[ X ]
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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[ ]
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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North Carolina
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56-1110199
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(State of incorporation)
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(I.R.S. Employer Identification No.)
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Large accelerated filer__ Accelerated filer __ Non-accelerated filer __ Smaller reporting company X
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(do not check if a smaller reporting company)
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PART I.
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FINANCIAL INFORMATION
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1
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2
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3
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4
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5
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7
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21
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36
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PART II.
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OTHER INFORMATION
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37
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38
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39
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September 30,
2011
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December 31,
2010
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Assets:
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||||||||
Investments in securities:
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||||||||
Fixed maturities, available-for-sale, at fair value (amortized cost: 2011: $77,394,287; 2010: | ||||||||
$81,784,262)
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$ | 83,603,960 | $ | 86,033,557 | ||||
Equity securities, available-for-sale, at fair value (cost: 2011: $14,693,945; 2010: $9,458,773)
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17,770,019 | 13,872,370 | ||||||
Short-term investments
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21,723,492 | 27,203,550 | ||||||
Other investments
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3,104,683 | 2,888,958 | ||||||
Total investments
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126,202,154 | 129,998,435 | ||||||
Cash and cash equivalents
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14,692,102 | 8,117,031 | ||||||
Premium and fees receivable (less allowance for doubtful accounts: 2011: $1,306,000; 2010: | ||||||||
$1,421,000)
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6,606,031 | 7,253,786 | ||||||
Accrued interest and dividends
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913,234 | 1,150,602 | ||||||
Prepaid expenses and other assets
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2,941,765 | 2,816,661 | ||||||
Property, net
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3,635,006 | 3,672,317 | ||||||
Current income taxes recoverable
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506,717 | - | ||||||
Deferred income taxes, net
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- | 476,534 | ||||||
Total Assets
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$ | 155,497,009 | $ | 153,485,366 | ||||
Liabilities and Stockholders’ Equity
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||||||||
Liabilities:
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||||||||
Reserves for claims
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$ | 37,548,000 | $ | 38,198,700 | ||||
Accounts payable and accrued liabilities
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13,141,854 | 10,301,495 | ||||||
Current income taxes payable
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- | 1,056,356 | ||||||
Deferred income taxes, net
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958,657 | - | ||||||
Total liabilities
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51,648,511 | 49,556,551 | ||||||
Commitments and Contingencies
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- | - | ||||||
Stockholders’ Equity:
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||||||||
Class A Junior Participating preferred stock (shares authorized 100,000; no shares issued)
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- | - | ||||||
Common stock - no par value (shares authorized 10,000,000; 2,121,630 and 2,282,596
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||||||||
shares issued and outstanding 2011 and 2010, respectively, excluding 291,676 shares
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||||||||
for 2011 and 2010, respectively, of common stock held by the Company’s subsidiary)
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1 | 1 | ||||||
Retained earnings
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97,729,595 | 98,240,109 | ||||||
Accumulated other comprehensive income
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6,118,902 | 5,688,705 | ||||||
Total stockholders’ equity
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103,848,498 | 103,928,815 | ||||||
Total Liabilities and Stockholders’ Equity
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$ | 155,497,009 | $ | 153,485,366 |
Three Months Ended
September 30
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Nine Months Ended
September 30
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2011
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2010
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2011
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2010
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Revenues:
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||||||||||||||||
Net premiums written
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$ | 23,986,592 | $ | 16,749,395 | $ | 63,303,202 | $ | 42,174,647 | ||||||||
Investment income - interest and dividends
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887,055 | 934,754 | 2,665,245 | 2,757,228 | ||||||||||||
Net realized (loss) gain on investments
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(200,087 | ) | (44,864 | ) | (79,172 | ) | 306,066 | |||||||||
Other
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1,443,310 | 1,522,399 | 3,968,828 | 3,839,920 | ||||||||||||
Total Revenues
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26,116,870 | 19,161,684 | 69,858,103 | 49,077,861 | ||||||||||||
Operating Expenses:
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||||||||||||||||
Commissions to agents
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15,161,823 | 8,632,083 | 39,335,237 | 20,707,910 | ||||||||||||
Provision for claims
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349,672 | 1,819,522 | 2,301,259 | 3,244,341 | ||||||||||||
Salaries, employee benefits and payroll taxes
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4,778,542 | 4,354,854 | 14,110,213 | 13,185,127 | ||||||||||||
Office occupancy and operations
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919,681 | 971,264 | 2,836,068 | 3,038,491 | ||||||||||||
Business development
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363,731 | 335,454 | 1,123,517 | 962,115 | ||||||||||||
Filing fees, franchise and local taxes
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79,638 | 241,774 | 411,897 | 534,473 | ||||||||||||
Premium and retaliatory taxes
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459,711 | 336,925 | 1,368,168 | 919,655 | ||||||||||||
Professional and contract labor fees
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412,227 | 334,973 | 1,132,308 | 1,038,845 | ||||||||||||
Other
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130,380 | 126,734 | 392,959 | 420,828 | ||||||||||||
Total Operating Expenses
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22,655,405 | 17,153,583 | 63,011,626 | 44,051,785 | ||||||||||||
Income before Income Taxes
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3,461,465 | 2,008,101 | 6,846,477 | 5,026,076 | ||||||||||||
Provision for Income Taxes
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1,021,000 | 559,000 | 1,792,000 | 1,022,000 | ||||||||||||
Net Income
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$ | 2,440,465 | $ | 1,449,101 | $ | 5,054,477 | $ | 4,004,076 | ||||||||
Basic Earnings per Common Share
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$ | 1.15 | $ | 0.63 | $ | 2.34 | $ | 1.75 | ||||||||
Weighted Average Shares Outstanding – Basic
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2,124,078 | 2,284,331 | 2,164,240 | 2,285,039 | ||||||||||||
Diluted Earnings per Common Share
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$ | 1.14 | $ | 0.63 | $ | 2.32 | $ | 1.75 | ||||||||
Weighted Average Shares Outstanding – Diluted
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2,143,327 | 2,285,785 | 2,180,455 | 2,291,060 | ||||||||||||
Cash Dividends Paid per Common Share
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$ | 0.07 | $ | 0.07 | $ | 0.21 | $ | 0.21 |
Three Months
Ended
September 30
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Three Months
Ended
September 30
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Nine Months
Ended
September 30
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Nine Months
Ended
September 30
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2011
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2010
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2011
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2010
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Net income
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$ | 2,440,465 | $ | 1,449,101 | $ | 5,054,477 | $ | 4,004,076 | ||||||||
Other comprehensive income, before tax:
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Amortization related to prior year service cost
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(415 | ) | 5,097 | 9,779 | 15,291 | |||||||||||
Amortization of unrecognized (loss) gain
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(1,525 | ) | 645 | (239 | ) | 1,929 | ||||||||||
Unrealized (losses) gains on investments arising | ||||||||||||||||
during the period
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(1,217,304 | ) | 2,786,823 | 543,683 | 2,898,570 | |||||||||||
Reclassification adjustment for sale of securities | ||||||||||||||||
included in net income
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49,979 | (1,477 | ) | (179,309 | ) | (437,301 | ) | |||||||||
Reclassification adjustment for write-down of | ||||||||||||||||
securities included in net income
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150,108 | 46,341 | 258,481 | 131,235 | ||||||||||||
Other comprehensive (loss) income, before tax
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(1,019,157 | ) | 2,837,429 | 632,395 | 2,609,724 | |||||||||||
Income tax (benefit) expense related to postretirement | ||||||||||||||||
health benefits
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(661 | ) | 1,956 | 3,244 | 5,855 | |||||||||||
Income tax (benefit) expense related to | ||||||||||||||||
unrealized (losses) gains on investments arising during the | ||||||||||||||||
year
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(427,839 | ) | 956,357 | 170,908 | 1,002,295 | |||||||||||
Income tax expense (benefit) related to reclassification | ||||||||||||||||
adjustment for sale of securities included in | ||||||||||||||||
net income
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17,377 | (340 | ) | (61,842 | ) | (152,395 | ) | |||||||||
Income tax expense related to reclassification | ||||||||||||||||
adjustment for write-down of securities included in | ||||||||||||||||
net income
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51,612 | 15,752 | 89,888 | 46,315 | ||||||||||||
Net income tax (benefit) expense on other | ||||||||||||||||
comprehensive income
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(359,511 | ) | 973,725 | 202,198 | 902,070 | |||||||||||
Other comprehensive (loss) income
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(659,646 | ) | 1,863,704 | 430,197 | 1,707,654 | |||||||||||
Comprehensive income
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$ | 1,780,819 | $ | 3,312,805 | $ | 5,484,674 | $ | 5,711,730 |
Accumulated
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||||||||||||||||||||
Other | Total | |||||||||||||||||||
Common Stock
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Retained
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Comprehensive
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Stockholders’
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|||||||||||||||||
Shares
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Amount
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Earnings
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Income
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Equity
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||||||||||||||||
Balance, January 1, 2010
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2,285,289 | $ | 1 | $ | 92,528,818 | $ | 4,730,258 | $ | 97,259,077 | |||||||||||
Net income
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4,004,076 | 4,004,076 | ||||||||||||||||||
Dividends ($0.21 per share)
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(479,861 | ) | (479,861 | ) | ||||||||||||||||
Shares of common stock repurchased and retired
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(10,592 | ) | (330,683 | ) | (330,683 | ) | ||||||||||||||
Stock options exercised
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9,345 | 139,000 | 139,000 | |||||||||||||||||
Share-based compensation expense
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163,739 | 163,739 | ||||||||||||||||||
Amortization related to postretirement health | ||||||||||||||||||||
benefits
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11,365 | 11,365 | ||||||||||||||||||
Net unrealized gain on investments
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1,696,289 | 1,696,289 | ||||||||||||||||||
Balance, September 30, 2010
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2,284,042 | $ | 1 | $ | 96,025,089 | $ | 6,437,912 | $ | 102,463,002 | |||||||||||
Balance, January 1, 2011
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2,282,596 | $ | 1 | $ | 98,240,109 | $ | 5,688,705 | $ | 103,928,815 | |||||||||||
Net income
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5,054,477 | 5,054,477 | ||||||||||||||||||
Dividends ($0.21 per share)
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(450,822 | ) | (450,822 | ) | ||||||||||||||||
Shares of common stock repurchased and retired
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(168,516 | ) | (5,426,478 | ) | (5,426,478 | ) | ||||||||||||||
Stock options exercised
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7,550 | 152,526 | 152,526 | |||||||||||||||||
Share-based compensation expense
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159,783 | 159,783 | ||||||||||||||||||
Amortization related to postretirement health | ||||||||||||||||||||
benefits
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6,296 | 6,296 | ||||||||||||||||||
Net unrealized gain on investments
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423,901 | 423,901 | ||||||||||||||||||
Balance, September 30, 2011
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2,131,630 | $ | 1 | $ | 97,729,595 | $ | 6,118,902 | $ | 103,848,498 |
2011
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2010
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Operating Activities
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Net income
|
$ | 5,054,477 | $ | 4,004,076 | ||||
Adjustments to reconcile net income to net cash provided by operating activities:
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Depreciation
|
360,820 | 384,601 | ||||||
Amortization, net
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250,728 | 251,456 | ||||||
Amortization related to postretirement benefits obligation
|
9,540 | 17,220 | ||||||
Share-based compensation expense related to stock options
|
159,783 | 163,739 | ||||||
Decrease in allowance for doubtful accounts on premiums receivable
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(115,000 | ) | (53,000 | ) | ||||
Net gain on disposals of property
|
(26,528 | ) | (2,870 | ) | ||||
Net realized loss (gain) on investments
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79,172 | (306,066 | ) | |||||
Net earnings from other investments
|
(396,487 | ) | (506,448 | ) | ||||
Provision for claims
|
2,301,259 | 3,244,341 | ||||||
Provision for deferred income taxes
|
1,233,000 | 1,718,000 | ||||||
Changes in assets and liabilities:
|
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Decrease (increase) in receivables
|
762,755 | (1,419,857 | ) | |||||
Decrease in other assets
|
73,731 | 305,154 | ||||||
Increase in current income taxes recoverable
|
(506,717 | ) | (1,047,057 | ) | ||||
Increase in accounts payable and accrued liabilities
|
2,840,359 | 434,167 | ||||||
Decrease in current income taxes payable
|
(1,056,356 | ) | (670,290 | ) | ||||
Payments of claims, net of recoveries
|
(2,951,959 | ) | (4,669,341 | ) | ||||
Net cash provided by operating activities
|
8,072,577 | 1,847,825 | ||||||
Investing Activities
|
||||||||
Purchases of available-for-sale securities
|
(8,610,912 | ) | (11,970,880 | ) | ||||
Purchases of short-term securities
|
(4,592,762 | ) | (9,695,660 | ) | ||||
Purchases of other investments
|
(341,117 | ) | (416,100 | ) | ||||
Proceeds from sales and maturities of available-for-sale securities
|
7,503,245 | 11,630,860 | ||||||
Proceeds from maturities of held-to-maturity securities
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- | 2,000 | ||||||
Proceeds from sales and maturities of short-term securities
|
10,072,820 | 5,640,859 | ||||||
Proceeds from sales and distributions of other investments
|
492,975 | 512,903 | ||||||
Purchases of property
|
(328,138 | ) | (163,343 | ) | ||||
Proceeds from disposals of property
|
31,157 | 17,200 | ||||||
Net cash provided by (used) in investing activities
|
4,227,268 | (4,442,161 | ) | |||||
Financing Activities
|
||||||||
Repurchases of common stock
|
(5,426,478 | ) | (330,683 | ) | ||||
Exercise of options
|
152,526 | 139,000 | ||||||
Dividends paid
|
(450,822 | ) | (479,861 | ) | ||||
Net cash used in financing activities
|
(5,724,774 | ) | (671,544 | ) | ||||
Net Increase (Decrease) in Cash and Cash Equivalents
|
6,575,071 | (3,265,880 | ) | |||||
Cash and Cash Equivalents, Beginning of Period
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8,117,031 | 8,733,221 | ||||||
Cash and Cash Equivalents, End of Period
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$ | 14,692,102 | $ | 5,467,341 |
Consolidated Statements of Cash Flows, continued
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2011
|
2010
|
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Supplemental Disclosures:
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Cash Paid During the Year for:
|
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Income Taxes, payments, net
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$ | 2,125,000 | $ | 1,075,000 | ||||
Non cash net unrealized gain on investments, net of deferred tax | ||||||||
provision of $(198,953) and $(896,219) for 2011 and 2010, | ||||||||
respectively
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$ | (423,901 | ) | $ | (1,696,289 | ) |
September 30, 2011
|
December 31, 2010
|
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Balance, beginning of period
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$ | 38,198,700 | $ | 39,490,000 | ||||
Provision, charged to operations
|
2,301,259 | 4,435,066 | ||||||
Payments of claims, net of recoveries
|
(2,951,959 | ) | (5,726,366 | ) | ||||
Ending balance
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$ | 37,548,000 | $ | 38,198,700 |
September 30, 2011
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%
|
December 31, 2010
|
%
|
|||||||||||||
Known title claims
|
$ | 5,881,172 | 15.7 | $ | 6,121,941 | 16.0 | ||||||||||
IBNR
|
31,666,828 | 84.3 | 32,076,759 | 84.0 | ||||||||||||
Total loss reserves
|
$ | 37,548,000 | 100 | $ | 38,198,700 | 100 |
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Net income
|
$ | 2,440,465 | $ | 1,449,101 | $ | 5,054,477 | $ | 4,004,076 | ||||||||
Weighted average common shares | ||||||||||||||||
outstanding – Basic
|
2,124,078 | 2,284,331 | 2,164,240 | 2,285,039 | ||||||||||||
Incremental shares outstanding assuming | ||||||||||||||||
the exercise of dilutive stock options | ||||||||||||||||
and SARs (share settled)
|
19,249 | 1,454 | 16,215 | 6,021 | ||||||||||||
Weighted average common shares | ||||||||||||||||
outstanding - Diluted
|
2,143,327 | 2,285,785 | 2,180,455 | 2,291,060 | ||||||||||||
Basic earnings per common share
|
$ | 1.15 | $ | 0.63 | $ | 2.34 | $ | 1.75 | ||||||||
Diluted earnings per common share
|
$ | 1.14 | $ | 0.63 | $ | 2.32 | $ | 1.75 |
Weighted
|
Average
|
|||||||||||||||
Average
|
Remaining
|
Aggregate
|
||||||||||||||
Number
|
Exercise
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Contractual
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Intrinsic
|
|||||||||||||
Of Shares
|
Price
|
Term (years)
|
Value
|
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Outstanding as of January 1, 2010
|
117,245 | $ | 27.54 | 5.10 | $ | 541,543 | ||||||||||
SARs granted
|
3,000 | 33.31 | ||||||||||||||
Options exercised
|
(9,445 | ) | 14.88 | |||||||||||||
Options/SARs cancelled/forfeited/expired
|
- | - | ||||||||||||||
Outstanding as of December 31, 2010
|
110,800 | $ | 28.77 | 4.51 | $ | 353,955 | ||||||||||
SARs granted
|
3,000 | 41.50 | ||||||||||||||
Options exercised
|
(7,550 | ) | 20.20 | |||||||||||||
Options/SARs cancelled/forfeited/expired
|
(4,500 | ) | 28.61 | |||||||||||||
Outstanding as of September 30, 2011
|
101,750 | $ | 29.79 | 4.15 | $ | 657,189 | ||||||||||
Exercisable as of September 30, 2011
|
94,644 | $ | 29.74 | 4.14 | $ | 613,968 | ||||||||||
Unvested as of September 30, 2011
|
7,106 | $ | 30.52 | 4.41 | $ | 43,221 |
2011
|
2010
|
|||||||
Expected Life in Years
|
5.0 | 5.0 | ||||||
Volatility
|
43.6 | % | 42.4 | % | ||||
Interest Rate
|
1.9 | % | 2.1 | % | ||||
Yield Rate
|
0.8 | % | 0.8 | % |
Three Months Ended
September 30, 2011
|
Title
Insurance
|
All
Other
|
Intersegment
Eliminations
|
Total
|
||||||||||||
Operating revenues
|
$ | 24,501,862 | $ | 1,128,526 | $ | (200,486 | ) | $ | 25,429,902 | |||||||
Investment income
|
783,495 | 123,977 | (20,417 | ) | 887,055 | |||||||||||
Net realized loss on investments
|
(179,016 | ) | (21,071 | ) | - | (200,087 | ) | |||||||||
Total revenues
|
$ | 25,106,341 | $ | 1,231,432 | $ | (220,903 | ) | $ | 26,116,870 | |||||||
Operating expenses
|
21,620,657 | 1,235,234 | (200,486 | ) | 22,655,405 | |||||||||||
Income (loss) before income taxes
|
$ | 3,485,684 | $ | (3,802 | ) | $ | (20,417 | ) | $ | 3,461,465 | ||||||
Total assets
|
$ | 118,905,284 | $ | 36,591,725 | $ | - | $ | 155,497,009 | ||||||||
Three Months Ended
|
||||||||||||||||
September 30, 2010
|
||||||||||||||||
Operating revenues
|
$ | 17,402,778 | $ | 1,066,743 | $ | (197,727 | ) | $ | 18,271,794 | |||||||
Investment income
|
794,078 | 161,093 | (20,417 | ) | 934,754 | |||||||||||
Net realized loss on investments
|
(41,277 | ) | (3,587 | ) | - | (44,864 | ) | |||||||||
Total revenues
|
$ | 18,155,579 | $ | 1,224,249 | $ | (218,144 | ) | $ | 19,161,684 | |||||||
Operating expenses
|
15,987,300 | 1,364,010 | (197,727 | ) | 17,153,583 | |||||||||||
Income (loss) before income taxes
|
$ | 2,168,279 | $ | (139,761 | ) | $ | (20,417 | ) | $ | 2,008,101 | ||||||
Total assets
|
$ | 109,070,835 | $ | 41,686,534 | $ | - | $ | 150,757,369 |
Nine Months Ended
September 30, 2011
|
Title
Insurance
|
All
Other
|
Intersegment
Eliminations
|
Total
|
||||||||||||
Operating revenues
|
$ | 64,498,303 | $ | 3,383,112 | $ | (609,385 | ) | $ | 67,272,030 | |||||||
Investment income
|
2,348,441 | 378,056 | (61,252 | ) | 2,665,245 | |||||||||||
Net realized loss on investments
|
(54,407 | ) | (24,765 | ) | - | (79,172 | ) | |||||||||
Total revenues
|
$ | 66,792,337 | $ | 3,736,403 | $ | (670,637 | ) | $ | 69,858,103 | |||||||
Operating expenses
|
59,758,416 | 3,862,595 | (609,385 | ) | 63,011,626 | |||||||||||
Income (loss) before income taxes
|
$ | 7,033,921 | $ | (126,192 | ) | $ | (61,252 | ) | $ | 6,846,477 | ||||||
Total assets
|
$ | 118,905,284 | $ | 36,591,725 | $ | - | $ | 155,497,009 | ||||||||
Nine Months Ended
|
||||||||||||||||
September 30, 2010
|
||||||||||||||||
Operating revenues
|
$ | 43,441,943 | $ | 3,163,721 | $ | (591,097 | ) | $ | 46,014,567 | |||||||
Investment income
|
2,361,414 | 457,066 | (61,252 | ) | 2,757,228 | |||||||||||
Net realized gain on investments
|
261,819 | 44,247 | - | 306,066 | ||||||||||||
Total revenues
|
$ | 46,065,176 | $ | 3,665,034 | $ | (652,349 | ) | $ | 49,077,861 | |||||||
Operating expenses
|
40,996,122 | 3,646,760 | (591,097 | ) | 44,051,785 | |||||||||||
Income before income taxes
|
$ | 5,069,054 | $ | 18,274 | $ | (61,252 | ) | $ | 5,026,076 | |||||||
Total assets
|
$ | 109,070,835 | $ | 41,686,534 | $ | - | $ | 150,757,369 |
For the Three
Months Ended
September 30,
|
For the Nine
Months Ended
September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Service cost – benefits earned during the year
|
$ | 1,778 | $ | 6,425 | $ | 14,627 | $ | 19,274 | ||||||||
Interest cost on the projected benefit obligation
|
3,077 | 7,688 | 18,455 | 23,066 | ||||||||||||
Amortization of unrecognized prior service cost
|
(415 | ) | 5,097 | 9,779 | 15,291 | |||||||||||
Amortization of unrecognized (gains) losses
|
(1,525 | ) | 645 | (239 | ) | 1,929 | ||||||||||
Net periodic benefits costs
|
$ | 2,915 | $ | 19,855 | $ | 42,622 | $ | 59,560 |
2011
|
2010
|
|||||||
Cumulative probability of earning maximum rate until maturity
|
0.0-0.1 | % | 0.0-0.8 | % | ||||
Cumulative probability of principle returned prior to maturity
|
95.4-98.7 | % | 85.3-98.6 | % | ||||
Cumulative probability of default at some future point
|
1.3-4.6 | % | 1.4-14.7 | % |
As of September 30, 2011
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Equity Securities
|
||||||||||||||||
Common stock and nonredeemable preferred stock
|
$ | 17,770,019 | $ | - | $ | - | $ | 17,770,019 | ||||||||
Fixed Maturities
|
||||||||||||||||
Obligations of states and political subdivisions*
|
- | 66,842,938 | 1,837,200 | 68,680,138 | ||||||||||||
Corporate Debt Securities*
|
- | 12,140,622 | 2,783,200 | 14,923,822 | ||||||||||||
Total
|
$ | 17,770,019 | $ | 78,983,560 | $ | 4,620,400 | $ | 101,373,979 | ||||||||
As of December 31, 2010
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Equity Securities
|
||||||||||||||||
Common stock and nonredeemable preferred stock
|
$ | 13,872,370 | $ | - | $ | - | $ | 13,872,370 | ||||||||
Fixed Maturities
|
||||||||||||||||
Obligations of states and political subdivisions*
|
- | 67,202,641 | 2,618,844 | 69,821,485 | ||||||||||||
Corporate Debt Securities*
|
- | 13,358,672 | 2,853,400 | 16,212,072 | ||||||||||||
Total
|
$ | 13,872,370 | $ | 80,561,313 | $ | 5,472,244 | $ | 99,905,927 | ||||||||
*Denotes fair market value obtained from pricing services.
|
Changes in fair value during the period ended:
|
2011
|
2010
|
||||||
Beginning balance at January 1
|
$ | 5,472,244 | $ | 10,097,795 | ||||
Redemptions and sales
|
(900,000 | ) | (4,938,500 | ) | ||||
Realized gain (loss)-included in realized (loss) gain on investments
|
8,248 | (314,386 | ) | |||||
Unrealized gain-included in other comprehensive income
|
39,908 | 627,335 | ||||||
Ending balance
|
$ | 4,620,400 | $ | 5,472,244 |
September 30, 2011
|
Valuation
Method
|
Impaired | Level 1 | Level 2 | Level 3 |
Total at
Estimated
Fair Value
|
Impairment
Losses
|
|||||||||||||||
Cost method investment
|
Fair Value
|
Yes
|
$ | - | $ | - | $ | 58,281 | $ | 58,281 | $ | (28,904 | ) | |||||||||
Other assets
|
Fair Value
|
Yes
|
- | - | 17,000 | 17,000 | (15,500 | ) | ||||||||||||||
Total cost method | ||||||||||||||||||||||
investments and | ||||||||||||||||||||||
other assets
|
$ | - | $ | - | $ | 75,281 | $ | 75,281 | $ | 44,404 |
December 31, 2010
|
Valuation
Method
|
Impaired
|
Level 1
|
Level 2
|
Level 3
|
Total at
Estimated
Fair Value
|
Impairment
Losses
|
|||||||||||||||
Cost method investment
|
Fair Value
|
Yes
|
$ | - | $ | - | $ | 52,625 | $ | 52,625 | $ | (47,141 | ) | |||||||||
Other assets
|
Fair Value
|
Yes
|
- | - | - | - | (47,550 | ) | ||||||||||||||
Total cost method | ||||||||||||||||||||||
investments and other | ||||||||||||||||||||||
assets
|
$ | - | $ | - | $ | 52,625 | $ | 52,625 | $ | (94,691 | ) |
Gross
|
Gross
|
Estimated
|
||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
|||||||||||||
September 30, 2011
|
Cost
|
Gains
|
Losses
|
Value
|
||||||||||||
Fixed Maturities-
|
||||||||||||||||
Available-for-sale, at fair value:
|
||||||||||||||||
Obligations of states and political subdivisions
|
$ | 61,632,682 | $ | 5,219,246 | $ | 8,990 | $ | 66,842,938 | ||||||||
Corporate debt securities
|
11,144,741 | 1,149,633 | $ | 153,752 | 12,140,622 | |||||||||||
Auction rate securities
|
4,616,864 | 3,536 | - | 4,620,400 | ||||||||||||
Total
|
$ | 77,394,287 | $ | 6,372,415 | $ | 162,742 | $ | 83,603,960 | ||||||||
Equity Securities, available-for-sale at fair value-
|
||||||||||||||||
Common stocks and nonredeemable preferred stocks
|
$ | 14,693,945 | $ | 3,410,160 | $ | 334,086 | $ | 17,770,019 | ||||||||
Total
|
$ | 14,693,945 | $ | 3,410,160 | $ | 334,086 | $ | 17,770,019 | ||||||||
Short-term investments-
|
||||||||||||||||
Certificates of deposit and other
|
$ | 21,723,492 | $ | - | $ | - | $ | 21,723,492 | ||||||||
Total
|
$ | 21,723,492 | $ | - | $ | - | $ | 21,723,492 | ||||||||
December 31, 2010
|
||||||||||||||||
Fixed Maturities-
|
||||||||||||||||
Available-for-sale, at fair value:
|
||||||||||||||||
Obligations of states and political subdivisions
|
$ | 64,120,509 | $ | 3,248,821 | $ | 166,690 | $ | 67,202,640 | ||||||||
Corporate debt securities
|
12,258,359 | 1,123,051 | 22,737 | 13,358,673 | ||||||||||||
Auction rate securities
|
5,405,394 | 66,850 | - | 5,472,244 | ||||||||||||
Total
|
$ | 81,784,262 | $ | 4,438,722 | $ | 189,427 | $ | 86,033,557 | ||||||||
Equity Securities, available-for-sale at fair value-
|
||||||||||||||||
Common stocks and nonredeemable preferred stocks
|
$ | 9,458,773 | $ | 4,430,175 | $ | 16,578 | $ | 13,872,370 | ||||||||
Total
|
$ | 9,458,773 | $ | 4,430,175 | $ | 16,578 | $ | 13,872,370 | ||||||||
Short-term investments-
|
||||||||||||||||
Certificates of deposit and other
|
$ | 27,203,550 | $ | - | $ | - | $ | 27,203,550 | ||||||||
Total
|
$ | 27,203,550 | $ | - | $ | - | $ | 27,203,550 |
Available-for-Sale
|
||||||||
Amortized
|
Fair
|
|||||||
Cost
|
Value
|
|||||||
Due in one year or less
|
$ | 6,219,802 | $ | 6,362,555 | ||||
Due after one year through five years
|
29,804,598 | 31,883,803 | ||||||
Due five years through ten years
|
32,879,859 | 36,180,952 | ||||||
Due after ten years
|
8,490,028 | 9,176,650 | ||||||
Total
|
$ | 77,394,287 | $ | 83,603,960 |
2011 | 2010 | |||||||
Gross realized gains:
|
||||||||
Obligations of states and political subdivisions
|
$ | 20,845 | $ | 19,927 | ||||
Common stocks and nonredeemable preferred stocks
|
138,290 | 440,797 | ||||||
Auction rate securities
|
43,200 | - | ||||||
Total
|
$ | 202,335 | $ | 460,724 |
Gross realized losses:
|
||||||||
Obligations of states and political subdivisions
|
$ | - | $ | - |
Common stocks and nonredeemable preferred stocks
|
- | (19,024 | ) |
Other than temporary impairment of securities
|
(214,077 | ) | (54,395 | ) | ||||
Total
|
(214,077 | ) | (73,419 | ) | ||||
Net realized (loss) gain
|
$ | (11,742 | ) | $ | 387,305 |
Less than 12 Months
|
12 Months or Longer
|
Total
|
||||||||||||||||||||||
Fair
|
Unrealized
|
Fair
|
Unrealized
|
Fair
|
Unrealized
|
|||||||||||||||||||
Value
|
Losses
|
Value
|
Losses
|
Value
|
Losses
|
|||||||||||||||||||
September 30, 2011
|
||||||||||||||||||||||||
Obligations of states
|
||||||||||||||||||||||||
and political | ||||||||||||||||||||||||
subdivisions | $ | 1,033,880 | $ | (8,990 | ) | $ | - | $ | - | $ | 1,033,880 | $ | (8,990 | ) | ||||||||||
Corporate debt
|
||||||||||||||||||||||||
securities
|
1,969,100 | (153,752 | ) | - | - | 1,969,100 | (153,752 | ) | ||||||||||||||||
Total Fixed Income
|
||||||||||||||||||||||||
Securities
|
$ | 3,002,980 | $ | (162,742 | ) | $ | - | $ | - | $ | 3,002,980 | $ | (162,742 | ) | ||||||||||
Equity Securities
|
4,501,592 | (334,086 | ) | - | - | 4,501,592 | (334,086 | ) | ||||||||||||||||
Total temporarily
|
||||||||||||||||||||||||
impaired securities
|
$ | 7,504,572 | $ | (496,828 | ) | $ | - | $ | - | $ | 7,504,572 | $ | (496,828 | ) |
Less than 12 Months
|
12 Months or Longer
|
Total
|
||||||||||||||||||||||
Fair
|
Unrealized
|
Fair
|
Unrealized
|
Fair
|
Unrealized
|
|||||||||||||||||||
Value
|
Losses
|
Value
|
Losses
|
Value
|
Losses
|
|||||||||||||||||||
December 31, 2010
|
||||||||||||||||||||||||
Obligations of states
|
||||||||||||||||||||||||
and political | ||||||||||||||||||||||||
subdivisions
|
$ | 7,008,818 | $ | (166,690 | ) | $ | - | $ | - | $ | 7,008,818 | $ | (166,690 | ) | ||||||||||
Corporate debt
|
||||||||||||||||||||||||
securities
|
1,077,263 | (22,737 | ) | - | - | 1,077,263 | (22,737 | ) | ||||||||||||||||
Total Fixed Income
|
||||||||||||||||||||||||
Securities
|
$ | 8,086,081 | $ | (189,427 | ) | $ | - | $ | - | $ | 8,086,081 | $ | (189,427 | ) | ||||||||||
Equity Securities
|
746,388 | (7,710 | ) | 220,635 | (8,868 | ) | 967,023 | (16,578 | ) | |||||||||||||||
Total temporarily
|
||||||||||||||||||||||||
impaired securities
|
$ | 8,832,469 | $ | (197,137 | ) | $ | 220,635 | $ | (8,868 | ) | $ | 9,053,104 | $ | (206,005 | ) |
Financial Statement Classification,
|
As of
September 30,
|
As of
December 31,
|
||||||
Consolidated Balance Sheets
|
2011
|
2010
|
||||||
Other investments
|
$ | 1,824,000 | $ | 1,682,000 | ||||
Premiums and fees receivable
|
$ | 706,000 | $ | 739,000 |
Financial Statement Classification,
|
For the Three Months Ended
September 30,
|
For the Nine Months Ended
September 30,
|
||||||||||||||
Consolidated Statements of Income
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Net premiums written
|
$ | 3,165,000 | $ | 3,724,000 | $ | 7,845,000 | $ | 8,572,000 | ||||||||
Other income
|
$ | 362,000 | $ | 451,000 | $ | 820,000 | $ | 906,000 |
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||||||||||||||||||
2011
|
%
|
2010
|
%
|
2011
|
%
|
2010
|
%
|
|||||||||||||||||||||||||
Home and Branch
|
$ | 4,387,971 | 18.3 | $ | 4,870,568 | 29.1 | $ | 12,061,485 | 19.1 | $ | 13,040,632 | 30.9 | ||||||||||||||||||||
Agency
|
19,598,621 | 81.7 | 11,878,827 | 70.9 | 51,241,717 | 80.9 | 29,134,015 | 69.1 | ||||||||||||||||||||||||
Total
|
$ | 23,986,592 | 100 | $ | 16,749,395 | 100 | $ | 63,303,202 | 100 | $ | 42,174,647 | 100 |
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
State
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Texas
|
$ | 9,511,966 | $ | 157,898 | $ | 23,377,875 | $ | 157,898 | ||||||||
North Carolina
|
5,843,439 | 6,370,911 | 15,910,699 | 17,055,366 | ||||||||||||
Michigan
|
859,889 | 837,384 | 3,508,465 | 2,820,240 | ||||||||||||
South Carolina
|
1,635,568 | 1,727,802 | 4,772,162 | 4,474,207 | ||||||||||||
Virginia
|
1,090,708 | 1,157,659 | 3,027,555 | 3,214,050 | ||||||||||||
Other States
|
5,078,348 | 6,540,500 | 12,828,709 | 14,555,628 | ||||||||||||
Direct Premiums
|
24,019,918 | 16,792,154 | 63,425,465 | 42,277,389 | ||||||||||||
Reinsurance Assumed
|
- | 9,900 | 10,496 | 19,834 | ||||||||||||
Reinsurance Ceded
|
(33,326 | ) | (52,659 | ) | (132,759 | ) | (122,576 | ) | ||||||||
Net Premiums
|
$ | 23,986,592 | $ | 16,749,395 | $ | 63,303,202 | $ | 42,174,647 |
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||||||||||||||||||
2011
|
%
|
2010
|
%
|
2011
|
%
|
2010
|
%
|
|||||||||||||||||||||||||
Title insurance
|
$ | 21,431,935 | 94.6 | $ | 15,802,179 | 92.1 | $ | 59,194,388 | 93.9 | $ | 40,445,497 | 91.8 | ||||||||||||||||||||
All other
|
1,223,470 | 5.4 | 1,351,404 | 7.9 | 3,817,238 | 6.1 | 3,606,288 | 8.2 | ||||||||||||||||||||||||
Total
|
$ | 22,655,405 | 100 | $ | 17,153,583 | 100 | $ | 63,011,626 | 100 | $ | 44,051,785 | 100 |
|
●
|
the level of real estate transactions, the level of mortgage origination volumes (including refinancing) and changes to the insurance requirements of the participants in the secondary mortgage market, and the effect of these factors on the demand for title insurance;
|
|
●
|
changes in general economic, business and political conditions, including the performance of the financial and real estate markets;
|
|
●
|
compliance with government regulation and significant changes to applicable regulations or in their application by regulators;
|
|
●
|
the possible inadequacy of provisions for claims to cover actual claim losses;
|
|
●
|
the incidence of fraud-related losses;
|
|
●
|
heightened regulatory scrutiny and investigations of the title insurance industry;
|
|
●
|
unanticipated adverse changes in securities markets, including interest rates, which could result in material losses on the Company’s investments;
|
|
●
|
the Company’s dependence on key management personnel, the loss of whom could have a material adverse affect on the Company’s business;
|
|
●
|
the Company’s ability to develop and offer products and services that meet changing industry standards in a timely and cost-effective manner;
|
|
●
|
statutory requirements applicable to the Company’s insurance subsidiaries which require them to maintain minimum levels of capital, surplus and reserves and restrict the amount of dividends that they may pay to the Company without prior regulatory approval;
|
|
●
|
significant competition that the Company’s operating subsidiaries face;
|
|
●
|
the Company’s business concentration in the states of North Carolina and Texas;
|
|
●
|
weakness in the commercial real estate market and increases in the amount or severity of commercial real estate claims; and
|
|
●
|
other risks detailed elsewhere in this document and in the Company’s other filings with the SEC.
|
Period
|
Total Number of
Shares Purchased
|
Average Price
Paid per Share
|
Total Number of
Shares Purchased as
Part of Publicly
Announced Plan
|
Maximum
Number of Shares
that May Yet Be
Purchased Under
the Plan
|
||||||||||||
Beginning | ||||||||||||||||
of period
|
311,165 | |||||||||||||||
07/01/11–
07/31/11
|
- | $ | - | - | 311,165 | |||||||||||
08/01/11–
08/31/11
|
4,866 | $ | 35.52 | 4,866 | 306,299 | |||||||||||
09/01/11–
09/30/11
|
1,239 | $ | 34.53 | 1,239 | 305,060 | |||||||||||
Total:
|
6,105 | $ | 35.52 | 6,105 | 305,060 |
|
31(i)
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
31(ii)
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
32
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
101.INS*
|
XBRL Instance Document
|
|
101.SCH*
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase Document
|
*
|
In accordance with Rule 406T of Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
|
INVESTORS TITLE COMPANY
|
|||
|
By:
|
/s/ James A. Fine, Jr. | |
James A. Fine, Jr.
|
|||
President, Principal Financial Officer and
|
|||
Principal Accounting Officer
|
|||
Dated: November 14, 2011
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Investors Title Company;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ J. Allen Fine
|
|
J. Allen Fine
|
|
Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Investors Title Company;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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/s/ James A. Fine, Jr.
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|
James A. Fine, Jr.
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|
Chief Financial Officer
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(i)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and
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(ii)
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Dated: November 14, 2011
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By:
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/s/ J. Allen Fine | |
J. Allen Fine
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Chief Executive Officer
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Dated: November 14, 2011
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By:
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/s/ James A. Fine, Jr. | |
James A. Fine, Jr.
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|||
Chief Financial Officer
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Consolidated Balance Sheets (Parenthetical) (USD $) | Sep. 30, 2011 | Dec. 31, 2010 |
---|---|---|
Available-for-sale, amortized cost | $ 77,394,287 | $ 81,784,262 |
Equity securities, available-for-sale, cost | 14,693,945 | 9,458,773 |
Premiums and fees receivable, allowance for doubtful accounts | $ 1,306,000 | $ 1,421,000 |
Common stock, no par value | ||
Common stock, shares authorized | 10,000,000 | 10,000,000 |
Common stock, shares issued | 2,121,630 | 2,282,596 |
Common stock, shares outstanding | 2,121,630 | 2,282,596 |
Common stock, held by company's subsidiary | 291,676 | 291,676 |
Class A Junior Participating Preferred Stock [Member] | ||
Preferred stock, shares authorized | 100,000 | 100,000 |
Preferred stock, shares issued | 0 | 0 |
Consolidated Statements Of Income (USD $) | 3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2011 | Sep. 30, 2010 | Sep. 30, 2011 | Sep. 30, 2010 | |
Revenues: | ||||
Net premiums written | $ 23,986,592 | $ 16,749,395 | $ 63,303,202 | $ 42,174,647 |
Investment income - interest and dividends | 887,055 | 934,754 | 2,665,245 | 2,757,228 |
Net realized (loss) gain on investments | (200,087) | (44,864) | (79,172) | 306,066 |
Other | 1,443,310 | 1,522,399 | 3,968,828 | 3,839,920 |
Total Revenues | 26,116,870 | 19,161,684 | 69,858,103 | 49,077,861 |
Operating Expenses: | ||||
Commissions to agents | 15,161,823 | 8,632,083 | 39,335,237 | 20,707,910 |
Provision for claims | 349,672 | 1,819,522 | 2,301,259 | 3,244,341 |
Salaries, employee benefits and payroll taxes | 4,778,542 | 4,354,854 | 14,110,213 | 13,185,127 |
Office occupancy and operations | 919,681 | 971,264 | 2,836,068 | 3,038,491 |
Business development | 363,731 | 335,454 | 1,123,517 | 962,115 |
Filing fees, franchise and local taxes | 79,638 | 241,774 | 411,897 | 534,473 |
Premium and retaliatory taxes | 459,711 | 336,925 | 1,368,168 | 919,655 |
Professional and contract labor fees | 412,227 | 334,973 | 1,132,308 | 1,038,845 |
Other | 130,380 | 126,734 | 392,959 | 420,828 |
Total Operating Expenses | 22,655,405 | 17,153,583 | 63,011,626 | 44,051,785 |
Income before Income Taxes | 3,461,465 | 2,008,101 | 6,846,477 | 5,026,076 |
Provision for Income Taxes | 1,021,000 | 559,000 | 1,792,000 | 1,022,000 |
Net Income | $ 2,440,465 | $ 1,449,101 | $ 5,054,477 | $ 4,004,076 |
Basic Earnings per Common Share | $ 1.15 | $ 0.63 | $ 2.34 | $ 1.75 |
Weighted Average Shares Outstanding - Basic | 2,124,078 | 2,284,331 | 2,164,240 | 2,285,039 |
Diluted Earnings per Common Share | $ 1.14 | $ 0.63 | $ 2.32 | $ 1.75 |
Weighted Average Shares Outstanding - Diluted | 2,143,327 | 2,285,785 | 2,180,455 | 2,291,060 |
Cash Dividends Paid per Common Share | $ 0.07 | $ 0.07 | $ 0.21 | $ 0.21 |
Document And Entity Information | 9 Months Ended | |
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Sep. 30, 2011 | Oct. 19, 2011 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2011 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2011 | |
Entity Registrant Name | INVESTORS TITLE CO | |
Entity Central Index Key | 0000720858 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 2,120,524 |
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Earnings Per Common Share And Share Awards | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Earnings Per Common Share And Share Awards [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Common Share And Share Awards | Note 3 - Earnings Per Common Share and Share Awards
Basic earnings per common share are 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, when share-based awards are exercised, (a) the exercise price of a share-based award; (b), the amount of compensation cost, if any, for future service that the Company has not yet recognized; and (c) the amount of estimated tax benefits that would be recorded in additional paid-in capital, if any, are assumed to be used to repurchase shares in the current period. The incremental dilutive potential common shares, calculated using the treasury stock method, were 19,249 and 1,454 for the three months ended September 30, 2011 and 2010, respectively, and 16,215 and 6,021 for the nine months ended September 30, 2011 and 2010, respectively.
The following table sets forth the computation of basic and diluted earnings per share for the three and nine month periods ended September 30:
There were 11,500 and 20,200 shares excluded from the computation of diluted earnings per share for the three months ended September 30, 2011 and 2010, respectively, because these shares were anti-dilutive. There were 11,500 and 13,500 shares excluded from the computation of diluted earnings per share for the nine months ended September 30, 2011 and 2010, respectively, because these shares were anti-dilutive.
The Company has adopted employee stock award plans (the "Plans") under which restricted stock, and options or stock appreciation rights ("SARs") to acquire shares (not to exceed 500,000 shares) of the Company's stock may be granted to key employees or directors of the Company at a price not less than the market value on the date of grant. SARs and options (which have predominantly been incentive stock options) awarded under the Plans thus far are exercisable and vest immediately or within one year or at 10% to 20% per year beginning on the date of grant and generally expire in five to ten years. All SARs issued to date have been share settled only. There have not been any SARs exercised in 2011 or 2010.
A summary of share-based award transactions for all share-based award plans follows:
During the second quarters of 2011 and 2010, the Company issued 3,000 share-settled SARs to the directors of the Company. 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. As such, these were valued using the Black-Scholes option valuation model. 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 exercise and employee termination 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 for periods during 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 values for the SARs issued during 2011 and 2010 were $15.55 and $12.30, respectively, and were estimated using the weighted-average assumptions shown in the table below.
There was approximately $160,000 and $164,000 of compensation expense relating to SARs or options vesting on or before September 30, 2011 and 2010, respectively, included in salaries, employee benefits and payroll taxes in the consolidated statements of income. As of September 30, 2011, there was approximately $96,000 of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Company's stock award plans. That cost is expected to be recognized over a weighted-average period of approximately 5 months. There have been no stock options or SARs granted where the exercise price was less than the market price on the date of grant. |
Commitments And Contingencies | 9 Months Ended |
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Sep. 30, 2011 | |
Commitments And Contingencies [Abstract] | |
Commitments And Contingencies | Note 8 – Commitments and Contingencies
Legal Proceedings. A class action lawsuit is pending in the United States District Court for the Southern District of West Virginia against several title insurance companies, including Investors Title Insurance Company, entitled Backel v. Fidelity National Title Insurance et al. (6:2008- CV-00181). The plaintiff in this case contends a lack of meaningful oversight by agencies with which title insurance rates are filed and approved. There are further allegations that the title insurance companies have conspired to fix title insurance rates. The plaintiffs seek monetary damages, including treble damages, as well as injunctive relief. Similar suits have been filed in other jurisdictions, several of which have already been dismissed. In West Virginia, the case has been placed on the inactive list pending the resolution of the bankruptcy of LandAmerica Financial Group, Inc. The Company believes that this case is without merit, and intends to vigorously defend against the allegations. At this stage in the litigation, the Company does not have the ability to make a reasonable range of estimates in regards to potential loss amounts, if any.
The Company and its subsidiaries are also involved in other legal proceedings that are incidental to their business. In the Company's opinion, based on the present status of these proceedings, any potential liability of the Company or its subsidiaries with respect to these legal proceedings, will not, in the aggregate, be material to the Company's consolidated financial condition or operations.
Regulation. The Company's title insurance and trust subsidiaries are regulated by various federal, state and local governmental agencies and are subject to various audits and inquiries. It is the opinion of management based on its present expectations that these audits and inquiries will not have a material impact on the Company's consolidated financial condition or operations.
Escrow and Trust Deposits. As a service to its customers, the Company, through Investors Title Insurance Company ("ITIC"), administers escrow and trust deposits representing earnest money received under real estate contracts, undisbursed amounts received for settlement of mortgage loans and indemnities against specific title risks. These amounts are not considered assets of the Company and, therefore, are excluded from the accompanying consolidated balance sheets. However, the Company remains contingently liable for the disposition of these deposits. Like-Kind Exchanges Proceeds. In administering tax-deferred property exchanges, the Company's subsidiary, Investors Title Exchange Corporation ("ITEC"), serves as a qualified intermediary for exchanges, holding the net sales proceeds from relinquished property to be used for purchase of replacement property. Another Company subsidiary, Investors Title Accommodation Corporation ("ITAC"), serves as exchange accommodation titleholder and, through limited liability companies ("LLCs") that are wholly owned subsidiaries of ITAC, holds property for exchangers in reverse exchange transactions. Like-kind exchange deposits and reverse exchange property totaled approximately $12,938,000 and $23,044,000 as of September 30, 2011 and December 31, 2010, respectively. These amounts are not considered assets of the Company and, therefore, are excluded from the accompanying consolidated balance sheets; however, the Company remains contingently liable for the disposition of the transfers of property, disbursements of proceeds and the return on the proceeds at the agreed upon rate. These like-kind exchange funds are primarily invested in money market and other short-term investments, including approximately $1,000,000 of par value in an auction rate security, as of September 30, 2011. The Company does not believe the current illiquidity of the auction rate security will impact its operations, as it believes it has sufficient capital to provide continuous and immediate liquidity as necessary. |
Retirement Agreements And Other Postretirement Benefits | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Retirement Agreements And Other Postretirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Retirement Agreements And Other Postretirement Benefits | Note 5 – Retirement Agreements and Other Postretirement Benefits
On November 17, 2003, the Company's subsidiary, Investors Title Insurance Company, entered into employment agreements with key executives that provide for the continuation of certain employee benefits and other payments due under the agreements upon retirement totaling $5,517,000 and $5,134,000 as of September 30, 2011 and December 31, 2010, respectively. The executive employee benefits include health insurance, dental, vision and life insurance and are unfunded. These amounts are classified as accounts payable and accrued liabilities in the consolidated balance sheets. The following sets forth the net periodic benefits cost for the executive benefits for the periods ended September 30, 2011 and 2010:
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Fair Value Measurement | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fair Value Measurement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurement | Note 6 - Fair Value Measurement
Valuation Hierarchy. The FASB has established a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value of financial assets and liabilities, such as securities. This hierarchy categorizes the inputs into three broad levels as follows. Level 1 inputs to the valuation methodology are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs to the valuation methodology are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company's own assumptions used to measure assets and liabilities at fair value.
Valuation Techniques. A financial instrument's classification within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement—consequently, if there are multiple significant valuation inputs that are categorized in different levels of the hierarchy, the instrument's hierarchy level is the lowest level (with Level 3 being the lowest level) within which any significant input falls.
The Level 1 category includes equity securities that are measured at fair value using quoted active market prices.
The Level 2 category includes fixed maturity investments such as corporate bonds, U.S. government and agency bonds and municipal bonds. Their fair value is principally based on market values obtained from a third party pricing service. Factors that are used in determining their fair market value include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two sided markets, benchmark securities, bids, offers and reference data. The Company receives one quote per security from the pricing service, although as discussed below, the Company does consult other pricing resources when confirming that the prices it obtains reflect the fair values of the instruments in accordance with Accounting Standards Codification ("ASC") 820, Fair Value Measurements and Disclosures. Generally, quotes obtained from the pricing service for instruments classified as Level 2 are not adjusted and are not binding. As of September 30, 2011 and December 31, 2010, the Company did not adjust any Level 2 fair values.
A number of the Company's investment grade corporate bonds are frequently traded in active markets, and trading prices are consequently available for these securities. However, these securities were classified as Level 2 because the third party pricing service from which the Company has obtained fair values for these instruments uses valuation models which use observable market inputs in addition to traded prices. Substantially all of the input assumptions used in the service's model are observable in the marketplace or can be derived or supported by observable market data.
The Level 3 category only includes the Company's investments in student loan auction rate securities ("ARS") because quoted prices were unavailable due to the failure of auctions. Some of the inputs to this model are unobservable in the market and are significant—therefore, the Company utilizes another third party pricing service to assist in the determination of fair market value of these securities. That service uses a proprietary valuation model that considers factors such as the following: the financial standing of the issuer; reported prices and the extent of public trading in similar financial instruments of the issuer or comparable companies; the ability of the issuer to obtain required financing; changes in the economic conditions affecting the issuer; pricing by other dealers in similar securities; time to maturity; and interest rates. The following table summarizes some key assumptions the service used to determine fair value as of September 30, 2011 and December 31, 2010:
Based upon these inputs and assumptions, the pricing service provides a range of values to the Company for its ARS. The Company records the fair value based on the midpoint of the range and believes that this valuation is the most reasonable estimate of fair value. In 2011 and 2010, the difference in the low and high values of the ranges was between approximately three and four percent of the carrying value of the Company's ARS.
The Company's ARS portfolio is comprised entirely of investment grade student loan ARS. The par value of the ARS bonds was $5,000,000 and $5,900,000 as of September 30, 2011 and December 31, 2010, respectively, with approximately 79.6% and 82.2% as of September 30, 2011 and December 31, 2010, respectively, guaranteed by the U.S. Department of Education.
The following table presents, by level, the financial assets carried at fair value measured on a recurring basis as of September 30, 2011 and December 31, 2010. The table does not include cash on hand and also does not include assets which are measured at historical cost or any basis other than fair value.
There were no transfers into or out of Levels 1 and 2 during the period. The following table presents a reconciliation of the Company's assets measured at fair value using significant unobservable inputs (Level 3) for the period ended September 30, 2011 and the year ended December 31, 2010:
Certain investments and other assets are measured at estimated fair value on a non-recurring basis, such as investments that are impaired during the period and recorded at estimated fair value in the financial statements as of or during the periods ended September 30, 2011 and December 31, 2010. The following table summarizes the corresponding estimated fair value hierarchy of such investments and other assets at September 30, 2011 and December 31, 2010 and the related impairments recognized.
To help ensure that fair value determinations are consistent with ASC 820 fair value measurements, prices from our pricing services go through multiple review processes to ensure appropriate pricing. Pricing procedures and inputs used to price each security include, but are not limited to the following: unadjusted quoted market prices for identical securities such as stock market closing prices, non-binding quoted prices for identical securities in markets that are not active, interest rates, yield curves observable at commonly quoted intervals, volatility, prepayment speeds, loss severity, credit risks and default rates. The Company reviews the procedures and inputs used by its pricing services and verifies a sample of the services' quotes by comparing them to values obtained from other pricing resources. In the event the Company disagrees with a price provided by its pricing services, the service reevaluates the price to corroborate the market information and then reviews inputs to the evaluation in light of potentially new market data. The Company believes that these processes and inputs result in appropriate classifications and fair values consistent with ASC 820. |
Segment Information | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | 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, 2011 and 2010:
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Consolidated Statements Of Cash Flows (Parenthetical) (USD $) | 9 Months Ended | |
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Sep. 30, 2011 | Sep. 30, 2010 | |
Consolidated Statements Of Cash Flows [Abstract] | ||
Non cash net unrealized gain on investments, deferred tax provision | $ (198,953) | $ (896,219) |
Basis Of Presentation And Significant Accounting Policies | 9 Months Ended |
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Sep. 30, 2011 | |
Basis Of Presentation And Significant Accounting Policies [Abstract] | |
Basis Of Presentation And Significant Accounting Policies | Note 1 - Basis of Presentation and Significant Accounting Policies
Reference should be made to the "Notes to Consolidated Financial Statements" of Investors Title Company's ("the Company") Annual Report on Form 10-K for the year ended December 31, 2010 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 (Investors Title Insurance Company, National Investors Title Insurance Company, Investors Title Exchange Corporation, Investors Title Accommodation Corporation, Investors Title Management Services, Inc., Investors Title Commercial Agency, LLC, Investors Capital Management Company, and Investors Trust Company), and have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and 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 in the accompanying unaudited consolidated financial statements have been included. All such adjustments are of a normal recurring nature. Operating results for the quarter ended September 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.
Use of Estimates and Assumptions – The preparation of the Company's consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("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 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 to or disclosure in its consolidated financial statements.
Recently Issued Accounting Standards – In January 2010, the FASB updated the requirements for fair value measurements and disclosures to provide for additional disclosures related to transfers in and out of fair value hierarchy Levels 1 and 2, and to require companies to present purchases, sales, issuances and settlements of Level 3 securities on a gross rather than net basis. Refer to Note 6 for a discussion of valuation hierarchy levels. The new disclosures are clarifications of existing disclosures and are effective for interim and annual reporting periods beginning after December 15, 2009, except that the disclosures requiring the presentation of Level 3 securities trading activity on a gross basis are effective for fiscal years beginning after December 15, 2010. This update did not have an impact on the Company's financial condition or results of operations.
Pending Accounting Standards – In May 2011, the FASB updated requirements for measuring and disclosing fair value information, resulting in common principles and requirements in accordance with GAAP and IFRS. For public entities, this guidance becomes effective during interim and annual periods beginning after December 15, 2011. Early application by public entities is not permitted. Management does not expect the adoption of this standard to have a material impact on the Company's consolidated financial statements.
In June 2011, the Financial Accounting Standards Board ("the FASB") updated requirements relating to the presentation of comprehensive income. The objectives of this accounting update are to facilitate convergence of GAAP and International Financial Reporting Standards ("IFRS"), to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. The main provisions of the guidance require that all nonowner changes in stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. For public entities, this update becomes effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Management does not expect the adoption of this standard to have a material impact on the Company's consolidated financial statements.
Change in Estimate. The Company's premium revenues from certain agency operations include accruals based on estimates using historical information, as well as other relevant trends and data. The accruals for premiums are necessary because of the lag between policy effective dates and the reporting of these transactions to the Company by the agents. In addition to accruing these earned but unreported agency premiums, the Company also accrues agent commission expenses, premium taxes and income taxes, and records a provision for claim losses at the prevailing provision rate as of the balance sheet date.
During the third quarter of 2011, the Company performed a study of certain agency transactions to more accurately gauge the lag time between policy effective dates and the reporting of these transactions to the Company by the agents. Based on the results of this study, the Company reevaluated and refined the estimate for this accrual, which resulted in an increase in accrued premiums receivable. The Company believes that this adjustment is properly reflected as a change in accounting estimate in the third quarter of 2011. The approximate impact of this change in estimate for the quarter ended September 30, 2011 were increases of $3,004,000 in net premiums written, $2,554,000 in commissions to agents, $60,000 in premium taxes, $90,000 in the provision for claims, $102,000 in the provision for income taxes and $198,000 in net income, or approximately $0.09 per share, compared with the amounts that would have been recorded under the Company's prior estimate. The net income and earnings per share effects exclude certain fixed expenses. |
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Related Party Transactions | Note 9 – Related Party Transactions
The Company does business with, and has investments in, unconsolidated limited liability companies, primarily title insurance agencies. The Company utilizes the equity method to account for its investment in these limited liability companies. The following table sets forth the approximate values by year found within each financial statement classification:
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Reserves For Claims | Note 2 - Reserves for Claims
Transactions in the reserves for claims for the nine months ended September 30, 2011 and the year ended December 31, 2010 are summarized as follows:
The total reserve for all reported and unreported losses the Company incurred through September 30, 2011 is represented by the reserves for claims. 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 incurred claims of policyholders which may be reported in the future. Despite the variability of such estimates, management believes that the reserves are adequate to cover claim losses which might result from pending and future claims under policies issued through September 30, 2011. The Company continually reviews and adjusts its reserve estimates to reflect its loss experience and any new information that becomes available. Adjustments resulting from such reviews may be significant.
A summary of the Company's loss reserves, broken down into its components of known title claims and incurred but not reported claims ("IBNR"), follows:
Claims and losses paid are charged to the reserves 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 acquiring company carries assets at the lower of cost or estimated realizable value, net of any indebtedness on the property. |