Income Taxes (Tables)

3 Months Ended

Mar. 31, 2014

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):



	As of March 31, 2014			As of December 31, 2013
General expenses	$	1,331		$	1,326
Unearned premiums	1,931			1,855
Claims liabilities	742			700
Litigation settlement	3,173			3,173
AMT credit	335			335
NOL carryforward	474			849
Unrealized loss on interest rate swaps	345			305
Deferred tax assets	8,331			8,543

Depreciation	(77		)	(119		)
Deferred policy acquisition costs	(2,970		)	(2,984		)
Unrealized gains on securities available-for-sale	(1,339		)	(786		)
Deferred tax liabilities	(4,386		)	(3,889		)
Net deferred tax asset	$	3,945		$	4,654

Changes in Temporary Differences in Federal Income Tax

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



	Three months ended March 31,
	2014			2013
Deferred policy acquisition costs	$	(14	)	$	(43	)
Trading securities	—			(1		)
Unearned premiums	(76		)	(26		)
General expenses	(5		)	(57		)
Depreciation	(42		)	(11		)
Claim liabilities	(42		)	(109		)
NOL carryforward	375			(504		)
Deferred income tax expense (benefit)	$	196		$	(751	)

Schedule of Effective Income Tax Rate Reconciliation

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



	Three months ended March 31,
	2014		2013
Federal income tax rate applied to pre-tax income/loss	34.0	%	(34.0	)%
Dividends received deduction and tax-exempt interest	(2.4	)%	(3.2	)%
Company owned life insurance	(0.8	)%	(1.6	)%
Small life deduction	(11.4	)%	(15.4	)%
AMT	1.9	%	—	%
Other, net	0.8	%	(6.0	)%
Effective federal income tax rate	22.1	%	(60.2	)%