8-K
INVESTORS TITLE CO (ITIC)
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): August 7, 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<br> 27514 | ||
| --- | ||
| (Address of Principal Executive Offices) (Zip Code) |
Registrant's telephone number, including area code: (919) 968-2200
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. ☐
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 August 7, 2023, reporting Investors Title Company's financial results for the fiscal quarter ended June 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 August 7,
2023
Exhibit 104 - Cover Page Interactive Data File (embedded within the Inline XBRL document)
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: | August 7, 2023 | By: | /s/ James A. Fine, Jr. |
| James A. Fine, Jr. | |||
| President, Principal Financial Officer and | |||
| Principal Accounting Officer |
| EXHIBIT INDEX | |
|---|---|
| Exhibit No. | Description |
| 99.1 | Press release issued by Investors Title Company on August 7, 2023 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| Exhibit 99.1 | |
| --- |
INVESTORS TITLE COMPANY ANNOUNCES SECOND QUARTER 2023 FINANCIAL RESULTS
Contact: Elizabeth B. Lewter
August 7, 2023
Telephone: (919) 968-2200
Nasdaq Symbol: ITIC
FOR IMMEDIATE RELEASE:
Chapel Hill, NC – Investors Title Company today announced results for the second quarter ended June 30, 2023. The Company reported net income of $7.6 million, or $4.00 per diluted share, for the three months ended June 30, 2023, compared to $2.3 million, or $1.20 per diluted share, for the prior year period.
Revenues decreased 17.8% to $58.3 million, compared with $70.9 million for the prior year quarter, primarily as a result of decreases in the Company’s title insurance business, partially offset by increases in 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, and was partially offset by increases in like-kind exchanges, net investment gains, and interest income. Net investment gains increased due to changes in the estimated fair value of equity security investments and net realized gains on the sale of investments.
Operating expenses decreased 28.7% compared to the prior year period, primarily due to reductions in expenses which fluctuate with title insurance volume. Commissions to agents declined by $13.2 million, commensurate with the decrease in agent premium volume. Personnel expenses declined by $2.4 million, and other expenses were down $3.8 million, mainly due to a decline in title and service fees, premium-related taxes and licensing, and professional services. The provision for claims and office and technology expenses remained relatively consistent with the prior year period.
Income before income taxes increased to $9.8 million for the current quarter, versus $3.0 million in the prior year period. Excluding the impact of net investment gains (losses), adjusted income before income taxes (non-GAAP) decreased 33.1% to $8.8 million for the second quarter, versus $13.1 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 six months ended June 30, 2023, net income increased $302 thousand to $8.8 million, or $4.62 per diluted share, versus $8.5 million, or $4.45 per diluted share, for the prior year period. Revenues decreased 21.6% to $109.7 million, compared with $139.9 million for the prior year period. Operating expenses decreased 23.9% to $98.3 million, compared to $129.2 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 second quarter.
Chairman J. Allen Fine commented, “I am pleased to report improvement in our revenues from the first quarter. Overall, the real estate environment has continued to face several headwinds, including elevated mortgage interest rates and a very low inventory of homes for sale. Despite these challenges, we managed to deliver a pre-tax profit margin of nearly 17% for the second quarter, as a result of expense management initiatives, higher investment earnings, and growth in revenue from non-title services.
“Regardless of current market conditions, the strength of our balance sheet affords flexibility in the execution of our business strategy. We continue to pursue opportunities to expand our presence, enhance operational capabilities, and position ourselves for profitable growth over the full real estate cycle.”
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.
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; 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.
# #
Investors Title Company and Subsidiaries
Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 2023 and 2022
(in thousands, except per share amounts)
(unaudited)
| Three Months Ended<br><br> <br>June 30, | Six Months Ended<br><br> <br>June 30, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2023 | 2022 | |||||||
| Revenues: | ||||||||||
| Net premiums written | $ | 44,005 | $ | 69,626 | $ | 82,971 | $ | 132,751 | ||
| Escrow and other title-related fees | 4,604 | 6,247 | 8,259 | 11,325 | ||||||
| Non-title services | 4,565 | 2,798 | 9,877 | 5,210 | ||||||
| Interest and dividends | 2,150 | 911 | 4,224 | 1,826 | ||||||
| Other investment income | 1,648 | 1,106 | 2,401 | 2,443 | ||||||
| Net investment gains (losses) | 1,092 | (10,134 | ) | 1,535 | (14,302 | ) | ||||
| Other | 250 | 348 | 390 | 647 | ||||||
| Total Revenues | 58,314 | 70,902 | 109,657 | 139,900 | ||||||
| Operating Expenses: | ||||||||||
| Commissions to agents | 20,603 | 33,826 | 39,929 | 63,683 | ||||||
| Provision for claims | 991 | 1,310 | 2,059 | 1,486 | ||||||
| Personnel expenses | 18,548 | 20,898 | 39,368 | 42,152 | ||||||
| Office and technology expenses | 4,513 | 4,288 | 8,913 | 8,656 | ||||||
| Other expenses | 3,813 | 7,627 | 7,981 | 13,177 | ||||||
| Total Operating Expenses | 48,468 | 67,949 | 98,250 | 129,154 | ||||||
| Income before Income Taxes | 9,846 | 2,953 | 11,407 | 10,746 | ||||||
| Provision for Income Taxes | 2,261 | 674 | 2,641 | 2,282 | ||||||
| Net Income | $ | 7,585 | $ | 2,279 | $ | 8,766 | $ | 8,464 | ||
| Basic Earnings per Common Share | $ | 4.00 | $ | 1.20 | $ | 4.62 | $ | 4.46 | ||
| Weighted Average Shares Outstanding – Basic | 1,895 | 1,897 | 1,896 | 1,897 | ||||||
| Diluted Earnings per Common Share | $ | 4.00 | $ | 1.20 | $ | 4.62 | $ | 4.45 | ||
| Weighted Average Shares Outstanding – Diluted | 1,896 | 1,899 | 1,896 | 1,900 |
Investors Title Company and Subsidiaries
Consolidated Balance Sheets
As of June 30, 2023 and December 31, 2022
(in thousands)
(unaudited)
| June 30,<br><br> 2023 | December 31,<br><br> 2022 | |||
|---|---|---|---|---|
| Assets | ||||
| Cash and cash equivalents | $ | 26,184 | $ | 35,311 |
| Investments: | ||||
| Fixed maturity securities, available-for-sale, at fair value | 58,452 | 53,989 | ||
| Equity securities, at fair value | 34,081 | 51,691 | ||
| Short-term investments | 114,857 | 103,649 | ||
| Other investments | 19,779 | 18,368 | ||
| Total investments | 227,169 | 227,697 | ||
| Premiums and fees receivable | 17,211 | 19,047 | ||
| Accrued interest and dividends | 949 | 872 | ||
| Prepaid expenses and other receivables | 11,523 | 11,095 | ||
| Property, net | 21,197 | 17,785 | ||
| Goodwill and other intangible assets, net | 16,927 | 17,611 | ||
| Lease assets | 6,830 | 6,707 | ||
| Other assets | 2,491 | 2,458 | ||
| Current income taxes recoverable | — | 1,174 | ||
| Total Assets | $ | 330,481 | $ | 339,757 |
| Liabilities and Stockholders’ Equity | ||||
| Liabilities: | ||||
| Reserve for claims | $ | 36,865 | $ | 37,192 |
| Accounts payable and accrued liabilities | 33,923 | 47,050 | ||
| Lease liabilities | 7,049 | 6,839 | ||
| Current income taxes payable | 586 | — | ||
| Deferred income taxes, net | 4,805 | 7,665 | ||
| Total liabilities | 83,228 | 98,746 | ||
| Stockholders’ Equity: | ||||
| Common stock –<br> no par value (10,000 authorized shares; 1,891 and 1,897 shares issued<br><br> <br>and outstanding as of June 30, 2023 and December 31, 2022, respectively, excluding in<br><br> <br>each period 292 shares of common stock held by the Company's subsidiary) | — | — | ||
| Retained earnings | 247,092 | 240,811 | ||
| Accumulated other comprehensive income | 161 | 200 | ||
| Total stockholders’ equity | 247,253 | 241,011 | ||
| Total Liabilities and Stockholders’ Equity | $ | 330,481 | $ | 339,757 |
Investors Title Company and Subsidiaries
Direct and Agency Net Premiums Written
For the Three and Six Months Ended June 30, 2023 and 2022
(in thousands)
(unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | % | 2022 | % | 2023 | % | 2022 | % | |||||||||
| Direct | $ | 15,776 | 35.9 | $ | 24,642 | 35.4 | $ | 28,490 | 34.3 | $ | 47,334 | 35.7 | ||||
| Agency | 28,229 | 64.1 | 44,984 | 64.6 | 54,481 | 65.7 | 85,417 | 64.3 | ||||||||
| Total | $ | 44,005 | 100.0 | $ | 69,626 | 100.0 | $ | 82,971 | 100.0 | $ | 132,751 | 100.0 |
Investors Title Company and Subsidiaries
Appendix A
Non-GAAP Measures Reconciliation
For the Three and Six Months Ended June 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 six months ended June 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<br><br> June 30, | Six Months Ended<br><br> June 30, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2023 | 2022 | |||||||
| Revenues | ||||||||||
| Total revenues (GAAP) | $ | 58,314 | $ | 70,902 | $ | 109,657 | $ | 139,900 | ||
| (Subtract) Add: Net investment (gains) losses | (1,092 | ) | 10,134 | (1,535 | ) | 14,302 | ||||
| Adjusted revenues (non-GAAP) | $ | 57,222 | $ | 81,036 | $ | 108,122 | $ | 154,202 | ||
| Income before Income Taxes | ||||||||||
| Income before income taxes (GAAP) | $ | 9,846 | $ | 2,953 | $ | 11,407 | $ | 10,746 | ||
| (Subtract) Add: Net investment (gains) losses | (1,092 | ) | 10,134 | (1,535 | ) | 14,302 | ||||
| Adjusted income before income taxes (non-GAAP) | $ | 8,754 | $ | 13,087 | $ | 9,872 | $ | 25,048 |