11.	Income Taxes

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

	Year Ended December 31,
	2014			2013			2012
Federal:
Current	$	228		$	175		$	—
Deferred		(19,098	)		(4	)		—
		(18,870	)		171			—
State:
Current		650			476			(8	)
Deferred		(125	)		3			3
		525			479			(5	)
	$	(18,345	)	$	650		$	(5	)

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

	Year Ended December 31,
	2014			2013			2012
Provision (benefit) for income taxes at statutory rate	$	3,403		$	3,440		$	(3,166	)
Tax effect of:
Tax-exempt investment income		(21	)		(27	)		(18	)
Change in the beginning of the year balance of the valuation allowance for deferred tax assets allocated to income taxes		(22,427	)		(4,277	)		580
Stock-based compensation		137			1,133			2,552
State income taxes		525			479			(5	)
Other		38			(98	)		52
	$	(18,345	)	$	650		$	(5	)

The tax effects of temporary differences that give rise to the net deferred tax assets and liabilities are presented below (in thousands).

	December 31,
	2014			2013
Deferred tax assets:
Net operating loss carryforwards	$	6,180		$	9,949
Stock option compensation		402			516
Unearned premiums and loss and loss adjustment expense reserves		5,614			4,898
Goodwill and identifiable intangible assets		5,404			6,311
Alternative minimum tax (“AMT”) credit carryforwards		2,004			1,784
Accrued expenses and other nondeductible items		1,201			1,182
Other		3,127			1,875
		23,932			26,515
Deferred tax liabilities:
Deferred acquisition costs		(1,211	)		(1,016	)
Identifiable intangible assets		(1,872	)		(1,872	)
Net unrealized change on investments		(2,105	)		(1,181	)
Other		(460	)		—
		(5,648	)		(4,069	)

Total net deferred tax asset		18,284			22,446
Less: Valuation allowance		(1,763	)		(24,224	)
Net deferred tax asset (liability)	$	16,521		$	(1,778	)

The Company had a valuation allowance of $1.8 million and $24.2 million at December 31, 2014 and 2013, respectively, to reduce the net deferred tax asset to the amount that is more likely than not to be realized. The change in the total valuation allowance for the year ended December 31, 2014 was a decrease of $22.4 million resulting from a change in management’s judgment regarding the realizability of the deferred tax asset. For the year ended December 31, 2014, a $1.2 million adjustment to the valuation allowance related to the unrealized change on investments was included in net income. The change in the valuation allowance was also net of the utilization of $9.8 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 net deferred tax asset will not be realized. The Company is required to assess whether a valuation allowance should be established against the Company’s net deferred tax asset 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 net deferred tax asset, 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 in establishing a deferred tax valuation allowance at December 31, 2013. Negative evidence including a twelve quarter cumulative taxable loss resulted in the establishment of a full valuation allowance from June 30, 2009 through September 30, 2014. As of December 31, 2014, the Company’s historical results now reflect a twelve quarter cumulative taxable income which management considers to be a trend of positive evidence in assessing the realizability of its net deferred tax asset. Based on this fact and the Company’s outlook for future profitability, the deferred tax asset valuation allowance was adjusted this period and resulted in the aforementioned change in the valuation allowance. The remaining allowance at December 31, 2014 relates to certain amounts that are not more likely than not expected to be realized.

The change in the total valuation allowance for the year ended December 31, 2013 was a decrease of $4.2 million. For the year ended December 31, 2013, the change in the calculation allowance included decreases of $1.9 million related to the unrealized change on investments included in other comprehensive income (loss) and was net of the utilization of $8.6 million in NOL carryforwards.

The change in the total valuation allowance for the year ended December 31, 2012 was an increase of $1.2 million. For the year ended December 31, 2012, the change in the calculation allowance included increases of $0.5 million related to the unrealized change on investments included in other comprehensive income (loss).

At December 31, 2014, the Company had gross state NOL carryforwards of $7.1 million that begin to expire in 2020. At December 31, 2014, the Company had gross federal NOL carryforwards of $17.7 million that begin to expire in 2031. In addition, the Company had AMT credit carryforwards of $2.0 million that have no expiration date. At December 31, 2014, the Company had gross state NOL carryforwards of $7.1 million that begin to expire in 2020.