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): February 15, 2021
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 February 15, 2021, reporting Investors Title Company's financial results for the fiscal quarter ended December 31, 2020.
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 February 15, 2021
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: | February 15, 2021 | 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 February 15, 2021 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
Exhibit 99.1
Investors Title Company Announces Record Fourth Quarter and Fiscal Year 2020 Results
CHAPEL HILL, N.C.--(BUSINESS WIRE)--February 15, 2021--Investors Title Company today announced record results for the fourth quarter and year ended December 31, 2020.
For the quarter, net income increased 46.2% to $16.6 million, or $8.77 per diluted share, versus $11.4 million, or $6.00 per diluted share, in the prior year period. For the year, net income increased 25.3% to $39.4 million, or $20.80 per diluted share, versus $31.5 million, or $16.59 per diluted share, in the prior year. The Company set all-time quarterly and annual records for total revenues, net premiums written and net income.
Quarterly results
Revenues for the quarter increased 45.8% to $77.1 million, compared to $52.9 million in the prior year period. Net premiums written increased 48.2% to $62.1 million, as lower average interest rates continued to drive strong levels of refinance activity and home sales. While escrow and title-related fees increased commensurate with the growth in premiums, revenues from non-title services decreased 10.5% mainly due to the impact of low interest rates on our like-kind exchange business. Changes in the estimated fair value of equity security investments resulted in a benefit to revenues of $7.8 million, $3.7 million higher than the prior year period, as equity markets continued to recover from the initial impacts of the COVID-19 pandemic earlier in the year.
Operating expenses increased 45.4%, mainly due to a 55.5% increase in commissions to agents commensurate with the increase in agent premium volume. Claims expense was $830,000 higher than the prior year period. While claims expense for both periods benefited substantially from recognition of favorable loss development, the prior year quarter also benefited from changes to actuarial estimates for the active policy year. Personnel expenses were 36.7% higher than the prior year due primarily to additions to staffing in support of strategic growth initiatives, additional staffing required to support volume increases, and increased levels of incentive compensation.
Income before income taxes increased 46.9% to $21.4 million. Excluding the impact of changes in the estimated fair value of investments in equity securities, income before income taxes (non-GAAP) increased 30.1% to $13.6 million (see Appendix A for a reconciliation of this non-GAAP measure to the most directly comparable GAAP measure).
Annual results
For the year, revenues increased 28.8% to $236.4 million, mainly due to increases in both refinance and home buying activity levels throughout the year, as well as strong increases in real estate values. Changes in the estimated fair value of equity security investments resulted in a benefit to revenues of $4.9 million, which was $5.4 million lower than the prior year period. Operating expenses increased 30.0%, mostly as a result of volume-related increases. Income before income taxes increased 24.7% to $49.7 million. Excluding the impact of changes in the estimated fair value of investments in equity securities, income before income taxes (non-GAAP) increased 51.6% to $44.8 million (see Appendix A for a reconciliation of this non-GAAP measure to the most directly comparable GAAP measure).
Chairman’s commentary
Chairman J. Allen Fine commented, “We are pleased to report another year of strong performance for the Company. For both the quarter and the year, the Company set new records for revenues, premiums, and earnings. Despite headwinds from the pandemic, we experienced strong demand for home purchases and ongoing increases in average real estate values in our operating markets. The decline in interest rates during the year supported housing affordability and drove a sharp increase in the level of refinance activity for the second year in a row.
On the expense side, we continued to experience relatively low levels of claims activity. The rate of residential mortgage foreclosures, typically a driver of claims activity, dropped during the year to its lowest level in a decade largely due to moratorium and forbearance programs enacted in response to COVID-19.
Looking forward to 2021, we are cautiously optimistic that the real estate sector is poised for another strong year. Many experts predict that the economy and employment will continue to recover during 2021, boosted by rollout of the coronavirus vaccine. We believe economic recovery will lend support to housing demand, while favorable interest rates will sustain high levels of refinance activity, although likely reduced from 2020. Regardless of market conditions, however, we will remain focused on enhancing our competitive strengths and capitalizing on targeted opportunities to expand our market presence.”
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, projections regarding U.S. recovery from the COVID-19 pandemic, 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, positive 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 severity and duration of the COVID-19 pandemic and its effects (and the effects of measures undertaken to combat it) on the economy and the Company’s business; 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; changes resulting from the new administration and Congress; 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, 2019, as filed with the Securities and Exchange Commission, and in subsequent filings.
| Investors Title Company and Subsidiaries<br><br> <br>Consolidated Statements of Operations<br><br> <br>For the Three and Twelve Months Ended December 31, 2020 and 2019<br><br> <br>(in thousands, except per share amounts)<br><br> <br>(unaudited)<br><br> <br>**** | ||||||||
|---|---|---|---|---|---|---|---|---|
| Three Months Ended <br><br> December 31, | Twelve Months Ended <br><br> December 31, | |||||||
| 2020 | 2019 | 2020 | 2019 | |||||
| Revenues: | ||||||||
| Net premiums written | $ | 62,107 | $ | 41,900 | $ | 205,418 | $ | 145,842 |
| Escrow and other title-related fees | 2,307 | 1,858 | 8,321 | 7,474 | ||||
| Non-title services | 2,217 | 2,478 | 8,693 | 9,922 | ||||
| Interest and dividends | 1,051 | 1,147 | 4,393 | 4,752 | ||||
| Other investment income | 1,487 | 1,147 | 3,723 | 3,191 | ||||
| Net realized investment gains | 6 | 141 | 333 | 1,340 | ||||
| Changes in the estimated fair value of equity security investments | 7,771 | 4,085 | 4,904 | 10,303 | ||||
| Other | 180 | 128 | 623 | 678 | ||||
| Total Revenues | 77,126 | 52,884 | 236,408 | 183,502 | ||||
| Operating Expenses: | ||||||||
| Commissions to agents | 33,463 | 21,519 | 106,807 | 72,780 | ||||
| Provision (benefit) for claims | 752 | (78) | 5,204 | 3,532 | ||||
| Personnel expenses | 15,297 | 11,187 | 51,929 | 46,058 | ||||
| Office and technology expenses | 2,623 | 2,451 | 9,951 | 9,254 | ||||
| Other expenses | 3,580 | 3,234 | 12,856 | 12,055 | ||||
| Total Operating Expenses | 55,715 | 38,313 | 186,747 | 143,679 | ||||
| Income before Income Taxes | 21,411 | 14,571 | 49,661 | 39,823 | ||||
| Provision for Income Taxes | 4,776 | 3,191 | 10,241 | 8,365 | ||||
| Net Income | $ | 16,635 | $ | 11,380 | $ | 39,420 | $ | 31,458 |
| Basic Earnings per Common Share | $ | 8.79 | $ | 6.03 | $ | 20.84 | $ | 16.66 |
| Weighted Average Shares Outstanding – Basic | 1,892 | 1,889 | 1,892 | 1,888 | ||||
| Diluted Earnings per Common Share | $ | 8.77 | $ | 6.00 | $ | 20.80 | $ | 16.59 |
| Weighted Average Shares Outstanding – Diluted | 1,897 | 1,896 | 1,896 | 1,896 |
| Investors Title Company and Subsidiaries<br><br> <br>Consolidated Balance Sheets<br><br> <br>As of December 31, 2020 and 2019<br><br> <br>(in thousands)<br><br> <br>(unaudited)<br><br> <br>**** | ||||
|---|---|---|---|---|
| December 31, <br><br> 2020 | December 31, <br><br> 2019 | |||
| Assets | ||||
| Cash and cash equivalents | $ | 13,723 | $ | 25,949 |
| Investments: | ||||
| Fixed maturity securities, available-for-sale, at fair value | 117,713 | 104,638 | ||
| Equity securities, at fair value | 64,919 | 61,108 | ||
| Short-term investments | 15,170 | 13,134 | ||
| Other investments | 15,493 | 13,982 | ||
| Total investments | 213,295 | 192,862 | ||
| Premiums and fees receivable | 19,427 | 12,523 | ||
| Accrued interest and dividends | 1,038 | 1,033 | ||
| Prepaid expenses and other receivables | 9,418 | 5,519 | ||
| Property, net | 11,160 | 9,776 | ||
| Goodwill and other intangible assets, net | 9,771 | 10,275 | ||
| Operating lease right-of-use assets | 3,533 | 4,469 | ||
| Other assets | 1,560 | 1,487 | ||
| Total Assets | $ | 282,925 | $ | 263,893 |
| Liabilities and Stockholders’ Equity | ||||
| Liabilities: | ||||
| Reserve for claims | $ | 33,584 | $ | 31,333 |
| Accounts payable and accrued liabilities | 36,020 | 28,318 | ||
| Operating lease liabilities | 3,669 | 4,502 | ||
| Current income taxes payable | 638 | 1,340 | ||
| Deferred income taxes, net | 8,592 | 7,038 | ||
| Total liabilities | 82,503 | 72,531 | ||
| Stockholders’ Equity: | ||||
| Common stock – no par value (10,000 authorized shares; 1,892 and 1,889 shares issued and outstanding as of December 31, 2020 and 2019, respectively, excluding in each period 292<br> shares of common stock held by the Company's subsidiary) | — | — | ||
| Retained earnings | 196,096 | 188,262 | ||
| Accumulated other comprehensive income | 4,326 | 3,100 | ||
| Total stockholders’ equity | 200,422 | 191,362 | ||
| Total Liabilities and Stockholders’ Equity | $ | 282,925 | $ | 263,893 |
| Investors Title Company and Subsidiaries<br><br> <br>Net Premiums Written By Branch and Agency<br><br> <br>For the Three and Twelve Months Ended December 31, 2020 and 2019<br><br> <br>(in thousands)<br><br> <br>(unaudited)<br><br> <br>**** | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||
| 2020 | % | 2019 | % | 2020 | % | 2019 | % | |||||
| Branch | $ | 14,840 | 23.9 | $ | 11,527 | 27.5 | $ | 53,204 | 25.9 | $ | 40,638 | 27.9 |
| Agency | 47,267 | 76.1 | 30,373 | 72.5 | 152,214 | 74.1 | 105,204 | 72.1 | ||||
| Total | $ | 62,107 | 100.0 | $ | 41,900 | 100.0 | $ | 205,418 | 100.0 | $ | 145,842 | 100.0 |
| Investors Title Company and Subsidiaries |
|---|
| Appendix A |
| Non-GAAP Measures Reconciliation |
| For the Three and Twelve Months Ended December 31, 2020 and 2019 |
| (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 changes in the estimated fair value of equity security investments, which are recognized in net income under GAAP. 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> December 31, | Twelve Months Ended <br><br> December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||
| Revenues | ||||||||
| Total revenues (GAAP) | $ | 77,126 | $ | 52,884 | $ | 236,408 | $ | 183,502 |
| Subtract: Changes in the estimated fair value of equity security investments | (7,771) | (4,085) | (4,904) | (10,303) | ||||
| Adjusted revenues (non-GAAP) | $ | 69,355 | $ | 48,799 | $ | 231,504 | $ | 173,199 |
| Income before Income Taxes | ||||||||
| Income before income taxes (GAAP) | $ | 21,411 | $ | 14,571 | $ | 49,661 | $ | 39,823 |
| Subtract: Changes in the estimated fair value of equity security investments | (7,771) | (4,085) | (4,904) | (10,303) | ||||
| Adjusted income before income taxes (non-GAAP) | $ | 13,640 | $ | 10,486 | $ | 44,757 | $ | 29,520 |
Contacts
Elizabeth B. Lewter
Telephone: \(919\) 968-2200