Company Quick10K Filing
Investors Title
Price155.27 EPS11
Shares2 P/E15
MCap294 P/FCF30
Net Debt-44 EBIT25
TEV250 TEV/EBIT10
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-09-30 Filed 2020-11-09
10-Q 2020-06-30 Filed 2020-08-07
10-Q 2020-03-31 Filed 2020-05-08
10-K 2019-12-31 Filed 2020-03-11
10-Q 2019-09-30 Filed 2019-11-07
10-Q 2019-06-30 Filed 2019-08-08
10-Q 2019-03-31 Filed 2019-05-08
10-K 2018-12-31 Filed 2019-03-13
10-Q 2018-09-30 Filed 2018-11-07
10-Q 2018-06-30 Filed 2018-08-08
10-Q 2018-03-31 Filed 2018-05-10
10-K 2017-12-31 Filed 2018-03-12
10-Q 2017-09-30 Filed 2017-11-07
10-Q 2017-06-30 Filed 2017-08-08
10-Q 2017-03-31 Filed 2017-05-08
10-K 2016-12-31 Filed 2017-03-10
10-Q 2016-09-30 Filed 2016-11-07
10-Q 2016-06-30 Filed 2016-08-08
10-Q 2016-03-31 Filed 2016-05-06
10-K 2015-12-31 Filed 2016-03-11
10-Q 2015-09-30 Filed 2015-11-09
10-Q 2015-06-30 Filed 2015-08-07
10-Q 2015-03-31 Filed 2015-05-07
10-K 2014-12-31 Filed 2015-03-13
10-Q 2014-09-30 Filed 2014-11-06
10-Q 2014-06-30 Filed 2014-08-08
10-Q 2014-03-31 Filed 2014-05-09
10-K 2013-12-31 Filed 2014-03-14
10-Q 2013-09-30 Filed 2013-11-07
10-Q 2013-06-30 Filed 2013-08-08
10-Q 2013-03-31 Filed 2013-05-10
10-K 2012-12-31 Filed 2013-03-14
10-Q 2012-09-30 Filed 2012-11-13
10-Q 2012-06-30 Filed 2012-08-13
10-Q 2012-03-31 Filed 2012-05-08
10-K 2011-12-31 Filed 2012-03-15
10-Q 2011-09-30 Filed 2011-11-14
10-Q 2011-06-30 Filed 2011-08-09
10-Q 2011-03-31 Filed 2011-04-29
10-K 2010-12-31 Filed 2011-03-09
10-Q 2010-09-30 Filed 2010-10-29
10-Q 2010-06-30 Filed 2010-08-02
10-Q 2010-03-31 Filed 2010-04-30
10-K 2009-12-31 Filed 2010-03-05
8-K 2020-11-04
8-K 2020-08-04
8-K 2020-05-20
8-K 2020-05-05
8-K 2020-02-27
8-K 2020-02-11
8-K 2019-11-04
8-K 2019-08-05
8-K 2019-05-15
8-K 2019-05-03
8-K 2019-02-08
8-K 2018-11-02
8-K 2018-08-06
8-K 2018-05-16
8-K 2018-05-08
8-K 2018-02-07

ITIC 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Note 1 - Basis of Presentation and Significant Accounting Policies
Note 2 - Reserve for Claims
Note 3 - Earnings per Common Share and Share Awards
Note 4 - Segment Information
Note 5 - Retirement Agreements and Other Postretirement Benefits
Note 6 - Investments and Estimated Fair Value
Note 7 - Commitments and Contingencies
Note 8 - Related Party Transactions
Note 9 - Intangible Assets, Goodwill and Title Plant
Note 10 - Accumulated Other Comprehensive Income
Note 11 - Revenue From Contracts with Customers
Note 12 - Leases
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-3.1 itic20200930ex-31.htm
EX-31.1 itic20200930ex-311.htm
EX-31.2 itic20200930ex-312.htm
EX-32 itic20200930ex-32.htm

Investors Title Earnings 2020-09-30

Balance SheetIncome StatementCash Flow
2702161621085402012201420172020
Assets, Equity
504030201002012201420172020
Rev, G Profit, Net Income
1593-3-9-152012201420172020
Ops, Inv, Fin

itic-20200930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
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 Carolina56-1110199
(State of incorporation)(I.R.S. Employer Identification No.)
                                        
121 North Columbia Street, Chapel Hill, North Carolina 27514
(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 classTrading symbol(s)Name of each exchange on which registered
Common Stock, no par valueITICThe Nasdaq Stock Market LLC
Rights to Purchase Series A Junior Participating Preferred StockThe 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 filerAccelerated filer
Non-accelerated filerSmaller 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.



INVESTORS TITLE COMPANY
AND SUBSIDIARIES

INDEX
 
PART I.FINANCIAL INFORMATION 
   
Item 1.Financial Statements: 
   
 
Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019
 
 
Consolidated Statements of Operations For the Three and Nine Months Ended September 30, 2020 and 2019
 
 
 
 
Consolidated Statements of Stockholders’ Equity For the Three and Nine Months Ended September 30, 2020 and 2019
 
 
Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 2020 and 2019
 
 
  
  
  
  
PART II.OTHER INFORMATION
Legal Proceedings
Risk Factors
  
Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
Item 5.Other Information
  
 




PART I.   FINANCIAL INFORMATION

Item 1.  Financial Statements

Investors Title Company and Subsidiaries
Consolidated Balance Sheets
As of September 30, 2020 and December 31, 2019
(in thousands)
(unaudited)
 September 30,
2020
December 31,
2019
Assets  
Cash and cash equivalents$41,534 $25,949 
Investments:  
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 dividends1,187 1,033 
Prepaid expenses and other receivables9,185 5,519 
Property, net10,669 9,776 
Goodwill and other intangible assets, net9,897 10,275 
Operating lease right-of-use assets3,798 4,469 
Other assets1,560 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,
 2020201920202019
Revenues:
Net premiums written$57,205 $40,169 $143,311 $103,942 
Escrow and other title-related fees2,154 2,393 6,014 5,616 
Non-title services1,954 2,539 6,476 7,444 
Interest and dividends1,060 1,156 3,342 3,605 
Other investment income1,270 708 2,236 2,044 
Net realized investment gains 186 423 327 1,199 
Changes in the estimated fair value of equity security investments3,619 406 (2,867)6,218 
Other185 145 443 550 
Total Revenues67,633 47,939 159,282 130,618 
Operating Expenses:
Commissions to agents29,068 19,928 73,344 51,261 
Provision for claims1,552 987 4,452 3,610 
Personnel expenses12,575 11,576 36,632 34,871 
Office and technology expenses2,456 2,350 7,328 6,803 
Other expenses3,125 3,079 9,276 8,821 
Total Operating Expenses48,776 37,920 131,032 105,366 
Income before Income Taxes18,857 10,019 28,250 25,252 
Provision for Income Taxes3,556 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 – Basic1,892 1,889 1,892 1,888 
Diluted Earnings per Common Share$8.07 $4.20 $12.02 $10.59 
Weighted Average Shares Outstanding – Diluted1,895 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
(in thousands)
(unaudited)
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2020201920202019
Net income$15,301 $7,952 $22,785 $20,078 
Other comprehensive income, before tax:
Accumulated postretirement benefit obligation adjustment
  (41) 
Net unrealized gain on investments arising during the period
61 431 1,093 2,847 
Reclassification adjustment for sale of securities included in net income
  (30) 
Reclassification adjustment for write-down of securities included in net income
  482  
Other comprehensive income, before tax
61 431 1,504 2,847 
Income tax benefit related to postretirement health benefits
  (9) 
Income tax expense related to net unrealized gain on investments arising during the period
11 90 229 601 
Income tax benefit related to reclassification adjustment for sale of securities included in net income
  (6) 
Income tax expense related to reclassification adjustment for write-down of securities included in net income
  110  
Net income tax expense on other comprehensive income
11 90 324 601 
Other comprehensive income 50 341 1,180 2,246 
Comprehensive Income$15,351 $8,293 $23,965 $22,324 

Refer to notes to the Consolidated Financial Statements.
3


Investors Title Company and Subsidiaries
Consolidated Statements of Stockholders’ Equity
For the Three and Nine Months Ended September 30, 2020 and 2019
(in thousands, except per share amounts)
(unaudited)
 Common StockRetained EarningsAccumulated
Other
Comprehensive
Income
Total
Stockholders’
Equity
 SharesAmount
Balance, June 30, 2019
1,889 $ $185,441 $2,854 $188,295 
Net income
  7,952  7,952 
Dividends paid ($0.40 per share)
  (755) (755)
Exercise of stock appreciation rights
     
Share-based compensation expense related to stock appreciation rights
  57  57 
Net unrealized gain on investments   341 341 
Balance, September 30, 2019
1,889 $ $192,695 $3,195 $195,890 
Balance, June 30, 2020
1,892 $ $194,235 $4,230 $198,465 
Net income
  15,301  15,301 
Dividends paid ($0.44 per share)
  (833) (833)
Exercise of stock appreciation rights
     
Share-based compensation expense related to stock appreciation rights
  38  38 
Net unrealized gain on investments  50 50 
Other(94)(94)
Balance, September 30, 2020
1,892 $ $208,647 $4,280 $212,927 



4


Common StockRetained EarningsAccumulated
Other
Comprehensive
Income
Total
Stockholders’
Equity
SharesAmount
Balance, December 31, 2018
1,887 $ $174,690 $949 $175,639 
Net income
20,078 20,078 
Dividends paid ($1.20 per share)
(2,266)(2,266)
Repurchases of common stock
 (11)(11)
Exercise of stock appreciation rights
2   
Share-based compensation expense related to stock appreciation rights
204 204 
Net unrealized gain on investments2,246 2,246 
Balance, September 30, 2019
1,889 $ $192,695 $3,195 $195,890 
Balance, December 31, 2019
1,889 $ $188,262 $3,100 $191,362 
Net income
22,785 22,785 
Dividends paid ($1.32 per share)
(2,497)(2,497)
Exercise of stock appreciation rights
3 (1)(1)
Share-based compensation expense related to stock appreciation rights
192 192 
Accumulated postretirement benefit obligation adjustment
(32)(32)
Net unrealized gain on investments1,212 1,212 
Other(94)(94)
Balance, September 30, 2020
1,892 $ $208,647 $4,280 $212,927 


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,
 20202019
Operating Activities  
Net income$22,785 $20,078 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation1,320 1,298 
Amortization of investments, net678 492 
Amortization of other intangible assets, net378 379 
Share-based compensation expense related to stock appreciation rights192 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 investments2,867 (6,218)
Net earnings from other investments(1,764)(1,286)
Provision for claims4,452 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 assets577 (4,619)
Increase (decrease) in accounts payable and accrued liabilities3,206 (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 activities21,941 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 securities7,139 7,280 
Proceeds from sales of equity securities9,412 4,040 
Proceeds from sales and maturities of short-term investments4,291 100,821 
Proceeds from sales and distributions of other investments2,010 2,490 
Proceeds from sales of other assets22 2 
Purchases of property(2,245)(1,020)
Proceeds from the sale of property58 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 Equivalents15,585 25,298 
Cash and Cash Equivalents, Beginning of Period25,949 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,
 20202019
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, 2020December 31, 2019
Balance, beginning of period$31,333 $31,729 
Provision charged to operations4,452 3,532 
Payments of claims, net of recoveries(2,253)(3,928)
Balance, end of period
$33,532 $31,333 

9


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 
IBNR29,539 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)
2020201920202019
Net income$15,301 $7,952 $22,785 $20,078 
Weighted average common shares outstanding – Basic1,892 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, 201928 $110.27 3.64$2,019 
SARs granted4 162.81   
SARs exercised(2)50.50   
Outstanding as of December 31, 201930 $124.13 3.53$1,352 
SARs granted11 135.05   
SARs exercised(8)75.75   
Outstanding as of September 30, 202033 $138.55 4.41$496 
Exercisable as of September 30, 202026 $140.02 3.83$480 
Unvested as of September 30, 20207 $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.
20202019
Expected Life in Years6.2-7.07.0-7.0
Volatility28.5%30.2%
Interest Rate0.7%2.3%
Yield Rate1.2%1.0%

11


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:
Three Months Ended
September 30, 2020 (in thousands)
Title
Insurance
All
Other
Intersegment
Eliminations
Total
Insurance and other services revenues$61,809 $2,176 $(2,487)$61,498 
Investment income5,627 322  5,949 
Net realized (loss) gain on investments(263)449  186 
Total revenues
$67,173 $2,947 $(2,487)$67,633 
Operating expenses49,260 1,858 (2,342)48,776 
Income before income taxes
$17,913 $1,089 $(145)$18,857 
Total assets
$213,152 $76,593 $ $289,745 

Three Months Ended
September 30, 2019 (in thousands)
Title
Insurance
All
Other
Intersegment
Eliminations
Total
Insurance and other services revenues$44,079 $2,851 $(1,684)$45,246 
Investment income 1,879 391  2,270 
Net realized gain on investments346