Investments

At June 30, 2017, investments and restricted investments classified as available-for-sale securities were as follows:



	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
Investments:
U.S. Treasury securities	$	24,930	$	—	$	7	$	24,923
Corporate debt securities	97,563		713		2,257		96,019
Preferred stock	40,525		855		1,103		40,277
Common stock	6,481		165		123		6,523
	169,499		1,733		3,490		167,742
Restricted investments:
Short-term bond	4,254		—		4		4,250
Money market funds	219		—		—		219
	4,473		—		4		4,469
	$	173,972	$	1,733	$	3,494	$	172,211

At December 31, 2016, investments and restricted investments classified as available-for-sale securities were as follows:



	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
Investments:
Corporate debt securities	$	135,590	$	5,311	$	1,769	$	139,132
Preferred stock	36,048		656		111		36,593
	171,638		5,967		1,880		175,725
Restricted investments:
Short-term bond	4,232		—		6		4,226
Money market fund	1,410		—		—		1,410
	5,642		—		6		5,636
	$	177,280	$	5,967	$	1,886	$	181,361

Mr. Bruce R. Berkowitz is the Chairman of the Company’s Board of Directors. He is the Manager of, and controls entities that own and control, Fairholme Holdings, LLC, which wholly owns Fairholme Capital Management, L.L.C. (“FCM”, a registered investment advisor registered with the Securities and Exchange Commission) and the Fairholme Trust Company, L.L.C. (“FTC”, a non-depository trust company regulated by the Florida Office of Financial Regulation). Mr. Berkowitz is the Chief Investment Officer of FCM, and the Chief Executive Officer and a director of FTC. Since April 2013, FCM has provided investment advisory services to the Company directly, or more recently, as the sub-advisor to FTC. Neither FCM nor FTC receives any compensation for services as the Company’s investment advisor. As of June 30, 2017, clients of FCM and FTC beneficially owned approximately 35.43% of the Company’s common stock. FCM and its client the Fairholme Fund, a Series of the Fairholme Funds, Inc., may be deemed affiliates of the Company.

Both Mr. Cesar Alvarez and Mr. Howard Frank are members of the Company’s Board of Directors and also serve as directors of the Fairholme Funds, Inc. Mr. Alvarez is also a director of FTC.

Pursuant to the terms of the Investment Management Agreement, as amended (the “Agreement”), FTC agreed to supervise and direct the investments of investment accounts established by the Company in accordance with the investment guidelines and restrictions approved by the Investment Committee of the Company’s Board of Directors. The investment guidelines are set forth in the Agreement and require that, as of the date of any investment: (i) no more than 15% of the investment account may be invested in securities of any one issuer (excluding the U.S. Government), (ii) any investment in any one issuer (excluding the U.S. Government) that exceeds 10%, but not 15%, requires the consent of at least two members of the Investment Committee, (iii) 25% of the investment account must be held in cash or cash equivalents, (iv) the investment account is permitted to be invested in common equity securities; however, common stock investments shall be limited to exchange-traded common equities, shall not exceed 5% ownership of a single issuer and, cumulatively, the common stock held in the Company’s investment portfolio shall not exceed $100.0 million market value, and (v) the aggregate market value of investments in common stock, preferred stock or other equity investments cannot exceed 25% of the market value of the Company’s investment portfolio at the time of purchase.

As of June 30, 2017, the investment account included $24.9 million of U.S. Treasury securities, $96.0 million of corporate debt securities, $40.3 million of preferred stock and $6.5 million of common stock investments. Of the $96.0 million corporate debt securities and $40.3 million preferred stock $8.6 million and $0.1 million, respectively, were issued by Sears Holdings Corporation or affiliates, of which Mr. Berkowitz is on the board of directors, and may be deemed an affiliate of FCM, or the Company.

During the three and six months ended June 30, 2017, realized gain from the sale of available for-sale securities were $7.7 million and $10.9 million, respectively. During the six months ended June 30, 2017 proceeds from the sale of available-for-sale securities were $110.4 million.

During the three and six months ended June 30, 2016, there was no realized gain or loss from the sale or maturity of available for-sale securities. During the six months ended June 30, 2016, proceeds from the sale of available-for-sale securities were $8.4 million and proceeds from the maturity of available-for-sale securities were $185.0 million.

The following table provides the U.S. Treasury securities, corporate debt securities, preferred stock, common stock and restricted investments unrealized loss position and related fair values:



	As of June 30, 2017								As of December 31, 2016
	Less Than 12 Months				12 Months or Greater				Less Than 12 Months				12 Months or Greater
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Investments:
U.S. Treasury securities	$	24,923	$	7	$	—	$	—	$	—	$	—	$	—	$	—
Corporate debt securities	49,758		1,394		9,542		863		64,516		1,410		6,971		359
Preferred stock	11,544		1,055		147		48		—		—		153		111
Common stock	3,054		123		—		—		—		—		—		—
Restricted investments:
Short-term bond	4,250		4		—		—		4,226		6		—		—
	$	93,529	$	2,583	$	9,689	$	911	$	68,742	$	1,416	$	7,124	$	470

As of June 30, 2017, the Company had investments with an unrealized loss of $3.5 million related to U.S. Treasury securities, corporate debt securities, preferred stock, common stock and restricted investments. The Company had an unrealized loss of $1.9 million as of December 31, 2016 related to corporate debt securities, preferred stock and restricted investments. As of June 30, 2017 and December 31, 2016, the Company did not intend to sell the investments with a material unrealized loss and it is more likely than not that the Company will not be required to sell any of these securities prior to their anticipated recovery, which could be maturity. During the six months ended June 30, 2017, the Company determined that an unrealized loss related to its corporate debt securities and preferred stock was other-than-temporarily impaired and recorded an impairment of $0.4 million for credit-related loss in investment income, net in the Company's condensed consolidated statements of income.

The net carrying value and estimated fair value of investments and restricted investments classified as available-for-sale at June 30, 2017, by contractual maturity are shown in the following table. Actual maturities may differ from contractual maturities since certain borrowers have the right to call or prepay obligations.



	Amortized Cost		Fair Value
Due in one year or less	$	28,886	$	28,584
Due after one year through five years	92,165		90,963
Due after five year through ten years	1,351		1,339
Due after ten years through fifteen years	91		56
	122,493		120,942
Preferred stock	40,525		40,277
Common stock	6,481		6,523
Restricted investments	4,473		4,469
	$	173,972	$	172,211