Income Taxes (Tables)

9 Months Ended

Sep. 30, 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 September 30, 2014			As of December 31, 2013
General expenses	$	1,349		$	1,326
Unearned premiums	2,112			1,855
Claims liabilities	975			700
Litigation settlement	3,173			3,173
AMT credit	479			335
NOL carryforward	—			849
Unrealized loss on interest rate swaps	369			305
Deferred tax assets	8,457			8,543

Depreciation	(105		)	(119		)
Deferred policy acquisition costs	(3,026		)	(2,984		)
Unrealized gains on securities available-for-sale	(1,702		)	(786		)
Deferred tax liabilities	(4,833		)	(3,889		)
Net deferred tax asset	$	3,624		$	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):



	Nine months ended September 30,
	2014			2013
Deferred policy acquisition costs	$	42		$	(19	)
Other-than-temporary impairments	—			96
Trading securities	—			(1		)
Unearned premiums	(257		)	(216		)
General expenses	(23		)	(72		)
Depreciation	(14		)	(23		)
Claim liabilities	(275		)	(277		)
AMT credit	(144		)	—
NOL carryforward	849			1,062

Deferred income tax expense (benefit)	$	178		$	550

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:



	Nine months ended September 30,
	2014		2013
Federal income tax rate applied to pre-tax income/loss	34.0	%	34.0	%
Dividends received deduction and tax-exempt interest	(1.5	)%	(1.9	)%
Company owned life insurance	(9.9	)%	0.7	%
Small life deduction	(6.6	)%	(5.2	)%
Life reserve tax adjustment	—	%	(6.6	)%
Other, net	1.4	%	1.1	%
Effective federal income tax rate	17.4	%	22.1	%