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

FORM 10-Q


|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2004

OR


|  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________________ to ______________________

Commission File Number: 0-11774

INVESTORS TITLE COMPANY
(Exact name of registrant as specified in its charter)


North Carolina 56-1110199
(State of incorporation)
(I.R.S. Employer Identification No.)

121 North Columbia Street, Chapel Hill, North Carolina 27514
(Address of principal executive offices) (Zip Code)

(919) 968-2200
(Registrant’s telephone number, including area code)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 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    X      No       

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes          No    X   

        As of March 31, 2004, there were 2,855,744 outstanding shares of common stock of Investors Title Company, including 349,929 shares held by Investors Title Insurance Company, a wholly owned subsidiary of Investors Title Company.



INVESTORS TITLE COMPANY
AND SUBSIDIARIES

INDEX


PART I.   FINANCIAL INFORMATION
     
Item 1.   Financial Statements:
       
    Consolidated Balance Sheets as of March 31, 2004 and December 31, 2003 1
       
    Consolidated Statements of Income
     For the Three Months Ended March 31, 2004 and 2003 		2
       
    Consolidated Statements of Stockholders’ Equity
     For the Three Months Ended March 31, 2004 and For the Year Ended December 31, 2003		 3
       
    Consolidated Statements of Cash Flows
     For the Three Months Ended March 31, 2004 and 2003 		4
       
               Notes to Consolidated Financial Statements 5
     
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of
     Operations 		9
       
Item 3.   Quantitative and Qualitative Disclosures About Market Risk 14
       
Item 4.   Controls and Procedures 15
     
PART II.   OTHER INFORMATION
       
Item 2.   Changes in Securities, Use of Proceeds & Issuer Purchases of Equity Securities 15
       
Item 6.   Exhibits and Reports on Form 8-K 16
       
SIGNATURES     17



PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

Investors Title Company and Subsidiaries
Consolidated Balance Sheets
As of March 31, 2004 and December 31, 2003


March 31, 2004
December 31, 2003
(Unaudited) (Audited)
Assets      
  Cash and cash equivalents $ 4,761,041          $ 5,125,356
 
  Investments in securities:
     Fixed maturities:
       Held-to-maturity, at amortized cost   3,343,339     3,526,030
       Available-for-sale, at fair value   68,857,649     60,803,807
     Equity securities, at fair value   8,359,781     14,556,785
     Other investments   1,166,963     955,561
        Total investments   81,727,732     79,842,183
 
  Premiums receivable, less allowance for doubtful accounts of
     $2,364,000 and $2,474,000 for 2004 and 2003, respectively   6,980,662     8,031,803
  Accrued interest and dividends   606,992     667,147
  Prepaid expenses and other assets   1,291,678     934,345
  Property acquired in settlement of claims   286,517     286,517
  Property, net   3,963,749     4,099,243
  Deferred income taxes, net   1,126,027     1,485,217
           
Total Assets $ 100,744,398   $ 100,471,811
 
Liabilities and Stockholders’ Equity
Liabilities:
  Reserves for claims (Note 2) $ 30,500,000   $ 30,031,000
  Accounts payable and accrued liabilities   3,488,727     5,782,470
  Commissions and reinsurance payables   390,899     726,191
  Premium taxes payable   235,279     461,436
  Current income taxes payable   778,370     281,968
        Total liabilities   35,393,275     37,283,065
 
Stockholders’ Equity:
  Class A Junior Participating preferred stock (shares authorized 100,000; no shares issued)   —     —
  Common stock-no par value (shares authorized 10,000,000;
    2,505,815 and 2,503,923 shares issued and outstanding 2004 and 2003,
    respectively, excluding 349,929 and 351,821 shares 2004 and 2003,
    respectively, of common stock held by the Company’s subsidiary)   1     1
  Retained earnings   61,841,289     59,756,927
  Accumulated other comprehensive income, net of deferred taxes of
    $1,808,667 and $1,768,477 for 2004 and 2003, respectively (Note 3)   3,509,833     3,431,818
        Total stockholders’ equity   65,351,123     63,188,746
           
Total Liabilities and Stockholders’ Equity $ 100,744,398   $ 100,471,811

See notes to consolidated financial statements.

1



Investors Title Company and Subsidiaries
Consolidated Statements of Income
For the Three Months Ended March 31, 2004 and 2003
(Unaudited)


2004
2003
Revenues:        
       Underwriting income:  
            Premiums written   $ 17,051,282   $ 19,765,174
            Less-premiums for reinsurance ceded     69,526     97,189
            Net premiums written     16,981,756     19,667,985
       Investment income – interest and dividends     673,326     674,578
       Net realized gain on sales of investments     3,431     23,047
       Exchange services revenue (Note 5)     479,894     101,089
       Other     478,162     561,744
            Total     18,616,569     21,028,443
   
Operating Expenses:  
       Commissions to agents     6,998,595     9,392,790
       Provision for claims (Note 2)     1,844,379     2,083,038
       Salaries, employee benefits and payroll taxes (Note 6)     3,847,905     3,547,057
       Office occupancy and operations     1,210,298     1,097,116
       Business development     353,414     380,952
       Taxes, other than payroll and income     201,114     54,123
       Premium and retaliatory taxes     333,004     421,286
       Professional fees     410,675     207,344
       Other     31,374     51,931
            Total     15,230,758     17,235,637
             
Income Before Income Taxes     3,385,811     3,792,806
             
Provision For Income Taxes     1,164,207     1,184,245
             
Net Income   $ 2,221,604   $ 2,608,561
             
Basic Earnings Per Common Share (Note 4)   $ 0.89   $ 1.04
             
Weighted Average Shares Outstanding – Basic (Note 4)     2,505,368     2,513,507
             
Diluted Earnings Per Common Share (Note 4)   $ 0.84   $ 1.00
             
Weighted Average Shares Outstanding– Diluted (Note 4)     2,638,264     2,610,242
             
Dividends Paid   $ 75,187   $ 75,471
             
Dividends Per Share   $ 0.03   $ 0.03

See notes to consolidated financial statements.

2



Investors Title Company and Subsidiaries
Consolidated Statements of Stockholders’ Equity
For the Three Months Ended March 31, 2004 and For the Year Ended December 31, 2003
(Unaudited)             (Audited)


Common Stock
  Retained   Accumulated
Other Comprehensive
Income (Net
Unrealized Gain 		  Total
Stockholders’ 		 
Shares   Amount   Earnings   on Investments)   Equity  
Balance,                        
     January 1, 2003       2,515,804   $ 1   $ 49,613,044   $ 3,055,139   $ 52,668,184  
     Net income               10,965,014         10,965,014  
     Dividends ($.12 per share)               (300,411 )       (300,411 )
     Shares of common stock repurchased       (41,175 )       (986,479 )       (986,479 )
     Compensation expense related to stock options       2,144         51,224         51,224  
     Stock options exercised       27,150         414,535         414,535  
     Net unrealized gain on investments                   376,679     376,679  
Balance,    
     December 31, 2003       2,503,923     1     59,756,927     3,431,818     63,188,746  
     Net income               2,221,604         2,221,604  
     Dividends ($.03 per share)               (75,187 )       (75,187 )
     Shares of common stock repurchased       (5,823 )       (197,150 )       (197,150 )
     Compensation expense related to stock options       370         12,281         12,281  
     Stock options exercised       7,345         122,814         122,814  
     Net unrealized gain on investments                   78,015     78,015  
Balance,    
     March 31, 2004       2,505,815   $ 1   $ 61,841,289   $ 3,509,833   $ 65,351,123  
     
 

See notes to consolidated financial statements.

3



Investors Title Company and Subsidiaries
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2004 and 2003
(Unaudited)


2004
 
2003
 
Operating Activities:            
Net income     $ 2,221,604   $ 2,608,561  
  Adjustments to reconcile net income to net cash    
     provided by operating activities:    
        Depreciation       229,816     198,341  
        Amortization, net       9,500     5,867  
        Issuance of common stock in payment of bonuses and fees       12,281     5,014  
        Provision (benefit) for losses on premiums receivable       (110,000 )   75,000  
        Net loss on disposals of property       —     2,128  
        Net realized gain on sales of investments       (3,431 )   (23,047 )
        Provision for deferred income taxes       319,000     223,000  
  Changes in assets and liabilities:    
        Decrease in receivables and other assets       863,963     49,099  
        Decrease in accounts payable and accrued liabilities       (2,293,743 )   (2,157,921 )
        Decrease in commissions and reinsurance payables       (335,292 )   (102,169 )
        Increase (decrease) in premium taxes payable       (226,157 )   144,558  
        Increase in current income taxes payable       496,402     109,878  
        Provision for claims       1,844,379     2,083,038  
        Payments of claims, net of recoveries       (1,375,379 )   (1,638,038 )
    Net cash provided by operating activities       1,652,943     1,583,309  
     
Investing Activities:    
  Purchases of available-for-sale securities       (16,365,855 )   (2,317,518 )
  Purchases of held-to-maturity securities       (1,631 )   (3,035 )
  Purchases of other securities       (211,402 )   (486,000 )
  Proceeds from sales of available-for-sale securities       14,617,475     2,928,643  
  Proceeds from sales of held-to-maturity securities       188,000     205,000  
  Proceeds from other securities       —     5,246  
  Purchases of property       (94,322 )   (190,310 )
  Proceeds from sales of property       —     185  
    Net cash provided by (used in) investing activities       (1,867,735 )   142,211  
     
Financing Activities: