Income Taxes

6 Months Ended

Jun. 30, 2011

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

INCOME TAXES

The Company recognizes tax-related interest and penalties as a component of tax expense.  The Company incurred no interest or penalties as of both June 30, 2011 and December 31, 2010. The Company files income tax returns in the U.S. federal jurisdiction and various states.  The Company is not subject to examinations by authorities related to its U.S. federal or state income tax filings for years prior to 2007. Tax returns have been filed through the year 2009 with extensions filed for 2010.

Net deferred tax liabilities are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of the enacted tax laws.  Management believes that, based on its historical pattern of taxable income, the Company will produce sufficient income in the future to realize its deferred tax assets.   The Company recognized net deferred tax liability positions of $1,132,000 at June 30, 2011 and $1,043,000 at December 31, 2010.

The tax effect of significant differences representing deferred tax assets and liabilities are as follows (dollars in thousands):

	June 30, 2011			December 31, 2010
General insurance expenses	$	1,540		$	1,442
Unearned premiums	1,897			1,795
Claims liabilities	304			301
Trading securities	7			17
Other than temporary impairments on securities owned	184			115
Unrealized loss on interest rate swaps	106			77
Deferred tax assets	$	4,038		$	3,747
Depreciation	$	(155	)	$	(171	)
Deferred policy acquisition costs	(3,178		)	(2,874		)
Unrealized gains on securities available-for-sale	(1,837		)	(1,745		)
Deferred tax liabilities	$	(5,170	)	$	(4,790	)
Net deferred tax liability	$	(1,132	)	$	(1,043	)

THE NATIONAL SECURITY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Continued)

The appropriate income tax effects of changes in temporary differences are as follows (dollars in thousands):

	Six months ended June 30,
	2011			2010
Deferred policy acquisition costs	$	304		$	157
Other-than-temporary-impairments	(69		)	(144		)
Trading securities	10			—
Unearned premiums	(102		)	(3		)
General insurance expenses	(98		)	84
Depreciation	(16		)	(8		)
Claim liabilities	(2		)	469
Deferred income tax expense	$	27		$	555

Total income tax expense varies from amounts computed by applying current federal income tax rates to income before income taxes.  The reason for these differences and the approximate tax effects are as follows (dollars in thousands):