UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the quarterly period ended March 31, ~~2016~~2017

OR



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

For the transition period from ___________________ to ___________________

Commission File Number: 0-11774

INVESTORS TITLE COMPANY

(Exact name of registrant as specified in its charter)



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

121 North Columbia Street, Chapel Hill, North Carolina 27514

(Address of principal executive offices) (Zip Code)

(919) 968-2200

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 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, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” ~~and~~ “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):



	Large accelerated filer			~~Accelerated filer~~	X		~~Non-accelerated~~Accelerated filer			~~Smaller reporting company~~X

	Non-accelerated filer				(doDo not check if a smaller reporting company)

					Smaller reporting company

					Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

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

Yes ___ No X

As of April ~~15, 2016~~17, 2017, there were ~~1,931,334~~1,886,088 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 March 31, ~~2016~~2017 and December 31, ~~2015~~2016	1

	Consolidated Statements of Income For the Three Months Ended March 31, ~~2016~~2017 and ~~2015~~2016	2

	Consolidated Statements of Comprehensive Income For the Three Months Ended March 31, ~~2016~~2017 and ~~2015~~2016	3

	Consolidated Statements of Stockholders’ Equity For the Three Months Ended March 31, ~~2016~~2017 and ~~2015~~2016	4

	Consolidated Statements of Cash Flows For theThree Months Ended March 31, ~~2016~~2017 and ~~2015~~2016	5

	Notes to Consolidated Financial Statements	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

Item 4.	Controls and Procedures	32

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	33

Item 1a.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 6.	Exhibits	34


SIGNATURE		35

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Investors Title Company and Subsidiaries

Consolidated Balance Sheets

As of March 31, ~~2016~~2017 and December 31, ~~2015~~2016

(Unaudited)


	March 31, 2016				December 31, 2015			March 31, 2017				December 31, 2016
Assets:
Investments in securities:
Fixed maturities, available-for-sale, at fair value (amortized cost: 2016: $101,325,609; 2015: $102,015,826)	$	106,383,823			$	106,066,384
Equity securities, available-for-sale, at fair value (cost: 2016: $23,962,393; 2015: $23,855,873)	37,681,569				37,513,464
Fixed maturities, available-for-sale, at fair value (amortized cost: March 31, 2017: $96,557,152; December 31, 2016: $100,162,357)								$	98,382,799			$	101,934,077
Equity securities, available-for-sale, at fair value (cost: March 31, 2017: $25,203,870; December 31, 2016: $24,836,032)								43,068,433				41,179,259
Short-term investments	7,520,069				6,865,406			13,635,465				6,558,840
Other investments	8,814,605				10,106,828			10,582,877				11,181,531
Total investments	160,400,066				160,552,082			165,669,574				160,853,707

Cash and cash equivalents	21,873,731				21,790,068			25,718,050				27,928,472
Premium and fees receivable	6,940,127				8,392,697			8,663,495				8,654,161
Accrued interest and dividends	1,320,942				1,004,126			1,336,998				1,035,152
Prepaid expenses and other assets	8,267,670				12,634,105			10,323,199				9,456,523
Property, net	7,502,745				7,148,951			9,477,362				8,753,466
Current income taxes recoverable	1,036,309				—
Goodwill and other intangible assets								12,023,053				12,256,641
Total Assets	$	207,341,590			$	211,522,029		$	233,211,731			$	228,938,122

Liabilities and Stockholders’ Equity
Liabilities:
Reserves for claims	$	37,397,000			$	37,788,000		$	35,445,000			$	35,305,000
Accounts payable and accrued liabilities	18,768,195				25,043,588			22,577,847				26,146,480
Current income taxes payable	—				210,355			3,479,935				1,232,432
Deferred income taxes, net	7,762,160				5,703,006			11,421,379				11,118,256
Total liabilities	63,927,355				68,744,949			72,924,161				73,802,168

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; 1,932,291 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
Common stock – no par value (10,000,000 authorized shares; 1,886,088 and 1,884,283 shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively, excluding in each period 291,676 shares of common stock held by the Company's subsidiary)								1				1
Retained earnings	131,132,279				131,186,866			147,405,440				143,283,621
Accumulated other comprehensive income	12,184,336				11,483,015			12,801,119				11,761,447
Total stockholders’ equity attributable to the Company	143,316,616				142,669,882			160,206,560				155,045,069
Noncontrolling interests	97,619				107,198			81,010				90,885
Total stockholders' equity	143,414,235				142,777,080			160,287,570				155,135,954
Total Liabilities and Stockholders’ Equity	$	207,341,590			$	211,522,029		$	233,211,731			$	228,938,122

See notes to the Consolidated Financial Statements.

Investors Title Company and Subsidiaries

Consolidated Statements of Income

For the Three Months Ended March 31, ~~2016~~2017 and ~~2015~~2016

(Unaudited)


	Three Months Ended March 31,							Three Months Ended March 31,
	2016				2015			2017				2016
Revenues:
Net premiums written	$	21,508,997			$	24,962,041		$	33,641,564			$	21,508,997
Investment income – interest and dividends	1,151,011				1,178,039			1,096,591				1,151,011
Net realized gain on investments	149,830				14,803			103,339				149,830
Other	2,052,184				2,146,926			2,959,695				2,052,184
Total Revenues	24,862,022				28,301,809			37,801,189				24,862,022

Operating Expenses:
Commissions to agents	11,532,882				14,596,539			16,331,110				11,532,882
Provision for claims	15,959				786,612			719,397				15,959
Salaries, employee benefits and payroll taxes	7,471,951				7,277,449			9,902,271				7,471,951
Office occupancy and operations	1,493,860				1,304,221			1,939,055				1,493,860
Business development	480,390				486,975			612,947				480,390
Filing fees, franchise and local taxes	230,054				216,643			153,556				230,054
Premium and retaliatory taxes	311,831				476,591			645,385				311,831
Professional and contract labor fees	538,653				584,107			439,176				538,653
Other	202,981				203,548			607,112				202,981
Total Operating Expenses	22,278,561				25,932,685			31,350,009				22,278,561

Income before Income Taxes	2,583,461				2,369,124			6,451,180				2,583,461

Provision for Income Taxes	779,000				643,000			1,985,000				779,000

Net Income	1,804,461				1,726,124			4,466,180				1,804,461

Net Loss Attributable to Noncontrolling Interests	9,579				—			9,875				9,579

Net Income Attributable to the Company	$	1,814,040			$	1,726,124		$	4,476,055			$	1,814,040

Basic Earnings per Common Share	$	0.94			$	0.86		$	2.37			$	0.94

Weighted Average Shares Outstanding – Basic	1,934,318				2,012,738			1,885,587				1,934,318

Diluted Earnings per Common Share	$	0.93			$	0.86		$	2.36			$	0.93

Weighted Average Shares Outstanding – Diluted	1,940,963				2,018,504			1,894,838				1,940,963

Cash Dividends Paid per Common Share	$	0.16			$	0.08		$	0.20			$	0.16

See notes to the Consolidated Financial Statements.

Investors Title Company and Subsidiaries

Consolidated Statements of Comprehensive Income

For the Three Months Ended March 31, ~~2016~~2017 and ~~2015~~2016

(Unaudited)


	Three Months Ended March 31,							Three Months Ended March 31,
	2016				2015			2017				2016
Net income	$	1,804,461			$	1,726,124		$	4,466,180			$	1,804,461
Other comprehensive income, before tax:
Amortization related to prior year service cost	—				1,097
Amortization of unrecognized loss	2,235				879			2,153				2,235
Unrealized gains on investments arising during the period	1,212,525				287,765			1,666,147				1,212,525
Reclassification adjustment for sales of securities included in net income	(186,079		)		(8,803		)	(90,506		)		(186,079		)
Reclassification adjustment for write-downs of securities included in net income	42,794				—			—				42,794
Other comprehensive income, before tax	1,071,475				280,938			1,577,794				1,071,475
Income tax expense related to postretirement health benefits	760				672			731				760
Income tax expense related to unrealized gains on investments arising during the period	419,586				103,538			568,956				419,586
Income tax benefit related to reclassification adjustment for sales of securities included in net income	(64,860		)		(3,009		)	(31,565		)		(64,860		)
Income tax expense related to reclassification adjustment for write-downs of securities included in net income	14,668				—			—				14,668
Net income tax expense on other comprehensive income	370,154				101,201			538,122				370,154
Other comprehensive income	701,321				179,737			1,039,672				701,321
Comprehensive Income	$	2,505,782			$	1,905,861		$	5,505,852			$	2,505,782
Comprehensive loss attributable to noncontrolling interests	9,579				—			9,875				9,579
Comprehensive Income Attributable to the Company	$	2,515,361			$	1,905,861		$	5,515,727			$	2,515,361

See notes to the Consolidated Financial Statements.

Investors Title Company and Subsidiaries

Consolidated Statements of Stockholders’ Equity

For the Three Months Ended March 31, ~~2016~~2017 and ~~2015~~2016

(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																										Retained Earnings				Accumulated Other Comprehensive Income				Noncontrolling Interests				Total Stockholders’ Equity
Balance, January 1, 2015	2,023,270			$	1			Retained Earnings			$	Accumulated Other Comprehensive Income			124,707,196	Noncontrolling Interests				Total Stockholders’ Equity		$	12,856,509			$	—			$	137,563,706
Net income attributable to the Company								1,726,124												1,726,124
Dividends ($0.08 per share)								(160,957		)										(160,957		)
Shares of common stock repurchased and retired	(15,036	)						(1,069,185		)										(1,069,185		)
Stock options and stock appreciation rights exercised	2,192							54,988												54,988
Share-based compensation expense								32,600												32,600
Amortization related to postretirement health benefits												1,304								1,304
Net unrealized gain on investments												178,433								178,433
Income tax benefit from share-based compensation								26,875												26,875
Balance, March 31, 2015	2,010,426			$	1			$	125,317,641			$	13,036,246			$	—			$	138,353,888
																							Shares			Amount				Retained Earnings				Accumulated Other Comprehensive Income				Noncontrolling Interests				Total Stockholders’ Equity
Balance, January 1, 2016	1,949,797			$	1			$	131,186,866			$	11,483,015			$	107,198			$	142,777,080		1,949,797			$	1							Accumulated Other Comprehensive Income				Noncontrolling Interests				Total Stockholders’ Equity
Net income attributable to the Company								1,814,040												1,814,040										Retained Earnings			1,814,040												1,814,040
Dividends ($0.16 per share)								(309,104		)										(309,104		)								(309,104		)										(309,104		)
Shares of common stock repurchased and retired	(18,795	)						(1,626,668		)										(1,626,668		)	(18,795	)						(1,626,668		)										(1,626,668		)
Stock options and stock appreciation rights exercised	1,289							(200		)										(200		)	1,289							(200		)										(200		)
Share-based compensation expense								35,053												35,053										35,053												35,053
Amortization related to postretirement health benefits												1,475								1,475														1,475								1,475
Net unrealized gain on investments												699,846								699,846														699,846								699,846
Net loss attributable to noncontrolling interests																(9,579		)		(9,579		)																(9,579		)		(9,579		)
Income tax benefit from share-based compensation								32,292												32,292										32,292												32,292
Balance, March 31, 2016	1,932,291			$	1			$	131,132,279			$	12,184,336			$	97,619			$	143,414,235		1,932,291			$	1			$	131,132,279			$	12,184,336			$	97,619			$	143,414,235

Balance, January 1, 2017																							1,884,283			$	1			$	143,283,621			$	11,761,447			$	90,885			$	155,135,954
Net income attributable to the Company																														4,476,055												4,476,055
Dividends ($0.20 per share)																														(377,218		)										(377,218		)
Shares of common stock repurchased and retired																							(70	)						(8,986		)										(8,986		)
Stock options and stock appreciation rights exercised																							1,875							(380		)										(380		)
Share-based compensation expense																														32,348												32,348
Amortization related to postretirement health benefits																																		1,422								1,422
Net unrealized gain on investments																																		1,038,250								1,038,250
Net loss attributable to noncontrolling interests																																						(9,875		)		(9,875		)
Balance, March 31, 2017																							1,886,088			$	1			$	147,405,440			$	12,801,119			$	81,010			$	160,287,570

See notes to the Consolidated Financial Statements.

Investors Title Company and Subsidiaries

Consolidated Statements of Cash Flows

For the Three Months Ended March 31, ~~2016~~2017 and ~~2015~~2016

(Unaudited)


	Three Months Ended March 31,							Three Months Ended March 31,
	2016				2015			2017				2016
Operating Activities
Net income	$	1,804,461			$	1,726,124		$	4,466,180			$	1,804,461
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	342,590				220,321			334,021				342,590
Amortization, net	196,875				182,230
Amortization of investments, net								195,246				196,875
Amortization related to postretirement benefits obligation	2,235				1,976			2,153				2,235
Share-based compensation expense related to stock options	35,053				32,600
Net gain on the disposals of property	(3,701		)		(18,891		)
Amortization of other intangible assets, net								233,588				—
Share-based compensation expense related to stock appreciation rights								32,348				35,053
Excess tax benefits related to exercise of stock appreciation rights								75,027				32,292
Net gain on disposals of property								(15,723		)		(3,701		)
Net realized gain on investments	(149,830		)		(14,803		)	(103,339		)		(149,830		)
Net loss (earnings) from other investments	24,263				(246,105		)
Net (earnings) loss from other investments								(143,243		)		24,263
Provision for claims	15,959				786,612			719,397				15,959
Provision for deferred income taxes	1,689,000				296,000
(Benefit) provision for deferred income taxes								(235,000		)		1,689,000
Changes in assets and liabilities:
Decrease in receivables	1,452,570				304,994
Decrease (increase) in other assets	4,032,198				(664,709		)
(Increase) decrease in receivables								(9,334		)		1,452,570
(Increase) decrease in other assets								(1,168,522		)		4,032,198
Increase in current income taxes recoverable	(1,036,309		)		—			—				(1,036,309		)
Decrease in accounts payable and accrued liabilities	(6,275,393		)		(2,810,752		)	(3,568,633		)		(6,275,393		)
(Increase) decrease in current income taxes payable	(210,355		)		195,069
Increase (decrease) in current income taxes payable								2,172,476				(210,355		)
Payments of claims, net of recoveries	(406,959		)		(400,612		)	(579,397		)		(406,959		)
Net cash provided by (used in) operating activities	1,512,657				(409,946		)
Net cash provided by operating activities								2,407,245				1,544,949

Investing Activities
Purchases of available-for-sale securities	(3,583,240		)		(241,882		)	(561,348		)		(3,583,240		)
Purchases of short-term investments	(1,974,677		)		(2,184,144		)	(7,722,430		)		(1,974,677		)
Purchases of other investments	(473,174		)		(346,693		)	(307,948		)		(473,174		)
Proceeds from sales and maturities of available-for-sale securities	4,130,767				3,056,743			3,693,973				4,130,767
Proceeds from sales and maturities of short-term investments	1,320,014				360,807			645,805				1,320,014
Proceeds from sales and distributions of other investments	1,741,134				1,304,877			1,050,225				1,741,134
Proceeds from sales of other assets	6,545				6,000			12,834				6,545
Purchases of property	(701,184		)		(610,926		)	(1,063,894		)		(701,184		)
Proceeds from the sale of property	8,501				26,000			21,700				8,501
Net cash provided by investing activities	474,686				1,370,782
Net cash (used in) provided by investing activities								(4,231,083		)		474,686

Financing Activities
Repurchases of common stock	(1,626,668		)		(1,069,185		)	(8,986		)		(1,626,668		)
Exercises of stock options and SARs	(200		)		54,988			(380		)		(200		)
Excess tax benefits related to exercise of stock options and SARs	32,292				26,875
Dividends paid	(309,104		)		(160,957		)	(377,218		)		(309,104		)
Net cash used in financing activities	(1,903,680		)		(1,148,279		)	(386,584		)		(1,935,972		)

Net Increase (Decrease) in Cash and Cash Equivalents	83,663				(187,443		)
Net (Decrease) Increase in Cash and Cash Equivalents								(2,210,422		)		83,663
Cash and Cash Equivalents, Beginning of Period	21,790,068				15,826,515			27,928,472				21,790,068
Cash and Cash Equivalents, End of Period	$	21,873,731			$	15,639,072		$	25,718,050			$	21,873,731


Consolidated Statements of Cash Flows, continued
	Three Months Ended March 31,							Three Months Ended March 31,
	2016				2015			2017				2016
Supplemental Disclosures:
Cash Paid During the Year for:
Income tax payments, net	$	1,926,400			$	125,000
Income tax (refunds) payments, net								$	(27,500	)		$	1,926,400
Non Cash Investing and Financing Activities:
Non cash net unrealized gain on investments, net of deferred tax benefit of $(369,394) and $(100,529) for 2016 and 2015, respectively	$	(699,846	)		$	(178,433	)
Non cash net unrealized gain on investments, net of deferred tax provision of $(537,391) and $(369,394) for March 31, 2017 and March 31, 2016, respectively								$	(1,038,250	)		$	(699,846	)

See notes to the Consolidated Financial Statements.

INVESTORS TITLE COMPANY

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, ~~2016~~2017

(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, ~~2015~~2016 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 March 31, ~~2016~~2017 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2016~~.2017.

~~Allowance for Doubtful Accounts~~Reclassification – ~~Company management continually evaluates the collectability of receivables and provides an allowance for doubtful accounts equal to estimated losses expected to be incurred~~Certain 2016 amounts in the ~~collection of premiums and fees receivable.~~accompanying unaudited Consolidated Financial Statements have been reclassified to conform to the 2017 classifications. These reclassifications had no effect on stockholders’ equity or net income as previously reported.

Use of Estimates and Assumptions – The preparation of the Company’s Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions used.

Subsequent Events – The Company has evaluated and concluded that there were no material subsequent events requiring adjustment to or disclosure into its Consolidated Financial Statements.

Recently Issued Accounting Standards –In March ~~2016,~~2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. ASU 2017-08 is intended to enhance the accounting for the amortization of premiums for purchased callable debt securities. Specifically, the ASU shortens the amortization period for certain investments in callable debt securities purchased at a premium by requiring that the premium be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The update is effective for annual periods beginning after December 15, 2018, 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 March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits (Topic 715). This update requires entities to (1) disaggregate the current service cost component from the other components of net benefit cost (the "other components") and present it with other current compensation costs for related employees in the income statement and (2) present the other components elsewhere in the income statement and outside of income from operations if that subtotal is presented. In addition, the ASU requires entities to disclose the income statement lines that contain the other components if they are not presented on appropriately described separate lines. The update is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. 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 January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350). This update removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. As a result, under the ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, the ASU clarifies that an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. This update is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. None of these amendments would have an impact on the Company's financial position or results of operation.

In June 2016, the FASB issued 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. Currently, the Company's potential credit losses under this accounting standard relate to available-for-sale securities. The Company does not believe that the risk of credit losses, based on current available-for-sale security holdings, is material to the financial statements as a whole. Please refer to Note 6 for further information about the Company's investments.

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 ~~amendments of this~~ update ~~are~~was effective for annual periods beginning after December 15, 2016, ~~and~~including interim periods within ~~those fiscal years. Early adoption is permitted.~~that reporting period. The Company ~~is currently evaluating the~~adopted this update on January 1, 2017 with no material impact ~~that the recently issued accounting standard will have~~ on the Company's financial position and results of ~~operations, but does not expect it~~operations. All excess tax benefits and tax deficiencies will now be recognized as income tax expense or benefit in the income statement. In addition, a reclassification was made on the Consolidated Statements of Cash Flows, as companies are now required to ~~have~~present excess tax benefits as an operating activity on the Consolidated Statements of Cash Flows rather than as a ~~material impact.~~financing activity. The Company began recording all excess tax benefits and tax deficiencies as an income tax expense or benefit on a prospective basis. The amendments relating to the presentation of excess tax benefits within the Consolidated Statements of Cash Flows was adopted by the Company retrospectively.

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 12twelve 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 ~~amendments of this~~ update ~~are~~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 impact that the recently issued accounting standard will have ~~a material impact~~ on the Company's financial position orand results of ~~operations.~~operations, but does not expect it to have a material impact. As of December 31, 2016, future minimum lease payments with terms of more than twelve months were approximately $2.5 million.

In January 2016, the FASB issued ASU 2016-01, Financial ~~Instruments─~~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 ~~amendments of this~~ update ~~are~~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 ~~amendments of this~~ 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 was effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. The Company adopted this update on January 1, 2016 with no impact to the Company's financial position or results of operations. Certain investments previously considered voting interest entities are considered VIEs under this update. However, since the Company is not considered the primary beneficiary, none of the investments are consolidated. Refer to Note 7 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~~Currently, the ~~impact that~~Company's only revenue stream impacted by the ~~recently~~ issued accounting standard ~~will have on~~is like-kind exchange services revenue produced by the Company's subsidiary, Investors Title Exchange Corporation ("ITEC"). Like-kind exchange proceeds are not considered material to the Company's financial ~~position~~condition and results of ~~operations, but does not expect it to have a material impact.~~operations.

Note 2 – Reserves for Claims

Transactions in the reserves for claims for the ~~three months~~three-month period ended March 31, ~~2016~~2017 and the year ended December 31, ~~2015~~2016 are summarized as follows:


	March 31, 2016				December 31, 2015			March 31, 2017				December 31, 2016
Balance, beginning of period	$	37,788,000			$	36,677,000		$	35,305,000			$	37,788,000
Provision, charged to operations	15,959				4,478,494			719,397				242,953
Payments of claims, net of recoveries	(406,959		)		(3,367,494		)	(579,397		)		(2,725,953		)
Ending balance	$	37,397,000			$	37,788,000		$	35,445,000			$	35,305,000

The total reserve for all reported and unreported losses the Company incurred through March 31, ~~2016~~2017 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 March 31, ~~2016~~2017. 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:


	March 31, 2016				%		December 31, 2015				%	March 31, 2017				%		December 31, 2016				%
Known title claims	$	4,965,800			13.3		$	5,066,469			13.4	$	4,554,599			12.8		$	4,405,343			12.5
IBNR	32,431,200				86.7		32,721,531				86.6	30,890,401				87.2		30,899,657				87.5
Total loss reserves	$	37,397,000			100.0		$	37,788,000			100.0	$	35,445,000			100.0		$	35,305,000			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; and (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,~~recognized, 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 6,645 and 5,766 for the three months ended March 31, 2016 and 2015, respectively.~~

The following table sets forth the computation of basic and diluted earnings per share for the three months endedMarch 31:


	Three Months Ended March 31,							Three Months Ended March 31,
	2016				2015			2017				2016
Net income attributable to the Company	$	1,814,040			$	1,726,124		$	4,476,055			$	1,814,040
Weighted average common shares outstanding – Basic	1,934,318				2,012,738			1,885,587				1,934,318
Incremental shares outstanding assuming the exercise of dilutive stock options and SARs (share-settled)	6,645				5,766			9,251				6,645
Weighted average common shares outstanding – Diluted	1,940,963				2,018,504			1,894,838				1,940,963
Basic earnings per common share	$	0.94			$	0.86		$	2.37			$	0.94
Diluted earnings per common share	$	0.93			$	0.86		$	2.36			$	0.93

There were no potential shares excluded from the computation of diluted earnings per share for the ~~three months~~three-month periods ended March 31, ~~2016~~2017 and ~~2015, as all share-based awards were "in-the-money."~~2016.

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 March 31, 2017, 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, 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 —
—

SARs exercised (2,000 ) 32.00

Outstanding as of March 31, 2016 20,000
$ 59.55
4.03 $ 630,455

Exercisable as of March 31, 2016 20,000
$ 59.55
4.03 $ 630,455



	Number Of Shares			Weighted Average Exercise Price				Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding as of January 1, 2016	22,000			$	57.04			3.93		$	945,055
SARs granted	4,500			93.87
SARs exercised	(2,000	)		32.00
Outstanding as of December 31, 2016	24,500			$	65.85			3.85		$	836,640
SARs granted	—			—
SARs exercised	(2,500	)		33.31
Outstanding as of March 31, 2017	22,000			$	69.55			4.00		$	1,949,215

Exercisable as of March 31, 2017	22,000			$	69.55			4.00		$	1,949,215

There was approximately $~~35,000~~32,000 and $~~33,000~~35,000 of compensation expense relating to SARs or options vesting on or before March 31, ~~2016~~2017 and ~~2015~~2016, respectively, included in salaries, employee benefits and payroll taxes in the Consolidated Statements of Income. As of March 31, ~~2016,~~2017, there was no unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Company’s stock award plans.

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 March 31, ~~2016~~2017 and ~~2015~~2016:


Three Months Ended March 31, 2016	Title Insurance				All Other				Intersegment Eliminations				Total
Three Months Ended March 31, 2017																Title Insurance				All Other				Intersegment Eliminations				Total
Insurance and other services revenues	$	22,391,723			$	1,572,155			$	(402,697	)		$	23,561,181		$	35,911,412			$	1,683,563			$	(993,716	)		$	36,601,259
Investment income	1,054,786				142,893				(46,668		)		1,151,011			1,022,341				132,585				(58,335		)		1,096,591
Net realized gain on investments	93,929				55,901				—				149,830			63,307				40,032				—				103,339
Total revenues	$	23,540,438			$	1,770,949			$	(449,365	)		$	24,862,022		$	36,997,060			$	1,856,180			$	(1,052,051	)		$	37,801,189
Operating expenses	21,096,917				1,566,921				(385,277		)		22,278,561			30,508,997				1,817,307				(976,295		)		31,350,009
Income before income taxes	$	2,443,521			$	204,028			$	(64,088	)		$	2,583,461		$	6,488,063			$	38,873			$	(75,756	)		$	6,451,180
Total assets	$	159,904,411			$	47,437,179			$	—			$	207,341,590		$	184,769,855			$	48,441,876			$	—			$	233,211,731


Three Months Ended March 31, 2015	Title Insurance				All Other				Intersegment Eliminations				Total
Three Months Ended March 31, 2016																Title Insurance				All Other				Intersegment Eliminations				Total
Insurance and other services revenues	$	25,995,525			$	1,464,157			$	(350,715	)		$	27,108,967		$	22,391,723			$	1,572,155			$	(402,697	)		$	23,561,181
Investment income	1,050,775				150,598				(23,334		)		1,178,039			1,054,786				142,893				(46,668		)		1,151,011
Net realized gain on investments	14,379				424				—				14,803			93,929				55,901				—				149,830
Total revenues	$	27,060,679			$	1,615,179			$	(374,049	)		$	28,301,809		$	23,540,438			$	1,770,949			$	(449,365	)		$	24,862,022
Operating expenses	24,597,471				1,668,508				(333,294		)		25,932,685			21,096,917				1,566,921				(385,277		)		22,278,561
Income (loss) before income taxes	$	2,463,208			$	(53,329	)		$	(40,755	)		$	2,369,124
Income before income taxes																$	2,443,521			$	204,028			$	(64,088	)		$	2,583,461
Total assets	$	150,689,425			$	46,307,485			$	—			$	196,996,910		$	159,904,411			$	47,437,179			$	—			$	207,341,590

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 $~~8,391,000~~9,468,000 and $~~7,818,000~~8,487,000 as of March 31, ~~2016~~2017 and December 31, ~~2015~~2016, 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 March 31, ~~2016~~2017 and ~~2015~~2016:


	Three Months Ended March 31,							Three Months Ended March 31,
	2016				2015			2017				2016
Service cost – benefits earned during the year	$	2,545			$	4,187		$	—			$	2,545
Interest cost on the projected benefit obligation	8,781				7,693			9,217				8,781
Amortization of unrecognized prior service cost	—				1,097			—				—
Amortization of unrecognized losses	2,235				879			2,153				2,235
Net periodic benefits costs	$	13,561			$	13,856		$	11,370			$	13,561

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 March 31, 2017	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	$	27,056,802			$	439,524			$	215,696			$	27,280,630
Special revenue issuer obligations of U.S. states, territories and political subdivisions	57,270,359				1,654,495				571,374				58,353,480
Corporate debt securities	12,229,991				518,698				—				12,748,689
Total	$	96,557,152			$	2,612,717			$	787,070			$	98,382,799
Equity securities, available-for-sale, at fair value:
Common stocks	$	25,203,870			$	17,927,424			$	62,861			$	43,068,433
Total	$	25,203,870			$	17,927,424			$	62,861			$	43,068,433
Short-term investments:
Money market funds and certificates of deposit	$	13,635,465			$	—			$	—			$	13,635,465
Total	$	13,635,465			$	—			$	—			$	13,635,465



As of December 31, 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	$	29,374,774			$	440,628			$	298,533			$	29,516,869
Special revenue issuer obligations of U.S. states, territories and political subdivisions	57,459,818				1,619,444				502,135				58,577,127
Corporate debt securities	13,327,765				512,316				—				13,840,081
Total	$	100,162,357			$	2,572,388			$	800,668			$	101,934,077
Equity securities, available-for-sale, at fair value:
Common stocks and nonredeemable preferred stocks	$	24,836,032			$	16,392,210			$	48,983			$	41,179,259
Total	$	24,836,032			$	16,392,210			$	48,983			$	41,179,259
Short-term investments:
Money market funds and certificates of deposit	$	6,558,840			$	—			$	—			$	6,558,840
Total	$	6,558,840			$	—			$	—			$	6,558,840

The special revenue category for both periods presented includes approximately 60 individual bonds with revenue sources from a variety of industry sectors.

The scheduled maturities of fixed maturity securities at March 31, 2017 were as follows:



	Available-for-Sale
	Amortized Cost				Estimated Fair Value
Due in one year or less	$	15,510,532			$	15,619,962
Due after one year through five years	25,318,351				26,050,476
Due five years through ten years	52,209,450				52,767,651
Due after ten years	3,518,819				3,944,710
Total	$	96,557,152			$	98,382,799

Gross realized gains and losses on sales of investments for the three-month periods ended March 31 are summarized as follows:



	2017				2016
Gross realized gains from securities:
Special revenue issuer obligations of U.S. states, territories and political subdivisions	$	139			$	160
Common stocks and nonredeemable preferred stocks	90,466				227,960
Auction rate securities	—				74,996
Total	$	90,605			$	303,116
Gross realized losses from securities:
Special revenue issuer obligations of U.S. states, territories and political subdivisions	$	(99	)		$	(85	)
Common stocks and nonredeemable preferred stocks	—				(116,952		)
Other-than-temporary impairment of securities	—				(42,794		)
Total	$	(99	)		$	(159,831	)
Net realized gain from securities	$	90,506			$	143,285
Net realized gain on other investments:
Gains on other investments	$	12,833			$	6,545
Total	$	12,833			$	6,545
Net realized gain on investments	$	103,339			$	149,830

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

The following table presents the gross unrealized losses on investment securities and the estimated fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous loss position at March 31, 2017 and December 31, 2016:



	Less than 12 Months								12 Months or Longer								Total
As of March 31, 2017	Estimated Fair Value				Unrealized Losses				Estimated Fair Value				Unrealized Losses				Estimated Fair Value				Unrealized Losses
General obligations of U.S. states, territories and political subdivisions	$	10,784,520			$	(215,696	)		$	—			$	—			$	10,784,520			$	(215,696	)
Special revenue issuer obligations of U.S. states, territories and political subdivisions	19,552,843				(571,374		)		—				—				19,552,843				(571,374		)
Total fixed income securities	$	30,337,363			$	(787,070	)		$	—			$	—			$	30,337,363			$	(787,070	)
Equity securities	$	1,117,077			$	(62,861	)		$	—			$	—			$	1,117,077			$	(62,861	)
Total temporarily impaired securities	$	31,454,440			$	(849,931	)		$	—			$	—			$	31,454,440			$	(849,931	)



	Less than 12 Months								12 Months or Longer								Total
As of December 31, 2016	Estimated Fair Value				Unrealized Losses				Estimated Fair Value				Unrealized Losses				Estimated Fair Value				Unrealized Losses
General obligations of U.S. states, territories and political subdivisions	$	13,884,808			$	(298,533	)		$	—			$	—			$	13,884,808			$	(298,533	)
Special revenue issuer obligations of U.S. states, territories and political subdivisions	16,161,906				(502,135		)		—				—				16,161,906				(502,135		)
Total fixed income securities	$	30,046,714			$	(800,668	)		$	—			$	—			$	30,046,714			$	(800,668	)
Equity securities	$	380,400			$	(48,983	)		$	—			$	—			$	380,400			$	(48,983	)
Total temporarily impaired securities	$	30,427,114			$	(849,651	)		$	—			$	—			$	30,427,114			$	(849,651	)

The decline in estimated 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.

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 40 and 36 securities had unrealized losses at March 31, 2017 and December 31, 2016, 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 no other-than-temporary impairment charges for debt and equity investments for the three-month period ended March 31, 2017 and $42,794 for the three-month period ended March 31, 2016. 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 March 31, 2017:



Type of Investment		Balance Sheet Classification		Carrying Value				Estimated Fair Value				Maximum Potential Loss (a)
Tax credit LPs		Other investments		$	846,228			$	1,137,346			$	1,325,000
Real estate LLCs or LPs		Other investments		4,812,037				5,677,547				7,400,000
Small business investment LPs		Other investments		3,104,944				3,277,637				9,400,000
Total				$	8,763,209			$	10,092,530			$	18,125,000



(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. 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 March 31, ~~2016~~2017 and December 31, ~~2015~~,2016, 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~~which 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 Company did not hold any Level 3 category ~~only includes the Company's investments in student loan auction~~debt or equity investment securities ("ARS") because quoted prices are unavailable due to failed auctions. The Company’s ARS portfolio, which was comprised entirely of an investment grade student loan ARS, was sold during the first quarter of 2016. The par value of this security was ~~$1,000,000~~ as of March 31, 2017 or December 31, ~~2015, with approximately~~ ~~97.0%~~ ~~guaranteed by the U.S. Department of Education.~~2016.

Some of the inputs to ARS valuation are unobservable in the market and are significant – therefore, the Company utilized another third party pricing service to assist in the determination of the estimated fair market value of these securities. This service used a proprietary valuation model that 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 pricing service provided a range of values to the Company for its ARS. The Company 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, 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 March 31, ~~2016~~2017 and December 31, ~~2015~~.2016. 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 March 31, 2016	Level 1				Level 2				Level 3				Total
As of March 31, 2017																Level 1				Level 2				Level 3				Total
Short-term investments	$	7,520,069			$	—			$	—			$	7,520,069		$	13,635,465			$	—			$	—			$	13,635,465
Equity securities:
Common stock	37,681,569				—				—				37,681,569			43,068,433				—				—				43,068,433
Fixed maturities:
Obligations of U.S. states, territories and political subdivisions*	—				88,650,329				—				88,650,329			—				85,634,110				—				85,634,110
Corporate debt securities*	—				17,733,494				—				17,733,494			—				12,748,689				—				12,748,689
Total	$	45,201,638			$	106,383,823			$	—			$	151,585,461		$	56,703,898			$	98,382,799			$	—			$	155,086,697


As of December 31, 2015	Level 1				Level 2				Level 3				Total
As of December 31, 2016																Level 1				Level 2				Level 3				Total
Short-term investments	$	6,865,406			$	—			$	—			$	6,865,406		$	6,558,840			$	—			$	—			$	6,558,840
Equity securities:
Common stock	37,513,464				—				—				37,513,464			41,179,259				—				—				41,179,259
Fixed maturities:
Obligations of U.S. states, territories and political subdivisions*	—				87,640,140				—				87,640,140			—				88,093,996				—				88,093,996
Corporate debt securities*	—				17,486,344				939,900				18,426,244			—				13,840,081				—				13,840,081
Total	$	44,378,870			$	105,126,484			$	939,900			$	150,445,254		$	47,738,099			$	101,934,077			$	—			$	149,672,176

*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 estimated 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 estimated 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 carried at estimated fair ~~value are disclosed in a previous table)~~value) as of March 31, ~~2016~~2017 and December 31, ~~2015~~2016 are presented in the following table:


As of March 31, 2016	Carrying Value				Estimated Fair Value				Level 1				Level 2				Level 3
As of March 31, 2017																				Carrying Value				Estimated Fair Value				Level 1				Level 2				Level 3
Financial assets:
Cash	$	21,873,731			$	21,873,731			$	21,873,731			$	—			$	—		$	25,718,050			$	25,718,050			$	25,718,050			$	—			$	—
Cost-basis investments	3,727,074				4,135,512				—				—				4,135,512			4,894,951				5,341,173				—				—				5,341,173
Accrued dividends and interest	1,320,942				1,320,942				1,320,942				—				—
Accrued interest and dividends																				1,336,998				1,336,998				1,336,998				—				—
Total	$	26,921,747			$	27,330,185			$	23,194,673			$	—			$	4,135,512		$	31,949,999			$	32,396,221			$	27,055,048			$	—			$	5,341,173


As of December 31, 2015	Carrying Value				Estimated Fair Value				Level 1				Level 2				Level 3
As of December 31, 2016																				Carrying Value				Estimated Fair Value				Level 1				Level 2				Level 3
Financial assets:
Cash	$	21,790,068			$	21,790,068			$	21,790,068			$	—			$	—		$	27,928,472			$	27,928,472			$	27,928,472			$	—			$	—
Cost-basis investments	3,588,314				3,684,020				—				—				3,684,020			4,244,402				4,497,665				—				—				4,497,665
Accrued dividends and interest	1,004,126				1,004,126				1,004,126				—				—
Accrued interest and dividends																				1,035,152				1,035,152				1,035,152				—				—
Total	$	26,382,508			$	26,478,214			$	22,794,194			$	—			$	3,684,020		$	33,208,026			$	33,461,289			$	28,963,624			$	—			$	4,497,665

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 ~~March 31, 2016~~ ~~and the year ended~~ ~~December 31, 2015~~:

Changes in fair value during the period ended: 2016 2015
Beginning balance at January 1 $ 939,900
$ 939,100
Redemptions and sales (1,000,000 ) —
Realized gain – included in net realized gain on investments 74,996
—
Unrealized (loss) gain – included in other comprehensive income (14,896 ) 800
Ending balance, net $ —
$ 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 impaired during the period and recorded at estimated fair value in the Consolidated Financial Statements as of March 31, ~~2016~~2017 and December 31, ~~2015. The following table summarizes the corresponding estimated fair value hierarchy~~2016. There were no impairments of such investments at made during the three-month period ended March 31, ~~2016~~ ~~and~~ 2017 or the twelve-month period ended December 31, ~~2015~~ ~~and the related impairments recognized:~~

~~As of March 31, 2016~~

~~Valuation~~

~~Method~~

~~Impaired~~

~~Level 1~~

~~Level 2~~

~~Level 3~~

~~Total at~~

~~Estimated~~

~~Fair~~

~~Value~~

~~Impairment~~

~~Losses~~

~~Cost-basis investments~~

~~Fair Value~~

No

$

—

$

—

$

—

$

—

$

—

~~Total cost-basis investments~~

$

—

$

—

$

—

$

—

$

—

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 $ —
$ —
$ 163,350
$ 163,350
$ (233,069 )
Total cost-basis investments $ —
$ —
$ 163,350
$ 163,350
$ (233,069 )
2016.

~~Note 7 – Investments~~

~~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 March 31, 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 $ 32,257,800
$ 1,110,229
$ 13,243
$ 33,354,786
Special revenue issuer obligations of U.S. states, territories and political subdivisions 52,061,731
3,234,721
909
55,295,543
Corporate debt securities 17,006,078
727,908
492
17,733,494
Total $ 101,325,609
$ 5,072,858
$ 14,644
$ 106,383,823
Equity securities, available-for-sale, at fair value:

Common stocks $ 23,962,393
$ 13,807,635
$ 88,459
$ 37,681,569
Total $ 23,962,393
$ 13,807,635
$ 88,459
$ 37,681,569
Short-term investments:

Money market funds and certificates of deposit $ 7,520,069
$ —
$ —
$ 7,520,069
Total $ 7,520,069
$ —
$ —
$ 7,520,069

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 at least 50 individual bonds with revenue sources from a variety of municipal sectors.~~

~~The scheduled maturities of fixed maturity securities at~~ ~~March 31, 2016~~ ~~were as follows:~~

Available-for-Sale

Amortized
Cost

Fair
Value
Due in one year or less $ 11,488,568
$ 11,607,930
Due after one year through five years 43,806,261
45,722,867
Due five years through ten years 44,039,421
46,529,077
Due after ten years 1,991,359
2,523,949
Total $ 101,325,609
$ 106,383,823

~~Realized gains and losses on investments for the~~ ~~three months endedMarch 31~~ ~~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 —
999
Common stocks and nonredeemable preferred stocks 227,960
8,200
Auction rate securities 74,996
—
Total $ 303,116
$ 9,199
Gross realized losses from securities:

General obligations of U.S. states, territories and political subdivisions $ —
$ (396 )
Special revenue issuer obligations of U.S. states, territories and political subdivisions (85 ) —
Common stocks and nonredeemable preferred stocks (116,952 ) —
Other than temporary impairment of securities (42,794 ) —
Total $ (159,831 ) $ (396 )
Net realized gain from securities $ 143,285
$ 8,803
Net realized gain on other investments:
Gains on other investments 6,545
6,000
Total $ 6,545
$ 6,000
Net realized gain on investments $ 149,830
$ 14,803

~~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 ~~March 31, 2016~~ ~~and~~ ~~December 31, 2015~~:

Less than 12 Months 12 Months or Longer Total
As of March 31, 2016
Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses
General obligations of U.S. states, territories and political subdivisions $ 1,122,050
$ (143 ) $ 1,070,310
$ (13,100 ) $ 2,192,360
$ (13,243 )
Special revenue issuer obligations of U.S. states, territories and political subdivisions 893,506
(909 ) —
—
893,506
(909 )
Corporate debt securities 890,520
(492 ) —
—
890,520
(492 )
Total fixed income securities $ 2,906,076
$ (1,544 ) $ 1,070,310
$ (13,100 ) $ 3,976,386
$ (14,644 )
Equity securities $ 2,123,918
$ (88,459 ) $ —
$ —
$ 2,123,918
$ (88,459 )
Total temporarily impaired securities $ 5,029,994
$ (90,003 ) $ 1,070,310
$ (13,100 ) $ 6,100,304
$ (103,103 )

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~~ ~~March 31, 2016, the Company held $3,976,386 in fixed maturity securities with unrealized losses of~~ ~~$14,644. 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~~ ~~March 31, 2016, the Company held $2,123,918 in equity securities with unrealized losses of~~ ~~$88,459. 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 11 ~~and~~ 30 ~~securities had unrealized losses at~~ ~~March 31, 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 $42,794 for the three months ended March 31, 2016 and no other-than-temporary impairment charges for debt and equity investments for the three months ended March 31, 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 as of March 31, 2016:

Type of Investment Balance Sheet Classification Carrying Value Estimated Fair Value Maximum Potential Loss (a)
  Tax credit LP's Other investments $ 969,153
$ 969,153
$ 1,325,000
  Real estate LLC's or LP's Other investments 3,481,576
3,688,921
6,150,000
  Small business investment LP's Other investments 2,127,376
2,029,385
1,800,000
Total $ 6,578,105
$ 6,687,459
$ 9,275,000



~~(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.

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 ~~$172,381,000~~$186,086,000 and ~~$171,010,000~~$202,184,000 as of March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, 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 three months ended March 31, 2016 and the twelve months ended December 31, 2015 and 2014, Independence Title originated 5.5%, 10.3% and 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 continued 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 by Texas American Title Company.

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 March 31, 2016				As of December 31, 2015			As of March 31, 2017			As of December 31, 2016
Consolidated Balance Sheets	As of March 31, 2016				As of December 31, 2015			As of March 31, 2017			As of December 31, 2016
Other investments	$	5,088,000			$	6,519,000		$	5,688,000		$	6,437,000
Premiums and fees receivable	$	71,000			$	719,000		$	746,000		$	56,000


Financial Statement Classification,	For the Three Months Ended March 31,							For the Three Months Ended March 31,
Consolidated Statements of Income	2016				2015			2017			2016
Net premiums written	$	2,743,000			$	3,056,000		$	3,558,000		$	2,743,000
Other income	$	126,000			$	403,000		$	272,000		$	126,000
Commissions to agents	$	1,848,000			$	2,132,000		$	2,404,000		$	1,848,000

~~Note 10 – Acquisitions~~9. Business Combinations, Intangible Assets and Goodwill

~~Effective August 1, 2015,~~Business Combinations

In October 2016, National Investors Holdings, LLC ("NIH"), a subsidiary of the Company, ~~ITIC,~~ acquired all of the outstanding shares of University Title Company (“University”), 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~~title insurance agency doing business in Texas. NIH paid $10 million plus a $918,000 adjustment for University’s net cash position at closing to the ~~State~~shareholders of ~~Michigan. Prior~~University. The acquisition was partially financed with loan proceeds from a Business/Commercial Loan Agreement and related Promissory Note (collectively, the “Loan Agreement”) with a bank, pursuant to ~~August 1, 2015,~~which the bank loaned the Company ~~had an ownership interest~~the principal amount of $6 million. The Company paid off all amounts due under the Loan Agreement in ~~1st Investors of 45%. The Company's Consolidated Financial Statements include~~December 2016, and therefore has no liabilities related to the ~~accounts and operations of 1st Investors, based on the Company's resulting 65% ownership interest~~Loan Agreement at ~~August 1, 2015. 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.December 31, 2016.

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~~Title Agency Co., LLC (“United”) for a purchase price of $1,041,250. OnIn May ~~21,~~ 2014, ITIC purchased the remaining 30% ~~ownership~~ interest in United for an additional $515,275, making United a wholly owned subsidiary of ITIC. United is a title insurance agency doing business in Michigan.

Intangible Assets

The Company recognized the required identifiable intangible assets of University and 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 March 31, 2016 and December 31, 2015, accumulated amortization of intangible assets was $278,736 and $261,315, respectively. Net intangible assets of $1,203,164 and $1,220,585 are categorized as prepaid expenses and other assets in the Consolidated Balance Sheets as of March 31, 2016 and December 31, 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~~amounts may not be recoverable, and therefore determined that ~~the~~no identifiable intangible assets ~~assigned to United~~were impaired at March 31, 2017.

Identifiable intangible assets consist of the following as of March 31, 2017 and December 31, 2016:



Year Ended:	2017			2016
Referral relationships	$	6,416,215		$	6,416,215
Non-complete agreements	1,405,685			1,405,685
Tradename	560,000			560,000
Total	8,381,900			8,381,900
Accumulated amortization	(708,698		)	(475,110		)
Identifiable intangible assets, net	$	7,673,202		$	7,906,790

The following table provides the estimated aggregate amortization expense for each of the five succeeding fiscal years:



Year Ended:
2017	$	665,763
2018	642,253
2019	568,920
2020	568,920
2021	561,587
Thereafter	4,665,759
Total	$	7,673,202

Goodwill and Title Plant

The Company recognized $4,349,851 in goodwill and $690,000 in a title plant as the result of the University acquisition. The title plant is included with prepaid expenses and other assets in the Consolidated Balance Sheets. The fair values of goodwill and the title plant, both Level 3 inputs, are principally based on values obtained from a third party valuation service. In accordance with ASC 350, Intangibles – Goodwill and Other, management determined that no events or changes in circumstances occurred that would indicate the carrying amounts may not be recoverable, and therefore determined that goodwill and the title plant were not impaired at March 31, ~~2016.~~2017.

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 March 31, ~~2016~~2017 and ~~2015~~2016:


Three Months Ended March 31, 2016	Unrealized Gains and Losses On Available-for-Sale Securities				Postretirement Benefits Plans				Total
Three Months Ended March 31, 2017												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		$	11,870,647			$	(109,200	)		$	11,761,447
Other comprehensive income before reclassifications	792,939				—				792,939			1,097,191				—				1,097,191
Amounts reclassified from accumulated other comprehensive income	(93,093		)		1,475				(91,618		)	(58,941		)		1,422				(57,519		)
Net current-period other comprehensive income	699,846				1,475				701,321			1,038,250				1,422				1,039,672
Ending balance	$	12,297,587			$	(113,251	)		$	12,184,336		$	12,908,897			$	(107,778	)		$	12,801,119


Three Months Ended March 31, 2015	Unrealized Gains and Losses On Available-for-Sale Securities				Postretirement Benefits Plans				Total
Three Months Ended March 31, 2016												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		$	11,597,741			$	(114,726	)		$	11,483,015
Other comprehensive income before reclassifications	184,227				—				184,227			792,939				—				792,939
Amounts reclassified from accumulated other comprehensive income	(5,794		)		1,304				(4,490		)	(93,093		)		1,475				(91,618		)
Net current-period other comprehensive income	178,433				1,304				179,737			699,846				1,475				701,321
Ending balance	$	13,112,930			$	(76,684	)		$	13,036,246		$	12,297,587			$	(113,251	)		$	12,184,336

The following tables provide significant amounts reclassified out of each component of accumulated other comprehensive income for the periods ended March 31, ~~2016~~2017 and ~~2015~~2016:


Three Months Ended March 31, 2016
Three Months Ended March 31, 2017
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 investments	$	186,079				$	90,506
Other-than-temporary impairments	(42,794		)			—
Total	$	143,285			Net realized gain on investments	$	90,506			Net realized gain on investments
Tax	(50,192		)		Provision for Income Taxes	(31,565		)		Provision for Income Taxes
Net of Tax	$	93,093				$	58,941
Amortization related to postretirement benefit plans:
Prior year service cost						$	—
Unrecognized loss	(2,235		)			(2,153		)
Total	$	(2,235	)		(a)	$	(2,153	)		(a)
Tax	760				Provision for Income Taxes	731				Provision for Income Taxes
Net of Tax	$	(1,475	)			$	(1,422	)
Reclassifications for the period	$	91,618				$	57,519


Three Months Ended March 31, 2015
Three Months Ended March 31, 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 investments	$	8,803				$	186,079
Other-than-temporary impairments	—					(42,794		)
Total	$	8,803			Net realized gain on investments	$	143,285			Net realized gain on investments
Tax	(3,009		)		Provision for Income Taxes	(50,192		)		Provision for Income Taxes
Net of Tax	$	5,794				$	93,093
Amortization related to postretirement benefit plans:
Prior year service cost	$	(1,097	)			$	—
Unrecognized loss	(879		)			(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	$	4,490				$	91,618

(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 ~~2015~~ Annual Report on Form 10-K for the year ended December 31, 2016 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"~~“Company”) is a holding company that engages primarily in issuing title insurance through two subsidiaries, Investors Title Insurance Company ~~("ITIC"~~(“ITIC”) and National Investors Title Insurance Company ~~("NITIC"~~(“NITIC”). Total revenues from the title segment accounted for ~~93.9%~~95.8% of the Company's revenues for the ~~three months~~three-month period ended March 31, ~~2016.~~2017. 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~~Title insurance policies for mortgage lenders and real estate owners are the two basic types of ~~title insurance policies – one for the mortgage lender and one for the real estate owner.~~policies. A lender often requires the property owner to purchase a 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 home and branch offices and through a network of agents. Issuing agents are typically real estate 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.

Title insurance premiums vary from state to state and are subject to extensive regulation. Statutes generally provide that rates must not be excessive, inadequate or unfairly discriminatory. The process of implementing a rate change in most states involves pre-approval by the applicable state insurance regulator.

Volume is a factor in the Company’s profitability due to fixed operating costs 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 are not 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, consisting of the operations of 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 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

The ~~United States economy has been gradually recovering from the~~housing market is heavily influenced by overall economic ~~downturn that began in 2008. Housing values have been rebounding, the economy is growing~~conditions and ~~the unemployment rate has been declining. Since the downturn began, many~~government policies. Prior initiatives undertaken by various governmental agencies ~~have implemented various initiatives designed~~were taken to ~~stimulate the economy,~~ease barriers to ~~improve consumer confidence~~home ownership and to ~~aid in~~provide guidance on the Federal Reserve's monetary policy. Regulatory changes and reform of government-sponsored entities could impact lending standards or the processes and procedures used by the Company. The current real estate environment, including interest rates and general economic ~~recovery. The following programs still continue to~~activity, typically influence the demand for real estate. Any of these factors would likely impact the ~~current economic environment.~~Company's results of operations.

~~Current~~ Initiatives

In efforts to provide transparency, ~~and improve market stability,~~ the Federal Open Market Committee ~~("FOMC"~~(“FOMC”) of the Federal Reserve issues disclosures on a periodic basis that include projections of the federal funds rate and expected actions. At the December 2015 meeting, the FOMC voted to raise the federal funds rate for the first time since December 2008 to a target range between 0.25% and 0.50%. The ~~Committee~~FOMC has voted twice more to increase the federal funds rate, at the December 2016 meeting to a target range between 0.50% and 0.75%, and again at the March ~~2016~~2017 meeting to ~~maintain the rates set in December 2015.~~a target range between 0.75% and 1.00%. Any future adjustments to the rate ~~will~~are expected to be based on realized and expected economic developments to achieve maximum employment and ~~2 percent~~2.0% inflation. The FOMC anticipates future economic conditions to evolve in ways that will warrant gradual increases, and that for some time, the federal funds rate is expected to be 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 once completed, 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~~do 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 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 reform are currently unknown; however, any changes to these entities could affect the Company and its results of operations.

On ~~November 20, 2013,~~August 15, 2016, the Consumer Financial Protection Bureau (“CFPB”)~~, which enforces~~ proposed various amendments to federal mortgage disclosure requirements under the Real Estate Settlement Procedures Act ~~(“RESPA”), the primary federal regulatory guidance governing the real estate settlement industry, released a final rule to integrate mortgage disclosures under the RESPA~~ and the Truth in Lending Act ~~(“TILA”).~~that are implemented in Regulation Z. The proposed amendments would reinforce the CFPB’s informal guidance on various issues and include clarifications and technical amendments. The CFPB also proposed changes that would create tolerances for the total of payments; adjust a partial exemption that mainly affects housing finance agencies and nonprofits; provide a uniform rule regarding application of the integrated mortgage disclosure requirements to cooperative units; and provide guidance on sharing the disclosures with various parties involved in the mortgage origination process. The final ~~rule went into effect on October 3, 2015. Under this rule,~~rules are expected to be released in 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.~~latter half of 2017. The final disclosure required by TILA and the HUD-1 settlement statement required by RESPA have been combined into one form, titled the Closing Disclosure. The Company actively prepared for any anticipated effect this rule would have on both its direct and agency operations, with respectproposed rules, if adopted, are not expected to ~~its processes and procedures, systems and compliance costs. The measures adopted by the Company to comply with the final rule did not~~ have a material impact on the ~~Company's financial position and results of operations.~~Company.

~~The~~In recent years, the CFPB, Office of the Comptroller of Currency and the Federal Reserve have issued memorandums to banks that communicated those agencies’ heightened focus on vetting third party 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.

In recent months, both the President and certain members of Congress have questioned the CFPB's constitutionality and have indicated a desire for reform. The timing and results of reform are currently unknown; however, any changes to the CFPB could affect the Company and its results of operations.

Real Estate Environment

~~The~~Overall, the economy ~~as a whole~~ is expanding and there has been a steady reduction in ~~unemployment.~~unemployment in recent years. The Mortgage Bankers Association's (“MBA”) March ~~17, 2016~~2017 Economic ~~Forecast~~and Mortgage Finance Commentary predicts ~~2016~~2017 overall ~~economic~~ growth in the gross domestic product of approximately ~~2.2%~~2.1% with continued improvement in the employment rate as the ~~unemployment~~economy adds approximately 150,000 jobs per month. As the economy continues to improve, higher inflation will likely ensue, leading to higher interest rates. The MBA projects that the FOMC will raise the federal funds rate ~~is expected to trend down to approximately 4.7%.~~two more times during 2017.

The MBA March ~~17, 2016~~15, 2017 Mortgage Finance Forecast (“MBA Forecast”) projects ~~2016~~2017 purchase activity to increase ~~10.4%~~11.5% to ~~$973~~$1,104 billion and refinance activity to decrease ~~26.6%~~45.0% to ~~$550~~$496 billion, resulting in a decrease in total mortgage originations of ~~6.6%~~15.4% to ~~$1,523~~$1,600 billion, all from ~~2015~~2016 levels. In ~~2015, refinance~~2016, purchase activity accounted for ~~46.0%~~52.4% of all mortgage originations and is projected to represent ~~36.1%~~69.0% of all mortgage originations in ~~2016.~~2017.

According to data published by Freddie Mac, the average 30-year fixed mortgage interest ~~rate~~rates in the United States ~~was~~were 4.2% and 3.7% for the ~~three months~~three-month periods ended March 31, 2017 and 2016, ~~and 2015. According to~~respectively. Per the MBA Forecast, refinancing is expected to be lower in ~~2016~~2017 as mortgage interest rates ~~continue~~are projected to climb to ~~a projected 4.3%~~4.7% in the fourth quarter of ~~2016.~~2017.

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.

Acquisition of University Title

In October 2016, National Investors Holdings, LLC ("NIH"), a subsidiary of the Company, acquired all of the outstanding shares of University Title Company (“University”), a title insurance agency doing business in Texas. NIH paid $10 million plus a $918,000 adjustment for University’s net cash position at closing to the shareholders of University. The acquisition was partially financed with loan proceeds from a Business/Commercial Loan Agreement and related Promissory Note (collectively, the “Loan Agreement”) with a bank, pursuant to which the bank loaned the Company the principal amount of $6 million. The Company paid off all amounts due under the Loan Agreement in December 2016, and therefore has no liabilities related to the Loan Agreement as of December 31, 2016.

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 ~~three months~~three-month period ended March 31, ~~2016,~~2017, 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, ~~2015~~2016 as filed with the Securities and Exchange Commission.

Results of Operations

The following table presents certain income statement data for the three months ended March 31, ~~2016~~2017 and ~~2015:~~2016:


		Three Months Ended March 31,								Three Months Ended March 31,
		2016				2015				2017				2016
Revenues:
Net premiums written		$	21,508,997			$	24,962,041			$	33,641,564			$	21,508,997
Investment income – interest and dividends		1,151,011				1,178,039				1,096,591				1,151,011
Net realized gain on investments		149,830				14,803				103,339				149,830
Other		2,052,184				2,146,926				2,959,695				2,052,184
Total Revenues		24,862,022				28,301,809				37,801,189				24,862,022

Operating Expenses:
Commissions to agents		11,532,882				14,596,539				16,331,110				11,532,882
Provision for claims		15,959				786,612				719,397				15,959
Salaries, employee benefits and payroll taxes		7,471,951				7,277,449				9,902,271				7,471,951
Office occupancy and operations		1,493,860				1,304,221				1,939,055				1,493,860
Business development		480,390				486,975				612,947				480,390
Filing fees, franchise and local taxes		230,054				216,643				153,556				230,054
Premium and retaliatory taxes		311,831				476,591				645,385				311,831
Professional and contract labor fees		538,653				584,107				439,176				538,653
Other		202,981				203,548				607,112				202,981
Total Operating Expenses		22,278,561				25,932,685				31,350,009				22,278,561

Income before Income Taxes		2,583,461				2,369,124				6,451,180				2,583,461

Provision for Income Taxes		779,000				643,000				1,985,000				779,000

Net Income Attributable to the Company		$	1,814,040			$	1,726,124			$	4,476,055			$	1,814,040

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 Policies:~~ Title policies issued decreased 7.9% in the first three months of 2016 to 44,535 compared with 48,357 title policies in the same period in 2015. The decrease in title policies from 2015 is primarily attributable to lower transaction volume, but with a mix more heavily weighted toward higher-margin purchase business.

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 months ended March 31,~~, 2016~~ 2017 and ~~2015:~~2016:


	Three Months Ended March 31,													Three Months Ended March 31,
	2016				%			2015				%		2017				%			2016				%
Home and Branch	$	5,477,657			25.5	%		$	5,605,764			22.5	%	$	9,463,769			28.1	%		$	5,477,657			25.5	%
Agency	16,031,340				74.5	%		19,356,277				77.5	%	24,177,795				71.9	%		16,031,340				74.5	%
Total	$	21,508,997			100.0	%		$	24,962,041			100.0	%	$	33,641,564			100.0	%		$	21,508,997			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 ~~slightly decreased~~increased ~~2.3%~~72.8% for the three months endedMarch 31, ~~2016~~2017, respectively, compared with the prior year period. The increase for the three months ended March 31, 2017 is primarily attributable to revised premium rates filed in North Carolina, growth in transaction volume stemming from higher levels of home sales and average real estate values, with the mix more heavily weighted toward higher-margin purchase transactions.

During the quarter ended March 31, 2016, the North Carolina Title Insurance Rating Bureau, which establishes premium rates for title insurance in North Carolina, and of which Investors Title Insurance Company is a member, filed updated premium rates that took effect on April 1, 2016. The revised rates positively impacted Company premiums by approximately $1,660,000 for the three-month period ended March 31, 2017, with the majority of those premiums being written through the Company's home and branch offices.

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 ~~decreased 17.2%~~increased 50.8% for the three months ended March 31, ~~2016~~2017, respectively, compared with the prior year period. The ~~decrease in agency premiums~~increase for the three-month period ended March 31, 2017 was primarily attributable to ~~a decrease~~the addition of new title insurance agents in the ~~amount~~Company's Texas and southeast markets, higher levels of ~~premiums written~~real estate activity from ~~a few larger~~existing agents particularly one agent in the Texas market that was acquired by another title insurer in the second quarter of 2015. For further details of this agency relationship, refer to Note 8 to the Notes to the Consolidated Financial Statements herein.and overall higher home prices.

Following is a schedule of net premiums written for the three months endedMarch 31, ~~2016~~2017 and ~~2015~~2016 in select states in which the Company's two insurance subsidiaries, ITIC and NITIC, currently write insurance:

Three Months Ended March 31,
State 2016 2015
North Carolina $ 7,320,753
$ 7,306,227
Texas 4,453,618
7,504,129
South Carolina 2,553,741
2,220,225
Georgia 1,878,696
1,249,569
Virginia 1,255,912
1,227,776
All Others 4,037,679
5,486,890
Premiums
21,500,399
24,994,816
Reinsurance Assumed —
9,994
Reinsurance Ceded 8,598
(42,769 )
Net Premiums Written $ 21,508,997
$ 24,962,041

During the quarter ended March 31, 2016, the North Carolina Rating Bureau, of which Investors Title Insurance Company is a member, filed new premium rates that took effect on April 1, 2016. The new premium rates are expected to result in increased revenues from premiums written in North Carolina, and will likely have a material impact on the Company's results of operations.



		Three Months Ended March 31,
State		2017				2016
North Carolina		$	12,427,079			$	7,320,753
Texas		7,297,340				4,453,618
South Carolina		3,552,794				2,553,741
Georgia		2,740,940				1,878,696
Virginia		1,497,458				1,255,912
All Others		6,182,404				4,037,679
Premiums		33,698,015				21,500,399
Reinsurance Assumed		—				—
Reinsurance Ceded		(56,451		)		8,598
Net Premiums Written		$	33,641,564			$	21,508,997

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 ~~$2,052,184~~$2,959,695 for the three months ended March 31, ~~2016~~2017, compared with ~~$2,146,926~~$2,052,184 for the same prior year period. The ~~decrease~~increase for the ~~three months~~three-month period ended March 31, ~~2016,~~2017 primarily related to ~~decreases in earnings of unconsolidated affiliates and trust and investment management services revenue, partially offset by~~ increases in revenue from ~~state tax credits~~title fees and ~~exchange services income.~~earnings of unconsolidated affiliates.

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~~The Company’s investment strategy ~~the Company has emphasized~~emphasizes after-tax income and principal preservation. The Company’s investments are primarily in bonds and, to a lesser extent, equity securities. The average effective maturity of the majority of the bonds is ~~within~~less than 10 years. The Company’s invested assets are managed to fund its obligations and evaluated to ensure 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 $1,096,591 for the three months ended March 31, 2017, compared with $1,151,011 for the ~~three months endedMarch 31, 2016~~ ~~compared with $1,178,039 for the~~same prior year period. The decrease in investment income for the three months ended March 31, ~~2016~~2017 was primarily due to a lower ~~levels~~level of ~~interest received.~~investments in fixed income securities.

Net Realized 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’ business prospects and tax planning considerations. Additionally, the amounts of net realized investment gains and losses are affected by assessments of 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 gain on investments was $103,339 for the three months ended March 31, 2017, compared with $149,830 for the same prior year period. The net realized gain on investments for the three months endedMarch 31, ~~2016~~ ~~compared with $14,803 for the prior year period.~~2017 did not include any impairment charges. The net realized gain on investments for the three months ended March 31, 2016 includes impairment charges of $42,794 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 $192,624. ~~There were no impairments for the three months ended March 31, 2015.~~ Management believes unrealized losses on remaining fixed income and equity securities at March 31, ~~2016~~2017 are temporary in nature.

The securities in the 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 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 assessment of an 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 the provision for claims. Operating expenses ~~decreased 14.1%~~increased 40.7% for ~~the~~ ~~three months endedMarch 31, 2016~~ ~~compared with the prior year period. For~~ the three months ended March 31, ~~2016, expenses decreased~~2017, compared with the same prior year period. The increase in the three-month period ended March 31, 2017 is primarily due to ~~a decrease~~increases in commissions and ~~the provision for claims.~~salaries, employee benefits and payroll taxes.

Following is a summary of the Company's operating expenses for the three months endedMarch 31, ~~2016~~2017 and ~~2015~~2016. 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 March 31,													Three Months Ended March 31,
	2016				%			2015				%		2017				%			2016				%
Title Insurance	$	20,723,977			93.0	%		$	24,285,515			93.6	%	$	29,555,492			94.3	%		$	20,723,977			93.0	%
All Other	1,554,584				7.0	%		1,647,170				6.4	%	1,794,517				5.7	%		1,554,584				7.0	%
Total	$	22,278,561			100.0	%		$	25,932,685			100.0	%	$	31,350,009			100.0	%		$	22,278,561			100.0	%

On a combined basis, after-tax profit margins were 11.8% for the three months ended March 31, 2017, and 7.3% for the three months endedMarch 31, 2016 ~~and 6.1% for the~~ ~~three months endedMarch 31, 2015~~. 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 ~~$7,471,951~~$9,902,271 for the three months ended March 31, ~~2016~~2017, compared with ~~$7,277,449~~$7,471,951 for the same prior year period. On a consolidated basis, salaries, employee benefits and payroll taxes as a percentage of total revenues were ~~30.1%~~26.2% for the three months ended March 31, ~~2016~~2017, compared with ~~25.7%~~30.1% for the same prior year period. The ~~increase~~increases in payroll expenses for the three months ended March 31, ~~2016~~2017 primarily relate ~~to normal inflationary~~ increases in salaries, benefits and payroll expenses associated with Texas title agency University Title, which was acquired in the fourth quarter of 2016, higher levels of incentive compensation and ~~benefit costs.~~inflationary increases.

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 ~~$1,493,860~~$1,939,055 for the three months ended March 31, ~~2016~~2017, compared with ~~$1,304,221~~$1,493,860 for the ~~prior year period. As a percentage of total revenues, office occupancy and operations expenses were 6.0% for the three months ended March 31, 2016 compared with 4.6% for the~~same prior year period. The increases in expenses in ~~2016~~2017 primarily related to increases in ~~depreciation~~office equipment and ~~maintenance expenses.~~facilities.

Business Development: Business development expenses primarily include marketing and travel-related expenses. Business development expenses were ~~$480,390~~$612,947 for the three months ended March 31, ~~2016~~2017, compared with ~~$486,975~~$480,390 for the same prior year period. ~~Business development expenses decreased 1.4%~~The increases for the three months ended March 31, ~~2016 compared with the prior year period. The decrease for the three months ended March 31, 2016~~2017 primarily related to ~~a decline~~increases in marketing and travel 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 ~~$230,054~~$153,556 for the three months ended March 31, ~~2016~~2017, compared with ~~$216,643~~$230,054 for the same prior year period.

Professional and Contract Labor Fees: Professional and contract labor fees were ~~$538,653~~$439,176 for the three months ended March 31, ~~2016~~2017, compared with ~~$584,107~~$538,653 for the same prior year period. The decrease for the ~~three months~~three-month period ended March 31, ~~2016~~2017 was primarily attributable to a decrease in ~~consulting~~legal fees ~~associated with the Company's ongoing software initiatives, partially offset by an increase in legal~~and other professional 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 ~~$202,981~~$607,112 for the three months ended March 31, ~~2016~~2017, compared with ~~$203,548~~$202,981 for the same prior year period. The increase for the three-month period ended March 31, 2017 was primarily attributable to an increase in amortization of intangible assets attributable to University Title and miscellaneous title expenses.

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 ~~decreased~~increased ~~21.0%~~41.6% for the three months endedMarch 31, ~~2016~~2017, compared with the same prior year period. Commission expense for the three months ended March 31, 2017 moved primarily commensurate with agent premium volume. Commission rates vary by market due to local practice, competition and state regulations. Commission expense as a percentage of net premiums written by agents was ~~71.9%~~ ~~for the~~ ~~three months endedMarch 31, 2016~~ ~~compared with~~ ~~75.4%~~ ~~for the prior year period. Commission expense~~67.5% for the three months ended March 31, ~~2016 decreased~~2017, compared with 71.9% for the same prior year period. The decrease in commission expense as a percentage of net premiums written by agents was primarily ~~due~~related to ~~lower agent premiums. Commission rates may vary due to~~changes in geographic ~~locations, different levels~~mix and the elimination of ~~premium rate structures and state regulations.~~intercompany commissions for affiliated agents upon consolidation.

Provision for Claims: The provision for claims as a percentage of net premiums written was 2.1% for the three months ended March 31, 2017, compared with 0.1% for the ~~three months endedMarch 31, 2016~~ ~~compared with~~ ~~3.2%~~ ~~for the~~same prior year period. The ~~decrease~~change in the provision for claims in the current ~~quarter~~period compared with the same prior year period primarily related to favorable claims 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.~~prior year period.

The ~~decrease~~increase in the loss provision rate for the ~~three months~~three-month period ended March 31, ~~2016~~2017 from the ~~2015~~2016 level resulted in approximately ~~$662,000 less~~$694,000 more in reserves than would have been recorded at the ~~higher 2015~~lower 2016 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~~is actuarially determined based on historical claims experience. Actual payments of claims, net of recoveries, were ~~$406,959~~$579,397 and ~~$400,612~~$406,959 for the ~~three months~~three-month periods ended March 31, ~~2016~~2017 and ~~2015~~2016, respectively.

Reserves for Claims: At March 31, ~~2016~~2017, the total reserve for claims was $~~37,397,000~~35,445,000. Of that total, approximately ~~$4,966,000~~$4,555,000 was reserved for specific claims, and approximately ~~$32,431,000~~$30,890,000 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~~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 total loss provision. Adjustments may be required as new information develops which often varies from past experience.

Premium and Retaliatory 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 ~~1.4%~~1.9% for the three months ended March 31, ~~2016~~2017, compared with ~~1.9%~~1.4% for the same prior year period.

Income Taxes

The provision for income taxes was $1,985,000 for the three months ended March 31, 2017, compared with $779,000 for the ~~three months endedMarch 31, 2016~~ ~~compared with $643,000 for the~~same prior year period. Income tax expense as a percentage of earnings before income taxes was 30.8% for the three months ended March 31, 2017, compared with 30.2% for the ~~three months endedMarch 31, 2016~~ ~~compared with 27.1% for the~~same prior year period. ~~The increase in the effective rate for~~ ~~2016~~ ~~compared with~~ ~~2015~~ ~~was primarily due to a higher proportion of taxable to tax-exempt income.~~ The effective income tax rate for both ~~2016~~2017 and ~~2015~~2016 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.

The Company believes it is more likely than not that the tax benefits associated with recognized impairment and unrecognized losses recorded through March 31, ~~2016~~2017 will be realized. However, this judgment could be impacted by further market fluctuations.

Liquidity and Capital Resources

The Company’s current cash requirements include general operating expenses, income taxes, capital expenditures, dividends on its common stock and repurchases of its commons stock. Cash flows from operations have 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 ~~(used in)~~ operating activities were $~~1,512,657~~$2,407,245 and ~~$(409,946)~~$1,544,949 for the ~~three months~~three-month periods ended March 31, ~~2016~~2017 and ~~2015~~,2016, respectively. Cash flows from operating activities increased in ~~2016~~2017 from ~~2015~~,2016, primarily due to ~~decreases in other assets and receivables, and~~ an increase in ~~the provision for deferred taxes, partially offset by~~net income, the timing of payable disbursements and an increase in income taxes ~~recoverable,~~payable, partially offset by an increase in other assets and a ~~lower provision~~benefit for ~~claims.~~deferred taxes.

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 ~~2016~~,2017, the Company had higher levels of investment purchase activity and purchases of property, partially offset by lower levels of proceeds from investing activities and repurchases of common stock ~~and dividends paid~~ compared with the prior 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 March 31, ~~2016,~~2017, the Company held cash and cash equivalents of ~~$21,873,731,~~$25,718,050, short-term investments of ~~$7,520,069,~~$13,635,465, fixed maturity securities of ~~$106,383,823~~$98,382,799 and equity securities of ~~$37,681,569.~~$43,068,433. The net effect of all activities on total cash and cash equivalents was ~~an increase of $83,663~~ in ~~2016~~ ~~and~~ a decrease of $~~187,443~~$2,210,422 in ~~2015~~.2017.

Capital Resources: The amount of capital resources the Company maintains is influenced by state regulation, the need to maintain 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 March 31, ~~2016,~~2017, both ITIC and ~~NTIIC~~NITIC met the minimum capital, surplus and reserve requirements for each state in which they are licensed.

While state ~~regulation~~regulations 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 adapt to a changing regulatory environment, including costs related to ~~emerging~~ CFPB regulation of the real estate industry.

~~Historically,~~The Company bases its capitalization levels, in part, on net coverage retained. Since the ~~Company's~~Company’s geographical focus has been and continues to be concentrated in states with average premium rates ~~that are~~ typically lower than the national average, ~~contributing~~capitalization relative to ~~the need to maintain~~premiums will usually appear higher ~~levels of capital to accommodate risk exposure beyond the~~than industry ~~average.~~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: 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 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 ~~18,795~~70 shares for the ~~three months~~three-month period ended March 31, ~~2016~~2017 and ~~15,036~~18,795 for the same period in ~~2015~~2016 at an average per share price of ~~$86.55~~$128.37 and ~~$71.11,~~$86.55, 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~~were approximately ~~$701,000~~$1,064,000 for ~~three months~~three-month period ended March 31, ~~2016.~~2017. In ~~2016,~~2017, 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~~reverse exchange property held by the Company for the purpose of completing such transactions totaled approximately $~~172,381,000~~186,086,000 and $~~171,010,000~~202,184,000 as of March 31, ~~2016~~2017 and December 31, ~~2015~~2016, 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 reliance upon the North Carolina and Texas markets for a significant portion of its premiums;

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 providers, including ~~insurance~~ title insurance agents, with federal consumer financial 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 they may pay to the Company without prior regulatory approval;

the desirability to maintain capital above statutory 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;

difficulty managing growth, whether organic or through acquisitions;

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 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, ~~2015.~~2016. 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 March 31, ~~2016~~2017.

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 March 31, ~~2016~~2017 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 March 31, 2016, the Company implemented changes to its premium accounting system used in financial reporting. The upgrade was not made in response to any deficiency in the Company’s internal control over financial reporting. Other than this upgrade,2017, there were no ~~other~~ changes in the Company's internal control over financial reporting ~~that occurred during the quarter ended March 31, 2016~~ 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

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, ~~2015.~~2016.

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 March 31, ~~2016~~2017 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											496,580												429,777
January 2016	11,790			$	86.32			11,790			484,790
February 2016	5,669			$	86.61			5,669			479,121
March 2016	1,336			$	88.26			1,336			477,785
January 2017													70			$	128.37			70			429,707
February 2017													—			$	—			—			429,707
March 2017													—			$	—			—			429,707
Total:	18,795			$	86.55			18,795			477,785		70			$	128.37			70			429,707

For the quarter ended March 31, ~~2016~~2017, the Company purchased an aggregate of ~~18,795~~70 shares of the Company’s common stock pursuant to the Company’s ongoing purchase program that was initially announced 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 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 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 6. Exhibits



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, Treasurer, Chief
		~~President, Principal~~ Financial Officer, Chief Accounting Officer and
		Director (Principal Financial Officer and
		Principal Accounting Officer)

Dated: May ~~6, 2016~~8, 2017

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