3. Investments

12 Months Ended

Dec. 31, 2015

Weighted average amortization period of identified intangible assets of finite useful life

3. Investments

Available-for-Sale Securities

The amortized cost and fair value of investments in available-for-sale fixed-maturity securities and equity securities as of December 31, 2015 and December 31, 2014 are summarized as follows:

	December 31, 2015
													Net
	Cost or		Gross		Gross Unrealized Losses								Unrealized
	Amortized		Unrealized		Less than 12			More than 12			Fair		Gains/
Category	Cost		Gains		Months			Months			Value		(Losses)
Fixed-Maturity Securities:
Political subdivisions of States, Territories and Possessions	$	12,139,793	$	431,194	$	(15,889	)	$	-		$	12,555,098	$	415,305
Corporate and other bonds Industrial and miscellaneous		45,078,044		490,444		(512,427	)		(99,593	)		44,956,468		(121,576	)
Residential mortgage backed securities		5,003,292		48,375		(61,169	)		-			4,990,498		(12,794	)
Total fixed-maturity securities		62,221,129		970,013		(589,485	)		(99,593	)		62,502,064		280,935
Equity Securities:
Preferred stocks		2,874,173		70,799		-			(29,322	)		2,915,650		41,477
Common stocks		5,877,364		514,977		(103,721	)		-			6,288,620		411,256
Total equity securities		8,751,537		585,776		(103,721	)		(29,322	)		9,204,270		452,733
Total	$	70,972,666	$	1,555,789	$	(693,206	)	$	(128,915	)	$	71,706,334	$	733,668

	December 31, 2014
													Net
	Cost or		Gross		Gross Unrealized Losses								Unrealized
	Amortized		Unrealized		Less than 12			More than 12			Fair		Gains/
Category	Cost		Gains		Months			Months			Value		(Losses)
Fixed-Maturity Securities:
Political subdivisions of States, Territories and Possessions	$	13,862,141	$	412,490	$	(23,813	)	$	(6,379	)	$	14,244,439	$	382,298
Corporate and other bonds Industrial and miscellaneous		36,221,300		803,440		(118,092	)		(30,228	)		36,876,420		655,120
Total fixed-maturity securities		50,083,441		1,215,930		(141,905	)		(36,607	)		51,120,859		1,037,418
Equity Securities:
Preferred stocks		3,172,632		19,180		(2,647	)		(62,886	)		3,126,280		(46,352	)
Common stocks		4,448,677		444,950		-			(2,177	)		4,891,449		442,772
Total equity securities		7,621,309		464,130		(2,647	)		(65,063	)		8,017,729		396,420
Total	$	57,704,750	$	1,680,060	$	(144,552	)	$	(101,670	)	$	59,138,588	$	1,433,838

A summary of the amortized cost and fair value of the Company’s investments in available-for-sale fixed-maturity securities by contractual maturity as of December 31, 2015 and 2014 is shown below:

The actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without penalties.

	December 31, 2015				December 31, 2014
	Amortized				Amortized
Remaining Time to Maturity	Cost		Fair Value		Cost		Fair Value
Less than one year	$	827,246	$	837,918	$	482,833	$	487,507
One to five years		17,146,349		17,393,571		11,640,381		11,943,127
Five to ten years		37,877,726		37,884,450		32,283,921		32,865,231
More than 10 years		1,366,516		1,395,627		5,676,306		5,824,994
Residential mortgage backed securities		5,003,292		4,990,498		-		-
Total	$	62,221,129	$	62,502,064	$	50,083,441	$	51,120,859

Held-to-Maturity Securities

The amortized cost and fair value of investments in held-to-maturity fixed-maturity securities as of December 31, 2015 and 2014 are summarized as follows:

	December 31, 2015
													Net
	Cost or		Gross		Gross Unrealized Losses								Unrealized
	Amortized		Unrealized		Less than 12			More than 12			Fair		Gains/
Category	Cost		Gains		Months			Months			Value		(Losses)
U.S. Treasury securities	$	606,389	$	147,650	$	-		$	-		$	754,039	$	147,650
Political subdivisions of States, Territories and Possessions		1,417,679		70,284		-			(54,189	)		1,433,774		16,095
Corporate and other bondsIndustrial and miscellaneous		3,114,804		82,265		(17,980	)		(125,807	)		3,053,282		(61,522	)
Total	$	5,138,872	$	300,199	$	(17,980	)	$	(179,996	)	$	5,241,095	$	102,223

	December 31, 2014
													Net
	Cost or		Gross		Gross Unrealized Losses								Unrealized
	Amortized		Unrealized		Less than 12			More than 12			Fair		Gains/
Category	Cost		Gains		Months			Months			Value		(Losses)
U.S. Treasury securities	$	606,353	$	183,200	$	-		$	-		$	789,553	$	183,200
Political subdivisions of States,Territories and Possessions		1,413,303		49,981		-			(12,247	)		1,451,037		37,734
Corporate and other bonds Industrial and miscellaneous		3,109,079		98,306		(52,921	)		-			3,154,464		45,385
Total	$	5,128,735	$	331,487	$	(52,921	)	$	(12,247	)	$	5,395,054	$	266,319

Held-to-maturity U.S. Treasury securities are held in trust pursuant to the New York State Department of Financial Services’ minimum funds requirement.

A summary of the amortized cost and fair value of the Company’s investments in held-to-maturity securities by contractual maturity as of December 31, 2015 and 2014 is shown below:

	December 31, 2015				December 31, 2014
	Amortized				Amortized
Remaining Time to Maturity	Cost		Fair Value		Cost		Fair Value
Less than one year	$	-	$	-	$	-	$	-
One to five years		500,000		496,245		-		-
Five to ten years		4,032,483		3,990,811		3,522,927		3,563,401
More than 10 years		606,389		754,039		1,605,808		1,831,653
Total	$	5,138,872	$	5,241,095	$	5,128,735	$	5,395,054

Investment Income

Major categories of the Company’s net investment income are summarized as follows:

	Year ended
	December 31,
	2015		2014
Income:
Fixed-maturity securities	$	2,308,993	$	1,665,534
Equity securities		503,363		483,175
Cash and cash equivalents		7,314		23,750
Other		1		(481	)
Total		2,819,671		2,171,978
Expenses:
Investment expenses		255,781		372,210
Net investment income	$	2,563,890	$	1,799,768

Proceeds from the sale and maturity of fixed-maturity securities were $6,577,943 and $6,823,015 for the years ended December 31, 2015 and 2014, respectively.

Proceeds from the sale of equity securities were $2,689,113 and $7,970,324 for the years ended December 31, 2015 and 2014, respectively.

The Company’s net realized gains and losses on investments are summarized as follows:

	Year ended
	December 31,
	2015			2014
Fixed-maturity securities:
Gross realized gains	$	49,412		$	323,455
Gross realized losses		(152,328	)		(48,729	)
		(102,916	)		274,726
Equity securities:
Gross realized gains		153,711			497,023
Gross realized losses		(101,341	)		(116,309	)
		52,370			380,714
Cash and short term investments (1)		-			51,587
Net realized gains (losses)	$	(50,546	)	$	707,027

(1) Realized gain on cash and short term investments is a partial recovery from the FDIC of an amount previously written off in 2009 due to the failure of Waterfield Bank.

Impairment Review

Impairment of investment securities results in a charge to operations when a market decline below cost is deemed to be other-than-temporary. The Company regularly reviews its fixed-maturity securities and equity securities portfolios to evaluate the necessity of recording impairment losses for other-than-temporary declines in the fair value of investments. In evaluating potential impairment, GAAP specifies (i) if the Company does not have the intent to sell a debt security prior to recovery and (ii) it is more likely than not that it will not have to sell the debt security prior to recovery, the security would not be considered other-than-temporarily impaired unless there is a credit loss.  When the Company does not intend to sell the security and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis, it will recognize the credit component of an other-than-temporary impairment (“OTTI”) of a debt security in earnings and the remaining portion in other comprehensive income.  The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term of the security as projected based on cash flow projections.  For held-to-maturity debt securities, the amount of OTTI recorded in other comprehensive income for the noncredit portion of a previous OTTI is amortized prospectively over the remaining life of the security on the basis of timing of future estimated cash flows of the security.

OTTI losses are recorded in the consolidated statements of income and comprehensive income as net realized losses on investments and result in a permanent reduction of the cost basis of the underlying investment. The determination of OTTI is a subjective process and different judgments and assumptions could affect the timing of loss realization. At December 31, 2015, there were 57 securities that accounted for the gross unrealized loss. The Company determined that none of the unrealized losses were deemed to be OTTI for its portfolio of fixed-maturity investments and equity securities for the years ended December 31, 2015 and 2014. Significant factors influencing the Company’s determination that unrealized losses were temporary included the magnitude of the unrealized losses in relation to each security’s cost, the nature of the investment and management’s intent and ability to retain the investment for a period of time sufficient to allow for an anticipated recovery of fair value to the Company’s cost basis.

The Company held securities with unrealized losses representing declines that were considered temporary at December 31, 2015 and 2014 as follows:

	December 31, 2015
	Less than 12 months							12 months or more							Total
						No. of							No. of		Aggregate
	Fair		Unrealized			Positions		Fair		Unrealized			Positions		Fair		Unrealized
Category	Value		Losses			Held		Value		Losses			Held		Value		Losses
Fixed-Maturity Securities:
Political subdivisions of States, Territories and Possessions	$	1,432,005	$	(15,889	)		4	$	-	$	-			-	$	1,432,005	$	(15,889	)
Corporate and other bonds industrial and miscellaneous		18,424,609		(512,427	)		32		636,093		(99,593	)		2		19,060,702		(612,020	)
Resedential mortgage backed securities		2,413,980		(61,169	)		12		-		-			-		2,413,980		(61,169	)
Total fixed-maturity securities	$	22,270,594	$	(589,485	)		48	$	636,093	$	(99,593	)		2	$	22,906,687	$	(689,078	)
Equity Securities:
Preferred stocks	$	-	$	-			-	$	702,000	$	(29,322	)		1	$	702,000	$	(29,322	)
Common stocks		2,538,900		(103,721	)		6		-		-			-		2,538,900		(103,721	)
Total equity securities	$	2,538,900	$	(103,721	)		6	$	702,000	$	(29,322	)		1	$	3,240,900	$	(133,043	)
Total	$	24,809,494	$	(693,206	)		54	$	1,338,093	$	(128,915	)		3	$	26,147,587	$	(822,121	)

	December 31, 2014
	Less than 12 months							12 months or more							Total
						No. of							No. of		Aggregate
	Fair		Unrealized			Positions		Fair		Unrealized			Positions		Fair		Unrealized
Category	Value		Losses			Held		Value		Losses			Held		Value		Losses
Fixed-Maturity Securities:
Political subdivisions of States, Territories and Possessions	$	3,013,648	$	(23,813	)		9	$	126,658	$	(6,379	)		1	$	3,140,306	$	(30,192	)
Corporate and other bonds industrial and miscellaneous		6,325,579		(118,092	)		15		714,640		(30,228	)		2		7,040,219		(148,320	)
Total fixed-maturity securities	$	9,339,227	$	(141,905	)		24	$	841,298	$	(36,607	)		3	$	10,180,525	$	(178,512	)
Equity Securities:
Preferred stocks	$	656,325	$	(2,647	)		1	$	1,448,376	$	(62,886	)		6	$	2,104,701	$	(65,533	)
Common stocks		-		-			-		267,000		(2,177	)		1		267,000		(2,177	)
Total equity securities	$	656,325	$	(2,647	)		1	$	1,715,376	$	(65,063	)		7	$	2,371,701	$	(67,710	)
Total	$	9,995,552	$	(144,552	)		25	$	2,556,674	$	(101,670	)		10	$	12,552,226	$	(246,222	)