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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 13, 2024
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:
(
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 ((s)230.405 of this chapter)
or Rule 12b-2 of the Securities Exchange Act of 1934 ((s)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 13, 2024
, reporting Investors Title Company's financial results for the fiscal quarter
ended
December 31, 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
February 13, 2024
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 13, 2024 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 13, 2024
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
Exhibit 99.1
INVESTORS TITLE COMPANY ANNOUNCES
FOURTH QUARTER AND FISCAL YEAR 2023 FINANCIAL RESULTS
Contact: Elizabeth B. Lewter
February 13, 2024
Telephone: (919) 968-2200
Nasdaq Symbol: ITIC
FOR IMMEDIATE RELEASE:
Chapel Hill, NC - Investors Title Company (Nasdaq: ITIC) today announced
results for the fourth quarter and year ended December 31, 2023. For the
quarter, net income decreased 22.5% to $5.8 million, or $3.09 per diluted
share, versus $7.5 million, or $3.97 per diluted share, in the prior year
period. For the year, net income decreased 9.3% to $21.7 million, or $11.45
per diluted share, versus $23.9 million, or $12.59 per diluted share, in the
prior year.
Revenues for the quarter decreased 18.0% to $53.7 million, compared with $65.5
million for the prior year period, primarily as the result of decreases in the
Company's title insurance business and net investment gains, partially offset
by increases in interest and dividend income 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, which started to trend downwards to some extent
towards the end of the current year period, and ongoing housing inventory
constraints. The decrease in net investment gains was mostly due to a
reduction in net realized gains from the sale of investments compared to the
prior year period. These decreases were partially offset by increases in other
investment income and interest income. Changes in other investment income are
due to fluctuations in the market value of the underlying investments and
distributions received during the quarter. Interest income levels are
primarily a function of general market performance, interest rates and the
level of cash balances.
Operating expenses for the quarter decreased 15.6% compared to the prior year
period, primarily due to reductions in expenses which fluctuate with title
insurance volume. Commissions to agents decreased by $4.8 million,
commensurate with the decrease in agent premium volume. Personnel expenses
decreased by $3.3 million, primarily due to reductions in incentive
compensation and reductions in staffing levels. Other expenses were down $552
thousand, mainly due to the impact of lower title insurance volumes. The
provision for claims, and office and technology expenses, remained consistent
with the prior year period.
-------------------------------------------------------------------------------
Income before income taxes decreased to $6.2 million for the current quarter,
versus $9.3 million in the prior year period. Excluding the impact of net
investment gains (losses), adjusted income before income taxes (non-GAAP)
decreased 13.8% to $3.5 million for the quarter, versus $4.0 million in the
prior year period (see Appendix A for a reconciliation of this non-GAAP
measure to the most directly comparable GAAP measure). Income tax expense,
including federal and state taxes, as a percentage of income before income
taxes was 6.1% for the current year, compared with 18.8% for the prior year
period. The lower effective income tax rate was primarily due to the impact of
tax adjustments and tax credits.
For the year, revenues decreased 20.7% to $224.8 million, compared with $283.4
million for the prior year. Operating expenses decreased 21.6% to $198.5
million, compared with $253.3 million for the prior year period. Income before
income taxes decreased 12.9% to $26.2 million, compared with $30.1 million for
the prior year. Excluding the impact of net investment gains (losses),
adjusted income before income taxes (non-GAAP) decreased 44.9% to $22.8
million, versus $41.3 million for the prior year (see Appendix A for a
reconciliation of this non-GAAP measure to the most directly comparable GAAP
measure). Aside from an increase in revenue from non-title services and an
improvement in net investment gains (losses), overall results for the full
year were shaped predominantly by the same factors that affected the fourth
quarter. The increase in revenue from non-title services was mainly due to an
increase in like-kind exchange revenues. Positive changes in the estimated
fair value of equity security investments resulted in an improvement in net
investment gains (losses) compared to the prior year.
Chairman J. Allen Fine commented, "Results for the quarter reflect the ongoing
slowdown in real estate transaction activity, as well as typical seasonal
patterns. Elevated levels of interest rates continue to negatively impact
home sales and mortgage refinancing. At the same time, a constrained
inventory of homes for sale coupled with the lowest levels of home turnover in
at least a decade has kept real estate values near their post-pandemic peaks.
These factors have all converged to reduce housing affordability to
historically low levels.
"Early in the fourth quarter, mortgage rates reached a 20-year high of 7.8%.
After public comments made by the Federal Reserve in October, however, rates
reversed their upward trend and declined steadily over the balance of the
quarter. By year-end, the average 30-year mortgage rate stood at 6.6%, more
than a full percentage point below the high. We believe this decline and any
accommodative policy by the Federal Reserve should help improve affordability
and provide general market support in 2024.
"Despite the most challenging economic conditions since the great financial
crisis of 2008, with mortgage transaction volumes dipping to levels not seen
in over two decades, we reported another year of solid operating results in
2023, with a pre-tax profit margin of 11.7%. The level of claims activity
remained low, and investment earnings continued to benefit from higher
interest rates and stock market gains. Additionally, we continue to make
select investments in software and other initiatives, which will help make us
a more competitive and efficient company over the course of the market 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, including those resulting from a potential shutdown of the U.S.
Government; the impact of inflation and responses by government regulators,
including the Federal Reserve, such as changes in interest rates; 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
Twelve Months Ended December 31,
2023
and
2022
(in thousands, except per share amounts)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2023 2022 2023 2022
Revenues:
Net premiums written $ 38,365 $ 49,223 $ 171,158 $ 248,632
Escrow and other title-related fees 4,167 4,853 17,109 22,314
Non-title services 4,724 5,042 19,237 13,931
Interest and dividends 2,518 1,649 9,055 4,704
Other investment income (loss) 837 (720 ) 3,752 3,896
Net investment gains (losses) 2,728 5,230 3,448 (11,226 )
Other 344 217 991 1,141
Total Revenues 53,683 65,494 224,750 283,392
Operating Expenses:
Commissions to agents 19,639 24,405 83,374 121,566
Provision for claims 865 803 4,762 4,255
Personnel expenses 18,255 21,593 76,706 85,331
Office and technology expenses 4,237 4,393 17,359 17,323
Other expenses 4,474 5,026 16,319 24,809
Total Operating Expenses 47,470 56,220 198,520 253,284
Income before Income Taxes 6,213 9,274 26,230 30,108
Provision for Income Taxes 377 1,748 4,544 6,205
Net Income $ 5,836 $ 7,526 $ 21,686 $ 23,903
Basic Earnings per Common Share $ 3.09 $ 3.97 $ 11.45 $ 12.60
Weighted Average Shares Outstanding - Basic 1,891 1,897 1,893 1,897
Diluted Earnings per Common Share $ 3.09 $ 3.97 $ 11.45 $ 12.59
Weighted Average Shares Outstanding - Diluted 1,891 1,897 1,893 1,898
-------------------------------------------------------------------------------
Investors Title Company and Subsidiaries
Consolidated Balance Sheets
As of
December 31, 2023
and
2022
(in thousands)
(unaudited)
December 31, December 31,
2023 2022
Assets
Cash and cash $ 24,031 $ 35,311
equivalents
Investments:
Fixed maturity securities, 63,847 53,989
available-for-sale, at fair value
Equity securities, 37,212 51,691
at fair value
Short-term 110,224 103,649
investments
Other 17,385 18,368
investments
Total 228,668 227,697
investments
Premiums and 13,338 19,047
fees receivable
Accrued interest 978 872
and dividends
Prepaid expenses and 13,525 11,095
other receivables
Property, net 23,886 17,785
Goodwill and other 16,249 17,611
intangible assets, net
Lease assets 6,303 6,707
Other assets 2,500 2,458
Current income 1,081 1,174
taxes recoverable
Total Assets $ 330,559 $ 339,757
Liabilities and
Stockholders' Equity
Liabilities:
Reserve for $ 37,147 $ 37,192
claims
Accounts payable and 31,864 47,050
accrued liabilities
Lease 6,449 6,839
liabilities
Deferred income 3,546 7,665
taxes, net
Total 79,006 98,746
liabilities
Stockholders'
Equity:
Common stock - -
-
no par value (10,000 authorized shares; 1,891
and 1,897 shares issued and outstanding as of
December
31, 2023
and
2022
, respectively, excluding in each period 292 shares
of common stock held by the Company's subsidiary)
Retained 250,915 240,811
earnings
Accumulated other 638 200
comprehensive income
Total stockholders' 251,553 241,011
equity
Total Liabilities and $ 330,559 $ 339,757
Stockholders' Equity
-------------------------------------------------------------------------------
Investors Title Company and Subsidiaries
Direct and Agency Net Premiums Written
For the Three and
Twelve Months Ended December 31,
2023
and
2022
(in thousands)
(unaudited)
Three Months Ended December 31, Twelve Months Ended December 31,
2023 % 2022 % 2023 % 2022 %
Direct $ 12,088 31.5 $ 16,230 33.0 $ 58,063 33.9 $ 85,676 34.5
Agency 26,277 68.5 32,993 67.0 113,095 66.1 162,956 65.5
Total $ 38,365 100.0 $ 49,223 100.0 $ 171,158 100.0 $ 248,632 100.0
-------------------------------------------------------------------------------
Investors Title Company and Subsidiaries
Appendix A
Non-GAAP Measures Reconciliation
For the Three and
Twelve Months Ended December 31,
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 twelve months ended December 31, 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 Twelve Months Ended
December 31, December 31,
2023 2022 2023 2022
Revenues
Total revenues (GAAP) $ 53,683 $ 65,494 $ 224,750 $ 283,392
(Subtract) Add: Net investment (gains) losses (2,728 ) (5,230 ) (3,448 ) 11,226
Adjusted revenues (non-GAAP) $ 50,955 $ 60,264 $ 221,302 $ 294,618
Income before Income Taxes
Income before income taxes (GAAP) $ 6,213 $ 9,274 $ 26,230 $ 30,108
(Subtract) Add: Net investment (gains) losses (2,728 ) (5,230 ) (3,448 ) 11,226
Adjusted income before income taxes (non-GAAP) $ 3,485 $ 4,044 $ 22,782 $ 41,334
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