Income Taxes (Tables)

6 Months Ended

Jun. 30, 2012

Schedule of Deferred Tax Assets and Liabilities

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



	June 30, 2012			December 31, 2011
	(unaudited)
General expenses	$	1,211		$	1,576
Unearned premiums	1,827			1,714
Claims liabilities	249			271
Litigation settlement	4,420			—
NOL carry forward	1,594			1,363
Other-than-temporary impairments on securities owned	231			258
Unrealized loss on interest rate swaps	489			407
Deferred tax assets	10,021			5,589

Depreciation	(120		)	(144		)
Deferred policy acquisition costs	(3,299		)	(3,250		)
Unrealized gains on securities available-for-sale	(2,320		)	(2,281		)
Deferred tax liabilities	(5,739		)	(5,675		)

Net deferred tax asset (liability)	$	4,282		$	(86	)

Changes in Temporary Differences in Federal Income Tax

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



	Six Months Ended June 30,
	2012			2011
Deferred policy acquisition costs	$	49		$	304
Other-than-temporary impairments	27			(69		)
Trading securities	—			10
Unearned premiums	(113		)	(102		)
General expenses	(61		)	(98		)
Depreciation	(24		)	(16		)
Claim liabilities	22			(2		)
Litigation settlement	(3,995		)	—
NOL carry forward	(230		)	—

Deferred income tax (benefit) expense	$	(4,325	)	$	27

Schedule of Effective Income Tax Rate Reconciliation

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



	Six Months Ended June 30,
	2012		2011
Federal income tax rate applied to pre-tax income/loss	34.00	%	34.00	%
Dividends received deduction and tax-exempt interest	0.80	%	1.70	%
Company owned life insurance	0.50	%	0.70	%
Small life deduction	2.10	%	3.10	%
Other, net	0.60	%	(4.40	)%

Effective federal income tax rate	38.00	%	35.10	%