falsedesktopITIC2020-09-30000072085820000022{"tbl_sim": "https://q10k.com/tbl-sim", "search": "https://q10k.com/search"}{"q10k_tbl_0": "Large accelerated filer\t☐\tAccelerated filer\t☒\nNon-accelerated filer\t☐\tSmaller reporting company\t☒\n\t\tEmerging growth company\t☐\n", "q10k_tbl_1": "PART I.\tFINANCIAL INFORMATION\t\nItem 1.\tFinancial Statements:\t\n\tConsolidated Balance Sheets as of September 30 2020 and December 31 2019\t1\n\tConsolidated Statements of Operations For the Three and Nine Months Ended September 30 2020 and 2019\t2\n\tConsolidated Statements of Comprehensive Income For the Three and Nine Months Ended September 30 2020 and 2019\t3\n\tConsolidated Statements of Stockholders' Equity For the Three and Nine Months Ended September 30 2020 and 2019\t4\n\tConsolidated Statements of Cash Flows For the Nine Months Ended September 30 2020 and 2019\t6\n\tNotes to Consolidated Financial Statements\t8\nItem 2.\tManagement's Discussion and Analysis of Financial Condition and Results of Operations\t25\nItem 3.\tQuantitative and Qualitative Disclosures About Market Risk\t38\nItem 4.\tControls and Procedures\t38\nPART II.\tOTHER INFORMATION\t\nItem 1.\tLegal Proceedings\t39\nItem 1A.\tRisk Factors\t39\nItem 2.\tUnregistered Sales of Equity Securities and Use of Proceeds\t39\nItem 3.\tDefaults Upon Senior Securities\t40\nItem 4.\tMine Safety Disclosures\t40\nItem 5.\tOther Information\t40\nItem 6.\tExhibits\t41\nSIGNATURE\t\t42\n", "q10k_tbl_2": "\tSeptember 30 2020\tDecember 31 2019\nAssets\t\t\nCash and cash equivalents\t41534\t25949\nInvestments:\t\t\nFixed maturity securities available-for-sale at fair value (amortized cost: September 30 2020: $92912; December 31 2019: $100667)\t98428\t104638\nEquity securities at fair value (cost: September 30 2020: $34180; December 31 2019: $33570)\t58851\t61108\nShort-term investments\t22516\t13134\nOther investments\t14829\t13982\nTotal investments\t194624\t192862\nPremium and fees receivable\t17291\t12523\nAccrued interest and dividends\t1187\t1033\nPrepaid expenses and other receivables\t9185\t5519\nProperty net\t10669\t9776\nGoodwill and other intangible assets net\t9897\t10275\nOperating lease right-of-use assets\t3798\t4469\nOther assets\t1560\t1487\nTotal Assets\t289745\t263893\nLiabilities and Stockholders' Equity\t\t\nLiabilities:\t\t\nReserve for claims\t33532\t31333\nAccounts payable and accrued liabilities\t31565\t28318\nOperating lease liabilities\t3937\t4502\nCurrent income taxes payable\t813\t1340\nDeferred income taxes net\t6971\t7038\nTotal liabilities\t76818\t72531\nCommitments and Contingencies\t0\t0\nStockholders' Equity:\t\t\nPreferred stock (1000 authorized shares; no shares issued)\t0\t0\nCommon stock - no par value (10000 authorized shares; 1892 and 1889 shares issued and outstanding as of September 30 2020 and December 31 2019 respectively excluding in each period 292 shares of common stock held by the Company)\t0\t0\nRetained earnings\t208647\t188262\nAccumulated other comprehensive income\t4280\t3100\nTotal stockholders' equity\t212927\t191362\nTotal Liabilities and Stockholders' Equity\t289745\t263893\n", "q10k_tbl_3": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nRevenues:\t\t\t\t\nNet premiums written\t57205\t40169\t143311\t103942\nEscrow and other title-related fees\t2154\t2393\t6014\t5616\nNon-title services\t1954\t2539\t6476\t7444\nInterest and dividends\t1060\t1156\t3342\t3605\nOther investment income\t1270\t708\t2236\t2044\nNet realized investment gains\t186\t423\t327\t1199\nChanges in the estimated fair value of equity security investments\t3619\t406\t(2867)\t6218\nOther\t185\t145\t443\t550\nTotal Revenues\t67633\t47939\t159282\t130618\nOperating Expenses:\t\t\t\t\nCommissions to agents\t29068\t19928\t73344\t51261\nProvision for claims\t1552\t987\t4452\t3610\nPersonnel expenses\t12575\t11576\t36632\t34871\nOffice and technology expenses\t2456\t2350\t7328\t6803\nOther expenses\t3125\t3079\t9276\t8821\nTotal Operating Expenses\t48776\t37920\t131032\t105366\nIncome before Income Taxes\t18857\t10019\t28250\t25252\nProvision for Income Taxes\t3556\t2067\t5465\t5174\nNet Income\t15301\t7952\t22785\t20078\nBasic Earnings per Common Share\t8.09\t4.21\t12.04\t10.63\nWeighted Average Shares Outstanding - Basic\t1892\t1889\t1892\t1888\nDiluted Earnings per Common Share\t8.07\t4.20\t12.02\t10.59\nWeighted Average Shares Outstanding - Diluted\t1895\t1895\t1896\t1896\n", "q10k_tbl_4": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n\t2020\t2019\t2020\t2019\nNet income\t15301\t7952\t22785\t20078\nOther comprehensive income before tax:\t\t\t\t\nAccumulated postretirement benefit obligation adjustment\t0\t0\t(41)\t0\nNet unrealized gain on investments arising during the period\t61\t431\t1093\t2847\nReclassification adjustment for sale of securities included in net income\t0\t0\t(30)\t0\nReclassification adjustment for write-down of securities included in net income\t0\t0\t482\t0\nOther comprehensive income before tax\t61\t431\t1504\t2847\nIncome tax benefit related to postretirement health benefits\t0\t0\t(9)\t0\nIncome tax expense related to net unrealized gain on investments arising during the period\t11\t90\t229\t601\nIncome tax benefit related to reclassification adjustment for sale of securities included in net income\t0\t0\t(6)\t0\nIncome tax expense related to reclassification adjustment for write-down of securities included in net income\t0\t0\t110\t0\nNet income tax expense on other comprehensive income\t11\t90\t324\t601\nOther comprehensive income\t50\t341\t1180\t2246\nComprehensive Income\t15351\t8293\t23965\t22324\n", "q10k_tbl_5": "\tCommon Stock\t\tRetained Earnings\tAccumulated Other Comprehensive Income\tTotal Stockholders' Equity\n\tShares\tAmount\t\nBalance June 30 2019\t1889\t0\t185441\t2854\t188295\nNet income\t\t\t7952\t\t7952\nDividends paid ($0.40 per share)\t\t\t(755)\t\t(755)\nExercise of stock appreciation rights\t0\t\t0\t\t0\nShare-based compensation expense related to stock appreciation rights\t\t\t57\t\t57\nNet unrealized gain on investments\t\t\t\t341\t341\nBalance September 30 2019\t1889\t0\t192695\t3195\t195890\nBalance June 30 2020\t1892\t0\t194235\t4230\t198465\nNet income\t\t\t15301\t\t15301\nDividends paid ($0.44 per share)\t\t\t(833)\t\t(833)\nExercise of stock appreciation rights\t0\t\t0\t\t0\nShare-based compensation expense related to stock appreciation rights\t\t\t38\t\t38\nNet unrealized gain on investments\t\t\t\t50\t50\nOther\t\t\t(94)\t\t(94)\nBalance September 30 2020\t1892\t0\t208647\t4280\t212927\n", "q10k_tbl_6": "\tCommon Stock\t\tRetained Earnings\tAccumulated Other Comprehensive Income\tTotal Stockholders' Equity\n\tShares\tAmount\t\nBalance December 31 2018\t1887\t0\t174690\t949\t175639\nNet income\t\t\t20078\t\t20078\nDividends paid ($1.20 per share)\t\t\t(2266)\t\t(2266)\nRepurchases of common stock\t0\t\t(11)\t\t(11)\nExercise of stock appreciation rights\t2\t\t0\t\t0\nShare-based compensation expense related to stock appreciation rights\t\t\t204\t\t204\nNet unrealized gain on investments\t\t\t\t2246\t2246\nBalance September 30 2019\t1889\t0\t192695\t3195\t195890\nBalance December 31 2019\t1889\t0\t188262\t3100\t191362\nNet income\t\t\t22785\t\t22785\nDividends paid ($1.32 per share)\t\t\t(2497)\t\t(2497)\nExercise of stock appreciation rights\t3\t\t(1)\t\t(1)\nShare-based compensation expense related to stock appreciation rights\t\t\t192\t\t192\nAccumulated postretirement benefit obligation adjustment\t\t\t\t(32)\t(32)\nNet unrealized gain on investments\t\t\t\t1212\t1212\nOther\t\t\t(94)\t\t(94)\nBalance September 30 2020\t1892\t0\t208647\t4280\t212927\n", "q10k_tbl_7": "\tNine Months Ended September 30\t\n\t2020\t2019\nOperating Activities\t\t\nNet income\t22785\t20078\nAdjustments to reconcile net income to net cash provided by operating activities:\t\t\nDepreciation\t1320\t1298\nAmortization of investments net\t678\t492\nAmortization of other intangible assets net\t378\t379\nShare-based compensation expense related to stock appreciation rights\t192\t204\nNet gain on disposals of property\t(26)\t(28)\nNet realized investment gains\t(327)\t(1199)\nNet change in estimated fair value of equity security investments\t2867\t(6218)\nNet earnings from other investments\t(1764)\t(1286)\nProvision for claims\t4452\t3610\n(Benefit) provision for deferred income taxes\t(391)\t1340\nChanges in assets and liabilities:\t\t\nIncrease in premium and fees receivables\t(4768)\t(502)\n(Increase) decrease in other assets\t(3893)\t360\nDecrease (increase) in operating lease right-of-use assets\t577\t(4619)\nIncrease (decrease) in accounts payable and accrued liabilities\t3206\t(205)\n(Decrease) increase in operating lease liabilities\t(565)\t4622\nDecrease in current income taxes payable\t(527)\t(4839)\nPayments of claims net of recoveries\t(2253)\t(3534)\nNet cash provided by operating activities\t21941\t9953\nInvesting Activities\t\t\nPurchases of fixed maturities\t(517)\t(1235)\nPurchases of equity securities\t(9270)\t(3921)\nPurchases of short-term investments\t(13668)\t(89519)\nPurchases of other investments\t(1090)\t(1456)\nProceeds from sales and maturities of fixed maturity securities\t7139\t7280\nProceeds from sales of equity securities\t9412\t4040\nProceeds from sales and maturities of short-term investments\t4291\t100821\nProceeds from sales and distributions of other investments\t2010\t2490\nProceeds from sales of other assets\t22\t2\nPurchases of property\t(2245)\t(1020)\nProceeds from the sale of property\t58\t140\nNet cash (used in) provided by investing activities\t(3858)\t17622\nFinancing Activities\t\t\nRepurchases of common stock\t0\t(11)\nExercise of stock appreciation rights\t(1)\t0\nDividends paid\t(2497)\t(2266)\nNet cash used in financing activities\t(2498)\t(2277)\nNet Increase in Cash and Cash Equivalents\t15585\t25298\nCash and Cash Equivalents Beginning of Period\t25949\t18694\nCash and Cash Equivalents End of Period\t41534\t43992\n", "q10k_tbl_8": "Consolidated Statements of Cash Flows continued\t\t\n\tNine Months Ended September 30\t\n\t2020\t2019\nSupplemental Disclosures:\t\t\nCash Paid During the Year for:\t\t\nIncome tax payments net\t6889\t9150\nNon-Cash Investing and Financing Activities:\t\t\nNon-cash net unrealized gain on investments net of deferred tax provision of $(333) and $(601) for September 30 2020 and 2019 respectively\t(1212)\t(2246)\nAdjustments to postretirement benefits obligation net of deferred tax benefit of $9 and $0 for September 30 2020 and 2019 respectively\t32\t0\nAdjustments to operating lease right-of-use assets for September 30 2020 and 2019 respectively\t94\t0\n", "q10k_tbl_9": "(in thousands)\tSeptember 30 2020\tDecember 31 2019\nBalance beginning of period\t31333\t31729\nProvision charged to operations\t4452\t3532\nPayments of claims net of recoveries\t(2253)\t(3928)\nBalance end of period\t33532\t31333\n", "q10k_tbl_10": "(in thousands except percentages)\tSeptember 30 2020\t%\tDecember 31 2019\t%\nKnown title claims\t3993\t11.9\t3799\t12.1\nIBNR\t29539\t88.1\t27534\t87.9\nTotal reserve for claims\t33532\t100.0\t31333\t100.0\n", "q10k_tbl_11": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n(in thousands except per share amounts)\t2020\t2019\t2020\t2019\nNet income\t15301\t7952\t22785\t20078\nWeighted average common shares outstanding - Basic\t1892\t1889\t1892\t1888\nIncremental shares outstanding assuming the exercise of dilutive SARs (share-settled)\t3\t6\t4\t8\nWeighted average common shares outstanding - Diluted\t1895\t1895\t1896\t1896\nBasic earnings per common share\t8.09\t4.21\t12.04\t10.63\nDiluted earnings per common share\t8.07\t4.20\t12.02\t10.59\n", "q10k_tbl_12": "(in thousands except weighted average exercise price and average remaining contractual term)\tNumber Of Shares\tWeighted Average Exercise Price\tAverage Remaining Contractual Term (Years)\tAggregate Intrinsic Value\nOutstanding as of January 1 2019\t28\t110.27\t3.64\t2019\nSARs granted\t4\t162.81\t\t\nSARs exercised\t(2)\t50.50\t\t\nOutstanding as of December 31 2019\t30\t124.13\t3.53\t1352\nSARs granted\t11\t135.05\t\t\nSARs exercised\t(8)\t75.75\t\t\nOutstanding as of September 30 2020\t33\t138.55\t4.41\t496\nExercisable as of September 30 2020\t26\t140.02\t3.83\t480\nUnvested as of September 30 2020\t7\t133.21\t6.52\t16\n", "q10k_tbl_13": "\t2020\t\t\t2019\t\t\nExpected Life in Years\t6.2\t0\t7.0\t7.0\t0\t7.0\nVolatility\t28.5%\t\t\t30.2%\t\t\nInterest Rate\t0.7%\t\t\t2.3%\t\t\nYield Rate\t1.2%\t\t\t1.0%\t\t\n", "q10k_tbl_14": "Three Months Ended September 30 2020 (in thousands)\tTitle Insurance\tAll Other\tIntersegment Eliminations\tTotal\nInsurance and other services revenues\t61809\t2176\t(2487)\t61498\nInvestment income\t5627\t322\t0\t5949\nNet realized (loss) gain on investments\t(263)\t449\t0\t186\nTotal revenues\t67173\t2947\t(2487)\t67633\nOperating expenses\t49260\t1858\t(2342)\t48776\nIncome before income taxes\t17913\t1089\t(145)\t18857\nTotal assets\t213152\t76593\t0\t289745\n", "q10k_tbl_15": "Three Months Ended September 30 2019 (in thousands)\tTitle Insurance\tAll Other\tIntersegment Eliminations\tTotal\nInsurance and other services revenues\t44079\t2851\t(1684)\t45246\nInvestment income\t1879\t391\t0\t2270\nNet realized gain on investments\t346\t77\t0\t423\nTotal revenues\t46304\t3319\t(1684)\t47939\nOperating expenses\t37201\t2269\t(1550)\t37920\nIncome before income taxes\t9103\t1050\t(134)\t10019\nTotal assets\t191436\t74678\t0\t266114\n", "q10k_tbl_16": "Nine Months Ended September 30 2020 (in thousands)\tTitle Insurance\tAll Other\tIntersegment Eliminations\tTotal\nInsurance and other services revenues\t154820\t7149\t(5725)\t156244\nInvestment income\t2525\t186\t0\t2711\nNet realized gain on investments\t327\t0\t0\t327\nTotal revenues\t157672\t7335\t(5725)\t159282\nOperating expenses\t129777\t6543\t(5288)\t131032\nIncome before income taxes\t27895\t792\t(437)\t28250\nTotal assets\t213152\t76593\t0\t289745\n", "q10k_tbl_17": "Nine Months Ended September 30 2019 (in thousands)\tTitle Insurance\tAll Other\tIntersegment Eliminations\tTotal\nInsurance and other services revenues\t113999\t8373\t(4820)\t117552\nInvestment income\t9780\t2087\t0\t11867\nNet realized gain on investments\t1102\t97\t0\t1199\nTotal revenues\t124881\t10557\t(4820)\t130618\nOperating expenses\t102792\t6991\t(4417)\t105366\nIncome before income taxes\t22089\t3566\t(403)\t25252\nTotal assets\t191436\t74678\t0\t266114\n", "q10k_tbl_18": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n(in thousands)\t2020\t2019\t2020\t2019\nService cost - benefits earned during the year\t0\t0\t0\t0\nInterest cost on the projected benefit obligation\t7\t8\t23\t25\nAmortization of unrecognized losses\t0\t0\t0\t0\nNet periodic benefit cost\t7\t8\t23\t25\n", "q10k_tbl_19": "As of September 30 2020 (in thousands)\tAmortized Cost\tGross Unrealized Gains\tGross Unrealized Losses\tEstimated Fair Value\nFixed maturity securities available-for-sale at fair value:\t\t\t\t\nGovernment obligations\t24060\t152\t0\t24212\nGeneral obligations of U.S. states territories and political subdivisions\t17569\t1245\t0\t18814\nSpecial revenue issuer obligations of U.S. states territories and political subdivisions\t47305\t3098\t3\t50400\nCorporate debt securities\t3978\t1024\t0\t5002\nTotal\t92912\t5519\t3\t98428\n", "q10k_tbl_20": "As of December 31 2019 (in thousands)\tAmortized Cost\tGross Unrealized Gains\tGross Unrealized Losses\tEstimated Fair Value\nFixed maturity securities available-for-sale at fair value:\t\t\t\t\nGovernment obligations\t25161\t6\t4\t25163\nGeneral obligations of U.S. states territories and political subdivisions\t18887\t843\t0\t19730\nSpecial revenue issuer obligations of U.S. states territories and political subdivisions\t51188\t2530\t20\t53698\nCorporate debt securities\t5431\t621\t5\t6047\nTotal\t100667\t4000\t29\t104638\n", "q10k_tbl_21": "\tAvailable-for-Sale\t\n(in thousands)\tAmortized Cost\tEstimated Fair Value\nDue in one year or less\t31052\t31253\nDue one year through five years\t42795\t46050\nDue five years through ten years\t18250\t19741\nDue after ten years\t815\t1384\nTotal\t92912\t98428\n", "q10k_tbl_22": "\tLess than 12 Months\t\t12 Months or Longer\t\tTotal\t\nAs of September 30 2020 (in thousands)\tEstimated Fair Value\tUnrealized Losses\tEstimated Fair Value\tUnrealized Losses\tEstimated Fair Value\tUnrealized Losses\nSpecial revenue issuer obligations of U.S. states territories and political subdivisions\t0\t0\t1103\t(3)\t1103\t(3)\nTotal temporarily impaired securities\t0\t0\t1103\t(3)\t1103\t(3)\n", "q10k_tbl_23": "\tLess than 12 Months\t\t12 Months or Longer\t\tTotal\t\nAs of December 31 2019 (in thousands)\tEstimated Fair Value\tUnrealized Losses\tEstimated Fair Value\tUnrealized Losses\tEstimated Fair Value\tUnrealized Losses\nGovernment obligations\t12045\t(4)\t0\t0\t12045\t(4)\nSpecial revenue issuer obligations of U.S. states territories and political subdivisions\t1101\t(17)\t1118\t(3)\t2219\t(20)\nCorporate debt securities\t413\t(5)\t0\t0\t413\t(5)\nTotal temporarily impaired securities\t13559\t(26)\t1118\t(3)\t14677\t(29)\n", "q10k_tbl_24": "As of September 30 2020 (in thousands)\tCost\tEstimated Fair Value\nEquity securities at fair value:\t\t\nCommon stocks\t34180\t58851\nTotal\t34180\t58851\n", "q10k_tbl_25": "As of December 31 2019 (in thousands)\tCost\tEstimated Fair Value\nEquity securities at fair value:\t\t\nCommon stocks\t33570\t61108\nTotal\t33570\t61108\n", "q10k_tbl_26": "(in thousands)\t2020\t2019\nGross realized gains from securities:\t\t\nCorporate debt securities\t30\t0\nCommon stocks\t2520\t1385\nTotal\t2550\t1385\nGross realized losses from securities:\t\t\nCommon stocks\t(1768)\t(188)\nOther-than-temporary impairment of securities\t(482)\t0\nTotal\t(2250)\t(188)\nNet realized gains from securities\t300\t1197\nGross realized gains (losses) on other investments:\t\t\nGains on other investments\t32\t2\nLosses on other investments\t(5)\t0\nTotal\t27\t2\nNet realized investment gains\t327\t1199\n", "q10k_tbl_27": "(in thousands)\tBalance Sheet Classification\tCarrying Value\tEstimated Fair Value\tMaximum Potential Loss (a)\nTax credit LPs\tOther investments\t267\t267\t1768\nReal estate LLCs or LPs\tOther investments\t5090\t6680\t6675\nSmall business investment LPs\tOther investments\t7125\t6667\t12955\nTotal\t\t12482\t13614\t21398\n", "q10k_tbl_28": "As of September 30 2020 (in thousands)\tLevel 1\tLevel 2 *\tLevel 3\tTotal\nFixed maturity securities:\t\t\t\t\nObligations of U.S. states territories and political subdivisions\t24212\t69214\t0\t93426\nCorporate debt securities\t0\t5002\t0\t5002\nTotal\t24212\t74216\t0\t98428\n", "q10k_tbl_29": "As of December 31 2019 (in thousands)\tLevel 1\tLevel 2 *\tLevel 3\tTotal\nFixed maturity securities:\t\t\t\t\nObligations of U.S. states territories and political subdivisions\t24160\t74431\t0\t98591\nCorporate debt securities\t0\t6047\t0\t6047\nTotal\t24160\t80478\t0\t104638\n", "q10k_tbl_30": "As of September 30 2020 (in thousands)\tLevel 1\tLevel 2\tLevel 3\tTotal\nFinancial assets:\t\t\t\t\nCash and cash equivalents\t41534\t0\t0\t41534\nAccrued interest and dividends\t1187\t0\t0\t1187\nEquity securities at fair value:\t\t\t\t\nCommon stocks\t58851\t0\t0\t58851\nShort-term investments:\t\t\t\t\nMoney market funds Treasury bills and certificates of deposit\t22516\t0\t0\t22516\nOther investments:\t\t\t\t\nEquity investments in unconsolidated affiliates equity method\t0\t0\t6541\t6541\nEquity investments in unconsolidated affiliates measurement alternative\t0\t0\t8288\t8288\nTotal\t124088\t0\t14829\t138917\n", "q10k_tbl_31": "As of December 31 2019 (in thousands)\tLevel 1\tLevel 2\tLevel 3\tTotal\nFinancial assets:\t\t\t\t\nCash and cash equivalents\t25949\t0\t0\t25949\nAccrued interest and dividends\t1033\t0\t0\t1033\nEquity securities at fair value:\t\t\t\t\nCommon stocks\t61108\t0\t0\t61108\nShort-term investments:\t\t\t\t\nMoney market funds and certificates of deposit\t13134\t0\t0\t13134\nOther investments:\t\t\t\t\nEquity investments in unconsolidated affiliates equity method\t0\t0\t6083\t6083\nEquity investments in unconsolidated affiliates measurement alternative\t0\t0\t7899\t7899\nTotal\t101224\t0\t13982\t115206\n", "q10k_tbl_32": "(in thousands)\tBalance December 31 2019\tAmounts Impaired\tObservable Changes\tPurchases and Additional Commitments Paid\tSales Returns of Capital and Other Reductions\tBalance September 30 2020\nOther investments:\t\t\t\t\t\t\nEquity investments in unconsolidated affiliates measurement alternative\t7899\t0\t0\t642\t(253)\t8288\nTotal\t7899\t0\t0\t642\t(253)\t8288\n", "q10k_tbl_33": "(in thousands)\tBalance December 31 2018\tAmounts Impaired\tObservable Changes\tPurchases and Additional Commitments Paid\tSales Returns of Capital and Other Reductions\tBalance December 31 2019\nOther investments:\t\t\t\t\t\t\nEquity investments in unconsolidated affiliates measurement alternative\t6589\t0\t0\t2241\t(931)\t7899\nTotal\t6589\t0\t0\t2241\t(931)\t7899\n", "q10k_tbl_34": "Financial Statement Classification Consolidated Balance Sheets (in thousands)\tAs of September 30 2020\tAs of December 31 2019\nOther investments\t6541\t6083\nPremium and fees receivable\t635\t410\n", "q10k_tbl_35": "Financial Statement Classification Consolidated Statements of Operations (in thousands)\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n2020\t2019\t2020\t2019\nNet premiums written\t6615\t4626\t16725\t11674\nNon-title services and other investment income\t1104\t779\t2241\t1866\nCommissions to agents\t4486\t3056\t11279\t7702\n", "q10k_tbl_36": "(in thousands)\tAs of September 30 2020\tAs of December 31 2019\nReferral relationships\t6416\t6416\nNon-compete agreements\t1406\t1406\nTradename\t560\t560\nTotal\t8382\t8382\nAccumulated amortization\t(2835)\t(2456)\nIdentifiable intangible assets net\t5547\t5926\n", "q10k_tbl_37": "Year Ended (in thousands)\t\n2020\t126\n2021\t562\n2022\t525\n2023\t525\n2024\t473\nThereafter\t3336\nTotal\t5547\n", "q10k_tbl_38": "Three Months Ended September 30 2020 (in thousands)\tUnrealized Gains and Losses On Available-for-Sale Securities\tPostretirement Benefits Plans\tTotal\nBeginning balance at June 30\t4294\t(64)\t4230\nOther comprehensive income before reclassifications\t50\t0\t50\nAmounts reclassified from accumulated other comprehensive income\t0\t0\t0\nNet current-period other comprehensive income\t50\t0\t50\nEnding balance\t4344\t(64)\t4280\n", "q10k_tbl_39": "Three Months Ended September 30 2019 (in thousands)\tUnrealized Gains and Losses On Available-for-Sale Securities\tPostretirement Benefits Plans\tTotal\nBeginning balance at June 30\t2886\t(32)\t2854\nOther comprehensive income before reclassifications\t341\t0\t341\nAmounts reclassified from accumulated other comprehensive income\t0\t0\t0\nNet current-period other comprehensive income\t341\t0\t341\nEnding balance\t3227\t(32)\t3195\n", "q10k_tbl_40": "Nine Months Ended September 30 2020 (in thousands)\tUnrealized Gains and Losses On Available-for-Sale Securities\tPostretirement Benefits Plans\tTotal\nBeginning balance at January 1\t3132\t(32)\t3100\nOther comprehensive income (loss) before reclassifications\t864\t(32)\t832\nAmounts reclassified from accumulated other comprehensive income\t348\t0\t348\nNet current-period other comprehensive income (loss)\t1212\t(32)\t1180\nEnding balance\t4344\t(64)\t4280\n", "q10k_tbl_41": "Nine Months Ended September 30 2019 (in thousands)\tUnrealized Gains and Losses On Available-for-Sale Securities\tPostretirement Benefits Plans\tTotal\nBeginning balance at January 1\t981\t(32)\t949\nOther comprehensive income before reclassifications\t2246\t0\t2246\nAmounts reclassified from accumulated other comprehensive income\t0\t0\t0\nNet current-period other comprehensive income\t2246\t0\t2246\nEnding balance\t3227\t(32)\t3195\n", "q10k_tbl_42": "Nine Months Ended September 30 2020 (in thousands)\t\t\nDetails about Accumulated Other Comprehensive Income Components (in thousands)\tAmount Reclassified from Accumulated Other Comprehensive Income\tAffected Line Item in the Consolidated Statements of Operations\nUnrealized gains (losses) on available-for-sale securities:\t\t\nNet realized gain on investments\t30\t\nOther-than-temporary impairments\t(482)\t\nTotal\t(452)\tNet realized investment gains\nTax\t104\tProvision for income taxes\nNet of Tax\t(348)\t\nReclassifications for the period\t(348)\t\n", "q10k_tbl_43": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n(in thousands)\t2020\t2019\t2020\t2019\nRevenue from contracts with customers:\t\t\t\t\nEscrow and other title-related fees\t2154\t2393\t6014\t5616\nNon-title services\t1954\t2539\t6476\t7444\nTotal revenue from contracts with customers\t4108\t4932\t12490\t13060\nOther sources of revenue:\t\t\t\t\nNet premiums written\t57205\t40169\t143311\t103942\nInvestment-related revenue\t6135\t2693\t3038\t13066\nOther\t185\t145\t443\t550\nTotal revenues\t67633\t47939\t159282\t130618\n", "q10k_tbl_44": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n(in thousands)\t2020\t2019\t2020\t2019\nOperating leases\t327\t312\t968\t944\nShort-term leases (b)\t44\t30\t110\t103\nLease expense\t371\t342\t1078\t1047\nSub-lease income\t0\t0\t0\t0\nLease cost\t371\t342\t1078\t1047\n", "q10k_tbl_45": "(in thousands)\tAs of September 30 2020\tAs of December 31 2019\nCurrent:\t\t\nOperating lease liabilities\t1097\t1048\nNon-current:\t\t\nOperating lease liabilities\t2840\t3454\nTotal operating lease liabilities\t3937\t4502\n", "q10k_tbl_46": "Year Ended (in thousands)\t\n2020\t324\n2021\t1195\n2022\t975\n2023\t685\n2024\t515\nThereafter\t649\nTotal undiscounted payments\t4343\nLess: present value adjustment\t(406)\nOperating lease liabilities\t3937\n", "q10k_tbl_47": "\tAs of September 30 2020\tAs of December 31 2019\nWeighted average remaining lease term (years)\t4.40\t4.84\nWeighted average discount rate\t4.6%\t4.6%\n", "q10k_tbl_48": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\n(in thousands)\t2020\t2019\t2020\t2019\nRevenues:\t\t\t\t\nNet premiums written\t57205\t40169\t143311\t103942\nEscrow and other title-related fees\t2154\t2393\t6014\t5616\nNon-title services\t1954\t2539\t6476\t7444\nInterest and dividends\t1060\t1156\t3342\t3605\nOther investment income\t1270\t708\t2236\t2044\nNet realized investment gains\t186\t423\t327\t1199\nChanges in the estimated fair value of equity security investments\t3619\t406\t(2867)\t6218\nOther\t185\t145\t443\t550\nTotal Revenues\t67633\t47939\t159282\t130618\nOperating Expenses:\t\t\t\t\nCommissions to agents\t29068\t19928\t73344\t51261\nProvision for claims\t1552\t987\t4452\t3610\nPersonnel expenses\t12575\t11576\t36632\t34871\nOffice and technology expenses\t2456\t2350\t7328\t6803\nOther expenses\t3125\t3079\t9276\t8821\nTotal Operating Expenses\t48776\t37920\t131032\t105366\nIncome before Income Taxes\t18857\t10019\t28250\t25252\nProvision for Income Taxes\t3556\t2067\t5465\t5174\nNet Income\t15301\t7952\t22785\t20078\n", "q10k_tbl_49": "\tThree Months Ended September 30\t\t\t\tNine Months Ended September 30\t\t\t\n(in thousands except percentages)\t2020\t%\t2019\t%\t2020\t%\t2019\t%\nHome and Branch\t15496\t27.1\t11557\t28.8\t38364\t26.8\t29111\t28.0\nAgency\t41709\t72.9\t28612\t71.2\t104947\t73.2\t74831\t72.0\nTotal\t57205\t100.0\t40169\t100.0\t143311\t100.0\t103942\t100.0\n", "q10k_tbl_50": "\tThree Months Ended September 30\t\tNine Months Ended September 30\t\nState (in thousands)\t2020\t2019\t2020\t2019\nNorth Carolina\t21524\t16129\t53565\t40790\nTexas\t10956\t7579\t26935\t19929\nGeorgia\t6347\t4535\t15751\t11306\nSouth Carolina\t4646\t3212\t12285\t9551\nVirginia\t2122\t1686\t5725\t4316\nAll Others\t11782\t7113\t29421\t18385\nPremiums Written\t57377\t40254\t143682\t104277\nReinsurance Assumed\t0\t0\t3\t0\nReinsurance Ceded\t(172)\t(85)\t(374)\t(335)\nNet Premiums Written\t57205\t40169\t143311\t103942\n", "q10k_tbl_51": "\tThree Months Ended September 30\t\t\t\tNine Months Ended September 30\t\t\t\n(in thousands except percentages)\t2020\t%\t2019\t%\t2020\t%\t2019\t%\nTitle Insurance\t46951\t96.3\t35682\t94.1\t124588\t95.1\t98468\t93.5\nAll Other\t1825\t3.7\t2238\t5.9\t6444\t4.9\t6898\t6.5\nTotal\t48776\t100.0\t37920\t100.0\t131032\t100.0\t105366\t100.0\n", "q10k_tbl_52": "\tIssuer Purchases of Equity Securities (unrounded)\t\t\t\nPeriod\tTotal Number of Shares Purchased\tAverage Price Paid per Share\tTotal Number of Shares Purchased as Part of Publicly Announced Plan\tMaximum Number of Shares that May Yet Be Purchased Under the Plan (1)\nBeginning of period\t\t\t\t428186\nJuly 1 through July 31 2020\t0\t0\t0\t428186\nAugust 1 through August 31 2020\t0\t0\t0\t428186\nSeptember 1 through September 30 2020\t0\t0\t0\t428186\nTotal\t0\t0\t0\t428186\n", "q10k_tbl_53": "3.1\tAmended and Restated Bylaws dated November 9 2020\n31(i)\tCertification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002\n31(ii)\tCertification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002\n32\tCertifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002\n101.INS\tInline XBRL Instance Document*\n101.SCH\tInline XBRL Taxonomy Extension Schema Document\n101.CAL\tInline XBRL Taxonomy Extension Calculation Linkbase Document\n101.LAB\tInline XBRL Taxonomy Extension Label Linkbase Document\n101.PRE\tInline XBRL Taxonomy Extension Presentation Linkbase Document\n101.DEF\tInline XBRL Taxonomy Extension Definition Linkbase Document\n104\tCover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)\n* - The instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document\t\n"}{"bs": "q10k_tbl_2", "is": "q10k_tbl_3", "cf": "q10k_tbl_7"}None
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ___________________
Commission File Number: 0-11774
INVESTORS TITLE COMPANY
(Exact name of registrant as specified in its charter)
North Carolina
56-1110199
(State of incorporation)
(I.R.S. Employer Identification No.)
121 North Columbia Street, Chapel Hill, North Carolina27514
(Address of principal executive offices) (Zip Code)
(919) 968-2200
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☒
Non-accelerated filer
☐
Smaller reporting company
☒
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐No☒
As of October 20, 2020, there were 1,892,411 common shares of the registrant outstanding.
Fixed maturity securities, available-for-sale, at fair value (amortized cost: September 30, 2020: $92,912; December 31, 2019: $100,667)
98,428
104,638
Equity securities, at fair value (cost: September 30, 2020: $34,180; December 31, 2019: $33,570)
58,851
61,108
Short-term investments
22,516
13,134
Other investments
14,829
13,982
Total investments
194,624
192,862
Premium and fees receivable
17,291
12,523
Accrued interest and dividends
1,187
1,033
Prepaid expenses and other receivables
9,185
5,519
Property, net
10,669
9,776
Goodwill and other intangible assets, net
9,897
10,275
Operating lease right-of-use assets
3,798
4,469
Other assets
1,560
1,487
Total Assets
$
289,745
$
263,893
Liabilities and Stockholders’ Equity
Liabilities:
Reserve for claims
$
33,532
$
31,333
Accounts payable and accrued liabilities
31,565
28,318
Operating lease liabilities
3,937
4,502
Current income taxes payable
813
1,340
Deferred income taxes, net
6,971
7,038
Total liabilities
76,818
72,531
Commitments and Contingencies
—
—
Stockholders’ Equity:
Preferred stock (1,000 authorized shares; no shares issued)
—
—
Common stock – no par value (10,000 authorized shares; 1,892 and 1,889 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively, excluding in each period 292 shares of common stock held by the Company)
—
—
Retained earnings
208,647
188,262
Accumulated other comprehensive income
4,280
3,100
Total stockholders' equity
212,927
191,362
Total Liabilities and Stockholders’ Equity
$
289,745
$
263,893
Refer to notes to the Consolidated Financial Statements.
1
Investors Title Company and Subsidiaries
Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2020 and 2019
(in thousands, except per share amounts)
(unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
Revenues:
Net premiums written
$
57,205
$
40,169
$
143,311
$
103,942
Escrow and other title-related fees
2,154
2,393
6,014
5,616
Non-title services
1,954
2,539
6,476
7,444
Interest and dividends
1,060
1,156
3,342
3,605
Other investment income
1,270
708
2,236
2,044
Net realized investment gains
186
423
327
1,199
Changes in the estimated fair value of equity security investments
3,619
406
(2,867)
6,218
Other
185
145
443
550
Total Revenues
67,633
47,939
159,282
130,618
Operating Expenses:
Commissions to agents
29,068
19,928
73,344
51,261
Provision for claims
1,552
987
4,452
3,610
Personnel expenses
12,575
11,576
36,632
34,871
Office and technology expenses
2,456
2,350
7,328
6,803
Other expenses
3,125
3,079
9,276
8,821
Total Operating Expenses
48,776
37,920
131,032
105,366
Income before Income Taxes
18,857
10,019
28,250
25,252
Provision for Income Taxes
3,556
2,067
5,465
5,174
Net Income
$
15,301
$
7,952
$
22,785
$
20,078
Basic Earnings per Common Share
$
8.09
$
4.21
$
12.04
$
10.63
Weighted Average Shares Outstanding – Basic
1,892
1,889
1,892
1,888
Diluted Earnings per Common Share
$
8.07
$
4.20
$
12.02
$
10.59
Weighted Average Shares Outstanding – Diluted
1,895
1,895
1,896
1,896
Refer to notes to the Consolidated Financial Statements.
2
Investors Title Company and Subsidiaries
Consolidated Statements of Comprehensive Income
For the Three and Nine Months Ended September 30, 2020 and 2019
Refer to notes to the Consolidated Financial Statements.
5
Investors Title Company and Subsidiaries
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2020 and 2019
(in thousands)
(unaudited)
Nine Months Ended September 30,
2020
2019
Operating Activities
Net income
$
22,785
$
20,078
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation
1,320
1,298
Amortization of investments, net
678
492
Amortization of other intangible assets, net
378
379
Share-based compensation expense related to stock appreciation rights
192
204
Net gain on disposals of property
(26)
(28)
Net realized investment gains
(327)
(1,199)
Net change in estimated fair value of equity security investments
2,867
(6,218)
Net earnings from other investments
(1,764)
(1,286)
Provision for claims
4,452
3,610
(Benefit) provision for deferred income taxes
(391)
1,340
Changes in assets and liabilities:
Increase in premium and fees receivables
(4,768)
(502)
(Increase) decrease in other assets
(3,893)
360
Decrease (increase) in operating lease right-of-use assets
577
(4,619)
Increase (decrease) in accounts payable and accrued liabilities
3,206
(205)
(Decrease) increase in operating lease liabilities
(565)
4,622
Decrease in current income taxes payable
(527)
(4,839)
Payments of claims, net of recoveries
(2,253)
(3,534)
Net cash provided by operating activities
21,941
9,953
Investing Activities
Purchases of fixed maturities
(517)
(1,235)
Purchases of equity securities
(9,270)
(3,921)
Purchases of short-term investments
(13,668)
(89,519)
Purchases of other investments
(1,090)
(1,456)
Proceeds from sales and maturities of fixed maturity securities
7,139
7,280
Proceeds from sales of equity securities
9,412
4,040
Proceeds from sales and maturities of short-term investments
4,291
100,821
Proceeds from sales and distributions of other investments
2,010
2,490
Proceeds from sales of other assets
22
2
Purchases of property
(2,245)
(1,020)
Proceeds from the sale of property
58
140
Net cash (used in) provided by investing activities
(3,858)
17,622
Financing Activities
Repurchases of common stock
—
(11)
Exercise of stock appreciation rights
(1)
—
Dividends paid
(2,497)
(2,266)
Net cash used in financing activities
(2,498)
(2,277)
Net Increase in Cash and Cash Equivalents
15,585
25,298
Cash and Cash Equivalents, Beginning of Period
25,949
18,694
Cash and Cash Equivalents, End of Period
$
41,534
$
43,992
6
Consolidated Statements of Cash Flows, continued
Nine Months Ended September 30,
2020
2019
Supplemental Disclosures:
Cash Paid During the Year for:
Income tax payments, net
$
6,889
$
9,150
Non-Cash Investing and Financing Activities:
Non-cash net unrealized gain on investments, net of deferred tax provision of $(333) and $(601) for September 30, 2020 and 2019, respectively
$
(1,212)
$
(2,246)
Adjustments to postretirement benefits obligation, net of deferred tax benefit of $9 and $0 for September 30, 2020 and 2019, respectively
$
32
$
—
Adjustments to operating lease right-of-use assets for September 30, 2020 and 2019, respectively
$
94
$
—
Refer to notes to the Consolidated Financial Statements.
7
INVESTORS TITLE COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2020
(unaudited)
Note 1 – Basis of Presentation and Significant Accounting Policies
Reference should be made to the “Notes to Consolidated Financial Statements” appearing in the Annual Report on Form 10-K for the year ended December 31, 2019 of Investors Title Company (the “Company”) for a complete description of the Company’s significant accounting policies.
Principles of Consolidation – The accompanying unaudited Consolidated Financial Statements include the accounts and operations of Investors Title Company and its subsidiaries, and have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information, with the instructions to Form 10-Q and with Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted. All intercompany balances and transactions have been eliminated in consolidation.
In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position, results of operations and cash flows of the Company in the accompanying unaudited Consolidated Financial Statements have been included. All such adjustments are of a normal recurring nature. Operating results for the three- and nine-month periods ended September 30, 2020 are not necessarily indicative of the financial condition and results that may be expected for the year ending December 31, 2020 or any other interim period.
Use of Estimates and Assumptions – The preparation of the Company’s Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions used.
Subsequent Events – The Company has evaluated and concluded that there were no material subsequent events requiring adjustment or disclosure to its Consolidated Financial Statements.
Recently Adopted Accounting Standards
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326). ASU 2016-13 updated guidance to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The update broadened the information that an entity must consider in developing its expected credit loss estimates, and was meant to better reflect an entity’s current estimate of all expected credit losses. In addition, this update amended the accounting for credit losses on available-for-sale fixed maturity securities and purchased financial assets with credit deterioration. The update was effective for the Company for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted this update on January 1, 2020 with no material impact on the Company's financial position and results of operations. Refer to Note 6 for further information about the Company's investments.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350). This update removed the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. As a result, under the ASU, an entity is required to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and must recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized must not exceed the total amount of goodwill allocated to that reporting unit. In addition, the ASU clarified that an entity is required to consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The update was effective for the Company for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company adopted this update on January 1, 2020 with no impact on the Company's financial position and results of operations.
8
Recently Issued Accounting Standards
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. ASU 2019-12 is intended to reduce the complexity in accounting for income taxes during interim and annual periods and is expected to provide clarity on income tax situations where a diversity in practice has developed. The update is effective for annual and interim periods in fiscal years beginning after December 15, 2020. Early adoption is permitted for interim or annual periods for which financial statements have not yet been issued. None of these amendments are expected to have a material impact on the Company's financial position or results of operations.
In January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). This update clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative immediately before applying or upon discontinuing the equity method. In addition, this update clarifies that, when determining the accounting for certain forward contracts and purchased options, a company should not consider, whether upon settlement or exercise, if the underlying securities would be accounted for under the equity method or fair value option. The update is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted, including early adoption in an interim period, for periods for which financial statements have not yet been issued. The Company is currently evaluating the impact that the recently issued accounting standard will have on the Company's financial position and results of operations, and does not expect it to have a material impact.
Significant Accounting Policies – The Company has updated the following accounting policies due to the adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):
Allowance for Credit Losses – Available-for-Sale Securities
For available-for-sale fixed maturity securities in an unrealized loss position, the Company evaluates the securities to determine whether the decline in the estimated fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized as an allowance for credit losses (“ACL”) on the Consolidated Balance Sheets, limited to the amount by which the amortized cost basis exceeds the estimated fair value, with a corresponding adjustment to earnings. Both the ACL and the adjustment to the Consolidated Statements of Operations may be reversed if conditions change. However, if the Company intends to sell an impaired available-for-sale fixed maturity security or more likely than not will be required to sell such a security before recovering its amortized cost basis, the entire impairment amount must be recognized in earnings with a corresponding adjustment to the security’s amortized cost basis. Because the security’s amortized cost basis is adjusted to estimated fair value, there is no ACL in this situation.
In evaluating available-for-sale fixed maturity securities in unrealized loss positions for impairment and the criteria regarding its intent or requirement to sell such securities, the Company considers the extent to which estimated fair value is less than amortized cost, whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuers’ financial condition, among other factors.
Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the ACL when management believes the uncollectability of an available-for-sale fixed maturity security is confirmed or when either of the criteria regarding intent or requirement to sell is met.
Accrued interest receivable is excluded from the estimate of credit losses.
Note 2 – Reserve for Claims
Activity in the reserve for claims for the nine-month period ended September 30, 2020 and the year ended December 31, 2019 are summarized as follows:
(in thousands)
September 30, 2020
December 31, 2019
Balance, beginning of period
$
31,333
$
31,729
Provision charged to operations
4,452
3,532
Payments of claims, net of recoveries
(2,253)
(3,928)
Balance, end of period
$
33,532
$
31,333
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The total reserve for all reported and unreported losses the Company incurred through September 30, 2020 is represented by the reserve for claims on the Consolidated Balance Sheets. The Company's reserves for unpaid losses and loss adjustment expenses are established using estimated amounts required to settle claims for which notice has been received (reported) and the amount estimated to be required to satisfy claims that have been incurred but not yet reported (“IBNR”). Despite the variability of such estimates, management believes that the total reserve for claims is adequate to cover claim losses which might result from pending and future claims under title insurance policies issued through September 30, 2020. Management continually reviews and adjusts its reserve for claims estimates to reflect its loss experience and any new information that becomes available. Adjustments resulting from such reviews could be significant.
A summary of the Company’s reserve for claims, broken down into its components of known title claims and IBNR, follows:
(in thousands, except percentages)
September 30, 2020
%
December 31, 2019
%
Known title claims
$
3,993
11.9
$
3,799
12.1
IBNR
29,539
88.1
27,534
87.9
Total reserve for claims
$
33,532
100.0
$
31,333
100.0
Claims and losses paid are charged to the reserve for claims. Although claims losses are typically paid in cash, occasionally claims are settled by purchasing the interest of the insured or the claimant in the real property. When this event occurs, the Company carries assets at the lower of cost or estimated fair value, net of any indebtedness on the property.
Note 3 – Earnings Per Common Share and Share Awards
Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per common share is computed by dividing net income by the combination of dilutive potential common stock, comprised of shares issuable under the Company’s share-based compensation plans, and the weighted average number of common shares outstanding during the reporting period. Dilutive common share equivalents include the dilutive effect of in-the-money share-based awards, which are calculated based on the average share price for each period using the treasury stock method. Under the treasury stock method, as share-based awards are exercised, (a) the exercise price of a share-based award and (b) the amount of compensation cost, if any, for future services that the Company has not yet recognized, are assumed to be used to repurchase shares in the current period.
The following table sets forth the computation of basic and diluted earnings per share for the three- and nine-month periods ended September 30:
Three Months Ended September 30,
Nine Months Ended September 30,
(in thousands, except per share amounts)
2020
2019
2020
2019
Net income
$
15,301
$
7,952
$
22,785
$
20,078
Weighted average common shares outstanding – Basic
1,892
1,889
1,892
1,888
Incremental shares outstanding assuming the exercise of dilutive SARs (share-settled)
3
6
4
8
Weighted average common shares outstanding – Diluted
1,895
1,895
1,896
1,896
Basic earnings per common share
$
8.09
$
4.21
$
12.04
$
10.63
Diluted earnings per common share
$
8.07
$
4.20
$
12.02
$
10.59
There were 20 thousand and 14 thousand potential shares excluded from the computation of diluted earnings per share for the three-month periods ended September 30, 2020 and 2019, respectively, due to the out-of-the-money status of the related share-based awards. There were 20 thousand and 14 thousand potential shares excluded from the computation of diluted earnings per share for the nine-month periods ended September 30, 2020 and 2019, respectively.
The Company historically has adopted employee stock award plans under which restricted stock, options or stock appreciation rights ("SARs") exercisable for the Company's stock may be granted to key employees or directors of the Company. There is currently one active plan from which the Company may grant share-based awards. The awards eligible to be granted under the active plan are limited to SARs, and the maximum aggregate number of shares of common stock of the Company available pursuant to the plan for the grant of SARs is 250 thousand shares.
10
As of September 30, 2020, the only outstanding awards under the plans were SARs, which expire within seven years or less from the date of grant. Most outstanding SARs vest and are exercisable within one year of the date of grant, with the exception of one grant where the SARs vest over five years. All SARs issued to date have been share-settled only. There have been no stock options or SARs granted where the exercise price was less than the market price on the date of grant.
There was approximately $192 thousand and $205 thousand of compensation expense relating to SARs vesting on or before September 30, 2020 and 2019, respectively, included in personnel expenses in the Consolidated Statements of Operations. As of September 30, 2020, there was $246 thousand of unrecognized compensation expense related to unvested share-based compensation arrangements granted under the Company’s stock award plans.
A summary of share-based award transactions for all share-based award plans follows:
(in thousands, except weighted average exercise price and average remaining contractual term)
Number Of Shares
Weighted Average Exercise Price
Average Remaining Contractual Term (Years)
Aggregate Intrinsic Value
Outstanding as of January 1, 2019
28
$
110.27
3.64
$
2,019
SARs granted
4
162.81
SARs exercised
(2)
50.50
Outstanding as of December 31, 2019
30
$
124.13
3.53
$
1,352
SARs granted
11
135.05
SARs exercised
(8)
75.75
Outstanding as of September 30, 2020
33
$
138.55
4.41
$
496
Exercisable as of September 30, 2020
26
$
140.02
3.83
$
480
Unvested as of September 30, 2020
7
$
133.21
6.52
$
16
During the second quarters of both 2020 and 2019, the Company issued 4 thousand share-settled SARs to directors of the Company. During the first quarter of 2020, the Company also issued 7 thousand share-settled SARs to directors and employees of the Company. There were no such first quarter issuances in 2019, as all 2019 issuances of share-settled SARs were made in the second quarter. SARs give the holder the right to receive stock equal to the appreciation in the value of shares of stock from the grant date for a specified period of time, and as a result, are accounted for as equity instruments. The fair value of each award is estimated on the date of grant using the Black-Scholes option valuation model with the weighted average assumptions noted in the table shown below. Expected volatilities are based on both the implied and historical volatility of the Company’s stock. The Company uses historical data to project SAR exercises and pre-exercise forfeitures within the valuation model. The expected term of awards represents the period of time that SARs granted are expected to be outstanding. The interest rate assumed for the expected life of the award is based on the U.S. Treasury yield curve in effect at the time of the grant. The weighted average fair value for the SARs issued during 2020 and 2019 were $34.45 and $51.88, respectively, and were estimated using the weighted average assumptions shown in the table below.
2020
2019
Expected Life in Years
6.2
-
7.0
7.0
-
7.0
Volatility
28.5%
30.2%
Interest Rate
0.7%
2.3%
Yield Rate
1.2%
1.0%
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Note 4 – Segment Information
The Company has one reportable segment, title insurance services. The remaining immaterial segments have been combined into a group called “All Other.”
The title insurance segment primarily issues title insurance policies through approved attorneys from underwriting offices and through independent issuing agents. Title insurance policies insure titles to real estate.
Provided below is selected financial information about the Company's operations by segment for the periods ended September 30, 2020 and 2019: