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 ~~September~~June 30, ~~2015~~2016



[ ]	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 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes X No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	Accelerated filer	X	Non-accelerated filer	Smaller reporting company
			(do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No X

As of ~~October 15, 2015~~July 18, 2016, there were ~~1,953,217~~1,901,946 common shares of the registrant outstanding.

INVESTORS TITLE COMPANY

AND SUBSIDIARIES

INDEX



PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements:

	Consolidated Balance Sheets as of ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014~~2015	1

	Consolidated Statements of Income For the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2015~~2016 and ~~2014~~2015	2

	Consolidated Statements of Comprehensive Income For the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2015~~2016 and ~~2014~~2015	3

	Consolidated Statements of Stockholders’ Equity For the~~Nine~~ Six Months Ended ~~September~~June 30, ~~2015~~2016 and ~~2014~~2015	4

	Consolidated Statements of Cash Flows For the~~Nine~~ Six Months Ended ~~September~~June 30, ~~2015~~2016 and ~~2014~~2015	5

	Notes to Consolidated Financial Statements	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2324

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3435

Item 4.	Controls and Procedures	3435

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	3536

Item 1a.	Risk Factors	3536

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35

~~Item 5.~~	~~Other Information~~	36

Item 6.	Exhibits	37


SIGNATURE		38

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Investors Title Company and Subsidiaries

Consolidated Balance Sheets

As of ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014~~2015

(Unaudited)


	September 30, 2015		December 31, 2014		June 30, 2016		December 31, 2015
Assets:
Investments in securities:
Fixed maturities, available-for-sale, at fair value (amortized cost: 2015: $94,114,403; 2014: $104,421,050)	$	98,034,042	$	109,048,290
Equity securities, available-for-sale, at fair value (cost: 2015: $24,247,215; 2014: $24,128,753)	35,135,885		39,254,981
Fixed maturities, available-for-sale, at fair value (amortized cost: 2016: $106,764,208; 2015: $102,015,826)					$	113,672,233	$	106,066,384
Equity securities, available-for-sale, at fair value (cost: 2016: $23,998,522; 2015: $23,855,873)					38,961,905		37,513,464
Short-term investments	13,884,266		2,576,993		2,665,302		6,865,406
Other investments	10,069,708		8,530,929		9,240,525		10,106,828
Total investments	157,123,901		159,411,193		164,539,965		160,552,082

Cash and cash equivalents	19,290,813		15,826,515		22,619,643		21,790,068
Premium and fees receivable	9,067,775		8,544,183		8,027,953		8,392,697
Accrued interest and dividends	1,286,710		1,063,837		1,067,546		1,004,126
Prepaid expenses and other assets	8,599,846		7,732,677		7,709,195		12,634,105
Property, net	7,176,557		5,460,805		7,827,159		7,148,951
Current income taxes recoverable					1,767,406		—
Total Assets	$	202,545,602	$	198,039,210	$	213,558,867	$	211,522,029

Liabilities and Stockholders’ Equity
Liabilities:
Reserves for claims	$	37,897,000	$	36,677,000	$	37,205,000	$	37,788,000
Accounts payable and accrued liabilities	19,441,453		18,290,819		18,393,997		25,043,588
Current income taxes payable	248,679		92,192		—		210,355
Deferred income taxes, net	5,635,321		5,415,493		9,772,206		5,703,006
Total liabilities	63,222,453		60,475,504		65,371,203		68,744,949

Commitments and Contingencies	—		—		—		—

Stockholders’ Equity:
Preferred stock (1,000,000 authorized shares; no shares issued)	—		—		—		—
Common stock - no par value (10,000,000 authorized shares; 1,953,418 and 2,023,270 shares issued and outstanding 2015 and 2014, respectively, excluding 291,676 shares for 2015 and 2014 of common stock held by the Company's subsidiary)	1		1
Common stock – no par value (10,000,000 authorized shares; 1,916,216 and 1,949,797 shares issued and outstanding 2016 and 2015, respectively, excluding 291,676 shares for 2016 and 2015 of common stock held by the Company's subsidiary)					1		1
Retained earnings	129,585,111		124,707,196		133,878,480		131,186,866
Accumulated other comprehensive income	9,606,451		12,856,509		14,219,544		11,483,015
Total stockholders’ equity attributable to the Company	139,191,563		137,563,706		148,098,025		142,669,882
Noncontrolling interests	131,586		—		89,639		107,198
Total stockholders' equity	139,323,149		137,563,706		148,187,664		142,777,080
Total Liabilities and Stockholders’ Equity	$	202,545,602	$	198,039,210	$	213,558,867	$	211,522,029

See notes to the Consolidated Financial Statements.

Investors Title Company and Subsidiaries

Consolidated Statements of Income

For the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2015~~2016 and ~~2014~~2015

(Unaudited)


	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended June 30,					Six Months Ended June 30,
	2015			2014		2015			2014			2016			2015		2016		2015
Revenues:
Net premiums written	$	30,945,532		$	26,356,835	$	86,372,154		$	81,115,940		$	29,790,232		$	30,464,581	$	51,299,229	$	55,426,622
Investment income - interest and dividends	1,117,529			1,064,995		3,427,055			3,130,846
Investment income – interest and dividends												1,167,005			1,131,487		2,318,016		2,309,526
Net realized (loss) gain on investments	(338,631		)	8,689		601,336			592,908			(14,828		)	925,164		135,002		939,967
Other	2,816,828			2,077,711		7,924,329			6,344,163			2,885,302			2,960,575		4,937,486		5,107,501
Total Revenues	34,541,258			29,508,230		98,324,874			91,183,857			33,827,711			35,481,807		58,689,733		63,783,616

Operating Expenses:
Commissions to agents	16,898,323			14,440,264		48,393,553			48,242,923			15,674,346			16,898,691		27,207,228		31,495,230
Provision for claims	703,979			1,507,814		3,621,401			4,177,478			647,912			2,130,810		663,871		2,917,422
Salaries, employee benefits and payroll taxes	6,957,874			6,609,425		21,101,955			19,250,116			7,173,198			6,866,632		14,645,149		14,144,081
Office occupancy and operations	1,342,288			1,257,009		4,089,806			3,683,980			1,535,902			1,443,297		3,029,762		2,747,518
Business development	568,189			552,215		1,633,358			1,581,872			606,258			578,194		1,086,648		1,065,169
Filing fees, franchise and local taxes	134,880			233,079		572,621			648,022			267,103			221,098		497,157		437,741
Premium and retaliatory taxes	573,336			491,927		1,684,674			1,332,492			574,249			634,747		886,080		1,111,338
Professional and contract labor fees	661,879			621,305		1,926,469			1,976,272			537,446			680,483		1,076,099		1,264,590
Other	264,012			196,702		708,918			656,653			269,250			241,358		472,231		444,906
Total Operating Expenses	28,104,760			25,909,740		83,732,755			81,549,808			27,285,664			29,695,310		49,564,225		55,627,995

Income before Income Taxes	6,436,498			3,598,490		14,592,119			9,634,049			6,542,047			5,786,497		9,125,508		8,155,621

Provision for Income Taxes	1,941,000			1,004,000		4,250,000			2,656,000			2,012,000			1,666,000		2,791,000		2,309,000

Net Income	4,495,498			2,594,490		10,342,119			6,978,049			4,530,047			4,120,497		6,334,508		5,846,621

Net Income Attributable to Noncontrolling Interests	(4,536		)	—		(4,536		)	(23,523		)
Net (Gain) Loss Attributable to Noncontrolling Interests												(667		)	—		8,912		—

Net Income Attributable to the Company	$	4,490,962		$	2,594,490	$	10,337,583		$	6,954,526		$	4,529,380		$	4,120,497	$	6,343,420	$	5,846,621

Basic Earnings per Common Share	$	2.28		$	1.28	$	5.18		$	3.42		$	2.36		$	2.06	$	3.29	$	2.91

Weighted Average Shares Outstanding – Basic	1,967,923			2,028,818		1,995,120			2,033,637			1,923,213			2,004,698		1,928,766		2,008,718

Diluted Earnings per Common Share	$	2.28		$	1.28	$	5.17		$	3.41		$	2.35		$	2.05	$	3.28	$	2.90

Weighted Average Shares Outstanding – Diluted	1,972,233			2,032,644		2,000,043			2,038,875			1,928,625			2,009,495		1,935,325		2,013,878

Cash Dividends Paid per Common Share	$	0.08		$	0.08	$	0.24		$	0.24		$	0.16		$	0.08	$	0.32	$	0.16

See notes to the Consolidated Financial Statements.

Investors Title Company and Subsidiaries

Consolidated Statements of Comprehensive Income

For the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2015~~2016 and ~~2014~~2015

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014			2016			2015			2016			2015
Net income	$	4,495,498		$	2,594,490		$	10,342,119		$	6,978,049		$	4,530,047		$	4,120,497		$	6,334,508		$	5,846,621
Other comprehensive (loss) income, before tax:
Other comprehensive income (loss), before tax:
Amortization related to prior year service cost	1,098			554			3,293			1,663			—			1,098			—			2,195
Amortization of unrecognized loss	878			—			2,635			—			2,235			878			4,470			1,757
Unrealized (losses) gains on investments arising during the period	(2,359,495		)	(960,948		)	(4,223,992		)	2,023,167
Unrealized gains (losses) on investments arising during the period													3,075,089			(2,152,262		)	4,287,614			(1,864,497		)
Reclassification adjustment for sales of securities included in net income	(458,058		)	(6,534		)	(1,390,070		)	(840,170		)	(53,513		)	(923,209		)	(239,592		)	(932,012		)
Reclassification adjustment for write-downs of securities included in net income	657,755			—			668,904			—			72,444			11,149			115,238			11,149
Other comprehensive (loss) income, before tax	(2,157,822		)	(966,928		)	(4,939,230		)	1,184,660
Other comprehensive income (loss), before tax													3,096,255			(3,062,346		)	4,167,730			(2,781,408		)
Income tax expense related to postretirement health benefits	672			188			2,016			565			760			672			1,520			1,344
Income tax (benefit) expense related to unrealized (losses) gains on investments arising during the year	(809,994		)	(332,034		)	(1,446,083		)	699,001
Income tax expense (benefit) related to unrealized gains (losses) on investments arising during the period													1,053,982			(739,627		)	1,473,568			(636,089		)
Income tax benefit related to reclassification adjustment for sales of securities included in net income	(156,447		)	(2,328		)	(474,198		)	(288,078		)	(18,372		)	(314,742		)	(83,232		)	(317,751		)
Income tax expense related to reclassification adjustment for write-downs of securities included in net income	225,293			—			229,093			—			24,677			3,800			39,345			3,800
Net income tax (benefit) expense on other comprehensive (loss) income	(740,476		)	(334,174		)	(1,689,172		)	411,488
Other comprehensive (loss) income	(1,417,346		)	(632,754		)	(3,250,058		)	773,172
Net income tax expense (benefit) on other comprehensive income (loss)													1,061,047			(1,049,897		)	1,431,201			(948,696		)
Other comprehensive income (loss)													2,035,208			(2,012,449		)	2,736,529			(1,832,712		)
Comprehensive Income	$	3,078,152		$	1,961,736		$	7,092,061		$	7,751,221		$	6,565,255		$	2,108,048		$	9,071,037		$	4,013,909
Comprehensive income attributable to noncontrolling interests	(4,536		)	—			(4,536		)	(23,523		)
Comprehensive (income) loss attributable to noncontrolling interests													(667		)	—			8,912			—
Comprehensive Income Attributable to the Company	$	3,073,616		$	1,961,736		$	7,087,525		$	7,727,698		$	6,564,588		$	2,108,048		$	9,079,949		$	4,013,909

See notes to the Consolidated Financial Statements.

Investors Title Company and Subsidiaries

Consolidated Statements of Stockholders’ Equity

For the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2015~~2016 and ~~2014~~2015

(Unaudited)


	Common Stock				Retained Earnings				Accumulated Other Comprehensive Income			Noncontrolling Interests			Total Stockholders’ Equity			Common Stock				Retained Earnings			Accumulated Other Comprehensive Income			Noncontrolling Interests			Total Stockholders’ Equity
	Shares		Amount					Shares						Amount
Balance, January 1, 2014	2,037,135		$	1				$		116,714,749		$	11,347,404				$	—		$	128,062,154
Balance, January 1, 2015																		2,023,270		$	1	$	124,707,196		$	12,856,509		$	—		$	137,563,706
Net income attributable to the Company					6,954,526										6,954,526							5,846,621									5,846,621
Dividends ($0.24 per share)					(488,127		)								(488,127		)
Dividends ($0.16 per share)																						(321,117		)							(321,117		)
Shares of common stock repurchased and retired																		(24,432	)			(1,747,322		)							(1,747,322		)
Stock options and stock appreciation rights exercised																		2,192				54,988									54,988
Share-based compensation expense																						67,654									67,654
Amortization related to postretirement health benefits																									2,608						2,608
Net unrealized loss on investments																									(1,835,320		)				(1,835,320		)
Income tax benefit from share-based compensation																						26,875									26,875
Balance, June 30, 2015																		2,001,030		$	1	$	128,634,895		$	11,023,797		$	—		$	139,658,693

Balance, January 1, 2016																		1,949,797		$	1	$	131,186,866		$	11,483,015		$	107,198		$	142,777,080
Net income attributable to the Company																						6,343,420									6,343,420
Dividends ($0.32 per share)																						(616,677		)							(616,677		)
Shares of common stock repurchased and retired	(9,824	)			(652,657		)								(652,657		)	(34,870	)			(3,134,126		)							(3,134,126		)
Stock options and stock appreciation rights exercised	1,507				27,100										27,100			1,289				(200		)							(200		)
Share-based compensation expense					88,291										88,291							67,401									67,401
Amortization related to postretirement health benefits									1,098						1,098										2,950						2,950
Net unrealized gain on investments									772,074						772,074										2,733,579						2,733,579
Purchase of redeemable noncontrolling interest of subsidiary					(114,320		)								(114,320		)
Purchase of noncontrolling interest of subsidiary																												(8,647		)	(8,647		)
Additional paid-in capital from purchase of noncontrolling interest of subsidiary																						(496		)							(496		)
Net loss attributable to noncontrolling interests																												(8,912		)	(8,912		)
Income tax benefit from share-based compensation					15,999										15,999							32,292									32,292
Balance, September 30, 2014	2,028,818		$	1	$	122,545,561			$	12,120,576		$	—		$	134,666,138

Balance, January 1, 2015	2,023,270		$	1	$	124,707,196			$	12,856,509		$	—		$	137,563,706
Net income attributable to the Company					10,337,583										10,337,583
Dividends ($0.24 per share)					(477,392		)								(477,392		)
Shares of common stock repurchased and retired	(72,044	)			(5,166,846		)								(5,166,846		)
Stock options and stock appreciation rights exercised	2,192				54,988										54,988
Share-based compensation expense					102,707										102,707
Amortization related to postretirement health benefits									3,912						3,912
Net unrealized loss on investments									(3,253,970		)				(3,253,970		)
Net effect of changes in ownership												127,050			127,050
Net income attributable to noncontrolling interests												4,536			4,536
Income tax benefit from share-based compensation					26,875										26,875
Balance, September 30, 2015	1,953,418		$	1	$	129,585,111			$	9,606,451		$	131,586		$	139,323,149
Balance, June 30, 2016																		1,916,216		$	1	$	133,878,480		$	14,219,544		$	89,639		$	148,187,664

See notes to the Consolidated Financial Statements.

Investors Title Company and Subsidiaries

Consolidated Statements of Cash Flows

For the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2015~~2016 and ~~2014~~2015

(Unaudited)


	Nine Months Ended September 30,						Six Months Ended June 30,
	2015			2014			2016			2015
Operating Activities
Net income	$	10,342,119		$	6,978,049		$	6,334,508		$	5,846,621
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	654,838			583,979			701,215			449,132
Amortization, net	542,841			458,635			408,010			364,520
Amortization related to postretirement benefits obligation	5,928			1,663			4,470			3,952
Share-based compensation expense related to stock options	102,707			88,291			67,401			67,654
Net (gain) loss on the disposals of property	(30,374		)	6,487
Net loss (gain) on the disposals of property							9,314			(18,114		)
Net realized gain on investments	(601,336		)	(592,908		)	(135,002		)	(939,967		)
Net earnings from other investments	(1,774,927		)	(990,657		)	(463,829		)	(1,209,585		)
Provision for claims	3,621,401			4,177,478			663,871			2,917,422
Provision for deferred income taxes	1,909,000			1,468,000			2,638,000			625,000
Changes in assets and liabilities:
(Increase) decrease in receivables	(457,484		)	261,128
Increase in other assets	(1,110,322		)	(1,407,762		)
Decrease (increase) in receivables							364,744			(836,421		)
Decrease (increase) in other assets							4,826,648			(202,641		)
Increase in current income taxes recoverable	—			(1,257,252		)	(1,767,406		)	—
Increase (decrease) in accounts payable and accrued liabilities	1,150,634			(1,640,499		)
Increase in current income taxes payable	156,487			—
Decrease in accounts payable and accrued liabilities							(6,649,591		)	(1,390,662		)
(Decrease) increase in current income taxes payable							(210,355		)	331,716
Payments of claims, net of recoveries	(2,401,401		)	(3,285,478		)	(1,246,871		)	(1,469,422		)
Net cash provided by operating activities	12,110,111			4,849,154			5,545,127			4,539,205

Investing Activities
Purchases of available-for-sale securities	(5,794,149		)	(13,572,217		)	(11,310,308		)	(3,471,184		)
Purchases of short-term investments	(11,642,357		)	(2,923,269		)	(361,749		)	(6,307,977		)
Purchases of other investments	(3,164,415		)	(1,036,110		)	(922,855		)	(858,464		)
Purchase of noncontrolling interest of subsidiary							(9,143		)	—
Proceeds from sales and maturities of available-for-sale securities	16,212,924			10,321,679			6,163,762			9,655,760
Proceeds from sales and maturities of short-term investments	335,084			4,694,893			4,561,853			296,830
Proceeds from sales and distributions of other investments	3,167,494			1,050,427			2,259,687			2,201,964
Proceeds from sales of other assets	113,238			26,233			10,649			19,104
Purchase of subsidiary	(72,600		)	—
Purchase of redeemable noncontrolling interest of subsidiary	—			(515,275		)
Purchases of property	(2,313,052		)	(1,649,412		)	(1,419,392		)	(1,144,333		)
Proceeds from the sale of property	74,395			15,400			30,655			52,413
Net cash used in investing activities	(3,083,438		)	(3,587,651		)
Net cash (used in) provided by investing activities							(996,841		)	444,113

Financing Activities
Repurchases of common stock	(5,166,846		)	(652,657		)	(3,134,126		)	(1,747,322		)
Exercises of stock options and SARs	54,988			27,100			(200		)	54,988
Distributions to noncontrolling interest	—			(168,057		)
Excess tax benefits related to exercise of stock options and SARs	26,875			15,999			32,292			26,875
Dividends paid	(477,392		)	(488,127		)	(616,677		)	(321,117		)
Net cash used in financing activities	(5,562,375		)	(1,265,742		)	(3,718,711		)	(1,986,576		)

Net Increase (Decrease) in Cash and Cash Equivalents	3,464,298			(4,239		)
Net Increase in Cash and Cash Equivalents							829,575			2,996,742
Cash and Cash Equivalents, Beginning of Period	15,826,515			23,626,761			21,790,068			15,826,515
Cash and Cash Equivalents, End of Period	$	19,290,813		$	23,622,522		$	22,619,643		$	18,823,257


Consolidated Statements of Cash Flows, continued
	Nine Months Ended September 30,					Six Months Ended June 30,
	2015		2014			2016			2015
Supplemental Disclosures:
Cash Paid During the Year for:
Income tax payments, net	$	2,727,700	$	2,443,000		$	2,099,000		$	1,329,000
Non Cash Investing and Financing Activities
Non cash net unrealized loss (gain) on investments, net of deferred tax benefit (provision) of $1,691,188 and $(410,923) for 2015 and 2014, respectively	$	3,253,970	$	(772,074	)
Non Cash Investing and Financing Activities:
Non cash net unrealized (gain) loss on investments, net of deferred tax (provision) benefit of $(1,429,681) and $950,040 for 2016 and 2015, respectively						$	(2,733,579	)	$	1,835,320

See notes to the Consolidated Financial Statements.

INVESTORS TITLE COMPANY

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

~~September~~June 30, ~~2015~~2016

(Unaudited)

Note 1 -– Basis of Presentation and Significant Accounting Policies

Reference should be made to the “Notes to Consolidated Financial Statements” appearing in the Annual Report on Form 10-K for the year ended December 31, ~~2014~~2015 of Investors Title Company (the “Company”) for a complete description of the Company’s significant accounting policies.

Principles of Consolidation – The accompanying unaudited Consolidated Financial Statements include the accounts and operations of Investors Title Company and its subsidiaries, and have been prepared in accordance with generally accepted accounting principles for interim financial information, with the instructions to Form 10-Q and with Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted. Earnings attributable to noncontrolling interests in majority-owned title insurance agencies ~~including redeemable noncontrolling interests,~~ are recorded in the Consolidated Statements of Income. Noncontrolling interests representing the portion of equity not related to the Company's ownership interests are recorded in separate sections of the Consolidated Balance Sheets. All intercompany balances and transactions have been eliminated in consolidation.

In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position, results of operations and cash flows of the Company in the accompanying unaudited Consolidated Financial Statements have been included. All such adjustments are of a normal recurring nature. Operating results for the quarter ended ~~September~~June 30, ~~2015~~2016 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2015~~2016.

Allowance for Doubtful Accounts – Company management continually evaluates the collectability of receivables and provides an allowance for doubtful accounts equal to estimated losses expected to be incurred in the collection of premiums and fees receivable.

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 concluded that there were no material subsequent events requiring adjustment to or disclosure in its Consolidated Financial Statements.

Recently Issued Accounting Standards – In ~~February 2015,~~June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326). ASU 2016-13 is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The update broadens the information that an entity must consider in developing its expected credit loss estimates, and is meant to better reflect an entity’s current estimate of all expected credit losses. In addition, this update amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The update is effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted as of fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact that the recently issued accounting standard will have on the Company's financial position and results of operations, but does not expect it to have a material impact.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718). ASU 2016-09 updated guidance to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The update is effective for annual periods beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact that the recently issued accounting standard will have on the Company's financial position and results of operations, but does not expect it to have a material impact.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 updated guidance to improve financial reporting for leasing transactions. The core principle of the guidance is that lessees will be required to recognize assets and liabilities on the balance sheet for all leases with terms of more than twelve months. A lessee would recognize a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. The accounting applied by a lessor is largely unchanged from current GAAP, with some targeted improvements. Disclosures will be required by lessees and lessors to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. In transition, both lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The update is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption was permitted for all entities upon issuance. The Company is currently evaluating whether or not the recently issued accounting standard will have a material impact on the Company's financial position or results of operations.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 updated guidance to enhance the reporting model for financial instruments. Among the main principles of the guidance applicable to the Company are provisions to: require equity investments, except those accounted for under the equity method of accounting or those that result in consolidation of the investee, to be measured at fair value with changes in fair value recognized in net income; simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, noting that when a qualitative assessment indicates that impairment exists that an entity is required to measure the investment at fair value; eliminate the requirement to disclose methods and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost; require entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; require separate presentation of financial assets and financial liabilities by measuring category and form of financial asset on the balance sheet or accompanying notes to the financial statements; and clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted for the provision requiring entities to recognize the fair value change from instrument-specific credit risk in other comprehensive income for financial liabilities measured using the fair value option in Accounting Standards Codification ("ASC") 825, and can be early adopted for financial statements of annual or interim periods that have not yet been issued or made available for issuance. The Company will be required to apply the update by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, with the amendments related to equity securities without readily determinable fair values being applied prospectively to equity investments that exist as of the date of adoption. The guidance is expected to have a material impact on the Company’s financial condition and results of operations once effective, primarily resulting from fluctuations in security exchanges or markets.

In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. ASU 2015-02 updated guidance to change the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. All legal entities are subject to reevaluation under the revised consolidation model. Specifically, the amendments: modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities ("VIEs") or voting interest entities; eliminate the presumption that a general partner should consolidate a limited partnership; affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships; and provide a scope exception from consolidation guidance for reporting entities that are required to comply with or operate in accordance with certain requirements similar to those for registered money market funds. For public entities, this update ~~becomes~~was effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. ~~Early adoption is permitted.~~ The Company ~~is currently evaluating the~~adopted this update on January 1, 2016 with no impact ~~that the recently issued accounting standard will have on~~to the Company's financial position ~~and~~or results of ~~operations, but does~~operations. Certain investments previously considered voting interest entities are considered VIEs under this update. However, since the Company is not ~~expect it~~considered the primary beneficiary, none of the investments are consolidated. Refer to ~~have a material impact.~~Note 6 for additional disclosure.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 updated guidance to improve the comparability of revenue recognition practices for entities that either enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards such as insurance contracts or lease standards. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For public entities, this update originally became effective for interim and annual reporting periods beginning after December 15, 2016. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. ASU 2015-14 updated guidance to defer the effective date of the standard by one year. Early adoption is not permitted, although public entities are permitted to elect to adopt the amendments on the original effective date. The Company is currently evaluating the impact that the recently issued accounting standard will have on the Company's financial position and results of operations, but does not expect it to have a material impact.

Note 2 -– Reserves for Claims

Transactions in the reserves for claims for the ~~nine months~~six-month period ended ~~September~~June 30, ~~2015~~2016 and the year ended December 31, ~~2014~~2015 are summarized as follows:


	September 30, 2015			December 31, 2014			June 30, 2016			December 31, 2015
Balance, beginning of period	$	36,677,000		$	35,360,000		$	37,788,000		$	36,677,000
Provision, charged to operations	3,621,401			5,229,716			663,871			4,478,494
Payments of claims, net of recoveries	(2,401,401		)	(3,912,716		)	(1,246,871		)	(3,367,494		)
Ending balance	$	37,897,000		$	36,677,000		$	37,205,000		$	37,788,000

The total reserve for all reported and unreported losses the Company incurred through ~~September~~June 30, ~~2015~~2016 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 claims that have been incurred but not yet reported (“IBNR”). 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 title insurance policies issued through ~~September~~June 30, ~~2015~~2016. Management 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 IBNR, follows:


	September 30, 2015		%	December 31, 2014		%	June 30, 2016		%	December 31, 2015		%
Known title claims	$	5,276,778	13.9	$	5,364,645	14.6	$	4,889,191	13.1	$	5,066,469	13.4
IBNR	32,620,222		86.1	31,312,355		85.4	32,315,809		86.9	32,721,531		86.6
Total loss reserves	$	37,897,000	100.0	$	36,677,000	100.0	$	37,205,000	100.0	$	37,788,000	100.0

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 Company carries assets at the lower of cost or estimated realizable value, net of any indebtedness on the property.

Note 3 -– Earnings Per Common Share and Share Awards

Basic earnings per common share is computed by dividing net income attributable to the Company by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per common share is computed by dividing net income attributable to the Company 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 services that the Company has not yet recognized; and (c) the amount of estimated tax benefits that would be recorded in retained earnings, if any, are assumed to be used to repurchase shares in the current period. The number of incremental dilutive potential common shares, calculated using the treasury stock method, was ~~4,310~~5,412 and ~~3,826~~4,797 for the ~~three months~~three-month periods ended ~~September~~June 30, ~~2015~~2016 and ~~2014,~~2015, respectively and ~~4,923~~6,559 and ~~5,238~~5,160 for the ~~nine months~~six-month periods ended ~~September~~June 30, ~~2015~~2016 and ~~2014~~,2015, respectively.

The following table sets forth the computation of basic and diluted earnings per share for the ~~three~~three- and six-month periods ended ~~nine months endedSeptember~~June 30:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014		2016		2015		2016		2015
Net income attributable to the Company	$	4,490,962	$	2,594,490	$	10,337,583	$	6,954,526	$	4,529,380	$	4,120,497	$	6,343,420	$	5,846,621
Weighted average common shares outstanding – Basic	1,967,923		2,028,818		1,995,120		2,033,637		1,923,213		2,004,698		1,928,766		2,008,718
Incremental shares outstanding assuming the exercise of dilutive stock options and SARs (share-settled)	4,310		3,826		4,923		5,238		5,412		4,797		6,559		5,160
Weighted average common shares outstanding – Diluted	1,972,233		2,032,644		2,000,043		2,038,875		1,928,625		2,009,495		1,935,325		2,013,878
Basic earnings per common share	$	2.28	$	1.28	$	5.18	$	3.42	$	2.36	$	2.06	$	3.29	$	2.91
Diluted earnings per common share	$	2.28	$	1.28	$	5.17	$	3.41	$	2.35	$	2.05	$	3.28	$	2.90

There were ~~7,500~~0 and ~~3,000~~4,500 potential shares excluded from the computation of diluted earnings per share for the ~~three months~~three-month periods ended ~~September~~June 30, ~~2015~~2016 and ~~2014,~~2015, respectively. There were 4,500 ~~and 0~~ potential shares excluded from the computation of diluted earnings per share for both the ~~nine months~~six-month periods ended ~~September~~June 30, ~~2015~~2016 and ~~2014,~~2015, respectively. ~~These potential~~Potential shares that were ~~anti-dilutive because~~excluded from the ~~underlying share awards~~computations had ~~strike~~exercise prices that ~~exceeded~~were greater than the ~~fair market value.~~stock price and were therefore considered antidilutive.

The Company has adopted employee stock award 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. There is currently one active plan from which the Company may grant share-based awards. The awards eligible to be granted under the active plan are limited to SARs, and ~~options (which have predominantly been incentive~~the maximum aggregate number of shares of common stock ~~options) awarded~~of the Company available pursuant to the plan for the grant of SARs is 250,000 shares.

As of June 30, 2016, the only outstanding awards under the plans ~~thus far generally expire~~were SARs expiring in five to ~~ten~~seven years from the date of grant, all of which vest and are exercisable ~~and vest: immediately;~~ within one year~~; or at~~ ~~10%~~ to ~~20%~~ ~~per year beginning on~~ of the date of grant. All SARs issued to date have been share-settled only.

A summary of share-based award transactions for all share-based award plans follows:

Number
Of Shares

Weighted
Average
Exercise Price

Average Remaining
Contractual
Term (Years)

Aggregate
Intrinsic
Value
Outstanding as of January 1, 2014 19,000
$ 45.74
3.43 $ 669,610
SARs granted 4,500
68.70

SARs exercised (1,500 ) 49.04

Options exercised (1,000 ) 27.21

Options/SARs canceled/forfeited/expired —
—

Outstanding as of December 31, 2014 21,000
$ 51.30
3.64 $ 453,510
SARs granted 4,500
73.00

SARs exercised (2,000 ) 47.88

Options exercised (1,500 ) 36.79

Options/SARs canceled/forfeited/expired —
—

Outstanding as of September 30, 2015 22,000
$ 57.04
4.18 $ 355,455
Exercisable as of September 30, 2015 19,750
$ 55.23
3.90 $ 355,005
Unvested as of September 30, 2015 2,250
$ 73.00
6.64 $ 450



	Number Of Shares		Weighted Average Exercise Price		Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding as of January 1, 2015	21,000		$	51.30	3.64	$	453,510
SARs granted	4,500		73.00
SARs exercised	(2,000	)	47.88
Options exercised	(1,500	)	36.79
Outstanding as of December 31, 2015	22,000		$	57.04	3.93	$	945,055
SARs granted	4,500		93.87
SARs exercised	(2,000	)	32.00
Outstanding as of June 30, 2016	24,500		$	65.85	4.35	$	720,265

Exercisable as of June 30, 2016	21,125		$	61.38	3.95	$	715,607

Unvested as of June 30, 2016	3,375		$	93.87	6.88	$	4,658

During the second quarters of both ~~2015~~2016 and ~~2014,~~2015, the Company issued a total of 4,500 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. The fair value of each award is estimated on the date of grant using the Black-Scholes option valuation model with the weighted average assumptions noted in the table shown below. Expected volatilities are based on both the implied and historical volatility of the Company's stock. The Company uses historical data to project SAR exercises and pre-exercise forfeitures within the valuation model. The expected term of awards represents the period of time that SARs granted are expected to be outstanding. The interest rate assumed for the expected life of the award is based on the U.S. Treasury yield curve at the time of the grant. The weighted average fair values for the SARs issued during 2016 and 2015 were $28.75 and ~~2014 were~~ $31.16, ~~and $28.98,~~ respectively.

The weighted average fair values for SARs issued during ~~2015~~2016 and ~~2014~~2015 were estimated using the weighted average assumptions shown in the table below:


	2015		2014		2016		2015
Expected life in years	7.0		6.9		7.0		7.0
Volatility	40.7	%	39.9	%	28.9	%	40.7	%
Interest rate	2.0	%	2.1	%	1.7	%	2.0	%
Yield rate	0.4	%	0.4	%	0.7	%	0.4	%

There was approximately $~~103,000~~67,000 and $~~88,000~~68,000 of compensation expense relating to SARs or options vesting on or before ~~September~~June 30, ~~2015~~2016 and ~~2014~~2015, respectively, included in salaries, employee benefits and payroll taxes in the Consolidated Statements of Income. As of ~~September~~June 30, ~~2015,~~2016, there was ~~approximately $70,000~~$97,000 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 period of approximately 5 months based on weighted average durations.~~

There have been no stock options or SARs granted where the exercise price was less than the market price on the date of grant.

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~~June 30, ~~2015~~2016 and ~~2014~~2015:


Three Months Ended September 30, 2015	Title Insurance			All Other			Intersegment Eliminations			Total
Three Months Ended June 30, 2016													Title Insurance			All Other		Intersegment Eliminations			Total
Insurance and other services revenues	$	32,583,093		$	1,684,088		$	(504,821	)	$	33,762,360		$	31,378,257		$	1,898,899	$	(601,622	)	$	32,675,534
Investment income	1,000,839			140,024			(23,334		)	1,117,529			1,072,189			141,484		(46,668		)	1,167,005
Net realized loss on investments	(309,874		)	(28,757		)	—			(338,631		)
Net realized (loss) gain on investments													(19,806		)	4,978		—			(14,828		)
Total revenues	$	33,274,058		$	1,795,355		$	(528,155	)	$	34,541,258		$	32,430,640		$	2,045,361	$	(648,290	)	$	33,827,711
Operating expenses	27,001,636			1,590,524			(487,400		)	28,104,760			26,182,798			1,687,067		(584,201		)	27,285,664
Income before income taxes	$	6,272,422		$	204,831		$	(40,755	)	$	6,436,498		$	6,247,842		$	358,294	$	(64,089	)	$	6,542,047
Total assets	$	160,754,846		$	41,790,756		$	—		$	202,545,602		$	167,239,552		$	46,319,315	$	—		$	213,558,867

Three Months Ended September 30, 2014 Title
Insurance All
Other Intersegment
Eliminations Total
Insurance and other services revenues $ 27,381,759
$ 1,517,927
$ (465,140 ) $ 28,434,546
Investment income 956,894
131,435
(23,334 ) 1,064,995
Net realized gain on investments 5,781
2,908
—
8,689
Total revenues $ 28,344,434
$ 1,652,270
$ (488,474 ) $ 29,508,230
Operating expenses 24,940,774
1,416,685
(447,719 ) 25,909,740
Income before income taxes $ 3,403,660
$ 235,585
$ (40,755 ) $ 3,598,490
Total assets $ 152,813,417
$ 42,681,883
$ —
$ 195,495,300


Nine Months Ended September 30, 2015	Title Insurance		All Other			Intersegment Eliminations			Total
Three Months Ended June 30, 2015											Title Insurance		All Other		Intersegment Eliminations			Total
Insurance and other services revenues	$	90,824,523	$	4,803,604		$	(1,331,644	)	$	94,296,483	$	32,245,905	$	1,655,359	$	(476,108	)	$	33,425,156
Investment income	3,061,857		435,200			(70,002		)	3,427,055		1,010,243		144,578		(23,334		)	1,131,487
Net realized gain (loss) on investments	604,093		(2,757		)	—			601,336
Net realized gain on investments											899,588		25,576		—			925,164
Total revenues	$	94,490,473	$	5,236,047		$	(1,401,646	)	$	98,324,874	$	34,155,736	$	1,825,513	$	(499,442	)	$	35,481,807
Operating expenses	80,214,039		4,798,097			(1,279,381		)	83,732,755		28,614,932		1,539,065		(458,687		)	29,695,310
Income before income taxes	$	14,276,434	$	437,950		$	(122,265	)	$	14,592,119	$	5,540,804	$	286,448	$	(40,755	)	$	5,786,497
Total assets	$	160,754,846	$	41,790,756		$	—		$	202,545,602	$	156,308,663	$	43,890,892	$	—		$	200,199,555


Nine Months Ended September 30, 2014	Title Insurance		All Other		Intersegment Eliminations			Total
Six Months Ended June 30, 2016										Title Insurance		All Other		Intersegment Eliminations			Total
Insurance and other services revenues	$	84,257,427	$	4,418,659	$	(1,215,983	)	$	87,460,103	$	53,769,980	$	3,471,054	$	(1,004,319	)	$	56,236,715
Investment income	2,823,098		377,750		(70,002		)	3,130,846		2,126,975		284,377		(93,336		)	2,318,016
Net realized gain on investments	536,309		56,599		—			592,908		74,123		60,879		—			135,002
Total revenues	$	87,616,834	$	4,853,008	$	(1,285,985	)	$	91,183,857	$	55,971,078	$	3,816,310	$	(1,097,655	)	$	58,689,733
Operating expenses	78,256,239		4,457,289		(1,163,720		)	81,549,808		47,279,715		3,253,988		(969,478		)	49,564,225
Income before income taxes	$	9,360,595	$	395,719	$	(122,265	)	$	9,634,049	$	8,691,363	$	562,322	$	(128,177	)	$	9,125,508
Total assets	$	152,813,417	$	42,681,883	$	—		$	195,495,300	$	167,239,552	$	46,319,315	$	—		$	213,558,867



Six Months Ended June 30, 2015	Title Insurance		All Other		Intersegment Eliminations			Total
Insurance and other services revenues	$	58,241,430	$	3,119,516	$	(826,823	)	$	60,534,123
Investment income	2,061,018		295,176		(46,668		)	2,309,526
Net realized gain on investments	913,967		26,000		—			939,967
Total revenues	$	61,216,415	$	3,440,692	$	(873,491	)	$	63,783,616
Operating expenses	53,212,403		3,207,573		(791,981		)	55,627,995
Income before income taxes	$	8,004,012	$	233,119	$	(81,510	)	$	8,155,621
Total assets	$	156,308,663	$	43,890,892	$	—		$	200,199,555

Note 5 – Retirement Agreements and Other Postretirement Benefits

The Company’s subsidiary, Investors Title Insurance Company ("ITIC"), is a party to employment agreements with key executives that provide for the continuation of certain employee benefits and other payments due under the agreements upon retirement, estimated to total $~~7,731,000~~8,438,000 and $~~7,111,000~~7,818,000 as of ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014~~2015, 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~~June 30, ~~2015~~2016 and ~~2014~~2015:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014		2016		2015		2016		2015
Service cost – benefits earned during the year	$	4,187	$	3,666	$	12,561	$	11,000	$	2,545	$	4,187	$	5,090	$	8,374
Interest cost on the projected benefit obligation	7,693		7,618		23,079		22,854		8,781		7,693		17,562		15,386
Amortization of unrecognized prior service cost	1,098		554		3,293		1,663		—		1,098		—		2,195
Amortization of unrecognized losses	878		—		2,635		—		2,235		878		4,470		1,757
Net periodic benefits costs	$	13,856	$	11,838	$	41,568	$	35,517	$	13,561	$	13,856	$	27,122	$	27,712

Note 6 -– Investments and Estimated Fair Value ~~Measurement~~

Investments in Securities

The aggregate estimated fair value, gross unrealized holding gains, gross unrealized holding losses and cost or amortized cost for securities by major security type are as follows:



As of June 30, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Fixed maturities, available-for-sale, at fair value:
General obligations of U.S. states, territories and political subdivisions	$	33,490,433	$	1,456,384	$	—	$	34,946,817
Special revenue issuer obligations of U.S. states, territories and political subdivisions	56,437,628		4,490,430		678		60,927,380
Corporate debt securities	16,836,147		961,889		—		17,798,036
Total	$	106,764,208	$	6,908,703	$	678	$	113,672,233
Equity securities, available-for-sale, at fair value:
Common stocks	$	23,998,522	$	15,057,993	$	94,610	$	38,961,905
Total	$	23,998,522	$	15,057,993	$	94,610	$	38,961,905
Short-term investments:
Money market funds and certificates of deposit	$	2,665,302	$	—	$	—	$	2,665,302
Total	$	2,665,302	$	—	$	—	$	2,665,302



As of December 31, 2015	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Fixed maturities, available-for-sale, at fair value:
General obligations of U.S. states, territories and political subdivisions	$	31,883,439	$	987,595	$	11,734	$	32,859,300
Special revenue issuer obligations of U.S. states, territories and political subdivisions	52,202,815		2,604,152		26,127		54,780,840
Corporate debt securities	17,004,985		539,832		58,473		17,486,344
Auction rate securities	924,587		15,313		—		939,900
Total	$	102,015,826	$	4,146,892	$	96,334	$	106,066,384
Equity securities, available-for-sale, at fair value:
Common stocks and nonredeemable preferred stocks	$	23,855,873	$	13,785,968	$	128,377	$	37,513,464
Total	$	23,855,873	$	13,785,968	$	128,377	$	37,513,464
Short-term investments:
Money market funds and certificates of deposit	$	6,865,406	$	—	$	—	$	6,865,406
Total	$	6,865,406	$	—	$	—	$	6,865,406

The special revenue category for both periods presented includes approximately 50 individual bonds with revenue sources from a variety of municipal sectors.

The scheduled maturities of fixed maturity securities at June 30, 2016 were as follows:



	Available-for-Sale
	Amortized Cost		Fair Value
Due in one year or less	$	22,144,063	$	22,385,064
Due after one year through five years	35,145,286		37,191,882
Due five years through ten years	47,484,081		51,467,938
Due after ten years	1,990,778		2,627,349
Total	$	106,764,208	$	113,672,233

Realized gains and losses on investments for the six-month periods ended June 30 are summarized as follows:



	2016			2015
Gross realized gains from securities:
Special revenue issuer obligations of U.S. states, territories and political subdivisions	$	160		$	—
Corporate debt securities	20			999
Common stocks and nonredeemable preferred stocks	282,454			944,564
Auction rate securities	74,996			—
Total	$	357,630		$	945,563
Gross realized losses from securities:
General obligations of U.S. states, territories and political subdivisions	$	—		$	(12,319	)
Special revenue issuer obligations of U.S. states, territories and political subdivisions	(1,085		)	(398		)
Common stocks and nonredeemable preferred stocks	(116,953		)	(834		)
Other-than-temporary impairment of securities	(115,238		)	(11,149		)
Total	$	(233,276	)	$	(24,700	)
Net realized gain from securities	$	124,354		$	920,863
Net realized gain on other investments:
Gains on other investments	$	10,648		$	19,104
Total	$	10,648		$	19,104
Net realized gain on investments	$	135,002		$	939,967

Realized gains and losses are determined on the specific identification method.

The following table presents the gross unrealized losses on investment securities and the fair value of the securities, aggregated by investment category and length of time that individual securities have been in a continuous loss position at June 30, 2016 and December 31, 2015:



	Less than 12 Months					12 Months or Longer					Total
As of June 30, 2016	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
General obligations of U.S. states, territories and political subdivisions	$	—	$	—		$	—	$	—		$	—	$	—
Special revenue issuer obligations of U.S. states, territories and political subdivisions	884,083		(678		)	—		—			884,083		(678		)
Corporate debt securities	—		—			—		—			—		—
Total fixed income securities	$	884,083	$	(678	)	$	—	$	—		$	884,083	$	(678	)
Equity securities	$	1,138,863	$	(77,707	)	$	269,035	$	(16,903	)	$	1,407,898	$	(94,610	)
Total temporarily impaired securities	$	2,022,946	$	(78,385	)	$	269,035	$	(16,903	)	$	2,291,981	$	(95,288	)



	Less than 12 Months					12 Months or Longer					Total
As of December 31, 2015	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
General obligations of U.S. states, territories and political subdivisions	$	1,758,345	$	(11,734	)	$	—	$	—		$	1,758,345	$	(11,734	)
Special revenue issuer obligations of U.S. states, territories and political subdivisions	1,672,217		(5,139		)	1,183,963		(20,989		)	2,856,180		(26,128		)
Corporate debt securities	6,981,275		(58,472		)	—		—			6,981,275		(58,472		)
Total fixed income securities	$	10,411,837	$	(75,345	)	$	1,183,963	$	(20,989	)	$	11,595,800	$	(96,334	)
Equity securities	$	5,533,667	$	(128,377	)	$	—	$	—		$	5,533,667	$	(128,377	)
Total temporarily impaired securities	$	15,945,504	$	(203,722	)	$	1,183,963	$	(20,989	)	$	17,129,467	$	(224,711	)

As of June 30, 2016, the Company held $884,083 in fixed maturity securities with unrealized losses of $678. As of December 31, 2015, the Company held $11,595,800 in fixed maturity securities with unrealized losses of $96,334. The decline in fair value of the fixed maturity securities can be attributed primarily to changes in market interest rates and changes in credit spreads over Treasury securities. Because the Company does not have the intent to sell these securities and will likely not be compelled to sell them before it can recover its cost basis, the Company does not consider these investments to be other-than-temporarily impaired.

As of June 30, 2016, the Company held $1,407,898 in equity securities with unrealized losses of $94,610. As of December 31, 2015, the Company held $5,533,667 in equity securities with unrealized losses of $128,377. The unrealized losses related to holdings of equity securities were caused by market changes that the Company considers to be temporary. Since the Company has the intent and ability to hold these equity securities until a recovery of fair value, the Company does not consider these investments other-than-temporarily impaired.

Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been below cost, the financial condition and prospects of the issuer (including credit ratings and analyst reports) and macro-economic changes. A total of 7 and 30 securities had unrealized losses at June 30, 2016 and December 31, 2015, respectively. Reviews of the values of securities are inherently uncertain and the value of the investment may not fully recover, or may decline in future periods resulting in a realized loss. The Company recorded other-than-temporary impairment charges for debt and equity investments in the amount of $115,238 for the six-month period ended June 30, 2016 and $11,149 for the six-month period ended June 30, 2015. Other-than-temporary impairment charges are included in net realized gain on investments in the Consolidated Statements of Income.

Variable Interest Entities

The Company holds investments in VIEs that are not consolidated in the Company's financial statements as the Company is not the primary beneficiary. These entities are considered VIEs as the equity investors at risk, including the Company, do not have the power over the activities that most significantly impact the economic performance of the entities; this power resides with a third-party general partner or managing member that cannot be removed except for cause. The following table sets forth details about the Company's variable interest investments in VIEs, which are structured either as limited partnerships ("LPs") or limited liability companies ("LLCs"), as of June 30, 2016:



Type of Investment	Balance Sheet Classification	Carrying Value		Estimated Fair Value		Maximum Potential Loss (a)
Tax credit LPs	Other investments	$	1,072,261	$	1,072,261	$	1,325,000
Real estate LLCs or LPs	Other investments	3,360,151		3,298,444		6,350,000
Small business investment LPs	Other investments	2,490,953		1,893,348		5,400,000
Total		$	6,923,365	$	6,264,053	$	13,075,000



(a)		Maximum potential loss is calculated as the total investment in the LLC or LP including any capital commitments that may have not yet been called. The Company is not exposed to any loss beyond the total commitment of its investment.

Valuation of Financial Assets and Liabilities

The FASB has established a valuation hierarchy for disclosure of the inputs used to measure estimated fair value of financial assets and liabilities, such as securities. This hierarchy categorizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs 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.

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.

Debt and Equity Securities

The Level 1 category includes equity securities that are measured at estimated 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. ~~Fair~~Estimated fair value is principally based on market values obtained from a third party pricing service. Factors that are used in determining estimated 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 a third party 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”)~~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~~June 30, ~~2015~~2016 and December 31, ~~2014~~,2015, 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 are classified as Level 2 because the pricing service from which the Company has obtained estimated fair values for these instruments uses valuation models that use observable market inputs in addition to trading 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~~Company's investments in student loan auction ~~rate~~ securities ~~(“ARS”~~("ARS") because quoted prices are unavailable due to ~~the failure of~~failed auctions. The Company’s ARS portfolio, iswhich was comprised entirely of an investment grade student loan ~~ARS.~~ARS, was sold during the first quarter of 2016. The par value of ~~these securities~~this security was ~~$1,000,000~~$1,000,000 as of ~~September 30, 2015 and~~ December 31, ~~2014,~~2015, with approximately 97.0% ~~as of both~~ ~~September 30, 2015~~ ~~and~~ ~~December 31, 2014~~, guaranteed by the U.S. Department of Education.

Some of the inputs to ARS valuation are unobservable in the market and are ~~significant –~~significant; therefore, the Company ~~utilizes~~utilized another third party pricing service to assist in the determination of the estimated fair market value of these securities. This service ~~uses~~used a proprietary valuation model that ~~considers~~considered 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 the fair value of the ARS portfolio as of~~ ~~September 30, 2015~~ ~~and~~ ~~December 31, 2014~~:

2015 2014
Cumulative probability of earning maximum rate until maturity —% —%
Cumulative probability of principal returned prior to maturity 95.2% 95.2%
Cumulative probability of default at some future point 4.8% 4.8%

Significant increases or decreases in any of the inputs in isolation could result in significant changes to the fair value measurement. Generally, increases in default probabilities and liquidity risk premiums lower the fair market value while increases in principal being returned and earning maximum rates increase fair market values.

~~Based upon these inputs and assumptions, the~~ pricing service ~~provides~~provided a range of values to the Company for its ARS. The Company ~~records~~recorded the estimated fair value based on the midpoint of the range and believes that this valuation is the most reasonable estimate of fair value. In 2015, ~~and~~ ~~2014~~, the difference in the low and high values of the ranges was approximately one to four percent of the carrying value of the Company’s ARS.

The following table presents, by level, the financial assets carried at estimated fair value measured on a recurring basis as of ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014~~.2015. The table does not include cash on hand and also does not include assets that are measured at historical cost or any basis other than fair value. Level 3 assets are comprised solely of ARS.

As of September 30, 2015 Level 1 Level 2 Level 3 Total
Short-term investments $ 13,884,266
$ —
$ —
$ 13,884,266
Equity securities:

Common stock 35,135,885
—
—
35,135,885
Fixed maturities:

Obligations of U.S. states, territories and political subdivisions* —
78,912,653
—
78,912,653
Corporate debt securities* —
18,182,389
939,000
19,121,389
Total $ 49,020,151
$ 97,095,042
$ 939,000
$ 147,054,193


As of December 31, 2014	Level 1		Level 2		Level 3		Total
As of June 30, 2016									Level 1		Level 2		Level 3		Total
Short-term investments	$	2,576,993	$	—	$	—	$	2,576,993	$	2,665,302	$	—	$	—	$	2,665,302
Equity securities:
Common stock and nonredeemable preferred stock	39,254,981		—		—		39,254,981
Common stock									38,961,905		—		—		38,961,905
Fixed maturities:
Obligations of U.S. states, territories and political subdivisions*	—		85,780,755		—		85,780,755		—		95,874,197		—		95,874,197
Corporate debt securities*	—		22,328,435		939,100		23,267,535		—		17,798,036		—		17,798,036
Total	$	41,831,974	$	108,109,190	$	939,100	$	150,880,264	$	41,627,207	$	113,672,233	$	—	$	155,299,440



As of December 31, 2015	Level 1		Level 2		Level 3		Total
Short-term investments	$	6,865,406	$	—	$	—	$	6,865,406
Equity securities:
Common stock	37,513,464		—		—		37,513,464
Fixed maturities:
Obligations of U.S. states, territories and political subdivisions*	—		87,640,140		—		87,640,140
Corporate debt securities*	—		17,486,344		939,900		18,426,244
Total	$	44,378,870	$	105,126,484	$	939,900	$	150,445,254

*Denotes fair market value obtained from pricing services.

There were no transfers into or out of Levels 1, 2 or 3 during the period.

To help ensure that fair value determinations are consistent with ASC 820, 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 respective 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.

Other Financial Instruments

The Company uses various financial instruments in the normal course of its business. In the measurement of the estimated fair value of certain financial instruments, other valuation techniques were utilized if quoted market prices were not available. These derived fair value estimates are significantly affected by the assumptions used. Additionally, ASC 820 excludes from its scope certain financial instruments, including those related to insurance contracts, pension and other postretirement benefits, and equity method investments.

In estimating the fair value of the financial instruments presented, the Company used the following methods and assumptions:

Cash and cash equivalents

The carrying amount for cash and cash equivalents is a reasonable estimate of fair value due to the short-term maturity of these investments.

Cost-basis investments

The estimated fair value of cost-basis investments is calculated from the book value of the underlying entities, which is not materially different from the fair value of the underlying entity. These items are included in other investments in the Consolidated Balance Sheets.

Accrued dividends and interest

The carrying amount for accrued dividends and interest is a reasonable estimate of fair value due to the short-term maturity of these assets.

The carrying amounts and estimated fair values of ~~these~~other financial instruments ~~(please note~~(see previous table for investments ~~are disclosed in a previous table)~~carried at estimated fair value) as of ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014~~2015 are presented in the following table:


As of September 30, 2015	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
As of June 30, 2016											Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash	$	19,290,813	$	19,290,813	$	19,290,813	$	—	$	—	$	22,619,643	$	22,619,643	$	22,619,643	$	—	$	—
Cost-basis investments	3,284,868		3,553,562		—		—		3,553,562		3,514,919		4,063,813		—		—		4,063,813
Accrued dividends and interest	1,286,710		1,286,710		1,286,710		—		—		1,067,546		1,067,546		1,067,546		—		—
Total	$	23,862,391	$	24,131,085	$	20,577,523	$	—	$	3,553,562	$	27,202,108	$	27,751,002	$	23,687,189	$	—	$	4,063,813


As of December 31, 2014	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
As of December 31, 2015											Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash	$	15,826,515	$	15,826,515	$	15,826,515	$	—	$	—	$	21,790,068	$	21,790,068	$	21,790,068	$	—	$	—
Cost-basis investments	2,516,608		2,675,817		—		—		2,675,817		3,588,314		3,684,020		—		—		3,684,020
Accrued dividends and interest	1,063,837		1,063,837		1,063,837		—		—		1,004,126		1,004,126		1,004,126		—		—
Total	$	19,406,960	$	19,566,169	$	16,890,352	$	—	$	2,675,817	$	26,382,508	$	26,478,214	$	22,794,194	$	—	$	3,684,020

The following table presents a reconciliation of the Company’s assets measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3), which are all ARS securities, for the period ended ~~September~~June 30, ~~2015~~2016 and the year ended December 31, ~~2014~~:2015:


Changes in fair value during the period ended:	2015			2014		2016			2015
Beginning balance at January 1	$	939,100		$	935,700	$	939,900		$	939,100
Redemptions and sales	—			—		(1,000,000		)	—
Realized gain – included in net realized (loss) gain on investments	—			—
Unrealized loss – included in other comprehensive (loss) income	(100		)	3,400
Realized gain – included in net realized gain on investments						74,996			—
Unrealized (loss) gain – included in other comprehensive income (loss)						(14,896		)	800
Ending balance, net	$	939,000		$	939,100	$	—		$	939,900

Certain cost-basis investments are measured at estimated fair value on a non-recurring basis, such as investments that are determined to be ~~other-than temporarily~~other-than-temporarily impaired during the period and recorded at estimated fair value in the Consolidated Financial Statements as of ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014~~.2015. The following table summarizes the corresponding estimated fair value hierarchy of such investments at ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014~~2015 and the related impairments recognized:

As of September 30, 2015
Valuation
Method
Impaired Level 1 Level 2 Level 3
Total at
Estimated
Fair
Value

Impairment
Losses
Cost-basis investments Fair Value Yes $ —
$ —
$ 163,350
$ 163,350
$ (233,069 )
Total cost-basis investments $ —
$ —
$ 163,350
$ 163,350
$ (233,069 )

As of June 30, 2016

Valuation

Method

Impaired

Level 1

Level 2

Level 3

Total at

Estimated

Fair

Value

Impairment

Losses

Cost-basis investments

Fair Value

—

Total cost-basis investments

—


As of December 31, 2014	Valuation Method	Impaired	Level 1		Level 2		Level 3		Total at Estimated Fair Value		Impairment Losses
As of December 31, 2015														Valuation Method	Impaired	Level 1		Level 2		Level 3		Total at Estimated Fair Value		Impairment Losses
Cost-basis investments	Fair Value	Yes	$	—	$	—	$	22,682	$	22,682	$	(10,062	)	Fair Value	Yes	$	—	$	—	$	163,350	$	163,350	$	(233,069	)
Total cost-basis investments			$	—	$	—	$	22,682	$	22,682	$	(10,062	)			$	—	$	—	$	163,350	$	163,350	$	(233,069	)

~~Note 7 – Investments in Securities~~

~~The aggregate estimated fair value, gross unrealized holding gains, gross unrealized holding losses and cost or amortized cost for securities by major security type are as follows:~~

As of September 30, 2015
Amortized
Cost

Gross
Unrealized
Gains
Gross Unrealized Losses Estimated Fair Value
Fixed maturities, available-for-sale, at fair value:
General obligations of U.S. states, territories and political subdivisions $ 27,857,108
$ 1,064,674
$ 35,992
$ 28,885,790
Special revenue issuer obligations of U.S. states, territories and political subdivisions 47,745,393
2,365,492
84,022
50,026,863
Corporate debt securities 17,587,935
619,909
25,455
18,182,389
Auction rate securities 923,967
15,033
—
939,000
Total $ 94,114,403
$ 4,065,108
$ 145,469
$ 98,034,042
Equity securities, available-for-sale, at fair value:

Common stocks $ 24,247,215
$ 11,612,947
$ 724,277
$ 35,135,885
Total $ 24,247,215
$ 11,612,947
$ 724,277
$ 35,135,885
Short-term investments:

Money market funds and certificates of deposit $ 13,884,266
$ —
$ —
$ 13,884,266
Total $ 13,884,266
$ —
$ —
$ 13,884,266

As of December 31, 2014
Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair
Value
Fixed maturities, available-for-sale, at fair value:
General obligations of U.S. states, territories and political subdivisions $ 35,215,247
$ 1,527,794
$ 19,542
$ 36,723,499
Special revenue issuer obligations of U.S. states, territories and political subdivisions 46,707,033
2,405,725
55,502
49,057,256
Corporate debt securities 21,576,641
823,133
71,339
22,328,435
Auction rate securities 922,129
16,971
—
939,100
Total $ 104,421,050
$ 4,773,623
$ 146,383
$ 109,048,290
Equity securities, available-for-sale, at fair value:

Common stocks and nonredeemable preferred stocks $ 24,128,753
$ 15,225,459
$ 99,231
$ 39,254,981
Total $ 24,128,753
$ 15,225,459
$ 99,231
$ 39,254,981
Short-term investments:

Money market funds and certificates of deposit $ 2,576,993
$ —
$ —
$ 2,576,993
Total $ 2,576,993
$ —
$ —
$ 2,576,993

~~The special revenue category for both periods presented includes at least 50 individual bonds with revenue sources from a variety of industry sectors.~~

~~The scheduled maturities of fixed maturity securities at~~ ~~September 30, 2015~~ ~~were as follows:~~

Available-for-Sale

Amortized
Cost

Fair
Value
Due in one year or less $ 8,587,887
$ 8,741,312
Due after one year through five years 47,565,502
49,628,257
Due five years through ten years 35,968,475
37,206,814
Due after ten years 1,992,539
2,457,659
Total $ 94,114,403
$ 98,034,042

~~Realized gains and losses on investments for the~~ ~~nine months endedSeptember 30~~ ~~are summarized as follows:~~

2015 2014
Gross realized gains:

Corporate debt securities $ 5,417
$ 4,286
Common stocks and nonredeemable preferred stocks 1,436,386
1,013,931
Total $ 1,441,803
$ 1,018,217
Gross realized losses:

General obligations of U.S. states, territories and political subdivisions $ (12,319 ) $ —
Special revenue issuer obligations of U.S. states, territories and political subdivisions (397 ) —
Common stocks and nonredeemable preferred stocks (39,017 ) (178,047 )
Impairments of bonds, debt and equity securities (668,904 ) —
Total $ (720,637 ) $ (178,047 )
Net realized gain from securities $ 721,166
$ 840,170
Net realized (losses) gains on other investments:
Impairments of other investments $ (233,069 ) $ (10,062 )
Gains on other investments 113,239
26,234
Losses on other investments —
(263,434 )
Total $ (119,830 ) $ (247,262 )
Net realized gain on investments $ 601,336
$ 592,908

~~Realized gains and losses are determined on the specific identification method.~~

Less than 12 Months 12 Months or Longer Total
As of September 30, 2015
Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses
General obligations of U.S. states, territories and political subdivisions $ 2,387,882
$ (35,992 ) $ —
$ —
$ 2,387,882
$ (35,992 )
Special revenue issuer obligations of U.S. states, territories and political subdivisions 6,995,291
(74,308 ) 1,200,232
(9,714 ) 8,195,523
(84,022 )
Corporate debt securities 1,472,615
(25,455 ) —
—
1,472,615
(25,455 )
Total fixed income securities $ 10,855,788
$ (135,755 ) $ 1,200,232
$ (9,714 ) $ 12,056,020
$ (145,469 )
Equity securities $ 4,336,722
$ (630,150 ) $ 92,475
$ (94,127 ) $ 4,429,197
$ (724,277 )
Total temporarily impaired securities $ 15,192,510
$ (765,905 ) $ 1,292,707
$ (103,841 ) $ 16,485,217
$ (869,746 )

Less than 12 Months 12 Months or Longer Total
As of December 31, 2014
Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses
General obligations of U.S. states, territories and political subdivisions $ 2,113,194
$ (19,542 ) $ —
$ —
$ 2,113,194
$ (19,542 )
Special revenue issuer obligations of U.S. states, territories and political subdivisions 3,946,977
(13,453 ) 1,182,390
(42,049 ) 5,129,367
(55,502 )
Corporate debt securities 6,924,430
(71,339 ) —
—
6,924,430
(71,339 )
Total fixed income securities $ 12,984,601
$ (104,334 ) $ 1,182,390
$ (42,049 ) $ 14,166,991
$ (146,383 )
Equity securities $ 930,208
$ (71,669 ) $ 141,280
$ (27,562 ) $ 1,071,488
$ (99,231 )
Total temporarily impaired securities $ 13,914,809
$ (176,003 ) $ 1,323,670
$ (69,611 ) $ 15,238,479
$ (245,614 )

~~As of~~ ~~September 30, 2015, the Company held $12,056,020 in fixed maturity securities with unrealized losses of~~ ~~$145,469. As of~~ ~~December 31, 2014, the Company held~~ ~~$14,166,991~~ ~~in fixed maturity securities with unrealized losses of~~ ~~$146,383~~. The decline in fair value of the fixed maturity securities can be attributed primarily to changes in market interest rates and changes in credit spreads over Treasury securities. Because the Company does not have the intent to sell these securities and will likely not be compelled to sell them before it can recover its cost basis, the Company does not consider these investments to be other-than-temporarily impaired.

~~As of~~ ~~September 30, 2015, the Company held $4,429,197 in equity securities with unrealized losses of~~ ~~$724,277. As of~~ ~~December 31, 2014, the Company held~~ ~~$1,071,488~~ ~~in equity securities with unrealized losses of~~ ~~$99,231~~. The unrealized losses related to holdings of equity securities were caused by market changes that the Company considers to be temporary. Since the Company has the intent and ability to hold these equity securities until a recovery of fair value, the Company does not consider these investments other-than-temporarily impaired.

Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been below cost, the financial condition and prospects of the issuer (including credit ratings and analyst reports) and macro-economic changes. A total of 35 ~~and~~ 25 ~~securities had unrealized losses at~~ ~~September 30, 2015~~ ~~and~~ ~~December 31, 2014~~, respectively. Reviews of the values of securities are inherently uncertain and the value of the investment may not fully recover, or may decline in future periods resulting in a realized loss. The Company recorded other-than-temporary impairment charges for debt and equity investments in the amount of $668,904 for the nine months ended September 30, 2015 and no other-than-temporary impairment charges for debt and equity investments for the nine months ended September 30, 2014. Other-than-temporary impairment charges are included in net realized (loss) gain on investments in the Consolidated Statements of Income.

Note 87 – Commitments and Contingencies

Legal Proceedings – The Company and its subsidiaries are involved in 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 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 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 ~~$205,861,000~~$159,781,000 and ~~$82,477,000~~$171,010,000 as of ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014,~~2015, 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. Exchange services revenues include earnings on these deposits; therefore, investment income is shown as other revenue rather than investment income. These like-kind exchange funds are primarily invested in money market and other short-term investments.

Agency Relationship – On July 1, 2015, Title Resource Group LLC's wholly owned subsidiary, title insurer Texas American Title Company, acquired the assets of ITCOA, LLC, which does business throughout Texas as Independence Title. For the ~~nine months~~six-month period ended ~~September~~June 30, ~~2015~~2016 and the ~~twelve months~~twelve-month periods ended December 31, ~~2014~~2015 and ~~2013,~~2014, Independence Title originated ~~12.2%~~6.0%, ~~23.6%~~10.3% and ~~16.4%~~23.6%, respectively, of the net premiums written for the Company. Independence Title is under no legal commitment to remit a minimum amount of premiums to the Company, and could cease doing so at any time. A significant decline in business originated by Independence Title for the Company, whether due to that business being diverted to its new title insurer owner or otherwise, could have a material negative impact on the Company's premiums written. Any reduction in premiums would be largely offset by related reductions in commissions, premium and income taxes, the provision for claims and other operating expenses. The Company did not have any ownership interest in Independence Title before or after the July 1, 2015 acquisition.

Note 98 – Related Party Transactions

The Company does business with, and has investments in, unconsolidated limited liability companies that are 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:


Financial Statement Classification,	As of September 30, 2015		As of December 31, 2014		As of June 30, 2016		As of December 31, 2015
Consolidated Balance Sheets	As of September 30, 2015		As of December 31, 2014		As of June 30, 2016		As of December 31, 2015
Other investments	$	6,785,000	$	6,014,000	$	5,726,000	$	6,519,000
Premiums and fees receivable	$	815,000	$	666,000	$	74,000	$	719,000


Financial Statement Classification,	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Three Months Ended June 30,				For the Six Months Ended June 30,
Consolidated Statements of Income	2015		2014		2015		2014		2016		2015		2016		2015
Net premiums written	$	3,451,000	$	3,116,000	$	10,436,000	$	8,677,000	$	3,737,000	$	3,929,000	$	6,480,000	$	6,985,000
Other income	$	716,000	$	447,000	$	2,230,000	$	1,423,000	$	606,000	$	1,111,000	$	732,000	$	1,514,000
Commissions to agents	$	2,326,000	$	2,109,000	$	7,176,000	$	5,880,000	$	2,555,000	$	2,718,000	$	4,403,000	$	4,850,000

Note 109 – Acquisitions

Effective August 1, 2015, a subsidiary of the Company, ITIC, acquired a 20% ownership interest in 1st Investors Title Agency, LLC ("1st Investors") for a purchase price of $72,600. 1st Investors, a Michigan limited liability company, is an insurance agency doing business in the State of Michigan. Prior to August 1, 2015, the Company had an ownership interest in 1st Investors of 45%. The Company's Consolidated Financial Statements include the accounts and operations of 1st Investors, based on the Company's resulting 65% ownership interest at ~~September~~August 1, 2015. Effective April 1, 2016, ITIC acquired an additional 3.1% ownership interest in 1st Investors for a purchase price of $9,142; resulting in the Company having a 68.1% ownership interest in 1st Investors as of June 30, ~~2015.~~2016. ITIC's purchase of 1st Investors was accounted for using the acquisition method required by ASC 805, Business Combinations. There were no intangible assets or goodwill recorded as a result of the acquisition. A reconciliation of the noncontrolling interest equity of 1st Investors is presented in the Consolidated Statements of Stockholders' Equity.

In January 2012, ITIC entered into a membership interest purchase and sale agreement under which it agreed to acquire a majority ownership interest of United Title Agency Co., LLC (“United”). United, a Michigan limited liability company, is an insurance agency doing business in the State of Michigan. ITIC's purchase of United was accounted for using the acquisition method required by ASC 805, Business Combinations. On April 2, 2012, ITIC purchased a 70% ownership interest in United, with both ITIC and the seller having the option to require ITIC to purchase the remaining 30% interest at a later date. ITIC purchased the 70% interest for a purchase price of $1,041,250. On May 21, 2014, ITIC purchased the remaining 30% ownership interest in United for an additional $515,275, making United a wholly owned subsidiary of ~~ITC.~~ITIC.

~~ITIC's purchase of United was accounted for using the acquisition method required by ASC 805,~~ ~~Business Combinations. Accordingly, the~~The Company recognized the required identifiable intangible assets of United. There was no goodwill recorded as a result of the acquisition. The fair values of intangible assets, all Level 3 inputs, are principally based on values obtained from a third party valuation service. At the closing of the initial acquisition, intangible assets included $645,685 relating to a non-compete contract resulting from the acquisition and $836,215 from referral relationships. The non-compete contract is being amortized over a 10-year period using the straight-line method, starting at a future date when the related employment agreement is terminated. The referral relationships are being amortized over a 12-year period using the straight-line method. At ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014,~~2015, accumulated amortization of intangible assets was ~~$243,894~~$296,157 and ~~$191,631,~~$261,315, respectively. Net intangible assets of ~~$1,238,006~~$1,185,743 and ~~$1,290,269~~$1,220,585 are categorized as prepaid expenses and other assets in the Consolidated Balance Sheets as of ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014.~~2015. In accordance with ASC 350, Intangibles – Goodwill and Other, management determined that no events or changes in circumstances occurred that would indicate the carrying amount may not be recoverable, and therefore determined that the intangible assets assigned to United were not impaired at ~~September~~June 30, ~~2015.~~2016.

A reconciliation of the noncontrolling interest equity of 1st Investors is presented in the Consolidated Statements of Stockholders' Equity. The following table provides a reconciliation of total redeemable equity of United for the periods ended ~~September 30, 2015~~ ~~and~~ ~~December 31, 2014~~:

Changes in carrying value during the period ended: September 30, 2015
December 31, 2014
Beginning balance at January 1 $ —
$ 545,489
Net income attributable to redeemable noncontrolling interest —
23,523
Distributions to noncontrolling interest —
(168,057 )
Redeemable noncontrolling interest resulting from subsidiary purchase —
(515,275 )
Adjustment to retained earnings for purchase of noncontrolling interest —
114,320
Balance, net $ —
$ —

Note 1110 – Accumulated Other Comprehensive Income

The following tables provide changes in the balances of each component of accumulated other comprehensive income, net of tax, for the periods ended ~~September~~June 30, ~~2015~~2016 and ~~2014~~2015:

Three Months Ended September 30, 2015
Unrealized Gains and Losses
On Available-for-Sale
Securities

Postretirement
Benefits Plans

Total
Beginning balance at July 1 $ 11,099,177
$ (75,380 ) $ 11,023,797
Other comprehensive loss before reclassifications (1,549,501 ) —
(1,549,501 )
Amounts reclassified from accumulated other comprehensive income 130,851
1,304
132,155
Net current-period other comprehensive (loss) income (1,418,650 ) 1,304
(1,417,346 )
Ending balance $ 9,680,527
$ (74,076 ) $ 9,606,451



Three Months Ended June 30, 2016	Unrealized Gains and Losses On Available-for-Sale Securities		Postretirement Benefits Plans			Total
Beginning balance at April 1	$	12,297,587	$	(113,251	)	$	12,184,336
Other comprehensive income before reclassifications	2,021,107		—			2,021,107
Amounts reclassified from accumulated other comprehensive income	12,626		1,475			14,101
Net current-period other comprehensive income	2,033,733		1,475			2,035,208
Ending balance	$	14,331,320	$	(111,776	)	$	14,219,544


Three Months Ended September 30, 2014	Unrealized Gains and Losses On Available-for-Sale Securities			Postretirement Benefits Plans			Total
Beginning balance at July 1	$	12,800,951		$	(47,621	)	$	12,753,330
Three Months Ended June 30, 2015										Unrealized Gains and Losses On Available-for-Sale Securities			Postretirement Benefits Plans			Total
Beginning balance at April 1										$	13,112,930		$	(76,684	)	$	13,036,246
Other comprehensive loss before reclassifications	(628,914		)	—			(628,914		)	(1,412,635		)	—			(1,412,635		)
Amounts reclassified from accumulated other comprehensive (loss) income	(4,206		)	366			(3,840		)
Amounts reclassified from accumulated other comprehensive income										(601,118		)	1,304			(599,814		)
Net current-period other comprehensive (loss) income	(633,120		)	366			(632,754		)	(2,013,753		)	1,304			(2,012,449		)
Ending balance	$	12,167,831		$	(47,255	)	$	12,120,576		$	11,099,177		$	(75,380	)	$	11,023,797

Nine Months Ended September 30, 2015
Unrealized Gains and Losses
On Available-for-Sale
Securities

Postretirement
Benefits Plans

Total
Beginning balance at January 1 $ 12,934,497
$ (77,988 ) $ 12,856,509
Other comprehensive loss before reclassifications (2,777,909 ) —
(2,777,909 )
Amounts reclassified from accumulated other comprehensive (loss) income (476,061 ) 3,912
(472,149 )
Net current-period other comprehensive (loss) income (3,253,970 ) 3,912
(3,250,058 )
Ending balance $ 9,680,527
$ (74,076 ) $ 9,606,451



Six Months Ended June 30, 2016	Unrealized Gains and Losses On Available-for-Sale Securities			Postretirement Benefits Plans			Total
Beginning balance at January 1	$	11,597,741		$	(114,726	)	$	11,483,015
Other comprehensive income before reclassifications	2,814,046			—			2,814,046
Amounts reclassified from accumulated other comprehensive income	(80,467		)	2,950			(77,517		)
Net current-period other comprehensive income	2,733,579			2,950			2,736,529
Ending balance	$	14,331,320		$	(111,776	)	$	14,219,544

Nine Months Ended September 30, 2014
Unrealized Gains and Losses
On Available-for-Sale
Securities

Postretirement
Benefits Plans

Total
Beginning balance at January 1 $ 11,395,757
$ (48,353 ) $ 11,347,404
Other comprehensive income before reclassifications 1,324,166
—
1,324,166
Amounts reclassified from accumulated other comprehensive (loss) income (552,092 ) 1,098
(550,994 )
Net current-period other comprehensive income 772,074
1,098
773,172
Ending balance $ 12,167,831
$ (47,255 ) $ 12,120,576



Six Months Ended June 30, 2015	Unrealized Gains and Losses On Available-for-Sale Securities			Postretirement Benefits Plans			Total
Beginning balance at January 1	$	12,934,497		$	(77,988	)	$	12,856,509
Other comprehensive loss before reclassifications	(1,228,408		)	—			(1,228,408		)
Amounts reclassified from accumulated other comprehensive income	(606,912		)	2,608			(604,304		)
Net current-period other comprehensive (loss) income	(1,835,320		)	2,608			(1,832,712		)
Ending balance	$	11,099,177		$	(75,380	)	$	11,023,797

The following tables provide significant amounts reclassified out of each component of accumulated other comprehensive income for the periods ended ~~September~~June 30, ~~2015~~2016 and ~~2014~~2015:


Three Months Ended September 30, 2015
Three Months Ended June 30, 2016
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statements of Income	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statements of Income
Unrealized gains and losses on available-for-sale securities:
Net realized gain on investment	$	458,058
Net realized gain on investments					$	53,513
Other-than-temporary impairments	(657,755		)		(72,444		)
Total	$	(199,697	)	Net realized (loss) gain on investment	$	(18,931	)	Net realized (loss) gain on investments
Tax	68,846			Provision for Income Taxes	6,305			Provision for Income Taxes
Net of Tax	$	(130,851	)		$	(12,626	)
Amortization related to postretirement benefit plans:
Prior year service cost	$	(1,098	)		$	—
Unrecognized loss	(878		)		(2,235		)
Total	$	(1,976	)	(a)	$	(2,235	)	(a)
Tax	672			Provision for Income Taxes	760			Provision for Income Taxes
Net of Tax	$	(1,304	)		$	(1,475	)
Reclassifications for the period	$	(132,155	)		$	(14,101	)

Three Months Ended September 30, 2014
Details about Accumulated Other
Comprehensive Income Components Amount Reclassified from
Accumulated Other
Comprehensive Income Affected Line Item in the Consolidated
Statements of Income
Unrealized gains and losses on available-for-sale securities:
Net realized gain on investment $ 6,534

Other-than-temporary impairments —

Total $ 6,534
Net realized (loss) gain on investment
Tax (2,328 ) Provision for Income Taxes
Net of Tax $ 4,206

Amortization related to postretirement benefit plans:

Prior year service cost $ (554 )
Unrecognized gain (loss) —

Total $ (554 ) (a)
Tax 188
Provision for Income Taxes
Net of Tax $ (366 )
Reclassifications for the period $ 3,840


Nine Months Ended September 30, 2015
Three Months Ended June 30, 2015
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statements of Income	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statements of Income
Unrealized gains and losses on available-for-sale securities:
Net realized gain on investment	$	1,390,070
Net realized gain on investments					$	923,209
Other-than-temporary impairments	(668,904		)		(11,149		)
Total	$	721,166		Net realized (loss) gain on investment	$	912,060		Net realized (loss) gain on investments
Tax	(245,105		)	Provision for Income Taxes	(310,942		)	Provision for Income Taxes
Net of Tax	$	476,061			$	601,118
Amortization related to postretirement benefit plans:
Prior year service cost	$	(3,293	)		$	(1,098	)
Unrecognized loss	(2,635		)		(878		)
Total	$	(5,928	)	(a)	$	(1,976	)	(a)
Tax	2,016			Provision for Income Taxes	672			Provision for Income Taxes
Net of Tax	$	(3,912	)		$	(1,304	)
Reclassifications for the period	$	472,149			$	599,814


Nine Months Ended September 30, 2014
Six Months Ended June 30, 2016
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statements of Income	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statements of Income
Unrealized gains and losses on available-for-sale securities:
Net realized gain on investment	$	840,170
Net realized gain on investments					$	239,592
Other-than-temporary impairments	—				(115,238		)
Total	$	840,170		Net realized (loss) gain on investment	$	124,354		Net realized (loss) gain on investments
Tax	(288,078		)	Provision for Income Taxes	(43,887		)	Provision for Income Taxes
Net of Tax	$	552,092			$	80,467
Amortization related to postretirement benefit plans:
Prior year service cost	$	(1,663	)		—
Unrecognized gain (loss)	—
Unrecognized loss					(4,470		)
Total	$	(1,663	)	(a)	$	(4,470	)	(a)
Tax	565			Provision for Income Taxes	1,520			Provision for Income Taxes
Net of Tax	$	(1,098	)		$	(2,950	)
Reclassifications for the period	$	550,994			$	77,517



Six Months Ended June 30, 2015
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statements of Income
Unrealized gains and losses on available-for-sale securities:
Net realized gain on investments	$	932,012
Other-than-temporary impairments	(11,149		)
Total	$	920,863		Net realized (loss) gain on investments
Tax	(313,951		)	Provision for Income Taxes
Net of Tax	$	606,912
Amortization related to postretirement benefit plans:
Prior year service cost	(2,195		)
Unrecognized loss	(1,757		)
Total	$	(3,952	)	(a)
Tax	1,344			Provision for Income Taxes
Net of Tax	$	(2,608	)
Reclassifications for the period	$	604,304

(a)

These accumulated other comprehensive income components are not reclassified to net income in their entirety in the same reporting period. The amounts are presented within salaries, employee benefits and payroll taxes on the Consolidated Statements of Income as amortized. Amortization and accretion related to postretirement benefit plans is included in the computation of net periodic pension costs, as discussed in Note 5.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The Company's ~~2014~~2015 Annual Report on Form 10-K should be read in conjunction with the following discussion since it contains information which is important for evaluating the Company's operating results and financial condition. Forward-looking statements are based on certain assumptions and expectations of future events that are subject to a number of risks and uncertainties. Actual results may vary.

Overview

Investors Title Company (the "Company") is a holding company that engages primarily in issuing title insurance through two subsidiaries, Investors Title Insurance Company ("ITIC") and National Investors Title Insurance Company ("NITIC"). Total revenues from the title segment accounted for ~~95.4%~~94.3% of the Company's revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016. Through ITIC and NITIC, the Company underwrites land title insurance for owners and mortgagees as a primary insurer. Title insurance protects against loss or damage resulting from title defects that affect real property.

There are two basic types of title insurance policies -– one for the mortgage lender and one for the real estate owner. A lender often requires the property owner to purchase a ~~lender's~~lender’s title insurance policy to protect its position as a holder of a mortgage loan, but the lender’s title insurance policy does not protect the property owner. The property owner has to purchase a separate owner’s title insurance policy to protect its investment. When real property is conveyed from one party to another, occasionally there is an undisclosed defect in the title or a mistake or omission in a prior deed, will or mortgage that may give a third party a legal claim against such property. If a covered claim is made against real property, title insurance provides indemnification against insured defects.

The Company issues title insurance policies through its ~~own~~home and branch offices and through a network of agents. Issuing agents are typically real estate ~~attorneys, agent~~ attorneys, independent agents or subsidiaries of community and regional mortgage lending institutions, depending on local customs and regulations and the Company’s marketing strategy in a particular territory. The ability to attract and retain issuing agents is a key determinant of the Company’s growth in title insurance premiums written.

Revenues for this segment primarily result from purchases of new and existing residential and commercial real estate, refinance activity and certain other types of mortgage lending such as home equity lines of credit.

Volume is a factor in the Company’s profitability due to fixed operating costs ~~that~~which are incurred by the Company regardless of title insurance premium volume. The resulting operating leverage tends to amplify the impact of changes in volume on the Company’s profitability. The Company’s profitability also depends, in part, upon its ability to manage its investment portfolio to maximize investment returns and minimize risks such as interest rate changes, defaults and impairments of assets.

The Company’s volume of title insurance premiums is affected by the overall level of residential and commercial real estate activity, which includes sales, mortgage financing and mortgage refinancing. Real estate activity, home sales and mortgage lending are cyclical in nature. In turn, real estate activity is affected by a number of factors, including the availability of mortgage credit, the cost of real estate, consumer confidence, employment and family income levels and general United States economic conditions. Interest rate volatility is also an important factor in the level of residential and commercial real estate activity.

The Company’s title insurance premiums in future periods are likely to fluctuate due to these and other factors which are beyond management’s control.

Historically, the title insurance business tends to be seasonal as well as cyclical. Because home sales are typically strongest in periods of favorable weather, the first calendar quarter tends to have the lowest activity levels, while the spring and summer quarters tend to be more active. Refinance activity is generally less seasonal, but is subject to interest rate fluctuations.

Services other than title insurance provided by operating divisions of the Company ~~that~~ are not ~~required to be~~ reported separately and are reported collectively in a category called “All Other.” These other services include those offered by the Company and by its wholly owned subsidiaries, Investors Title Exchange Corporation (“ITEC”), Investors Title Accommodation Corporation (“ITAC”), Investors Trust Company (“Investors Trust”) and Investors Title Management Services, Inc. (“ITMS”).

The Company’s exchange services division, ITEC and ITAC, provides customer services in connection with tax-deferred real property exchanges. ITEC serves as a qualified intermediary in like-kind exchanges of real or personal property under Section 1031 of the Internal Revenue Code of 1986, as amended. In its role as qualified intermediary, ITEC coordinates the exchange aspects of the real estate transaction, and its duties include drafting standard exchange documents, holding the exchange funds between the sale of the old property and the purchase of the new property, and accepting the formal identification of the replacement property within the required identification period. ITAC serves as exchange accommodation titleholder in reverse exchanges. An exchange accommodation offers a vehicle for accommodating a reverse exchange when the taxpayer must acquire replacement property before selling the relinquished property.

The ~~Company's~~Company’s trust services division, Investors Trust, provides investment management and trust services to individuals, companies, banks and trusts.

ITMS offers various consulting services to provide clients with the technical expertise to start and successfully operate a title insurance agency.

Business Trends and Recent Conditions

~~Beginning in 2008, the~~The United States economy experienced a material economic downturn, resulting in a recession. Events leading to the recession were primarily the collapse of the housing market and frozen credit markets, prompting the federal government to take unprecedented monetary and fiscal action in an attempt to slow the economic rate of decline and instill consumer confidence. The economy has been gradually recovering from ~~this~~the economic downturn ~~with housing~~that began in 2008. Housing values have been rebounding, the economy is growing and the unemployment rate has been declining. Since the downturn began, many governmental agencies have implemented various initiatives designed to stimulate the economy and to aid in its recovery, and to improve consumer confidence.

Current Initiatives

In efforts to ~~stimulate the economy, the Federal Reserve announced in September 2012 Quantitative Easing, “QE3,” in which it would purchase mortgage-backed securities~~provide transparency and longer-term Treasury securities. Through QE3, the Federal Reserve initially purchased mortgage-backed securities at a rate of $40 billion per month and longer-term Treasury securities at a rate of $45 billion per month. Beginning in 2014,improve market stability, the Federal Open Market Committee ("FOMC") of the Federal Reserve ~~steadily reduced the purchase of securities, and concluded the QE3 program at the end of October 2014.~~

~~The FOMC also~~ issues disclosures on a periodic basis that include projections of the federal funds rate and expected actions. At the ~~September~~December 2015 meeting, the FOMC ~~reaffirmed its intent~~voted to ~~keep~~raise the federal funds rate ~~exceptionally low,~~for the first time since December 2008 to a target range between 0%0.25% and ~~0.25%, so long as progress is made toward its~~0.50%. The Committee voted at the June 2016 meeting to maintain the rates set in December 2015. Any future adjustments to the rate are expected to be based on realized and expected economic developments to achieve maximum employment and ~~inflation objectives. Federal Reserve Chairwoman Janet Yellen remarked~~2.0% inflation. The FOMC anticipates future economic conditions to evolve in ~~a press conference after the September 2015 meeting~~ways that ~~an increase in~~will warrant gradual increases, and that for some time, the federal funds rate is ~~likely to come later in 2015; however, any rate increases are~~ expected to be ~~gradual.~~below long range levels.

On October 20, 2014, the Federal Housing Finance Agency ("FHFA"), which regulates the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), announced that Fannie Mae and Freddie Mac were negotiating guidelines with mortgage lenders that resulted in less strict lending requirements and lower barriers to mortgage loans for borrowers who are seeking access to home loans. The FHFA noted in its announcement that it intended to clarify the rules that allow Fannie Mae and Freddie Mac to require mortgage lenders to repurchase troubled loans. The FHFA also sought to increase the supply of credit available, particularly to creditworthy lower and middle-income families, by collaborating with mortgage lenders to provide guidelines for mortgage loans with down payments as low as ~~three percent.~~3.0%. In December 2014, both Fannie Mae and Freddie Mac officially approved ~~ninety-seven percent~~97.0% loan-to-value products ~~(three percent~~(3.0% down payment mortgages). The Fannie Mae program is targeted to first-time home buyers and became available to lenders in December 2014. The Freddie Mac program became available to lenders on March 23, 2015 and is available to both first-time home buyers and other qualified borrowers with limited down payment savings.

In an effort to expand home ownership for lower-income buyers, the Federal Housing Authority (“FHA”) announced in January 2015 that it would cut its rates on mortgage insurance premiums. Mortgage insurance premium rates for 30-year FHA insured mortgages with less than a 5%5.0% down payment decreased from 1.35% to 0.85%. Mortgage insurance premium rates for 30-year FHA insured mortgages with more than a 5%5.0% down payment decreased from 1.30% to 0.80%. The new rates took effect on January 26, 2015 and will not apply to borrowers with existing mortgages, unless refinanced, or to 15-year mortgages.

Regulation and Reform

In 2008, the federal government took control of Fannie Mae and Freddie Mac in an effort to keep these ~~government sponsored~~government-sponsored entities from failing. The primary functions of Fannie Mae and Freddie Mac are to provide liquidity to the nation's mortgage finance system by purchasing mortgages on the secondary market, pooling them and selling them as mortgage-backed securities. In order to securitize, Fannie Mae and Freddie Mac typically require the purchase of title insurance for loans they acquire. Since the federal takeover, there have been various discussions and proposals regarding their reform. Changes to these entities could impact the entire mortgage loan process and, as a result, could affect the demand for title insurance. The timing and results of ~~any reforms~~reform are currently unknown; however, any changes to these entities could affect the Company and its results of operations.

On November 20, 2013, the Consumer Financial Protection Bureau (“CFPB”), which enforces the Real Estate Settlement Procedures Act (“RESPA”), the primary federal regulatory guidance ~~covering~~governing the real estate settlement industry, released a final rule to integrate mortgage disclosures under the RESPA and the Truth in Lending Act (“TILA”). The final rule went into effect on October 3, 2015. Under this rule, the early disclosure forms required by TILA and the good faith estimate required by RESPA have been combined into one form, titled the Loan Estimate. The ~~final disclosure required by TILA~~CFPB has indicated it intends to reopen the rule making process for additional comments and considerations. The scope of the changes, if any, and the HUD-1 settlement statement required by RESPA have been combined into one form, titled the Closing Disclosure. The Company has been actively preparing for the impact this rule will have on both direct and agency operations in terms of processes and procedures, systems and compliance costs, and does not expect it to have a materialpotential impact on the ~~Company's financial position and results of operations.~~Company are not known at this time.

The CFPB, Office of the Comptroller of Currency and the Federal Reserve have issued memorandums to banks that ~~have~~communicated those agencies’ heightened ~~those agencies'~~ focus on vetting third party ~~providers and~~providers. Such increased regulatory involvement may affect the Company's agents and approved providers. Further proposals to change regulations governing insurance holding companies and the title insurance industry are often introduced in Congress, in state legislatures and before various insurance regulatory agencies. Although the Company regularly monitors such proposals, the likelihood and timing of passage of any such regulation, and the possible effects of any such regulation on the Company and its subsidiaries, cannot be determined at this time.

Real Estate Environment

~~Overall, the~~The economy as a whole is expanding and there has been a steady reduction in unemployment. The Mortgage Bankers Association's (“MBA”) ~~September 2015~~June 20, 2016 Economic ~~and Mortgage Finance Commentary~~Forecast predicts ~~2015~~2016 overall economic growth of approximately ~~2.4% and a decline~~1.9% with continued improvement in employment as the unemployment rate is expected to 5.0% by the end of 2015. While recovery in the housing sector remains slow, purchase applications and refinance transactions are both higher compared with the prior year, primarily a result of the economic growth and improved employment conditions.trend down to approximately 4.6%.

The MBA ~~September 18, 2015~~June 20, 2016 Mortgage Finance Forecast (“("MBA ~~Forecast”~~Forecast") projects ~~2015~~2016 purchase activity to increase ~~25.5%~~10.4% to ~~$801~~$973 billion and refinance activity to ~~increase 21.9%~~decrease 7.9% to ~~$590~~$690 billion, resulting in an increase in total mortgage originations of ~~24.0%~~2.0% to ~~$1,391~~$1,663 billion, all from ~~2014~~2015 levels. In ~~2014,~~2015, refinance activity accounted for ~~43.1%~~46.0% of all mortgage originations and is projected to represent ~~42.4%~~41.5% of all mortgage originations in ~~2015.~~2016.

According to data published by Freddie Mac, the average 30-year fixed mortgage interest rate in the United States was ~~3.8%~~3.7% and ~~4.2%~~3.8% for the ~~nine months~~six-month periods ended ~~September~~June 30, 2016 and 2015, ~~and 2014,~~ respectively. ~~Refinancing activity is expected to be higher in 2015 as a result of lower mortgage interest rates in the current year.~~ According to the MBA Forecast, refinancing is expected to be lower in 2016 as mortgage interest rates ~~are projected~~continue to climb to ~~4.2% by~~a projected 4.0% in the fourth quarter of ~~2015.~~2016.

Historically, activity in real estate markets has varied over the course of market cycles by geographic region and in response to evolving economic factors. Operating results can vary from year to year based on cyclical market conditions and do not necessarily indicate the Company's future operating results and cash flows.

Critical Accounting Estimates and Policies

The preparation of the Company's Consolidated Financial Statements requires management to make estimates and judgments that affect the reported amounts of certain assets, liabilities, revenues, expenses and related disclosures regarding contingencies and commitments. Actual results could differ from these estimates. During the ~~nine months~~six-month period ended ~~September~~June 30, ~~2015,~~2016, the Company did not make any material changes to its critical accounting policies as previously disclosed in Management's Discussion and Analysis in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2014~~2015 as filed with the Securities and Exchange Commission.

Results of Operations

The following table presents certain income statement data for the ~~three~~three- and ~~nine months~~six-month periods ended ~~September~~June 30, ~~2015~~2016 and ~~2014:~~2015:


	Three Months Ended September 30,					Nine Months Ended September 30,				Three Months Ended June 30,					Six Months Ended June 30,
	2015			2014		2015		2014		2016			2015		2016		2015
Revenues:
Net premiums written	$	30,945,532		$	26,356,835	$	86,372,154	$	81,115,940	$	29,790,232		$	30,464,581	$	51,299,229	$	55,426,622
Investment income - interest and dividends	1,117,529			1,064,995		3,427,055		3,130,846
Investment income – interest and dividends										1,167,005			1,131,487		2,318,016		2,309,526
Net realized (loss) gain on investments	(338,631		)	8,689		601,336		592,908		(14,828		)	925,164		135,002		939,967
Other	2,816,828			2,077,711		7,924,329		6,344,163		2,885,302			2,960,575		4,937,486		5,107,501
Total Revenues	34,541,258			29,508,230		98,324,874		91,183,857		33,827,711			35,481,807		58,689,733		63,783,616

Operating Expenses:
Commissions to agents	16,898,323			14,440,264		48,393,553		48,242,923		15,674,346			16,898,691		27,207,228		31,495,230
Provision for claims	703,979			1,507,814		3,621,401		4,177,478		647,912			2,130,810		663,871		2,917,422
Salaries, employee benefits and payroll taxes	6,957,874			6,609,425		21,101,955		19,250,116		7,173,198			6,866,632		14,645,149		14,144,081
Office occupancy and operations	1,342,288			1,257,009		4,089,806		3,683,980		1,535,902			1,443,297		3,029,762		2,747,518
Business development	568,189			552,215		1,633,358		1,581,872		606,258			578,194		1,086,648		1,065,169
Filing fees, franchise and local taxes	134,880			233,079		572,621		648,022		267,103			221,098		497,157		437,741
Premium and retaliatory taxes	573,336			491,927		1,684,674		1,332,492		574,249			634,747		886,080		1,111,338
Professional and contract labor fees	661,879			621,305		1,926,469		1,976,272		537,446			680,483		1,076,099		1,264,590
Other	264,012			196,702		708,918		656,653		269,250			241,358		472,231		444,906
Total Operating Expenses	28,104,760			25,909,740		83,732,755		81,549,808		27,285,664			29,695,310		49,564,225		55,627,995

Income before Income Taxes	6,436,498			3,598,490		14,592,119		9,634,049		6,542,047			5,786,497		9,125,508		8,155,621

Provision for Income Taxes	1,941,000			1,004,000		4,250,000		2,656,000		2,012,000			1,666,000		2,791,000		2,309,000

Net Income Attributable to the Company	$	4,490,962		$	2,594,490	$	10,337,583	$	6,954,526	$	4,529,380		$	4,120,497	$	6,343,420	$	5,846,621

Insurance and Other Services Revenues

Insurance and other services revenues include net premiums written plus other fee income, trust income, management services income and exchange services income. Investment income and realized investment gains and losses are not included in insurance and other services revenues and are discussed separately under “Investment Related Revenues” below.

~~Title Orders:~~ ~~Title orders issued increased 15.6% in the first nine months of~~ ~~2015~~ ~~to 175,890 compared with 152,103 title orders in the same period in~~ ~~2014. The increase in title orders from~~ ~~2014~~ is primarily attributable to an increase in the number of purchase and refinance transactions. Premiums written did not move proportionally with title orders due to an increasing proportion of refinance transactions as well as the mix of premiums written by state, as rates vary by state. Refinance transactions typically have lower premium rates than purchase transactions.

Title insurance companies typically issue title insurance policies directly through home and branch offices or through title agencies. Following is a breakdown of net premiums generated by home and branch offices and agency operations ~~for the three~~three- and ~~nine months~~six-month periods ended ~~September~~June 30,~~, 2015~~ 2016 and ~~2014:~~2015:


	Three Months Ended September 30,								Nine Months Ended September 30,								Three Months Ended June 30,								Six Months Ended June 30,
	2015		%		2014		%		2015		%		2014		%		2016		%		2015		%		2016		%		2015		%
Home and Branch	$	7,967,826	25.7	%	$	6,815,125	25.9	%	$	21,281,363	24.6	%	$	17,922,166	22.1	%	$	8,413,116	28.2	%	$	7,707,773	25.3	%	$	13,890,773	27.1	%	$	13,313,537	24.0	%
Agency	22,977,706		74.3	%	19,541,710		74.1	%	65,090,791		75.4	%	63,193,774		77.9	%	21,377,116		71.8	%	22,756,808		74.7	%	37,408,456		72.9	%	42,113,085		76.0	%
Total	$	30,945,532	100.0	%	$	26,356,835	100.0	%	$	86,372,154	100.0	%	$	81,115,940	100.0	%	$	29,790,232	100.0	%	$	30,464,581	100.0	%	51,299,229		100.0	%	$	55,426,622	100.0	%

Home and Branch Office Net Premiums: In the Company's home and branch operations, the Company issues the title insurance policy and retains the entire premium, as no commissions are paid in connection with these policies. Net premiums written from home and branch operations increased ~~16.9%~~9.2% and ~~18.7%~~4.3% for the three- and six-month periods ended ~~three and nine months endedSeptember~~June 30, ~~2015~~2016, respectively, compared with the ~~same~~ prior year ~~periods.~~period. The increases for the three- and six-month periods ended June 30, 2016 primarily relate to new premium rates filed in North Carolina and an increase in ~~net premiums was primarily attributable to increases in both refinance and~~ purchase activity. Refinance activity increased as mortgage interest rates were lower from prior year levels. Premiums from purchase transactions increased as well, due to both increased volume from favorable interest rates and overall economic conditions, and increases in average home prices.transactions. All of the Company's home office operations and the majority of its branch offices are located in North Carolina; as a result, the home and branch office net premiums written are primarily for North Carolina title insurance policies.

Agency Net Premiums: When a policy is written through a title agency, the premium is shared between the agency and the underwriter. Total premiums include an estimate of premiums for policies that have been issued by agents, but not reported to the Company as of the balance sheet date. To determine the estimated premiums, the Company uses historical experience, as well as other factors, to make certain assumptions about the average elapsed time between the policy effective date and the date the policies are reported. From time to time, the Company adjusts the inputs to the estimation process as agents report transactions and new information becomes available. In addition to estimating revenues, the Company also estimates and accrues agent commissions, claims provision, premium taxes, income taxes, and other expenses associated with the estimated revenues that have been accrued. The Company reflects any adjustments to the accruals in the result of operations in the period in which new information becomes available.

Agency net premiums written ~~increased 17.6%~~decreased 6.1% and ~~3.0%~~11.2% for the ~~three~~three- and ~~nine months~~six-month periods ended ~~September~~June 30, ~~2015,~~2016 respectively, compared with the prior year ~~periods.~~period. The ~~increases~~decrease in agency premiums ~~were~~was primarily attributable to ~~higher average real estate prices and higher levels of real estate activity in most states in which the Company operates, partially offset by~~ a decrease in the amount of premiums written from a few larger agents, particularly one agent in the Texas ~~market. Agency net premiums in Texas were down primarily due to reductions in estimated unreported agency premiums and lower levels of purchase transactions.~~

~~Agency Relationship:~~ ~~The Company receives a significant percentage of its Texas net premiums written from a single title agent, which~~market that was ~~recently~~ acquired by another title ~~insurer.~~insurer in the second quarter of 2015, partially offset by an increase in premiums written from other agents. For further details of this agency relationship, refer to Note 87 to the Notes to the Consolidated Financial Statements herein.

Following is a schedule of net premiums written for the three- and six-month periods ended ~~three and nine months endedSeptember~~June 30, ~~2015~~2016 and ~~2014~~2015 in select states in which the Company's two insurance subsidiaries, ITIC and NITIC, currently write insurance:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
State	2015			2014			2015			2014			2016			2015			2016			2015
North Carolina	$	10,320,737		$	8,717,897		$	27,618,674		$	23,375,703		$	10,698,238		$	9,991,710		$	18,018,991		$	17,297,937
Texas	6,460,351			6,900,659			21,047,559			29,874,149			5,843,995			7,083,079			10,297,613			14,587,208
South Carolina	3,280,208			2,620,089			8,344,775			5,774,293			2,216,931			2,844,342			4,770,672			5,064,567
Georgia	2,479,942			1,293,562			5,551,143			3,218,600			2,636,349			1,821,632			4,515,045			3,071,201
Virginia	1,558,932			1,361,935			4,235,041			3,570,595			1,732,741			1,448,333			2,988,653			2,676,109
Michigan	1,182,747			885,508			3,500,426			2,831,820
All Others	5,716,133			4,621,412			16,198,055			12,547,606			6,701,241			7,312,711			10,738,920			12,799,601
Premiums	30,999,050			26,401,062			86,495,673			81,192,766			29,829,495			30,501,807			51,329,894			55,496,623
Reinsurance Assumed	—			6,895			23,195			35,367			10,946			13,201			10,946			23,195
Reinsurance Ceded	(53,518		)	(51,122		)	(146,714		)	(112,193		)	(50,209		)	(50,427		)	(41,611		)	(93,196		)
Net Premiums Written	$	30,945,532		$	26,356,835		$	86,372,154		$	81,115,940		$	29,790,232		$	30,464,581		$	51,299,229		$	55,426,622

During the quarter ended March 31, 2016, the North Carolina Rating Bureau, which establishes premium rates for certain types of insurance in North Carolina, including title insurance, and of which Investors Title Insurance Company is a member, filed new premium rates that took effect on April 1, 2016. The newly filed rates positively impacted premiums by approximately $615,000 for the three-month period ended June 30, 2016.

Other Revenues

Other revenues primarily include other fee income, trust income, management services income, exchange services income, state tax credit income and income related to the Company’s equity method investments. Other revenues were ~~$2,816,828~~$2,885,302 and $~~7,924,329~~$4,937,486 for the ~~three~~three- and ~~nine~~ ~~months~~six-month periods ended ~~September~~June 30, ~~2015~~2016, respectively, compared with ~~$2,077,711~~$2,960,575 and $~~6,344,163~~$5,107,501 for the same prior year periods. The ~~increases~~decrease for the ~~three~~three- and ~~nine months~~six-month periods ended ~~September~~June 30, ~~2015,~~2016, primarily related to ~~increases~~decreases in earnings of unconsolidated affiliates, ~~fee income and exchange services revenues,~~ partially offset by ~~a decline~~increases in ~~income~~revenue from exchange services, management services, trust and investment management ~~services.~~services and title fees.

Investment Related Revenues

Investment income and realized gains and losses from investments are included in investment related revenues.

Investment Income

The Company derives a substantial portion of its income from investments in municipal and corporate bonds and equity securities. The Company's title insurance subsidiaries are required by statute to maintain minimum levels of investments in order to protect the interests of policyholders. The Company’s investment policy is designed to comply with regulatory requirements and to balance the competing objectives of asset quality and investment returns.

In formulating its investment strategy, the Company has emphasized after-tax ~~income.~~income and principal preservation. The Company’s investments are primarily in bonds and, to a lesser extent, equity securities. The effective maturity of the majority of the bonds is within 10 years. The Company’s invested assets are managed to fund its obligations and evaluated to ensure ~~long-term~~long term stability of capital accounts.

As the Company generates cash from operations, it is invested in accordance with the Company’s investment policy and corporate goals. The Company’s investment policy has been designed to balance multiple goals, including the assurance of a stable source of income from interest and dividends, the preservation of principal, and the provision of liquidity sufficient to meet insurance underwriting and other obligations as they become payable in the future. Securities purchased may include a combination of taxable bonds, tax-exempt bonds and equity securities. The Company strives to maintain a high quality investment portfolio. Interest and investment income levels are primarily a function of general market performance, interest rates and the amount of cash available for investment.

Investment income was ~~$1,117,529~~$1,167,005 and $~~3,427,055~~$2,318,016 for the three- and six-month periods ended ~~three and nine months endedSeptember~~June 30, ~~2015~~2016, respectively, compared with ~~$1,064,995~~$1,131,487 and $~~3,130,846~~$2,309,526 for the same ~~periods in~~ ~~2014~~.prior year periods. The increase in investment income for the ~~three~~three- and ~~nine months~~six-month periods ended ~~September~~June 30, ~~2015~~2016 was due ~~primarily~~ to higher levels of interest ~~and dividends earned in conjunction with a higher average portfolio balance for both fixed maturities and equity securities during the current year periods.~~received.

Net Realized (Loss) Gain on Investments

Dispositions of equity securities at a realized gain or loss reflect such factors as industry sector allocation decisions, ongoing assessments of ~~issuers'~~issuers’ business prospects and tax planning considerations. Additionally, the amounts of net realized investment gains orand losses are affected by assessments of ~~securities'~~securities’ valuation for other-than-temporary impairment. As a result of the interaction of these factors and considerations, the net realized investment gain or loss can vary significantly from period to period.

The net realized (loss) gain on investments was ~~$(338,631)~~$(14,828) and $~~601,336~~$135,002 for the three- and six-month periods ended ~~three and nine months endedSeptember~~June 30, ~~2015~~2016, respectively, compared with ~~$8,689~~$925,164 and $~~592,908~~$939,967 for the same ~~periods in~~ ~~2014~~.prior year periods. The net realized ~~loss~~gain on investments for the ~~three months~~six-month period ended ~~September~~June 30, ~~2015~~2016 includes impairment charges of $890,824 on certain investments and other assets that were deemed to be other-than-temporarily impaired, offset by a net realized gain on the sales of investments and other assets of $552,193. There were no impairments for the three months ended September 30, 2014. The ~~2015~~ year-to-date gain includes impairment charges of $901,973 on certain investments and other assets that were deemed to be other-than-temporarily impaired, offset by a net realized gain on the sales of investments and other assets of $1,503,309. The ~~2014~~ ~~year-to-date gain includes impairment charges of $10,062~~$115,238 on certain investments that were deemed to be other-than-temporarily impaired, offset by a net realized gain on the sales of investments and other assets of ~~$602,970.~~$250,240. The net realized gain on investments for the six-month period ended June 30, 2015 includes impairment charges of $11,149 on certain investments that were deemed to be other-than-temporarily impaired, offset by a net realized gain on the sales of investments and other assets of $951,116. Management believes unrealized losses on remaining fixed income and equity securities at ~~September~~June 30, ~~2015~~2016 are temporary in nature.

The securities in the ~~Company's~~Company’s investment portfolio are subject to economic conditions and market risks. The Company considers relevant facts and circumstances in evaluating whether a credit or interest-related impairment of a security is other-than-temporary. Relevant facts and circumstances include the extent and length of time the fair value of an investment has been below cost.

There are a number of risks and uncertainties inherent in the process of monitoring impairments and determining if ~~impairments are~~an impairment is other-than-temporary. These risks and uncertainties include the risk that the economic outlook will be worse than expected or have more of an impact on the issuer than ~~anticipated,~~anticipated; the risk that the ~~Company's~~Company’s assessment of an ~~issuer's~~issuer’s ability to meet all of its contractual obligations will change based on changes in the characteristics of that ~~issuer,~~issuer; the risk that information obtained by the Company or changes in other facts and circumstances leads management to change its intent to hold the equity security until it recovers in value or its intent to sell the debt ~~security,~~security; and the risk that management is making decisions based on misstated information in the financial statements provided by issuers.

Expenses

The Company's operating expenses consist primarily of commissions to agents, salaries, employee benefits and payroll taxes, office occupancy and operations and provision for claims. Operating expenses ~~increased 8.5%~~decreased 8.1% and ~~2.7%~~10.9% for the three- and six-month periods ended ~~three and nine months endedSeptember~~June 30, ~~2015~~2016, respectively, compared with the same ~~periods~~prior year periods. The decreases in ~~2014. For the three months ended September 30, 2015, expenses increased~~2016 are primarily due to ~~an increase~~a decrease in commissions ~~partially offset by a decrease in~~and the provision for claims. For the nine months ended September 30, 2015, expenses increased primarily due to normal inflationary increases in compensation and benefit costs and higher staffing levels to support ongoing software development initiatives.

Following is a summary of the Company's operating expenses for the three- and six-month periods ended ~~three and nine months endedSeptember~~June 30, ~~2015~~2016 and ~~2014~~2015. Inter-segment eliminations have been netted; therefore, the individual segment amounts will not agree to Note 4 in the accompanying Consolidated Financial Statements.


	Three Months Ended September 30,								Nine Months Ended September 30,								Three Months Ended June 30,								Six Months Ended June 30,
	2015		%		2014		%		2015		%		2014		%		2016		%		2015		%		2016		%		2015		%
Title Insurance	$	26,529,660	94.4	%	$	24,513,591	94.6	%	$	78,992,688	94.3	%	$	77,153,327	94.6	%	$	25,611,212	93.9	%	$	28,177,513	94.9	%	$	46,335,189	93.5	%	$	52,463,028	94.3	%
All Other	1,575,100		5.6	%	1,396,149		5.4	%	4,740,067		5.7	%	4,396,481		5.4	%	1,674,452		6.1	%	1,517,797		5.1	%	3,229,036		6.5	%	3,164,967		5.7	%
Total	$	28,104,760	100.0	%	$	25,909,740	100.0	%	$	83,732,755	100.0	%	$	81,549,808	100.0	%	$	27,285,664	100.0	%	$	29,695,310	100.0	%	$	49,564,225	100.0	%	$	55,627,995	100.0	%

On a combined basis, after-tax profit margins were ~~13.0%~~13.4% and ~~10.5%~~10.8% for the three- and six-month periods ended ~~three~~June 30, 2016 respectively, and ~~nine months~~11.6% and 9.2% for the three- and six-month periods ended~~September~~June 30, 2015~~, respectively, and 8.8% and~~ ~~7.6%~~ ~~for the~~ ~~three and nine months endedSeptember 30, 2014, respectively.~~. The Company continually strives to enhance its competitive strengths and market position, including ongoing initiatives to reduce its operating expenses.

Total Company

Salaries, Employee Benefits and Payroll Taxes: Personnel costs include base salaries, benefits and payroll taxes, and bonuses paid to employees. Salaries, employee benefits and payroll taxes were $7,173,198 and $14,645,149 for the three- and six-month periods ended June 30, 2016 respectively, compared with $6,866,632 and $14,144,081 for the same prior year periods. On a consolidated basis, salaries, employee benefits and payroll taxes as a percentage of total revenues were 21.2% and 25.0% for the three- and six-month periods ended June 30, 2016 respectively, compared with 19.4% and 22.2% for the same prior year periods. The increases in payroll expenses for the three- and six-month periods ended June 30, 2016 primarily relate to normal inflationary increases and an increase in the accrual for incentive compensation.

Office Occupancy and Operations: Office occupancy and operations expenses primarily include office rent and utilities, depreciation, maintenance, telecommunications and insurance expenses. Office occupancy and operations expenses were $1,535,902 and $3,029,762 for the three- and six-month periods ended June 30, 2016 respectively, compared with $1,443,297 and $2,747,518 for the same prior year periods. As a percentage of total revenues, office occupancy and operations expenses were 4.5% and 5.2% for the three- and six-month periods ended June 30, 2016 respectively, compared with 4.1% and 4.3% for the same prior year periods. The increases in expenses in 2016 primarily related to increases in depreciation and maintenance expenses.

Business Development: Business development expenses primarily include marketing and travel-related expenses. Business development expenses were $606,258 and $1,086,648 for the three- and six-month periods ended June 30, 2016 respectively, compared with $578,194 and $1,065,169 for the same prior year periods. Business development expenses increased 4.9% and 2.0% for the three- and six-month periods ended June 30, 2016 respectively, compared with the same prior year periods. The increases for the three- and six-month periods ended June 30, 2016 primarily related to an increase in marketing expenses.

Filing Fees, Franchise and Local Taxes: Filing fees, franchise and local tax expenses include insurance filing and licensing fees, franchise taxes, excise taxes, and local taxes. Filing fees, franchise and local tax expenses were $267,103 and $497,157 for the three- and six-month periods ended June 30, 2016 respectively, compared with $221,098 and $437,741 for the same prior year periods.

Professional and Contract Labor Fees: Professional and contract labor fees were $537,446 and $1,076,099 for the three- and six-month periods ended June 30, 2016 respectively, compared with $680,483 and $1,264,590 for the same prior year periods. The decrease for the three- and six-month periods ended June 30, 2016 was primarily attributable to a decrease in consulting fees associated with the Company's ongoing software initiatives.

Other Expenses: Other operating expenses primarily include miscellaneous operating expenses of the trust division and other miscellaneous expenses of the title segment. These amounts typically fluctuate in relation to transaction volume of the title segment and the trust division. Other expenses were $269,250 and $472,231 for the three- and six-month periods ended June 30, 2016 respectively, compared with $241,358 and $444,906 for the same prior year periods.

Title Insurance

Commissions: Agent commissions represent the portion of premiums retained by agents pursuant to the terms of their respective agency contracts. Commissions to agents ~~increased~~decreased ~~17.0%~~7.2% and ~~0.3%~~13.6% for the three- and six-month periods ended ~~three and nine months endedSeptember~~June 30, ~~2015~~2016, respectively, compared with the same prior year periods. Commission expense as a percentage of net premiums written by agents was ~~73.5%~~73.3% and ~~74.3%~~72.7% for the three- and six-month periods ended ~~three and nine months endedSeptember~~June 30, ~~2015~~2016, respectively, compared with ~~73.9%~~74.3% and ~~76.3%~~74.8% for the same ~~periods in~~ ~~2014~~.prior year periods. Commission expense ~~was flat versus~~for the ~~prior year period even as premiums grew, as a larger proportion of premiums originated in markets with~~three- and six-month periods ended June 30, 2016 decreased primarily due to lower ~~average commission rates.~~agent premiums. Commission rates may vary due to geographic locations, different levels of premium rate structures and state regulations.

Provision for Claims: The provision for claims as a percentage of net premiums written was ~~2.3%~~2.2% and ~~4.2%~~1.3% for the three- and six-month periods ended ~~three and nine months endedSeptember~~June 30, ~~2015~~2016, respectively, compared with ~~5.7%~~7.0% and ~~5.2%~~5.3% for the same ~~periods in 2014. For the three and nine months ended September 30, 2015, the~~prior year periods. The decrease in the provision for claims in the current quarter compared with the prior year period primarily related to favorable experience in recent policy years. Recent policy years continue to develop favorably, with the Company’s incurred losses for policy years 2011 through 2015 being below historical levels.

The decrease in the loss provision rate for the ~~nine months~~six-month periods ended ~~September~~June 30, ~~2015~~2016 from the ~~2014~~2015 level resulted in approximately ~~$827,000~~$2,036,000 less in reserves than would have been recorded at the higher ~~2014~~2015 level. Loss provision ratios are subject to variability and are reviewed and adjusted as experience develops.

Title claims are typically reported and paid within the first several years of policy issuance. The provision for claims reflects actual payments of claims, net of recovery amounts, plus adjustments to the specific and incurred but not reported claims reserves, the latter of which are actuarially determined based on historical claims experience. Actual payments of claims, net of recoveries, were ~~$2,401,401~~$1,246,871 and ~~$3,285,478~~$1,469,422 for the ~~nine months~~six-month periods ended ~~September~~June 30, ~~2015~~2016 and ~~2014~~2015, respectively.

Reserves for Claims: At ~~September~~June 30, ~~2015~~2016, the total reserve for claims was $~~37,897,000~~37,205,000. Of that total, approximately ~~$5,277,000~~$4,889,000 was reserved for specific claims, and approximately ~~$32,620,000~~$32,316,000 was reserved for claims for which the Company had no notice. Because of the uncertainty of future claims, changes in economic conditions and the fact that claims may not materialize for several years, reserve estimates are subject to variability.

Changes from prior periods in the expected liability for claims reflect the uncertainty of the claims environment, as well as the limited predictive power of historical data. The Company continually updates and refines its reserve estimates as current experience develops and credible data emerges. Such data includes payments on claims closed during the quarter, new details that emerge on still-open cases that cause claims adjusters to increase or decrease the case reserves, and the impact that these types of changes have on the ~~Company's~~Company’s total loss provision. Adjustments may be required as new information develops which often varies from past experience.

~~Salaries, Employee Benefits and Payroll Taxes:~~ ~~Personnel costs include base salaries, benefits and payroll taxes, and bonuses paid to employees. Salaries, employee benefits and payroll taxes were $6,957,874 and $21,101,955~~ ~~for the~~ ~~three and nine months endedSeptember 30, 2015, respectively, compared with $6,609,425 and $19,250,116~~ ~~for the prior year periods. On a consolidated basis, salaries, employee benefits and payroll taxes as a percentage of total revenues were 20.1% and~~ ~~21.5%~~ ~~for the~~ ~~three and nine months endedSeptember 30, 2015, respectively, compared with 22.4% and~~ ~~21.1%~~ for the prior year periods. The increases in expenses for the three and nine months ended September 30, 2015 primarily relate to normal inflationary increases in compensation and benefit costs, and higher staffing levels to support ongoing software development activities.

~~Office Occupancy and Operations:~~ Office occupancy and operations expenses primarily include office rent and utilities, depreciation, maintenance, telecommunications and insurance expenses. Office occupancy and operations expenses were $1,342,288 and $4,089,806 for the ~~three and nine months endedSeptember 30, 2015, respectively, compared with $1,257,009 and $3,683,980 for the prior year periods. As a percentage of total revenues, office occupancy and operations expenses were~~ ~~3.9%~~ ~~and 4.2% for the~~ ~~three and nine months endedSeptember 30, 2015, respectively, compared with 4.3% and~~ ~~4.0%~~ ~~for the prior year periods. The increases in expenses in 2015 primarily related to increases in printing, maintenance, contract services and depreciation expenses.~~

~~Business Development:~~ ~~Business development expenses primarily include marketing and travel-related expenses. Business development expenses were $568,189 and $1,633,358~~ ~~for the~~ ~~three and nine months endedSeptember 30, 2015, respectively, compared with $552,215 and $1,581,872~~ ~~for the prior year periods. Business development expenses increased~~ ~~2.9%~~ ~~and 3.3% for the~~ ~~three and nine months endedSeptember 30, 2015, respectively, compared with the prior year periods. The increase for the three and nine months ended~~ ~~September 30, 2015~~ ~~primarily related to increased marketing expenses.~~

~~Filing Fees, Franchise and Local Taxes:~~ Filing fees, franchise and local tax expenses include insurance filing and licensing fees, franchise taxes, excise taxes, and local taxes. Filing fees, franchise and local tax expenses were $134,880 and $572,621 for the ~~three and nine months endedSeptember 30, 2015, respectively, compared with~~ ~~$233,079~~ ~~and $648,022 for the prior year periods.~~

Premium and Retaliatory ~~Taxes:~~ Taxes: Title insurance companies are generally not subject to state income or franchise taxes. However, in most states they are subject to premium and retaliatory taxes, as defined by statute. Premium and retaliatory tax rates vary from state to state; accordingly, the total premium and retaliatory tax incurred is dependent upon the geographical mix of insurance revenues. Premium and retaliatory taxes as a percentage of net premiums written were 1.9% and 1.7% for the three- and six-month periods ended June 30, 2016 respectively, compared with 2.1% and 2.0% for the ~~three and nine months endedSeptember 30, 2015, respectively, compared with~~ ~~1.9%~~ ~~and 1.6% for the~~same prior year periods.

~~Professional and Contract Labor Fees:~~ ~~Professional and contract labor fees were $661,879 and $1,926,469~~ ~~for the~~ ~~three and nine months endedSeptember 30, 2015, respectively, compared with $621,305 and $1,976,272~~ ~~for the prior year periods. The increase for the three months ended September 30,~~ ~~2015~~ was primarily attributable to an increase in legal and accounting fees, partially offset by a decrease in consulting fees associated with the Company's ongoing software initiatives. The decrease for the nine months ended September 30, 2015 was primarily attributable to a decrease in consulting fees associated with the Company's ongoing software initiatives, partially offset by an increase in legal and accounting fees.

~~Other Expenses:~~ Other operating expenses primarily include miscellaneous operating expenses of the trust division and other miscellaneous expenses of the title segment. These amounts typically fluctuate in relation to transaction volume of the title segment and the trust division. Other expenses were $708,918 for the nine months ended September 30, 2015 compared with $656,653 for the prior year period.

Income Taxes

The provision for income taxes was ~~$1,941,000~~$2,012,000 and ~~$4,250,000~~$2,791,000 for the three- and six-month periods ended ~~three and nine months endedSeptember~~June 30, ~~2015~~2016, respectively, compared with ~~$1,004,000~~$1,666,000 and ~~$2,656,000~~$2,309,000 for the same prior year periods. Income tax expense as a percentage of earnings before income taxes was ~~30.2%~~30.8% and ~~29.1%~~30.6% for the three- and six-month periods ended ~~three and nine months endedSeptember~~June 30, ~~2015~~2016, respectively, compared with ~~27.9%~~28.8% and ~~27.6%~~28.3% for the same prior year periods. The increase in the effective rate for ~~2015~~2016 compared with ~~2014~~2015 was primarily due to a higher proportion of taxable to tax-exempt income. The effective income tax rate for both ~~2015~~2016 and ~~2014~~2015 was below the U.S. federal statutory income tax rate of 34%, primarily due to the effect of tax-exempt income. Tax-exempt income lowers the effective tax rate.

~~Management~~The Company believes it is more likely than not that the tax benefits associated with recognized impairment and unrecognized losses recorded through ~~September~~June 30, ~~2015~~2016 will be realized. However, this judgment could be impacted by further market fluctuations.

Liquidity and Capital Resources

The ~~Company's~~Company’s current cash requirements include general operating expenses, income taxes, capital expenditures, dividends on its common stock and repurchases of its ~~common~~commons stock. Cash flows from operations have ~~also~~ historically been the primary source of financing for expanding operations, whether through organic growth or outside investments.

The Company evaluates nonorganic growth opportunities, such as mergers and acquisitions, from time to time in the ordinary course of business. Because of the episodic nature of these events, related incremental liquidity and capital resource needs can be difficult to predict.

The Company’s operating results and cash flows are heavily dependent on the real estate market. The Company’s business has certain fixed costs such as personnel; therefore, changes in the real estate market are monitored closely, and operating expenses such as staffing levels are managed and adjusted accordingly. The Company believes that its significant working capital position and management of operating expenses will aid its ability to manage cash resources through fluctuations in the real estate market.

Cash Flows: Net cash flows provided by operating activities were $~~12,110,111~~$5,545,127 and $~~4,849,154~~$4,539,205 for the ~~nine months~~six-month periods ended ~~September~~June 30, ~~2015~~2016 and ~~2014~~,2015, respectively. Cash flows from operating activities increased in ~~2015~~2016 from ~~2014~~,2015, primarily due to decreases in other assets and receivables, and an increase in ~~net income,~~the provision for deferred taxes, partially offset by the timing of payable disbursements, a lower provision for claims and an increase in income taxes ~~recoverable, and lower claim payments, partially offset by increases in earnings from other investments and receivables.~~recoverable.

Cash flows from non-operating activities have historically consisted of purchases and proceeds from investing activities, repurchases of common stock and the payment of dividends. In ~~2015~~2016, the Company had higher levels of investment purchase activity, proceeds from investing activities, ~~and~~ repurchases of common stock and dividends paid compared with the prior ~~year.~~year period.

The Company maintains a high degree of liquidity within its investment portfolio, classified as ~~available for sale,~~available-for-sale, in the form of cash, short-term investments and other readily marketable securities. As of ~~September~~June 30, ~~2015,~~2016, the Company held cash and cash equivalents of ~~$19,290,813,~~$22,619,643, short-term investments of ~~$13,884,266,~~$2,665,302, fixed maturity securities of ~~$98,034,042~~$113,672,233 and equity securities of ~~$35,135,885.~~$38,961,905. The net effect of all activities on total cash and cash equivalents ~~was an increase~~were increases of $~~3,464,298~~$829,575 in ~~2015~~2016 and ~~a decrease of $4,239~~$2,996,742 in ~~2014~~.2015.

Capital Resources: The amount of capital resources the Company maintains is influenced by state regulation, the need to maintain ~~favorable~~superior financial ratings from third party rating agencies and other marketing and operational considerations.

The Company's significant sources of funds are dividends and distributions from its subsidiaries, primarily its two title insurance subsidiaries. Cash is received from its subsidiaries in the form of dividends and as reimbursements for operating and other administrative expenses that it incurs. The reimbursements are executed within the guidelines of management agreements between the Company and its subsidiaries.

The ability of the Company's title insurance subsidiaries to pay dividends to the Company is subject to state regulation from their respective states of domicile. Each state regulates the extent to which title underwriters can pay dividends or make distributions and requires prior regulatory approval of the payment of dividends and other intercompany transfers. The maximum dividend permitted by law is not necessarily indicative of an insurer’s actual ability to pay dividends. Depending on regulatory conditions, the Company may in the future need to retain cash in its title insurance subsidiaries in order to maintain their statutory capital position. As of ~~September~~June 30, ~~2015,~~2016, both ITIC and ~~NTIIC~~NITIC met the minimum capital, surplus and reserve requirements for each state ~~in which~~where they are ~~licensed.~~

~~Historically, the Company's geographical focus has been concentrated in states with premium rates that are typically lower than the national average, contributing~~licensed to ~~the need to maintain higher levels of capital to accommodate risk exposure beyond the industry average.~~issue title insurance.

While state regulation and the need to cover risks may set a minimum level for capital requirements, other factors necessitate maintaining capital resources in excess of the required minimum amounts. For instance, the Company’s capital resources help it maintain high ratings from insurance company rating agencies. Superior ratings strengthen the Company's ability to compete with larger, well known title insurers with national footprints.

A strong financial position provides necessary flexibility to fund potential acquisition activity, to invest in the Company's core business, and to minimize the financial impact of potential adverse developments. Adverse developments that generally require additional capital include adverse financial results, changes in statutory accounting requirements by regulators, reserve charges, investment losses or costs incurred to ~~adopt~~adapt to a changing regulatory environment, including costs related to emerging CFPB regulation of the real estate industry.

The Company bases its capitalization levels, in part, on net coverage retained. Since the Company’s geographical focus has been and continues to be concentrated in states with average premium rates typically lower than the national average, capitalization relative to premiums will usually appear higher than industry averages.

Due to the Company’s historical ability to consistently generate positive cash flows from its consolidated operations and investment income, management believes that funds generated from operations will enable the Company to adequately meet its current operating needs for the foreseeable future. However, there can be no assurance that future experience will be similar to historical experience, since it is influenced by such factors as the interest rate environment, real estate activity, the Company’s claims-paying ability and its financial strength ratings. In addition to operational and investment considerations, taking advantage of opportunistic external growth opportunities may necessitate obtaining additional capital resources. The Company is unaware of any trend that is likely to result in material adverse liquidity changes, but continually assesses its capital allocation strategy, including decisions relating to repurchasing the Company’s stock and/or conserving cash.

Purchase of Company ~~Stock:~~ Stock: On November 9, 2015, the Board of Directors of the Company approved the purchase of an additional 163,335 shares pursuant to the ~~Company's~~Company’s repurchase plan, such that there was authority remaining under the plan to purchase up to an aggregate of 500,000 shares of the Company’s common stock pursuant to the plan immediately after this approval. Unless terminated earlier by resolution of the Board of Directors, the plan will expire when all shares authorized for purchase under the plan have been purchased. Pursuant to the Company’s ongoing purchase program, the Company has purchased ~~72,044~~34,870 shares for the ~~nine months~~six-month period ended ~~September~~June 30, ~~2015~~2016 and ~~9,824~~24,432 for the same period in ~~2014~~2015 at an average per share price of ~~$71.72~~$89.88 and ~~$66.43~~,$71.52, respectively. The Company anticipates making further purchases under this plan from time to time in the future, depending on such factors as the prevailing market price of the Company’s common stock, the Company’s available cash and then existing alternative uses for such cash.

Capital Expenditures: Capital Expenditures were approximately ~~$2,313,000 through September~~$1,419,000 for six-month period ended June 30, ~~2015.~~2016. In ~~2015,~~2016, the Company has plans for various capital improvement projects, including increased investment in a number of technology and system development initiatives and hardware purchases which are anticipated to be funded via cash flows from operations. All material anticipated capital expenditures are subject to periodic review and revision and may vary depending on a number of factors.

Off-Balance Sheet Arrangements

As a service to its customers, the Company, through 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.

In addition, in administering tax-deferred property exchanges, ITEC serves as a qualified intermediary for exchanges, holding the net sales proceeds from relinquished property to be used for purchase of replacement property. ITAC serves as exchange accommodation titleholder and, through limited liability companies that are wholly owned subsidiaries of ITAC, holds property for exchangers in reverse exchange transactions. Like-kind exchange deposits and reverses exchange property held by the Company for the purpose of completing such transactions totaled approximately $~~205,861,000~~159,781,000 and $~~82,477,000~~171,010,000 as of ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014~~2015, respectively. These exchange deposits are held at third-party financial institutions. These amounts are not considered assets of the Company for accounting purposes and, therefore, are excluded from the accompanying Consolidated Balance Sheets. Exchange services revenues include earnings on these deposits; therefore, investment income is shown as exchange services revenue, rather than investment income. The Company remains contingently liable to customers for the transfers of property, disbursements of proceeds, and the return on the proceeds at the agreed upon rate.

External assets under management of Investors Trust Company are not considered assets of the Company and, therefore, are excluded from the accompanying Consolidated Balance Sheets.

It is not the general practice of the Company to enter into off-balance sheet arrangements or issue guarantees to third parties. The Company does not have any material source of liquidity or financing that involves off-balance sheet arrangements. Other than items noted above, off-balance sheet arrangements are generally limited to the future payments under noncancelable operating leases and payments due under various agreements with third party service providers.

Recent Accounting Standards

For a description of recent accounting pronouncements, please refer to Note 1 to the Notes to Consolidated Financial Statements herein.

Safe Harbor for Forward-Looking Statements

This Quarterly Report on Form 10-Q, as well as information included in future filings by the Company with the Securities and Exchange Commission and information contained in written material, press releases and oral statements issued by or on behalf of the Company, contains, or may contain, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that reflect management’s current outlook for future periods. These statements may be identified by the use of words such as “plan,” “expect,” “aim,” “believe,” “project,” “anticipate,” “intend,” “estimate,” “should,” “could,” “would” and other expressions that indicate future events and trends. All statements that address expectations or projections about the future, including statements about the Company’s strategy for growth, product and service development, market share position, claims, expenditures, financial results and cash requirements, are forward-looking statements. Without limitation, projected developments in mortgage interest rates and the overall economic environment set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Business Trends and Recent Conditions” constitute forward-looking statements. Forward-looking statements are based on certain assumptions and expectations of future events that are subject to a number of risks and uncertainties.

Actual future results and trends may differ materially from historical results or those projected in any such forward-looking statements depending on a variety of factors, including, but not limited to, the following:

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;

the possible inadequacy of provisions for claims to cover actual claim losses;

the incidence of fraud-related losses;

unanticipated adverse changes in securities markets, including interest rates, could result in material losses to the Company’s investments;

significant competition that the Company’s operating subsidiaries face, including the Company’s ability to develop and offer products and services that meet changing industry standards in a timely and cost-effective manner and expansion into new geographic locations;

the ~~Company's~~Company’s reliance upon ~~the Texas and~~ North Carolina ~~markets~~ for a significant portion of its premiums;

~~the Company's receipt of a significant percentage of its net premiums written from a single title agent, which was recently acquired by another title insurer;~~

compliance with government regulation, including pricing regulation, and significant changes to applicable regulations or in their application by regulators;

the impact of governmental oversight of compliance by service ~~provider’s compliance~~providers, including title insurance agents, with federal consumer financial ~~laws, including title insurance agents;~~laws;

possible downgrades from a rating agency, which could result in a loss of underwriting business;

the inability of the Company to manage, develop and implement technological advancements and prevent system interruptions or unauthorized system intrusions;

statutory requirements applicable to the Company’s insurance subsidiaries that require them to maintain minimum levels of capital, surplus and reserves and that restrict the amount of dividends ~~that~~ they may pay to the Company without prior regulatory approval;

the desirability to maintain capital above statutory ~~minimums~~minimum requirements for competitive, marketing and other reasons;

heightened regulatory scrutiny and investigations of the title insurance industry;

the Company’s dependence on key management and marketing personnel, the loss of whom could have a material adverse effect on the Company’s business;

reform of government-sponsored entities that could adversely impact the Company;

policies and procedures for the mitigation of risks that may be insufficient to prevent losses;

the shareholder rights plan ~~which~~ could discourage transactions involving actual or potential changes of control; and

other risks detailed elsewhere in this document and in the Company’s other filings with the SEC.

These and other risks and uncertainties may be described from time to time in the Company's other reports and filings with the Securities and Exchange Commission. For more details on factors that could affect expectations, see the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2014.~~2015. The Company is not under any obligation (and expressly disclaims any such obligation) and does not undertake to update or alter any forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made. You should consider the possibility that actual results may differ materially from our forward-looking statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company’s primary exposure to market risk relates to interest rate risk associated with certain financial instruments. Although the Company monitors its risk associated with fluctuations in interest rates, it does not currently use derivative financial instruments to hedge these risks.

No material changes in the Company’s market risk or market strategy occurred during the quarter ended ~~September~~June 30, ~~2015~~2016.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

The Company's disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in such reports is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure.

No system of controls, no matter how well designed and operated, can provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that the system of controls has operated effectively in all cases. The Company’s disclosure controls and procedures, however, are designed to provide reasonable assurance that the objectives of disclosure controls and procedures are met.

Pursuant to Rule 13a-15(b) under the Exchange Act, an evaluation was performed under the supervision and with the participation of the Company's management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of ~~September~~June 30, ~~2015~~2016 to provide reasonable assurance that the objectives of disclosure controls and procedures are met.

Changes in Internal Control Over Financial Reporting

During the quarter ended ~~September~~June 30, ~~2015~~,2016, there were no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

See discussion of legal proceedings in Note 87 to the Consolidated Financial Statements included in Item 1 of Part I of this Report, which is incorporated by reference into this Part II, Item 1.

Item 1a. Risk Factors

~~The following supplements the risk factors~~There have been no material changes in risks previously disclosed under Item 1a. of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2014 and Quarterly Report on Form 10-Q for the quarter ended June 30,~~ 2015.

In recent years, the Company received a significant portion of its premiums from one agent. This agent was recently acquired by another title insurer. Significant declines in the agent's business would have a negative impact on premiums written.

The Company has one agent that accounted for 12.2%, 23.6% and 16.4% of net premiums written for the nine months ended September 30, 2015 and the years ended December 31, 2014 and 2013, respectively. On July 1, 2015, a competing title insurer acquired the assets of the agent. The agent is under no legal commitment to remit a minimum amount of premiums to the Company, and could cease doing so at any time. A significant decline in business originated by this agent for the Company, whether due to that business being diverted to its new title insurer owner or otherwise, could have a material negative impact on the Company's premiums written.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) None

(b) None

(c) The following table provides information about purchases by the Company (and all affiliated purchasers) during the quarter ended ~~September~~June 30, ~~2015~~2016 of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act:


	Issuer Purchases of Equity Securities					Issuer Purchases of Equity Securities
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	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					384,478					477,785
July 2015	4,113	$	70.67	4,113	380,365
August 2015	43,482	$	71.93	43,482	336,883
September 2015	17	$	70.29	17	336,866
April 2016						2,505	$	95.02	2,505	475,280
May 2016						6,150	$	94.15	6,150	469,130
June 2016						7,420	$	93.05	7,420	461,710
Total:	47,612	$	71.82	47,612	336,866	16,075	$	93.78	16,075	461,710

For the quarter ended ~~September~~June 30, ~~2015~~2016, the Company purchased an aggregate of ~~47,612~~16,075 shares of the Company’s common stock pursuant to the Company’s ongoing purchase program that was initially announced ~~publicly~~ on June 5, 2000. On November 9, 2015, the Board of Directors of the Company approved the purchase of an additional 163,335 shares pursuant to the ~~Company's~~Company’s repurchase plan, such that there was authority remaining under the plan to purchase up to an aggregate of 500,000 shares of the Company’s common stock pursuant to the plan immediately after this approval. Unless terminated earlier by resolution of the Board of Directors, the plan will expire when all shares authorized for purchase under the plan (as such ~~numbers~~number may be amended by the Board from time to time) have been purchased. The Company anticipates making further purchases under this plan from time to time in the future, depending on such factors as the prevailing market price of the Company’s common stock, the Company’s available cash and then existing alternative uses for such cash.

~~Item 5.~~ ~~Other Information~~

~~Amendment to Bylaws~~

~~On November 9, 2015, the board of directors (the “Board”) of the Company adopted Amended and Restated Bylaws (the “Bylaws”) of the Company. The Bylaws became effective immediately and include, among other things, the following changes:~~

~~Providing for additional disclosure requirements for notices of director nominations and shareholder proposals.~~

~~Clarifying the procedures for postponement, rescheduling, recessing and adjournment of any meeting of shareholders.~~

~~Clarifying the powers of the presiding officer of a shareholder meeting.~~

~~Providing for an explicit confidentiality obligation for shareholder-nominated directors.~~

~~Clarifying the time period in which an annual meeting of shareholders may be held.~~

Conforming the Bylaws to Section 55-8-10 of the North Carolina Business Act by clarifying that, in addition to the shareholders, the Board has the power to fill any newly created directorship or any vacancy occurring in the Board.

Designating the state and federal courts located within the state of North Carolina as the sole and exclusive forum for certain legal actions, unless the Company consents in writing to the selection of an alternative forum.

The foregoing description of the Bylaws is not complete and is qualified in its entirety by reference to the complete text of the Bylaws, a copy of which is filed as Exhibit 3.1 to this Quarterly Report on Form 10-Q and incorporated by reference herein.

Item 6. Exhibits



~~3.1~~	~~Amended and Restated Bylaws of the Company dated November 9, 2015 (filed herewith)~~

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

SIGNATURE

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	INVESTORS TITLE COMPANY

	By:	/s/ James A. Fine, Jr.
		James A. Fine, Jr.
		President, Principal Financial Officer and
		Principal Accounting Officer

Dated: ~~November 9, 2015~~August 8, 2016



	2015	2014
Cumulative probability of earning maximum rate until maturity	—%	—%
Cumulative probability of principal returned prior to maturity	95.2%	95.2%
Cumulative probability of default at some future point	4.8%	4.8%



	2015			2014
Gross realized gains:
Corporate debt securities	$	5,417		$	4,286
Common stocks and nonredeemable preferred stocks	1,436,386			1,013,931
Total	$	1,441,803		$	1,018,217
Gross realized losses:
General obligations of U.S. states, territories and political subdivisions	$	(12,319	)	$	—
Special revenue issuer obligations of U.S. states, territories and political subdivisions	(397		)	—
Common stocks and nonredeemable preferred stocks	(39,017		)	(178,047		)
Impairments of bonds, debt and equity securities	(668,904		)	—
Total	$	(720,637	)	$	(178,047	)
Net realized gain from securities	$	721,166		$	840,170
Net realized (losses) gains on other investments:
Impairments of other investments	$	(233,069	)	$	(10,062	)
Gains on other investments	113,239			26,234
Losses on other investments	—			(263,434		)
Total	$	(119,830	)	$	(247,262	)
Net realized gain on investments	$	601,336		$	592,908