Note 8.

Income Taxes

A reconciliation of the differences between income taxes computed at the federal statutory income tax rate and income tax expense is as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Federal income tax provision at statutory rate of 35%	$	764		$	125		$	643		$	607
Dividends-received deduction		(24	)		(24	)		(48	)		(46	)
Small life insurance company deduction		(30	)		-			(30	)		-
Other permanent differences		15			15			34			33
Income tax expense	$	725		$	116		$	599		$	594

The components of income tax expense were:

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Current - Federal	$	1,063		$	590		$	1,063		$	590
Deferred - Federal		(338	)		(474	)		(464	)		4
Total	$	725		$	116		$	599		$	594

The primary differences between the effective tax rate and the federal statutory income tax rate for the three month and six month periods ended June 30, 2017 resulted from the dividends-received deduction ("DRD") and the small life insurance company deduction ("SLD"). The current estimated DRD is adjusted as underlying factors change and can vary from estimates based on, but not limited to, actual distributions from investments as well as the amount of the Company's taxable income. The SLD varies in amount and is determined at a rate of 60 percent of the tentative life insurance company taxable income ("LICTI"). The SLD for any taxable year is reduced (but not below zero) by 15 percent of the tentative LICTI for such taxable year as it exceeds $3,000 and is ultimately phased out at $15,000.

The primary difference between the effective tax rate and the federal statutory income tax rate for the three month and six month periods ended June 30, 2016 resulted from the DRD.