such filing.

Item 9.01.  Financial Statements and Exhibits

(d) Exhibits.  The following exhibit accompanies this Report:

Exhibit 99.1 - Press Release of Investors Title Company dated November 2, 2023

Exhibit 104  - Cover Page Interactive Data File (embedded within the Inline XBRL document)

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SIGNATURE

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	INVESTORS TITLE COMPANY
Date:    November 2, 2023	By:	/s/ James A. Fine, Jr.
		James A. Fine, Jr.
		President, Principal Financial Officer and
		Principal Accounting Officer

 

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EXHIBIT INDEX

Exhibit No.              Description

99.1                          Press release issued by Investors Title Company on November 2, 2023

104                           Cover Page Interactive Data File (embedded within the Inline XBRL document)

Exhibit 99.1

INVESTORS TITLE COMPANY ANNOUNCES THIRD QUARTER 2023 FINANCIAL RESULTS

     Contact:  Elizabeth B. Lewter

November 2, 2023

Telephone:  [phone]

        Nasdaq Symbol:  ITIC

FOR IMMEDIATE RELEASE:

Chapel Hill, NC – Investors Title Company today announced results for the third quarter ended September 30, 2023. The Company reported net income of $7.1 million, or $3.75 per diluted share, for the three months ended September 30, 2023, compared to $7.9 million, or $4.17 per diluted share, for the prior year period.

Revenues decreased 21.3% to $61.4 million, compared with $78.0 million for the prior year quarter, primarily as the result of decreases in the Company’s title insurance business and other investment income. The reduction in title insurance revenues is attributable to an overall decline in the level of real estate transaction volumes resulting from higher average mortgage interest rates and ongoing housing inventory constraints. Changes in other investment income are due to fluctuations in the carrying value of the underlying investments and distributions received. The lower levels of title insurance activity and other investment income were partially offset by increases in non-title services revenue and interest income and an improvement in net investment (losses) gains. The increase in revenue from non-title services was mainly due to an increase in like-kind exchange revenues. The impact of positive changes in the estimated fair value of equity security investments resulted in a decrease in net investment losses compared to the prior year period.

Operating expenses decreased 22.3% compared to the prior year period, primarily due to reductions in expenses which fluctuate with title insurance volume. Commissions to agents decreased by $9.7 million, commensurate with the decrease in agent premium volume. Personnel expenses decreased by $2.5 million, primarily due to reductions in incentive compensation and reductions in staffing levels. Other expenses were down $2.7 million, mainly due to the impact of lower title insurance volumes and a reduction in the level of contractors engaged in software development activities.  The provision for claims, and office and technology expenses, remained consistent with the prior year period.

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Income before income taxes decreased to $8.6 million for the current quarter, versus $10.1 million in the prior year period. Excluding the impact of net investment (losses) gains, adjusted income before income taxes (non-GAAP) decreased 23.0% to $9.4 million for the quarter, versus $12.2 million in the prior year period (see Appendix A for a reconciliation of this non-GAAP measure to the most directly comparable GAAP measure).

 For the nine months ended September 30, 2023, net income decreased $527 thousand to $15.9 million, or $8.37 per diluted share, versus $16.4 million, or $8.63 per diluted share, for the prior year period.  Revenues decreased 21.5% to $171.1 million, compared with $217.9 million for the prior year period.  Operating expenses decreased 23.3% to $151.1 million, compared to $197.1 million for the prior year period.  Overall results for the year-to-date period have been shaped predominantly by the same factors that affected the third quarter.

Chairman J. Allen Fine commented, “We were pleased to see an uptick in revenues this quarter over the second quarter, as we entered what is traditionally a more favorable time of year for real estate activity. Market conditions remained challenging, as interest rates rose to levels not seen in over 20 years.  Partially offsetting reductions in title insurance revenues, investment earnings continued to benefit from higher average interest rates.

“Regardless of current market conditions, the strength of our balance sheet allows us to remain focused on the execution of our long-term business strategy.  We will continue to navigate this market cycle by balancing expense discipline with ongoing targeted investments in growing our business and improving our competitive positioning.”

Investors Title Company’s subsidiaries issue and underwrite title insurance policies.  The Company also provides investment management services and services in connection with tax-deferred exchanges of like-kind property.

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Cautionary Statements Regarding Forward-Looking Statements

Certain statements contained herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements may be identified by the use of words such as “plan,” expect,” “aim,” “believe,” “project,” “anticipate,” “intend,” “estimate,” “should,” “could,” “would,” and other expressions that indicate future events and trends.  Such statements include, among others, any statements regarding the Company’s expected performance for this year,  future home price fluctuations, changes in home purchase or refinance demand, activity and the mix thereof, interest rate changes, expansion of the Company’s market presence, enhancing competitive strengths, development in housing affordability, wages, unemployment or overall economic conditions or statements regarding our actuarial assumptions and the application of recent historical claims experience to future periods.  These statements involve a number of risks and uncertainties that could cause actual results to differ materially from anticipated and historical results.  Such risks and uncertainties include, without limitation:  the cyclical demand for title insurance due to changes in the residential and commercial real estate markets; the occurrence of fraud, defalcation or misconduct; variances between actual claims experience and underwriting and reserving assumptions, including the limited predictive power of historical claims experience; declines in the performance of the Company’s investments; government regulations; changes in the economy, including those resulting from a shutdown of the U.S. Government; the impact of inflation and responses by government regulators, including the Federal Reserve, such as increases in interest rates; the impact of the COVID-19 pandemic (including any of its variants) on the economy and the Company’s business; loss of agency relationships, or significant reductions in agent-originated business; difficulties managing growth, whether organic or through acquisitions and other considerations set forth under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the Securities and Exchange Commission, and in subsequent filings.

# # # #

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Investors Title Company and Subsidiaries

Consolidated Statements of Operations

For the Three and Nine Months Ended September 30, 2023 and 2022

(in thousands, except per share amounts)

(unaudited)

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
Revenues:
Net premiums written		$	49,822			$	66,658			$	132,793			$	199,409
Escrow and other title-related fees			4,683				6,136				12,942				17,461
Non-title services			4,636				3,679				14,513				8,889
Interest and dividends			2,313				1,229				6,537				3,055
Other investment income			514				2,173				2,915				4,616
Net investment (losses) gains			(815	)			(2,154	)			720				(16,456	)
Other			257				277				647				924
Total Revenues			61,410				77,998				171,067				217,898
Operating Expenses:
Commissions to agents			23,806				33,478				63,735				97,161
Provision for claims			1,838				1,966				3,897				3,452
Personnel expenses			19,083				21,586				58,451				63,738
Office and technology expenses			4,209				4,274				13,122				12,930
Other expenses			3,864				6,606				11,845				19,783
Total Operating Expenses			52,800				67,910				151,050				197,064
Income before Income Taxes			8,610				10,088				20,017				20,834
Provision for Income Taxes			1,526				2,175				4,167				4,457
Net Income		$	7,084			$	7,913			$	15,850			$	16,377
Basic Earnings per Common Share		$	3.75			$	4.17			$	8.37			$	8.63
Weighted Average Shares Outstanding – Basic			1,891				1,897				1,894				1,897
Diluted Earnings per Common Share		$	3.75			$	4.17			$	8.37			$	8.63
Weighted Average Shares Outstanding – Diluted			1,891				1,897				1,894				1,898

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Investors Title Company and Subsidiaries

Consolidated Balance Sheets

As of September 30, 2023 and December 31, 2022

(in thousands)

(unaudited)

 

		September 30, 2023				December 31, 2022
Assets
Cash and cash equivalents		$	30,411			$	35,311
Investments:
Fixed maturity securities, available-for-sale, at fair value			64,640				53,989
Equity securities, at fair value			31,831				51,691
Short-term investments			103,959				103,649
Other investments			20,144				18,368
Total investments			220,574				227,697
Premiums and fees receivable			17,322				19,047
Accrued interest and dividends			1,111				872
Prepaid expenses and other receivables			14,888				11,095
Property, net			22,093				17,785
Goodwill and other intangible assets, net			16,588				17,611
Lease assets			6,432				6,707
Other assets			2,496				2,458
Current income taxes recoverable			—				1,174
Total Assets		$	331,915			$	339,757
Liabilities and Stockholders’ Equity
Liabilities:
Reserve for claims		$	37,494			$	37,192
Accounts payable and accrued liabilities			30,719				47,050
Lease liabilities			6,639				6,839
Current income taxes payable			1,008				—
Deferred income taxes, net			3,387				7,665
Total liabilities			79,247				98,746
Stockholders’ Equity:
Common stock – no par value (10,000 authorized shares; 1,891 and 1,897 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively, excluding in each period 292 shares of common stock held by the Company's subsidiary)			—				—
Retained earnings			253,423				240,811
Accumulated other comprehensive (loss) income			(755	)			200
Total stockholders’ equity			252,668				241,011
Total Liabilities and Stockholders’ Equity		$	331,915			$	339,757

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Investors Title Company and Subsidiaries

Direct and Agency Net Premiums Written

For the Three and Nine Months Ended September 30, 2023 and 2022

(in thousands)

(unaudited)

 

		Three Months Ended September 30,																Nine Months Ended September 30,
		2023				%				2022				%				2023				%				2022				%
Direct		$	17,485				35.1			$	22,112				33.2			$	45,975				34.6			$	69,446				34.8
Agency			32,337				64.9				44,546				66.8				86,818				65.4				129,963				65.2
Total		$	49,822				100.0			$	66,658				100.0			$	132,793				100.0			$	199,409				100.0

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Investors Title Company and Subsidiaries

Appendix A

Non-GAAP Measures Reconciliation

For the Three and Nine Months Ended September 30, 2023 and 2022

(in thousands)

(unaudited)

Management uses various financial and operational measurements, including financial information not prepared in accordance with generally accepted accounting principles ("GAAP"), to analyze Company performance.  This includes adjusting revenues to remove the impact of net investment gains and losses, which are recognized in net income under GAAP.  Net investment gains and losses include realized gains and losses on sales of investment securities and changes in the estimated fair value of equity security investments.  For the three and nine months ended September 30, 2023, management has decided to exclude realized gains and losses on sales of investment securities in addition to changes in the estimated fair value of equity security investments for consistency with a similar change in the presentation in the Consolidated Statement of Operations.  The non-GAAP financial measures for prior year periods included in this Appendix have also been updated for consistency with this presentation.  Therefore adjusted revenues (non-GAAP) and adjusted income before income taxes (non-GAAP) below are not comparable with previously published non-GAAP financial measures for the Company.  Management believes that these measures are useful to evaluate the Company's internal operational performance from period to period because they eliminate the effects of external market fluctuations.  The Company also believes users of the financial results would benefit from having access to such information, and that certain of the Company’s peers make available similar information.  This information should not be used as a substitute for, or considered superior to, measures of financial performance prepared in accordance with GAAP, and may be different from similarly titled non-GAAP financial measures used by other companies.

The following tables reconcile non-GAAP financial measurements used by Company management to the comparable measurements using GAAP:

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
Revenues
Total revenues (GAAP)		$	61,410			$	77,998			$	171,067			$	217,898
Add (Subtract):  Net investment losses (gains)			815				2,154				(720	)			16,456
Adjusted revenues (non-GAAP)		$	62,225			$	80,152			$	170,347			$	234,354
Income before Income Taxes
Income before income taxes (GAAP)		$	8,610			$	10,088			$	20,017			$	20,834
Add (Subtract):  Net investment losses (gains)			815				2,154				(720	)			16,456
Adjusted income before income taxes (non-GAAP)		$	9,425			$	12,242			$	19,297			$	37,290

Document and Entity Information	Nov. 02, 2023
Entity Listings [Line Items]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Nov. 02, 2023
Entity Registrant Name	INVESTORS TITLE COMPANY
Entity Incorporation, State or Country Code	NC
Entity File Number	0-11774
Entity Tax Identification Number	56-1110199
Entity Address, Address Line One	121 North Columbia Street
Entity Address, City or Town	Chapel Hill
Entity Address, State or Province	NC
Entity Address, Postal Zip Code	27514
City Area Code	919
Local Phone Number	968-2200
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Entity Central Index Key	0000720858
Common Stock [Member]
Entity Listings [Line Items]
Title of 12(b) Security	Common Stock, no par value
Trading Symbol	ITIC
Security Exchange Name	NASDAQ
Preferred Stock [Member]
Entity Listings [Line Items]
Title of 12(b) Security	Rights to Purchase Series A Junior Participating Preferred Stock
Security Exchange Name	NASDAQ

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