5. Income Taxes

The provision for income taxes consisted of the following (in thousands).


	Three Months Ended March 31,
	2014		2013
Federal:
Current	$	10	$	26
Deferred		—		—

		10		26
State:
Current		25		66
Deferred		1		1

		26		67

	$	36	$	93

The provision for income taxes differs from the amounts computed by applying the statutory federal corporate tax rate of 35% to income before income taxes as a result of the following (in thousands).


	Three Months Ended March 31,
	2014			2013
Provision for income taxes at statutory rate	$	192		$	741
Tax effect of:
Tax-exempt investment income		(5	)		(5	)
Change in the beginning of the period balance of the valuation allowance for deferred tax assets allocated to federal income taxes		(223	)		(886	)
Stock-based compensation		37			171
State income taxes, net of federal income tax benefit and valuation allowance		26			67
Other		9			5

	$	36		$	93

The Company had a valuation allowance of $23.4 million and $24.2 million at March 31, 2014 and December 31, 2013, respectively, to reduce deferred tax assets to the amount that is more likely than not to be realized. The change in the total valuation allowance for the three months ended March 31, 2014 was a decrease of $0.8 million. For the three months ended March 31, 2014, the change in the valuation allowance included an increase of $0.6 million related to the unrealized change in investments included in comprehensive income and was net of the utilization of $3.0 million in NOL carryforwards.

In assessing the realization of deferred tax assets, management considered whether it was more likely than not that some portion or all of the deferred tax assets will not be realized. The Company is required to assess whether a valuation allowance should be established against the Company’s net deferred tax assets based on the consideration of all available evidence using a more likely than not standard. In making such judgments, significant weight is given to evidence that can be objectively verified. In assessing the Company’s ability to support the realizability of its deferred tax assets, management considered both positive and negative evidence. The Company placed greater weight on historical results than on the Company’s outlook for future profitability and established a deferred tax valuation allowance at March 31, 2014 and December 31, 2013. The deferred tax valuation allowance may be adjusted in future periods if management determines that it is more likely than not that some portion or all of the deferred tax assets will be realized. In the event the deferred tax valuation allowance is adjusted, the Company would record an income tax benefit for the adjustment.