INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2013

Summary of provision for income tax benefit

A summary of the provision for income tax expense (benefit) is as follows.

	Years Ended December 31,
	2013		2012		2011
	(Dollars in Thousands)
Federal
Current	$	4,289	$	63	$	310
Deferred		1,393		2,052		(490	)
Provision for Federal income tax expense (benefit)		5,682		2,115		(180	)
State
Current		-		-		-
Deferred		809		320		(390	)
Provision for state income tax expense (benefit)		809		320		(390	)
Provision for income tax expense (benefit)	$	6,491	$	2,435	$	(570	)

Components of effective federal and state tax rates to income before provision for income tax benefit

The actual income tax expense (benefit) differs from the "expected" income tax expense (benefit) (computed by applying the combined applicable effective federal and state tax rates to income before provision for income tax expense (benefit) as follows.

	Years Ended December 31,
	2013			2012			2011
	(Dollars in Thousands)

Computed expected tax expense (benefit) provision, at federal rate	$	6,535		$	2,294		$	(341	)
State tax, net of federal deduction expense (benefit)		698			245			(36	)
Tax-exempt interest		(31	)		(26	)		(41	)
Dividend received deduction		(97	)		(88	)		(80	)
Stock option expense and other permanent differences		(34	)		72			87
AMT Tax credit		-			(113	)		-
True-up		(306	)		-			-
Other		(274	)		51			(159	)
Provision for income tax expense (benefit)	$	6,491		$	2,435		$	(570	)

Components of net deferred tax asset

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our net deferred tax asset are as follows.

	Years Ended December 31,
	2013			2012
Deferred tax assets:
Unpaid losses and loss adjustment expenses	$	1,157		$	1,725
Unearned premiums		6,864			2,629
Discount on advance premiums		243			167
Allowance for credit losses		59			31
Allowance for impairments		21			91
FIGA Guaranty Assessment		-			306
Depreciation & amortization		149			366
Reserve for claims settlements		1,844			809
NOL Carryforward		73			3,259
AMT credit		-			253
Flow-through income or loss		4			-
Stock option expense per ASC 718		550			432
Total deferred tax assets		10,964			10,068
Deferred tax liabilities:

Deferred acquisition costs, net		(6,287	)		(3,191	)
Dividends Collected vs. Earned		(6	)		(18	)
Regulatory assessments		(67	)		(67	)
Unrealized Gain on investment securities		(3,598	)		(2,454	)
Total deferred tax liabilities		(9,958	)		(5,730	)
Net deferred tax asset	$	1,006		$	4,338