10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

  (Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarterly Period Ended June 30, 2015

or      

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from           to          .

Commission File Number 0-18649

The National Security Group, Inc.

(Exact name of registrant as specified in its charter)

Delaware	63-1020300
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)
661 East Davis Street Elba, Alabama	36323
(Address of principal executive offices)	(Zip-Code)

Registrant’s Telephone Number including Area Code (334) 897-2273

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    þ Yes    o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in rule 12b-2 of the Act).  (Check One) :    Large accelerated filer o Accelerated filer  o Non-accelerated filer  o Smaller reporting company  þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No  þ

As of August 13, 2015, there were 2,512,425 shares, $1.00 par value, of the registrant’s common stock outstanding.

1

THE NATIONAL SECURITY GROUP, INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
			Page No.
	Item 1.  Financial Statements
		Condensed Consolidated Balance Sheets	4
		Condensed Consolidated Statements of Income	5
		Condensed Consolidated Statements of Comprehensive Income (Loss)	6
		Condensed Consolidated Statements of Changes in Shareholders’ Equity	7
		Condensed Consolidated Statements of Cash Flows	8
		Notes to Condensed Consolidated Financial Statements	9
		Review Report of Independent Registered Public Accounting Firm	31
	Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations		32
	Item 3.  Quantitative and Qualitative Disclosures about Market Risk		45
	Item 4.  Controls and Procedures		45
PART II. OTHER INFORMATION
	Item 1.    Legal Proceedings		46
	Item 1A. Risk Factors		46
	Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds		46
	Item 3.    Defaults Upon Senior Securities		46
	Item 4. Mine Safety Disclosures		46
	Item 5.    Other Information		46
	Item 6.    Exhibits		46
			47
SIGNATURE

2

Cautionary Statement Regarding Forward-Looking Statements

Any statement contained in this report which is not a historical fact, or which might otherwise be considered an opinion or projection concerning the Company or its business, whether expressed or implied, is meant as and should be considered a forward-looking statement as that term is defined in the Private Securities Litigation Reform Act of 1995. The following report contains forward-looking statements that are not strictly historical and that involve risks and uncertainties. Such statements include any statements containing the words “expect,” “plan,” “estimate,” “anticipate” or other words of a similar nature. Management cautions investors about forward-looking statements. Forward-looking statements involve certain evaluation criteria, such as risks, uncertainties, estimates, and/or assumptions made by individuals informed of the Company and industries in which we operate. Any variation in the preceding evaluation criteria could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, without limitation, the following:

▪ The insurance industry is highly competitive and the Company encounters significant competition in all lines of business from other insurance companies. Many of the competing companies have more abundant financial resources than the Company.

▪ Insurance is a highly regulated industry. It is possible that legislation may be enacted which would have an adverse effect on the Company's business.

▪ The Company is subject to regulation by state governments for each of the states in which it conducts business. The Company cannot predict the subject of any future regulatory initiative(s) or its (their) impact on the Company's business.

▪ The Company is rated by various insurance rating agencies. If a rating is downgraded from its current level by one of these agencies, sales of the Company's products and stock price could be adversely impacted.

▪ The Company's financial results are adversely affected by increases in policy claims received by the Company. While a manageable risk, this fluctuation is often unpredictable.

▪ The Company's investments are subject to a variety of risks. Investments are subject to defaults and changes in market value. Market value can be affected by changes in interest rates, market performance and the economy.

▪ The Company mitigates risk associated with life policies through implementing effective underwriting and reinsurance strategies. These factors mitigate, not eliminate, risk related to mortality and morbidity exposure. The Company has established reserves for claims and future policy benefits based on amounts determined by independent actuaries. There is no assurance that these estimated reserves will prove to be sufficient or that the Company will not incur claims exceeding reserves, which could result in operating losses and loss of capital.

▪ The Company mitigates risk associated with property and casualty policies through implementing effective underwriting and reinsurance strategies. The Company obtains reinsurance which increases underwriting capacity and limits the risk associated with policy claims. The Company is subject to credit risk with regard to reinsurers as reinsurance does not alleviate the Company's liability to its insured's for the ceded risks. The Company utilizes a third-party to develop a reinsurance treaty with reinsurers who are reliable and financially stable. However, there is no guarantee that booked reinsurance recoverable will actually be recovered. A reinsurer's insolvency or inability to make payments due could have a material adverse impact on the financial condition of the Company.

▪ The Company's ability to continue to pay dividends to shareholders is contingent upon profitability and capital adequacy of the insurance subsidiaries. The insurance subsidiaries operate under regulatory restrictions that could limit the ability to fund future dividend payments of the Company. An adverse event or series of events could materially impact the ability of the insurance subsidiaries to fund future dividends, and consequently, the Board of Directors would have to suspend the declaration of dividends to shareholders.

▪ The Company is subject to the risk of adverse settlements or judgments resulting from litigation of contested claims. It is difficult to predict or quantify the expected results of litigation because the outcome depends on decisions of the court and jury that are based on facts and legal arguments presented at the trial.

3

PART I. Financial Information

Item 1. Financial Statements

THE NATIONAL SECURITY GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)

	June 30, 2015		December 31, 2014
	(UNAUDITED)
ASSETS
Investments
Fixed maturities held-to-maturity, at amortized cost (estimated fair value: 2015 -       $2,724; 2014 - $3,182)	$	2,649	$	3,108
Fixed maturities available-for-sale, at estimated fair value (cost: 2015 - $84,956; 2014 - $84,024)	86,648		86,886
Equity securities available-for-sale, at estimated fair value (cost: 2015 - $2,420; 2014 - $2,420)	4,839		4,995
Trading securities	107		19
Mortgage loans on real estate, at cost	206		210
Investment real estate, at book value	3,534		3,735
Policy loans	1,570		1,530
Company owned life insurance	5,065		5,513
Other invested assets	3,366		3,553
Total Investments	107,984		109,549
Cash	8,378		6,426
Accrued investment income	801		797
Policy receivables and agents' balances, net	12,430		10,948
Reinsurance recoverable	1,410		939
Deferred policy acquisition costs	8,712		8,592
Property and equipment, net	2,012		2,013
Deferred income tax asset, net	3,782		3,189
Other assets	984		2,412
Total Assets	$	146,493	$	144,865
LIABILITIES AND SHAREHOLDERS' EQUITY
Property and casualty benefit and loss reserves	$	8,882	$	8,321
Accident and health benefit and loss reserves	3,021		3,017
Life and annuity benefit and loss reserves	31,528		31,418
Unearned premiums	31,335		28,853
Policy and contract claims	768		996
Other policyholder funds	1,532		1,510
Short-term notes payable and current portion of long-term debt	857		857
Long-term debt	17,515		18,715
Accrued income taxes	153		487
Other liabilities	7,273		7,934
Total Liabilities	102,864		102,108
Contingencies
Shareholders' equity
Common stock	2,512		2,508
Additional paid-in capital	5,341		5,267
Accumulated other comprehensive income	1,836		2,772
Retained earnings	33,940		32,210
Total Shareholders' Equity	43,629		42,757
Total Liabilities and Shareholders' Equity	$	146,493	$	144,865

The Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

4

THE NATIONAL SECURITY GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In thousands, except per share amounts)

	Three months ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
REVENUES
Net premiums earned	$	14,880		$	14,100		$	29,586		$	27,924
Net investment income	784			1,030			1,758			1,978
Net realized investment gains	245			312			387			400
Gain on company owned life insurance	—			1,621			—			1,621
Other income	156			92			314			246
Total Revenues	16,065			17,155			32,045			32,169
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits and settlement expenses	9,435			9,155			17,697			17,019
Amortization of deferred policy acquisition costs	918			873			1,817			1,771
Commissions	2,089			1,967			4,144			3,994
General and administrative expenses	2,093			2,413			4,099			4,439
Taxes, licenses and fees	518			521			1,173			1,051
Interest expense	345			382			662			768
Total Benefits, Losses and Expenses	15,398			15,311			29,592			29,042
Income Before Income Taxes	667			1,844			2,453			3,127
INCOME TAX EXPENSE (BENEFIT)
Current	161			80			632			168
Deferred	(117		)	(170		)	(110		)	26
	44			(90		)	522			194
Net Income	$	623		$	1,934		$	1,931		$	2,933
INCOME PER COMMON SHARE BASIC AND DILUTED	$	0.25		$	0.77		$	0.77		$	1.18
DIVIDENDS DECLARED PER SHARE	$	0.04		$	0.03		$	0.08		$	0.06

The Notes to Condensed Financial Statements are an integral part of these statements.

5

THE NATIONAL SECURITY GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(In thousands)

	Three months ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Net income	$	623		$	1,934		$	1,931		$	2,933
Other comprehensive income (loss), net of tax
Changes in:
Unrealized gains (losses) on securities, net of reclassification adjustment of $257 and $166 for 2015 and 2014, respectively	(1,240		)	1,080			(875		)	2,153
Unrealized gain (loss) on interest rate swap	56			(98		)	(61		)	(174		)
Other comprehensive income (loss), net of tax	(1,184		)	982			(936		)	1,979
Comprehensive income (loss)	$	(561	)	$	2,916		$	995		$	4,912

The Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

6

THE NATIONAL SECURITY GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)

(In thousands)

	Total			Retained Earnings			Accumulated Other Comprehensive Income			Common Stock		Additional Paid-in Capital
Balance at December 31, 2014 (AUDITED)	$	42,757		$	32,210		$	2,772		$	2,508	$	5,267
Net income for the six months ended June 30, 2015	1,931			1,931
Other comprehensive loss (net of tax)	(936		)				(936		)
Common stock issued	78									4		74
Cash dividends	(201		)	(201		)
Balance at June 30, 2015	$	43,629		$	33,940		$	1,836		$	2,512	$	5,341

The Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

7

THE NATIONAL SECURITY GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands)

	Six months ended June 30,
	2015			2014
Cash Flows from Operating Activities
Net income	$	1,931		$	2,933
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense and amortization/accretion, net	165			262
Decrease (increase) in cash surrender value of company owned life insurance	52			(138		)
Net realized gains on investments	(387		)	(400		)
Deferred income taxes	(110		)	26
Amortization of deferred policy acquisition costs	1,817			1,771
Changes in assets and liabilities:
Change in accrued investment income	(4		)	15
Change in reinsurance recoverable	(471		)	712
Policy acquisition costs deferred	(1,937		)	(1,955		)
Change in accrued income taxes	(334		)	58
Change in net policy liabilities and claims	1,438			2,459
Change in other assets/liabilities, net	929			(1,459		)
Other, net	8			13
Net cash provided by operating activities	3,097			4,297
Cash Flows from Investing Activities
Purchase of:
Available-for-sale securities	(14,290		)	(8,619		)
Trading securities and short-term investments	(88		)	—
Property and equipment	(103		)	(123		)
Proceeds from sale or maturities of:
Held-to-maturity securities	470			83
Available-for-sale securities	13,668			5,865
Real estate held for investment	201			—
Property and equipment	5			219
Other invested assets, net	371			8
Net cash provided by (used in) investing activities	234			(2,567		)
Cash Flows from Financing Activities
Change in other policyholder funds	22			36
Proceeds from long-term debt	—			275
Repayments of long-term debt	(500		)	—
Change in short-term notes payable	(700		)	(700		)
Dividends paid	(201		)	(149		)
Net cash used in financing activities	(1,379		)	(538		)
Net change in cash and cash equivalents	1,952			1,192
Cash and cash equivalents, beginning of year	6,426			4,987
Cash and cash equivalents, end of period	$	8,378		$	6,179

The Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

8

THE NATIONAL SECURITY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED EXCEPT FOR DECEMBER 31, 2014 AMOUNTS)

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of The National Security Group, Inc. (the Company) and its wholly-owned subsidiaries:  National Security Insurance Company (NSIC), National Security Fire and Casualty Company (NSFC) and NATSCO, Inc. (NATSCO).  NSFC includes a wholly-owned subsidiary, Omega One Insurance Company (Omega).  The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).  In the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the condensed consolidated financial statements have been included. All significant intercompany transactions and accounts have been eliminated. The financial information presented herein should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, which includes information and disclosures not presented herein.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Among the more significant estimates included in these condensed consolidated financial statements are reserves for future life insurance policy benefits, liabilities for losses and loss adjustment expenses, reinsurance recoverable associated with loss and loss adjustment expense liabilities, deferred policy acquisition costs, deferred income tax assets and liabilities, assessments of other-than-temporary impairments on investments and accruals for contingencies.  Actual results could differ from these estimates.

Earnings Per Share

Earnings per share of common stock is based on the weighted average number of shares outstanding during each year. The adjusted weighted average shares outstanding were 2,508,551 in 2015 and 2,495,770 in 2014.

Reclassifications

Certain 2014 amounts have been reclassified from the prior year consolidated financial statements to conform to the 2015 presentation.

Concentration of Credit Risk

The Company maintains cash balances which are generally held in non-interest bearing demand deposit accounts subject to FDIC insured limits of $250,000 per entity. At June 30, 2015, the net amount exceeding FDIC insured limits was $3,998,000 at one financial institution. The Company has not experienced any losses in such accounts. Management of the Company reviews financial information of financial institutions on a quarterly basis and believes the Company is not exposed to any significant credit risk on cash and cash equivalents.

Policy receivables are reported at unpaid balances. Policy receivables are generally offset by associated unearned premium liabilities and are not subject to significant credit risk. Receivables from agents, less provision for credit losses, are composed of balances due from independent agents. At June 30, 2015, the single largest balance due from one agent totaled $1,314,000.

Reinsurance contracts do not relieve the Company of its obligations to policyholders. A failure of a reinsurer to meet their obligation could result in losses to the insurance subsidiaries. Allowances for losses are established if amounts are believed to be uncollectible. At June 30, 2015 and December 31, 2014, no amounts were deemed uncollectible. The Company, at least annually, evaluates the financial condition of all reinsurers and evaluates any potential concentrations of credit risk. At June 30, 2015, management does not believe the Company is exposed to any significant credit risk related to its reinsurance program.

9

THE NATIONAL SECURITY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED EXCEPT FOR DECEMBER 31, 2014 AMOUNTS)

Accounting Changes Not Yet Adopted

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (FASB) issued guidance on a comprehensive new revenue recognition standard. This standard will not impact accounting for insurance contracts, leases, financial instruments and guarantees. For those contracts that are impacted by the new guidance, the guidance will require an entity to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to, in exchange for those goods or services. The guidance requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued a deferral of the effective date by one year. This guidance is effective retrospectively for fiscal years beginning after December 15, 2017 and interim periods within those years. Early adoption of this standard is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Although insurance contracts are specifically scoped out of this new guidance, the Company has minor services that may be subject to the new revenue recognition guidance and are still in the process of evaluating the impact, if any, the guidance may have on its consolidated financial statements.

Presentation of Financial Statements - Going Concern

In August 2014, the FASB issued guidance on determining when and how to disclose going concern uncertainties in the financial statements, and requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. The updated guidance is effective for annual periods ending after December 15, 2016 and interim periods thereafter. Early adoption is permitted. The Company does not expect the adoption to have a material impact on its financial position or results of operations.

Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items

In January 2015, the FASB issued guidance that eliminates from GAAP the concept of extraordinary items. The guidance is effective for fiscal periods ending after December 15, 2015 and interim periods thereafter. Early adoption is permitted. The Company does not expect the adoption to have a material impact on its financial position or results of operations.

Amendments to the Consolidation Analysis

In February 2015, the FASB issued additional guidance regarding the consolidation of certain legal entities. The guidance modifies the evaluation of whether or not limited partnerships and similar legal entities are variable interest entities (VIEs) and the consolidation analysis of entities involved with VIEs, particularly those that have fee arrangements and related party relationships. This guidance is effective for fiscal years beginning after December 15, 2015. The Company does not expect the adoption to have a material impact on its financial position or results of operations.

Disclosure about Short-Duration Contracts

In May 2015, the FASB issued guidance that enhances disclosure about short-duration insurance liabilities to help users understand the nature, amount, timing and uncertainty of future cash flows related to insurance liabilities and the effect of those cash flows on the statement of comprehensive income. This guidance is effective for annual periods beginning after December 15, 2015 and for interim periods within annual periods beginning after December 15, 2016. The Company does not expect the adoption to have a material impact on its financial position or results of operations.

Recently Adopted Accounting Standards

Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures

In June 2014, the FASB issued guidance requiring secured borrowing accounting treatment for repurchase-to-maturity transactions and provides guidance on accounting for repurchase financing arrangements. This ASU is effective for interim and annual reporting periods beginning after December 15, 2014. The Company adopted this standard on January 1, 2015. The Company is the counter party to repurchase agreements and as such, the adoption did not have a material impact on its financial position or results of operations.

Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity

10

THE NATIONAL SECURITY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED EXCEPT FOR DECEMBER 31, 2014 AMOUNTS)

In April 2014, the FASB issued guidance which modifies the definition of discontinued operations by limiting discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have (or will have) a major effect on an entity’s operations and financial results. Also, this update requires additional financial statement disclosures about discontinued operations, as well as disposals of an individually significant component of an entity that do not qualify for discontinued operations presentation. This ASC update is effective for all disposals (or classifications as held for sale) of components of an entity that occur within annual and interim periods beginning on or after December 15, 2014 and for all businesses that, on acquisition, are classified as held for sale that also occur within interim and annual periods beginning on or after December 15, 2014. The Company adopted this standard on January 1, 2015. The Company has no discontinued operations, and the adoption of this standard did not have a material impact on its financial position or results of operations.

NOTE 2 – VARIABLE INTEREST ENTITIES

The Company holds a passive interest in a limited partnership that is considered to be a Variable Interest Entity (VIE) under the provisions of ASC 810 Consolidation. The Company is not the primary beneficiary of the entity and is not required to consolidate under ASC 810. The entity is a private placement investment fund formed for the purpose of investing in private equity investments. The Company owns less than 1% of the limited partnership. The carrying value of the investment totals $249,000 and is included as a component of Other Invested Assets in the accompanying condensed consolidated balance sheets.

In December 2005, the Company formed National Security Capital Trust I, a statutory trust created under the Delaware Statutory Trust Act, for the sole purpose of issuing, in private placement transactions, $9,000,000 of trust preferred securities (TPS) and using the proceeds thereof, together with the equity proceeds received from the Company in the initial formation of the Trust, to purchase $9,279,000 of variable rate subordinated debentures issued by the Company. The Company owns all voting securities of the Trust and the subordinated debentures are the sole assets of the Trust. The Trust will meet the obligations of the TPS with the interest and principal paid on the subordinated debentures. The Company received net proceeds from the TPS transactions, after commissions and other costs of issuance, of $9,005,000. The Company also holds all the voting securities issued by the Trust and such trusts are considered to be VIE's. The Trust is not consolidated because the Company is not the primary beneficiary of the trust. The Subordinated Debentures, disclosed in Note 8, are reported in the accompanying condensed consolidated balance sheets as a component of long-term debt. The Company's equity investments in the Trust total $279,000 and are included in Other Assets in the accompanying condensed consolidated balance sheets.

In June 2007, the Company formed National Security Capital Trust II for the sole purpose of issuing, in private placement transactions, $3,000,000 of trust preferred securities (TPS) and using the proceeds thereof, together with the equity proceeds received from the Company in the initial formation of the Trust, to purchase $3,093,000 unsecured junior subordinated deferrable interest debentures. The Company owns all voting securities of the Trust and the subordinated debentures are the sole assets of the Trust. The Trust will meet the obligations of the TPS with the interest and principal paid on the subordinated debentures. The Company received net proceeds from the TPS transactions, after commissions and other costs of issuance, of $2,995,000. The Company also holds all the voting securities issued by the Trust and such trusts are considered to be VIE's. The Trust is not consolidated because the Company is not the primary beneficiary of the Trust. The Subordinated Debentures, disclosed in Note 7, are reported in the accompanying condensed consolidated balance sheets as a component of long-term debt. The Company's equity investments in the Trust total $93,000 and are included in Other Assets in the accompanying condensed consolidated balance sheets.

11

THE NATIONAL SECURITY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED EXCEPT FOR DECEMBER 31, 2014 AMOUNTS)

NOTE 3 – INVESTMENTS

The amortized cost and aggregate fair values of investments in available-for-sale securities as of June 30, 2015 are as follows (dollars in thousands):

Available-for-sale securities:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Corporate debt securities	$	32,203	$	1,100	$	464	$	32,839
Mortgage backed securities	12,037		182		169		12,050
Private label mortgage backed securities	6,629		32		94		6,567
Obligations of states and political subdivisions	15,146		829		50		15,925
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	18,941		482		156		19,267
Total fixed maturities	84,956		2,625		933		86,648
Equity securities	2,420		2,568		149		4,839
Total	$	87,376	$	5,193	$	1,082	$	91,487

The amortized cost and aggregate fair values of investments in held-to-maturity securities as of June 30, 2015 are as follows (dollars in thousands):

Held-to-maturity securities:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Mortgage backed securities	$	2,595	$	71	$	—	$	2,666
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	54		4		—		58
Total	$	2,649	$	75	$	—	$	2,724

The amortized cost and aggregate fair values of investments in available-for-sale securities as of December 31, 2014 are as follows (dollars in thousands):

Available-for-sale securities:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Corporate debt securities	$	37,299	$	1,773	$	405	$	38,667
Mortgage backed securities	12,691		214		153		12,752
Private label mortgage backed securities	1,261		38		3		1,296
Obligations of states and political subdivisions	14,919		993		13		15,899
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	17,854		525		107		18,272
Total fixed maturities	84,024		3,543		681		86,886
Equity securities	2,420		2,745		170		4,995
Total	$	86,444	$	6,288	$	851	$	91,881

The amortized cost and aggregate fair values of investments in held-to-maturity securities as of December 31, 2014 are as follows (dollars in thousands):

Held-to-maturity securities:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Mortgage backed securities	$	2,818	$	69	$	—	$	2,887
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	290		5		—		295
Total	$	3,108	$	74	$	—	$	3,182

12

THE NATIONAL SECURITY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED EXCEPT FOR DECEMBER 31, 2014 AMOUNTS)

The amortized cost and aggregate fair value of debt securities at June 30, 2015, by contractual maturity, are presented in the following table (dollars in thousands).  Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

(Dollars in Thousands)	Amortized Cost		Fair Value
Available-for-sale securities:
Due in one year or less	$	808	$	813
Due after one year through five years	13,319		14,014
Due after five years through ten years	28,913		29,116
Due after ten years	41,916		42,705
Total	$	84,956	$	86,648
Held-to-maturity securities:
Due in one year or less	$	—	$	—
Due after one year through five years	117		122
Due after five years through ten years	120		132
Due after ten years	2,412		2,470
Total	$	2,649	$	2,724

A summary of securities available-for-sale with unrealized losses as of June 30, 2015, along with the related fair value, aggregated by the length of time that investments have been in a continuous unrealized loss position, is as follows (dollars in thousands):

	Less than 12 months				12 months or longer				Total
June 30, 2015	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Total Securities in a Loss Position
Fixed maturities
Corporate debt securities	$	10,343	$	315	$	2,582	$	149	$	12,925	$	464	27
Mortgage backed securities	4,364		55		1,135		114		5,499		169		14
Private label mortgage backed securities	4,526		92		84		2		4,610		94		7
Obligations of state and political subdivisions	865		38		330		12		1,195		50		3
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	4,264		82		2,442		74		6,706		156		13
Equity securities	—		—		1,137		149		1,137		149		1
	$	24,362	$	582	$	7,710	$	500	$	32,072	$	1,082	65

There were no securities held-to-maturity with unrealized losses as of June 30, 2015.

13

THE NATIONAL SECURITY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED EXCEPT FOR DECEMBER 31, 2014 AMOUNTS)

A summary of securities available-for-sale with unrealized losses as of December 31, 2014, along with the related fair value, aggregated by the length of time that investments have been in a continuous unrealized loss position, is as follows (dollars in thousands):

	Less than 12 months				12 months or longer				Total
December 31, 2014	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Total Securities in a Loss Position
Fixed maturities
Corporate debt securities	$	6,306	$	364	$	1,843	$	41	$	8,149	$	405	18
Mortgage backed securities	1,386		4		1,855		149		3,241		153		12
Private label mortgage backed securities	—		—		97		3		97		3		1
Obligations of state and political subdivisions	—		—		651		13		651		13		2
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	1,475		6		3,499		101		4,974		107		10
Equity securities	—		—		1,116		170		1,116		170		1
	$	9,167	$	374	$	9,061	$	477	$	18,228	$	851	44

There were no securities held-to-maturity with unrealized losses as of December 31, 2014.

The Company conducts periodic reviews to identify and evaluate securities in an unrealized loss position in order to identify other-than-temporary impairments. For securities in an unrealized loss position, the Company assesses whether the Company has the intent to sell the security or more-likely-than-not will be required to sell the security before the anticipated recovery.  If either of these conditions is met, the Company is required to recognize an other-than-temporary impairment with the entire unrealized loss reported in earnings.  For securities in an unrealized loss position that do not meet these conditions, the Company assesses whether the impairment of a security is other-than-temporary.  If the impairment is determined to be other-than-temporary, the Company is required to separate the other-than-temporary impairments into two components:  the amount representing the credit loss and the amount related to all other factors.  The credit loss is the portion of the amortized book value in excess of the net present value of the projected future cash flows discounted at the effective interest rate implicit in the debt security prior to impairment.  The credit loss component of other-than-temporary impairments is reported in earnings, whereas the amount relating to factors other than credit losses are recorded in other comprehensive income, net of taxes.

Management has evaluated each security in a significant unrealized loss position.  The Company has no material exposure to sub-prime mortgage loans and less than 2.84% of the fixed income investment portfolio is rated below investment grade.  In evaluating whether or not the equity loss positions were other-than-temporary impairments, Management evaluated financial information on each company and where available, reviewed analyst reports from at least two independent sources.  Based on a review of the available financial information, the prospect for future earnings of each company and consideration of the Company’s intent and ability to hold the securities until market values recovered, it was determined that the securities in an accumulated loss position in the portfolio were temporary impairments.

For the six months ended June 30, 2015 and year ended December 31, 2014, the Company realized no other-than-temporary impairments.

14

THE NATIONAL SECURITY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED EXCEPT FOR DECEMBER 31, 2014 AMOUNTS)

Major categories of investment income are summarized as follows (dollars in thousands):

	Three months ended June 30,					Six months ended June 30,
	2015			2014		2015			2014
Fixed maturities	$	868		$	857	$	1,762		$	1,716
Equity securities	30			29		60			58
Mortgage loans on real estate	4			3		8			7
Investment real estate	2			1		4			3
Policy loans	30			28		59			55
Company owned life insurance change in surrender value	(96		)	108		(52		)	138
Other	33			74		75			128
	871			1,100		1,916			2,105
Less: Investment expenses	87			70		158			127
Net investment income	$	784		$	1,030	$	1,758		$	1,978

Major categories of investment gains and losses are summarized as follows (dollars in thousands):

	Three months ended June 30,					Six months ended June 30,
	2015			2014		2015			2014
Fixed maturities	$	250		$	159	$	392		$	249
Other, principally real estate	(5		)	153		(5		)	151
Net realized investment gains	$	245		$	312	$	387		$	400

An analysis of the net change in unrealized appreciation on available-for-sale securities follows (dollars in thousands):

	June 30, 2015			December 31, 2014
Net change in unrealized appreciation on available-for-sale securities before deferred tax	$	(1,326	)	$	3,123
Deferred income tax	451			(1,062		)
Net change in unrealized appreciation on available-for-sale securities	$	(875	)	$	2,061

NOTE 4 – FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

Our available-for-sale securities consists of fixed maturity and equity securities which are recorded at fair value in the accompanying condensed consolidated balance sheets.  The change in the fair value of these investments, unless deemed to be other-than-temporarily impaired, is recorded as a component of other comprehensive income.

We are permitted to elect to measure financial instruments and certain other items at fair value, with the change in fair value recorded in earnings.  We elected not to measure any eligible items using the fair value option.

Accounting standards define fair value as the price that would be received to sell an asset or would be paid to transfer a liability in an orderly transaction between market participants at the measurement date, and establishes a framework to make the measurement of fair value more consistent and comparable.  In determining fair value, we primarily use prices and other relevant information generated by market transactions involving identical or comparable assets.

The Company categorizes assets and liabilities carried at their fair value based upon a fair value hierarchy:

15

THE NATIONAL SECURITY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED EXCEPT FOR DECEMBER 31, 2014 AMOUNTS)

Level 1 – Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 1 assets and liabilities consist of money market fund deposits and certain of our marketable debt and equity instruments, including equity instruments offsetting deferred compensation, that are traded in an active market with sufficient volume and frequency of transactions.

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 2 assets include certain of our marketable debt and equity instruments with quoted market prices that are traded in less active markets or priced using a quoted market price for similar instruments. Level 2 assets also include marketable equity instruments with security-specific restrictions that would transfer to the buyer, marketable debt instruments priced using indicator prices which represent non-binding market consensus prices that can be corroborated by observable market quotes, as well as derivative contracts and debt instruments priced using inputs that are observable in the market or can be derived principally from or corroborated by observable market data.  Marketable debt instruments in this category generally include commercial paper, bank time deposits, repurchase agreements for fixed-income instruments, and a majority of floating-rate notes, corporate bonds, and municipal bonds.

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

Level 3 assets and liabilities include marketable debt instruments, non-marketable equity investments, derivative contracts, and company issued debt whose values are determined using inputs that are both unobservable and significant to the values of the instruments being measured. Level 3 assets also include marketable debt instruments that are priced using indicator prices that we were unable to corroborate with observable market quotes.

Marketable debt instruments in this category generally include asset-backed securities and certain floating-rate notes, corporate bonds, and municipal bonds.

16

THE NATIONAL SECURITY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED EXCEPT FOR DECEMBER 31, 2014 AMOUNTS)

Assets/Liabilities Measured at Fair Value on a Recurring Basis

Financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2015 are summarized in the following table by the type of inputs applicable to the fair value measurements (in thousands):

	Fair Value Measurements at Reporting Date Using
Description	Total			Level 1		Level 2		Level 3
Financial Assets
Fixed maturities available-for-sale
Corporate debt securities	$	32,839		$	—	$	32,839	$	—
Mortgage backed securities	12,050			—		12,050		—
Private label mortgage backed securities	6,567			—		6,567		—
Obligations of states and political subdivisions	15,925			—		15,925		—
U.S. Treasury securities and obligations of U.S.    Government corporations and agencies	19,267			19,267		—		—
Trading securities	107			107		—		—
Equity securities available-for-sale	4,839			3,702		—		1,137
Total Financial Assets	$	91,594		$	23,076	$	67,381	$	1,137
Financial Liabilities
Interest rate swap	$	(1,330	)	$	—	$	—	$	(1,330	)
Total Financial Liabilities	$	(1,330	)	$	—	$	—	$	(1,330	)

The methods and assumptions the Company uses to estimate the fair value of assets and liabilities measured at fair value on a recurring basis are summarized below.

Fixed maturities available-for-sale — The fair values of the Company’s public fixed maturity securities are generally based on prices obtained from independent pricing services. Consistent with the fair value hierarchy described above, securities with validated quotes from pricing services are generally reflected within Level 2, as they are primarily based on observable pricing for similar assets and/or other market observable inputs.

Trading securities — Trading securities consist primarily of mutual funds whose fair values are determined consistent with similar instruments described above under “Fixed Maturities” and below under “Equity Securities.”

Equity securities — Equity securities consist principally of investments in common and preferred stock of publicly traded companies and privately traded securities. The fair values of our publicly traded equity securities are based on quoted market prices in active markets for identical assets and are classified within Level 1 in the fair value hierarchy.

Estimated fair values for our privately traded equity securities require a substantial level of judgment. Privately traded equity securities are classified within Level 3.

Interest rate swaps — Interest rate swaps are recorded at fair value either as assets, within other assets or as liabilities, within other liabilities. The fair values of our interest rate swaps are provided by a third-party broker and are classified within Level 3.

As of June 30, 2015, Level 3 fair value measurements of assets include $1,137,000 of equity securities in a local community bank whose value is based on an evaluation of the financial statements of the entity. The Company does not develop the unobservable inputs used in measuring fair value.

As of June 30, 2015, Level 3 fair value measurements of liabilities include $1,330,000 net fair value of various interest rate swap agreements whose value is based on analysis provided by a third party broker who utilizes financial modeling tools and assumptions on interest and other factors. The Company does not develop the unobservable inputs used in measuring fair value. Additional information regarding the interest rate swap agreements is provided in Note 7.

17

THE NATIONAL SECURITY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED EXCEPT FOR DECEMBER 31, 2014 AMOUNTS)

The table below presents a reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended June 30, 2015 (in thousands):

For the six months ended June 30, 2015	Equity Securities Available-for-Sale		Interest Rate Swap
Beginning balance	$	1,116	$	(1,238	)
Total gains or losses (realized and unrealized):
Included in earnings	—		—
Included in other comprehensive income	21		(92		)
Purchases:	—		—
Sales:	—		—
Issuances:	—		—
Settlements:	—		—
Transfers in/(out) of Level 3	—		—
Ending balance	$	1,137	$	(1,330	)
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held as of June 30, 2015:	$	—	$	—

For the six months ended June 30, 2015, there were no assets or liabilities measured at fair values on a nonrecurring basis.

Financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2014 are summarized in the following table by the type of inputs applicable to the fair value measurements (in thousands):

	Fair Value Measurements at Reporting Date Using
Description	Total			Level 1		Level 2		Level 3
Financial Assets
Fixed maturities available-for-sale
Corporate debt securities	$	38,667		$	—	$	38,667	$	—
Mortgage backed securities	12,752			—		12,752		—
Private label mortgage backed securities	1,296			—		1,296		—
Obligations of states and political subdivisions	15,899			—		15,899		—
U.S. Treasury securities and obligations of U.S.    Government corporations and agencies	18,272			18,272		—		—
Trading securities	19			19		—		—
Equity securities available-for-sale	4,995			3,879		—		1,116
Total Financial Assets	$	91,900		$	22,170	$	68,614	$	1,116
Financial Liabilities
Interest rate swap	$	(1,238	)	$	—	$	—	$	(1,238	)
Total Financial Liabilities	$	(1,238	)	$	—	$	—	$	(1,238	)

18

THE NATIONAL SECURITY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED EXCEPT FOR DECEMBER 31, 2014 AMOUNTS)

The table below presents a reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2014 (in thousands):

For the year ended December 31, 2014	Equity Securities Available-for-Sale		Interest Rate Swap
Beginning balance	$	875	$	(897	)
Total gains or losses (realized and unrealized):
Included in earnings	—		—
Included in other comprehensive income	241		(341		)
Purchases:	—		—
Sales:	—		—
Issuances:	—		—
Settlements:	—		—
Transfers in/(out) of Level 3	—		—
Ending balance	$	1,116	$	(1,238	)
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held as of December 31, 2014:	$	—	$	—

For the year ended December 31, 2014, there were no assets or liabilities measured at fair values on a nonrecurring basis.

The Company is exposed to certain risks in the normal course of its business operations.  The primary risk that is managed through the use of derivatives is interest rate risk on floating rate borrowings.  This risk is managed through the use of interest rate swap agreements which are designated as cash flow hedges.  For cash flow hedges, the effective portion of the gain or loss on the interest rate swap is included as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged transaction is recognized in earnings.  The Company does not hold or issue derivatives that are not designated as hedging instruments.  See Note 7 for additional information about the interest rate swap agreements.

The following methods and assumptions were used to estimate fair value of each class of financial instrument for which it is practical to estimate that value:

Cash and cash equivalents — the carrying amount is a reasonable estimate of fair value.

Fixed maturities held-to-maturity — the carrying amount is amortized cost; the fair values of the Company’s public fixed maturity securities that are classified as held-to-maturity are generally based on prices obtained from independent pricing services.

Mortgage loans — the carrying amount is a reasonable estimate of fair value due to the restrictive nature and limited marketability of the mortgage notes.

Policy loans — the carrying amount is a reasonable estimate of fair value.

Company owned life insurance — the carrying amount is a reasonable estimate of fair value.

Other invested assets — the carrying amount is a reasonable estimate of fair value.

Other policyholder funds — the carrying amount is a reasonable estimate of fair value.

Debt — the carrying amount is a reasonable estimate of fair value.

19

THE NATIONAL SECURITY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED EXCEPT FOR DECEMBER 31, 2014 AMOUNTS)

The carrying amount and estimated fair value of the Company’s financial instruments as of June 30, 2015 and December 31, 2014 are as follows (in thousands):

	June 30, 2015				December 31, 2014
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Assets and related instruments
Held-to-maturity securities	$	2,649	$	2,724	$	3,108	$	3,182
Mortgage loans	206		206		210		210
Policy loans	1,570		1,570		1,530		1,530
Company owned life insurance	5,065		5,065		5,513		5,513
Other invested assets	3,366		3,366		3,553		3,553
Liabilities and related instruments
Other policyholder funds	1,532		1,532		1,510		1,510
Short-term notes payable and current portion of long-term debt	857		857		857		857
Long-term debt	17,515		17,515		18,715		18,715

NOTE 5 – PROPERTY AND EQUIPMENT

Major categories of property and equipment are summarized as follows (dollars in thousands):

	June 30, 2015		December 31, 2014
Building and improvements	$	3,348	$	3,367
Electronic data processing equipment	1,627		1,570
Furniture and fixtures	649		606
	5,624		5,543
Less accumulated depreciation	3,612		3,530
Property and equipment, net	$	2,012	$	2,013

Depreciation expense for the six months ended June 30, 2015 was $94,000 ($306,000 for the year ended December 31, 2014).

NOTE 6 – INCOME TAXES

The Company recognizes tax-related interest and penalties as a component of tax expense.  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 2009. Tax returns have been filed through the year 2013.

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 asset positions of $3,782,000 at June 30, 2015 and $3,189,000 at December 31, 2014.

20

THE NATIONAL SECURITY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED EXCEPT FOR DECEMBER 31, 2014 AMOUNTS)

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

	As of June 30, 2015			As of December 31, 2014
General expenses	$	1,467		$	1,371
Unearned premiums	2,130			1,961
Claims liabilities	845			849
Litigation settlement	2,040			2,040
AMT credit	1,121			1,240
Impairment on real estate owned	187			187
Unrealized loss on interest rate swaps	453			421
Deferred tax assets	8,243			8,069
Depreciation	(102		)	(111		)
Deferred policy acquisition costs	(2,962		)	(2,921		)
Unrealized gains on securities available-for-sale	(1,397		)	(1,848		)
Deferred tax liabilities	(4,461		)	(4,880		)
Net deferred tax asset	$	3,782		$	3,189

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

	Six months ended June 30,
	2015			2014
Deferred policy acquisition costs	$	41		$	63
Unearned premiums	(169		)	(219		)
General expenses	(96		)	(33		)
Depreciation	(9		)	(11		)
Claims liabilities	4			(187		)
AMT credit	119			—
NOL carryforward	—			413
Deferred income tax expense	$	(110	)	$	26

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:

	Six months ended June 30,
	2015		2014
Federal income tax rate applied to pre-tax income/loss	34.0	%	34.0	%
Dividends received deduction and tax-exempt interest	(2.1	)%	(2.0	)%
Company owned life insurance	0.7	%	(19.1	)%
Small life deduction	(7.7	)%	(8.9	)%
Other, net	(3.6	)%	2.2	%
Effective federal income tax rate	21.3	%	6.2	%

21

THE NATIONAL SECURITY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED EXCEPT FOR DECEMBER 31, 2014 AMOUNTS)

NOTE 7 – NOTES PAYABLE AND LONG-TERM DEBT

Short-term debt and current portion of long-term debt consisted of the following as of June 30, 2015 and December 31, 2014 (dollars in thousands):

	2015		2014
Line of credit with variable interest rate equal to the Wall Street Journal (WSJ) prime rate, subject to a 5.0% floor; maturity February 2016.  Interest payments due quarterly.  Unsecured.	$	—	$	—
Current portion of installment note payable due November 2015 with variable interest rate equal to the WSJ prime rate plus 1%. Unsecured.	857		857
	$	857	$	857

Long-term debt consisted of the following as of June 30, 2015 and December 31, 2014 (dollars in thousands):

	2015		2014
Line of credit with variable interest rate equal to the WSJ prime rate, subject to a 5.0% floor; maturity February 2016.  Interest payments due quarterly.  Unsecured.	$	—	$	700
Line of credit with variable interest rate equal to the WSJ prime rate, subject to a 4.5% floor; maturity September 2017.  Interest payments due monthly.  Secured.	—		500
Long term portion of installment note with variable interest rate equal to the WSJ prime rate plus 1% and adjustable each November; maturity November 2021. Interest payable annually with principal payable in equal annual installments. Next principal installment on long term portion due November 2015. Unsecured.	5,143		5,143
Subordinated debentures issued on December 15, 2005 with fixed interest rate of 8.83% each distribution period thereafter until December 15, 2015 when the coupon rate shall equal the 3-Month LIBOR plus 3.75% applied to the outstanding principal; maturity December 2035.  Interest payments due quarterly.  All may be redeemed at any time following the tenth anniversary of issuance.  Unsecured.	9,279		9,279
Subordinated debentures issued on June 21, 2007 with a floating interest rate equal to the 3-Month LIBOR plus 3.40% applied to the outstanding principal; maturity June 15, 2037. Interest payments due quarterly.  All may be redeemed at any time following the fifth anniversary of issuance.  Unsecured.	3,093		3,093
	$	17,515	$	18,715

The Company has entered into various swap agreements related to the trust preferred securities. On March 19, 2009, the Company entered into a forward swap effective September 17, 2012, with a notional amount of $3,000,000 and designated the swap as a hedge against changes in cash flows attributable to changes in the benchmark interest rate (LIBOR) associated with the subordinated debentures issued June 21, 2007. Quarterly, commencing September 17, 2012, under the terms of the forward swap, the Company will pay interest at a fixed rate of 7.02% until March 15, 2019. On May 26, 2010, the Company entered into a forward swap with a notional amount of $9,000,000 effective December 15, 2015, which will hedge against changes in cash flows following the termination of the fixed rate period. Quarterly, commencing March 16, 2016 under the terms of the forward swap, the Company will pay interest at a fixed rate of 8.49% until March 15, 2020.

The swaps entered into in 2009 and 2010 have fair values of $244,000 (liability) and $1,086,000 (liability), respectively, for a total liability of $1,330,000 at June 30, 2015 ($1,238,000 at December 31, 2014).  The swap liability is reported as a component of other liabilities on the condensed consolidated balance sheets.  A net valuation loss of $61,000 (net of tax) is included in accumulated other comprehensive income related to the swap agreements at June 30, 2015.  A net valuation loss of $225,000 (net of tax) was included in accumulated other comprehensive income related to the swap at December 31, 2014.

22

THE NATIONAL SECURITY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED EXCEPT FOR DECEMBER 31, 2014 AMOUNTS)

We use dollar offset at the hedge's inception and for each reporting period thereafter to assess whether the derivative used in a hedging transaction is expected to be, and has been, effective in offsetting changes in the fair value of the hedged item. Since inception, no portion of the hedged item has been deemed ineffective. For all hedges, we discontinue hedge accounting if it is determined that a derivative is not expected to be, or has ceased to be, effective as a hedge.

The Company’s interest rate swaps include provisions requiring the Company to post collateral when the derivative is in a net liability position.  At June 30, 2015, the Company has securities on deposit with fair market values of $1,486,000 (all of which is posted as collateral). At December 31, 2014, the Company had securities on deposit with fair market values of $1,494,000 (all of which is posted as collateral). See Note 4 for additional information about the interest rate swaps.

NOTE 8 – REINSURANCE

The Company's insurance operations utilize reinsurance in order to limit losses, minimize exposure to large risks, provide additional capacity for future growth and effect business-sharing arrangements. Life reinsurance is accomplished through yearly renewable term coverage. Property and casualty reinsurance is placed on an excess of loss basis to cover losses from catastrophe events. Reinsurance ceded arrangements do not discharge the insurance subsidiaries as the primary insurer, except for cases involving a novation. Failure of re-insurers to honor their obligations could result in losses to the insurance subsidiaries. The insurance subsidiaries evaluate the financial conditions of their reinsurance companies and monitor concentrations of credit risk arising from similar geographic regions, activities, or economic characteristics of the companies to minimize their exposure to significant losses from reinsurance insolvencies.

In the normal course of business, NSFC seeks to reduce the loss that may arise from catastrophes or other individually significant large loss events that cause unfavorable underwriting results by re-insuring certain levels of risk in various areas of exposure with reinsurance companies.  NSFC maintains a catastrophe reinsurance agreement to cover losses from catastrophic events, primarily hurricanes.

Under the catastrophe reinsurance program, the Company retains the first $4,000,000 in losses from each catastrophe event.  Catastrophe reinsurance coverage is maintained in three layers as follows:

Layer	Reinsurers' Limits of Liability
First Layer	100% of $13,500,000 in excess of $4,000,000
Second Layer	100% of $25,000,000 in excess of $17,500,000
Third Layer	100% of $30,000,000 in excess of $42,500,000

Each reinsurance layer covers events occurring from January 1 through December 31 of the contract year.  All significant reinsurance companies under the program carry A.M. Best ratings of A- (Excellent) or higher, or equivalent ratings.

The Company's catastrophe reinsurance contract allows for one reinstatement. The Company maintains reinstatement premium protection (RPP) to cover reinstatement premiums incurred. The RPP further reduces risk from a major catastrophe and serves to strengthen the Company's capital position by reducing the modeled 100 year event net cost.

Amounts recoverable from re-insurers are estimated in a manner consistent with the claim liability associated with the underlying insurance policies.  Amounts paid for prospective reinsurance contracts are reported as prepaid reinsurance premiums and amortized over the remaining contract period.

In the normal course of business, NSIC seeks to limit its exposure to loss on any single insured and to recover a portion of benefits paid by ceding reinsurance to reinsurance companies under excess coverage contracts.  NSIC retains a maximum of $50,000 of coverage per individual life.  The cost of reinsurance is amortized over the contract period of the reinsurance.

23

THE NATIONAL SECURITY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED EXCEPT FOR DECEMBER 31, 2014 AMOUNTS)

At June 30, 2015, the largest reinsurance recoverable of a single reinsurer was $6,000 ($37,000 at December 31, 2014). Amounts reported as ceded incurred losses in both 2015 and 2014 were related to the development of losses from prior year catastrophes.

NOTE 9 – EMPLOYEE BENEFIT PLANS

The Company and its subsidiaries have an established retirement savings plan (401K Plan). All full-time employees are eligible to participate, and all employer contributions are fully vested for employees who have completed 1,000 hours of service in the year of contribution. Company matching contributions for the six months ended June 30, 2015 and 2014 amounted to $115,000 and $104,000, respectively. The Company contributes dollar-for-dollar matching contributions up to 5% of compensation subject to government limitations.

In January 2006, the Company established a non-qualified plan under which directors are allowed to defer all or a portion of directors' fees into various investment options.

The supplemental executive retirement plan (SERP) became effective March 1, 2008 and covers named executive officers with the Company contributing 15% of executive compensation to the plan. Contributions to the plan are fully vested upon the earlier of death, disability, change in control, or ten years of participation in the plan. Costs for amounts credited to the non-qualified deferred compensation plans for the six months ended June 30, 2015 and 2014 amounted to approximately $89,000 and $102,000, respectively.

The Company and its subsidiaries established an Employee Stock Ownership Plan (ESOP) in January 2010, to enable its eligible employees to acquire a proprietary interest in the Company's common stock and to provide retirement and other benefits to such employees. There were $158,000 costs incurred during the first six months of 2015 and $100,000 in costs incurred during the first six months of 2014 related to ESOP plan contributions. All contributions were made in cash for purchase of Company shares in the open market. The Company has not allocated shares directly to the plan and the plan has no debt.

NOTE 10 – SHAREHOLDERS' EQUITY

During the six months ended June 30, 2015, and year ended December 31, 2014, changes in shareholders' equity consisted of net income of $1,931,000 and $7,616,000, respectively; dividends paid of $201,000 in 2015 and $300,000 in 2014; changes in accumulated other comprehensive loss, net of applicable taxes, of $936,000 in 2015 and other comprehensive income, net of applicable taxes, of $1,836,000 in 2014.  Other comprehensive gains and loss consisted of accumulated unrealized gains and losses on securities available for sale and unrealized loss on interest rate swaps.

Preferred Stock

Preferred Stock may be issued in one or more series as shall from time to time be determined and authorized by the Board of Directors. The directors may make specific provisions regarding (a) the voting rights, if any (b) whether such dividends are to be cumulative or noncumulative (c) the redemption provisions, if any (d) participating rights, if any (e) any sinking fund or other retirement provisions (f) dividend rates (g) the number of shares of such series and (h) liquidation preference.

Common Stock

The holders of the Class A Common Stock will have one-twentieth of one vote per share, and the holders of the common stock will have one vote per share. There is currently no Class A Common Stock issued or outstanding.

In the event of any liquidation, dissolution or distribution of the assets of the Company remaining after the payments to the holders of the Preferred Stock of the full preferential amounts to which they may be entitled as provided in the resolution or resolutions creating any series thereof, the remaining assets of the Company shall be divided and distributed among the holders of both classes of common stock, except as may otherwise be provided in any such resolution or resolutions.

24

THE NATIONAL SECURITY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED EXCEPT FOR DECEMBER 31, 2014 AMOUNTS)

The table below provides information regarding the Company's preferred and common stock as of June 30, 2015 and December 31, 2014:

	June 30, 2015			December 31, 2014
	Authorized	Issued	Outstanding	Authorized	Issued	Outstanding
Preferred Stock, $1 par value	500,000	—	—	500,000	—	—
Class A Common Stock, $1 par value	2,000,000	—	—	2,000,000	—	—
Common Stock, $1 par value	3,000,000	2,512,425	2,512,425	3,000,000	2,507,452	2,507,452

On May 22, 2015, 4,973 shares of common stock were issued to directors as compensation under the 2009 Equity Incentive Plan previously approved by shareholders.

NOTE 11 – ACCUMULATED OTHER COMPREHENSIVE INCOME

Accumulated other comprehensive income (loss) ("AOCI") includes certain items that are reported directly within a separate component of shareholders' equity. The following table presents changes in AOCI balances (dollars in thousands):

	Six months ended June 30,
	2015			2014
Gains and Losses on Cash Flow Hedges
Balance at beginning of period	$	(816	)	$	(591	)
Other comprehensive income (loss) for period:
Other comprehensive income (loss) before reclassifications	(61		)	(174		)
Amounts reclassified from accumulated other comprehensive income	—			—
Net current period other comprehensive income (loss)	(61		)	(174		)
Balance at end of period	$	(877	)	$	(765	)
Unrealized Gains and Losses on Available-for-Sale Securities
Balance at beginning of period	$	3,588		$	1,527
Other comprehensive income (loss) for period:
Other comprehensive income (loss) before reclassifications	(618		)	2,319
Amounts reclassified from accumulated other comprehensive income	(257		)	(166		)
Net current period other comprehensive income (loss)	(875		)	2,153
Balance at end of period	$	2,713		$	3,680
Total Accumulated Other Comprehensive Income at end of period	$	1,836		$	2,915

25

THE NATIONAL SECURITY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED EXCEPT FOR DECEMBER 31, 2014 AMOUNTS)

The following table presents the amounts reclassified out of AOCI for the six months ended June 30, 2015 (dollars in thousands):

Details about Accumulated Other Comprehensive Income Components	Amounts Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income is Presented
Unrealized Gains and Losses on Available-for-Sale Securities	$	390		Net realized investment gains
	390			Total before tax
	(133		)	Tax (expense) or benefit
	$	257		Net of Tax

The following table presents the amounts reclassified out of AOCI for the six months ended June 30, 2014 (dollars in thousands):

Details about Accumulated Other Comprehensive Income Components	Amounts Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income is Presented
Unrealized Gains and Losses on Available-for-Sale Securities	$	252		Net realized investment gains
	252			Total before tax
	(86		)	Tax (expense) or benefit
	$	166		Net of Tax

NOTE 12 – SEGMENTS

The Company’s property and casualty insurance operations comprise one business segment. The property and casualty insurance segment primarily underwrites home insurance coverage with primary lines of business consisting of:  dwelling fire and extended coverage, homeowners (including mobile homeowners) and other liability. The Company has ceased writing ocean marine coverages and no policies were in-force in this line of business during 2015.  

Management organizes the business utilizing a niche strategy focusing on lower valued dwellings.  Our chief decision makers (Chief Executive Officer, Chief Financial Officer and President) review results and operating plans making decisions on resource allocations on a company-wide basis.  The Company’s products are primarily produced through agents within the states in which we operate.  

The Company’s life and accident and health operations comprise the second business segment.  The life and accident and health insurance segment consists of two lines of business: traditional life insurance and accident and health insurance.

Total assets by industry segment at June 30, 2015 and at December 31, 2014 are summarized below (dollars in thousands):

	Total		P&C Insurance Operations		Life Insurance Operations		Non-Insurance Operations
June 30, 2015	$	146,493	$	83,147	$	56,526	$	6,820
December 31, 2014	$	144,865	$	81,648	$	56,541	$	6,676

26

THE NATIONAL SECURITY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED EXCEPT FOR DECEMBER 31, 2014 AMOUNTS)

Premium revenues and operating income by business segment for the three and six months ended June 30, 2015 and 2014 are summarized below (dollars in thousands):

Three months ended June 30, 2015	Total		P&C Insurance Operations		Life Insurance Operations		Non-Insurance Operations
REVENUE
Net premiums earned	$	14,880	$	13,276	$	1,604	$	—
Net investment income	784		336		429		19
Net realized investment gains (losses)	245		99		146		—
Other income	156		156		—		—
	16,065		13,867		2,179		19
BENEFITS AND EXPENSES
Policyholder benefits paid	9,435		8,534		901		—
Amortization of deferred policy acquisition costs	918		675		243		—
Commissions	2,089		1,997		92		—
General and administrative expenses	2,093		1,619		324		150
Taxes, licenses and fees	518		472		46		—
Interest expense	345		—		13		332
	15,398		13,297		1,619		482
Income (Loss) Before Income Taxes	$	667	$	570	$	560	$	(463	)

Three months ended June 30, 2014	Total		P&C Insurance Operations		Life Insurance Operations			Non-Insurance Operations
REVENUE
Net premiums earned	$	14,100	$	12,467	$	1,633		$	—
Net investment income	1,030		508		503			19
Net realized investment gains	312		1		310			1
Gain on company owned life insurance	1,621		1,621		—			—
Other income	92		92		—			—
	17,155		14,689		2,446			20
BENEFITS AND EXPENSES
Policyholder benefits paid	9,155		7,566		1,589			—
Amortization of deferred policy acquisition costs	873		641		232			—
Commissions	1,967		1,890		77			—
General and administrative expenses	2,413		1,532		598			283
Taxes, licenses and fees	521		457		64			—
Interest expense	382		—		14			368
	15,311		12,086		2,574			651
Income (Loss) Before Income Taxes	$	1,844	$	2,603	$	(128	)	$	(631	)

27

THE NATIONAL SECURITY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED EXCEPT FOR DECEMBER 31, 2014 AMOUNTS)

Six months ended June 30, 2015	Total		P&C Insurance Operations		Life Insurance Operations		Non-Insurance Operations
REVENUE
Net premiums earned	$	29,586	$	26,398	$	3,188	$	—
Net investment income	1,758		826		894		38
Net realized investment gains (losses)	387		130		257		—
Other income	314		313		1		—
	32,045		27,667		4,340		38
BENEFITS AND EXPENSES
Policyholder benefits paid	17,697		15,311		2,386		—
Amortization of deferred policy acquisition costs	1,817		1,350		467		—
Commissions	4,144		3,965		179		—
General and administrative expenses	4,099		3,159		633		307
Taxes, licenses and fees	1,173		1,016		157		—
Interest expense	662		—		23		639
	29,592		24,801		3,845		946
Income (Loss) Before Income Taxes	$	2,453	$	2,866	$	495	$	(908	)

Six months ended June 30, 2014	Total		P&C Insurance Operations		Life Insurance Operations			Non-Insurance Operations
REVENUE
Net premiums earned	$	27,924	$	24,640	$	3,284		$	—
Net investment income	1,978		963		977			38
Net realized investment gains	400		49		350			1
Gain on company owned life insurance	1,621		1,621		—			—
Other income	246		245		1			—
	32,169		27,518		4,612			39
BENEFITS AND EXPENSES
Policyholder benefits paid	17,019		14,230		2,789			—
Amortization of deferred policy acquisition costs	1,771		1,282		489			—
Commissions	3,994		3,835		159			—
General and administrative expenses	4,439		2,989		1,058			392
Taxes, licenses and fees	1,051		921		130			—
Interest expense	768		—		31			737
	29,042		23,257		4,656			1,129
Income (Loss) Before Income Taxes	$	3,127	$	4,261	$	(44	)	$	(1,090	)

28

THE NATIONAL SECURITY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED EXCEPT FOR DECEMBER 31, 2014 AMOUNTS)

The following table presents the Company’s gross and net premiums written for the property and casualty segment and the life and accident and health segment for the three and six months ended June 30, 2015 and 2014, respectively:

	Three months ended June 30,						Six months ended June 30,
	2015			2014			2015			2014
Life, accident and health operations premiums written:
Traditional life insurance	$	1,104		$	1,137		$	2,241		$	2,316
Accident and health insurance	422			431			841			875
Gross life, accident and health	1,526			1,568			3,082			3,191
Reinsurance premium ceded	(15		)	(12		)	(30		)	(35		)
Net life, accident and health premiums written	$	1,511		$	1,556		$	3,052		$	3,156
Property and Casualty operations premiums written:
Dwelling fire & extended coverage	$	9,454		$	9,219		$	18,182		$	17,548
Homeowners (Including mobile homeowners)	6,715			6,879			12,466			12,628
Other liability	549			521			1,054			990
Gross property and casualty	16,718			16,619			31,702			31,166
Reinsurance premium ceded	(1,229		)	(1,802		)	(2,720		)	(3,557		)
Net property and casualty written	$	15,489		$	14,817		$	28,982		$	27,609
Consolidated gross premiums written	$	18,244		$	18,187		$	34,784		$	34,357
Reinsurance premium ceded	(1,244		)	(1,814		)	(2,750		)	(3,592		)
Consolidated net premiums written	$	17,000		$	16,373		$	32,034		$	30,765

The following table presents the Company’s gross and net premiums earned for the property and casualty segment and the life and accident and health segment three and six months ended June 30, 2015 and 2014, respectively:

	Three months ended June 30,						Six months ended June 30,
	2015			2014			2015			2014
Life, accident and health operations premiums earned:
Traditional life insurance	$	1,199		$	1,214		$	2,377		$	2,457
Accident and health insurance	420			431			841			862
Gross life, accident and health	1,619			1,645			3,218			3,319
Reinsurance premium ceded	(15		)	(12		)	(30		)	(35		)
Net life, accident and health premiums earned	$	1,604		$	1,633		$	3,188		$	3,284
Property and Casualty operations premiums earned:
Dwelling fire & extended coverage	$	8,403		$	7,910		$	16,603		$	15,580
Homeowners (Including mobile homeowners)	5,955			5,916			11,903			11,747
Other liability	480			443			945			870
Gross property and casualty	14,838			14,269			29,451			28,197
Reinsurance premium ceded	(1,562		)	(1,802		)	(3,053		)	(3,557		)
Net property and casualty earned	$	13,276		$	12,467		$	26,398		$	24,640
Consolidated gross premiums earned	$	16,457		$	15,914		$	32,669		$	31,516
Reinsurance premium ceded	(1,577		)	(1,814		)	(3,083		)	(3,592		)
Consolidated net premiums earned	$	14,880		$	14,100		$	29,586		$	27,924

29

THE NATIONAL SECURITY GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED EXCEPT FOR DECEMBER 31, 2014 AMOUNTS)

NOTE 13 – CONTINGENCIES

The Company and its subsidiaries continue to be named individually as parties to litigation related to the conduct of their insurance operations.  These suits involve alleged breaches of contracts, torts, including bad faith and fraud claims based on alleged wrongful or fraudulent acts of the Company's subsidiaries, and other miscellaneous causes of action. 

The Company's property & casualty subsidiaries are defending a limited number of matters filed in the aftermath of Gustav and Ike in Texas.  These actions include individual lawsuits with allegations of underpayment of hurricane-related claims.

The various suits seek a variety of remedies, including actual and/or punitive damages in unspecified amounts and/or declaratory relief.  The Company has reserves set up on litigated claims and the reserves are included in benefit and loss reserves.

NOTE 14 – SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for interest during the six months ended June 30, 2015 was $561,000 ($568,000 in 2014). Cash paid for income taxes during the six months ended June 30, 2015 was $1,000,000 ($111,000 in 2014).

During the six months ended June 30, 2015, non-cash changes in equity included $4,000 in common stock issued to Directors in lieu of cash compensation along with a corresponding $74,000 increase in additional paid-in-capital.

NOTE 15 – SUBSEQUENT EVENTS

Management has evaluated subsequent events and their potential effects on these condensed consolidated financial statements through the filing date of this Form 10-Q.

30

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

The National Security Group, Inc.

We have reviewed the accompanying condensed consolidated balance sheet of The National Security Group, Inc. as of June 30, 2015, and the related condensed consolidated statements of income and comprehensive income (loss) for the three-months and six-months ended June 30, 2015 and 2014, the condensed consolidated statement of shareholders’ equity for the six-months ended June 30, 2014 and the condensed consolidated statements of cash flows for the six-months ended June 30, 2015 and 2014. These condensed consolidated financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the consolidated financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with auditing standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of The National Security Group, Inc. as of December 31, 2014, and the related consolidated statements of income, comprehensive income (loss), shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated March 20, 2015, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2014, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Warren Averett, LLC

Birmingham, Alabama

August 13, 2015

31

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

The following discussion highlights significant factors influencing the consolidated financial position and results of operations of The National Security Group, Inc. (referred to in this document as we, our, us, the Company or NSEC) and its subsidiaries. We are a “smaller reporting company” under Securities and Exchange Commission (SEC) regulations and therefore qualify for the scaled disclosure of smaller reporting companies. In general, the same information is required to be disclosed in the management discussion and analysis by smaller reporting companies except that the discussion need only cover the latest two year period and disclosures relating to contractual obligations are not required. In accordance with the scaled disclosure requirements, this discussion covers the three-month and six-month periods ended June 30, 2015 and 2014.

The National Security Group, Inc. is made up of two operating segments: the Life segment and the P&C segment. The Company's life, accident and health insurance business is conducted through National Security Insurance Company (NSIC), a wholly owned subsidiary of the Company organized in 1947. The Company's property and casualty insurance business is conducted through National Security Fire & Casualty Company (NSFC), a wholly owned subsidiary of the Company organized in 1959, and Omega One Insurance Company (Omega), a wholly owned subsidiary of National Security Fire & Casualty Company organized in 1992.

This discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and related notes thereto included in Part 1, Item 1 of this report and with our audited consolidated financial statements and related notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2014.

Information in this discussion is presented in whole dollars rounded to the nearest thousand. Tabular amounts are presented in thousands.

The National Security Group operates in the property and casualty and life, accident and supplemental health insurance businesses and markets products primarily through independent agents.  The Company operates in ten states with 48.9% of total premium revenue generated in the states of Alabama and Mississippi.  Property and casualty insurance is the most significant segment, accounting for 90.1% of gross earned premium revenue in the first six months of 2015.  Revenue generated from the life segment accounted for 9.9% of gross insurance premium revenue in the first six months of 2015.

National Security Insurance Company (NSIC) is a life, accident and health insurance company founded in 1947.  All references to NSIC in the remainder of this management discussion and analysis will refer to the combined life, accident and health insurance operations and will compose the life segment of the Company.  NSIC is licensed to underwrite life and accident and health insurance in Alabama, Florida, Georgia, Mississippi, South Carolina, Tennessee and Texas.

The property and casualty segment consists of the consolidated operations of two subsidiaries, National Security Fire and Casualty Company and its wholly owned subsidiary, Omega One Insurance Company. There is no material differentiation between the products underwritten by NSFC and Omega as both underwrite primarily dwelling personal lines coverage. The Property and Casualty segment has premium in-force in the states of Alabama, Arkansas, Georgia, Louisiana, Mississippi, Oklahoma, South Carolina, and Tennessee.

All of the insurance subsidiaries are Alabama domiciled insurance companies; therefore, the Alabama Department of Insurance is the primary insurance regulator.  However, each subsidiary is subject to regulation by the respective insurance regulators of each state in which it is licensed to transact business.  Insurance rates charged by each of the insurance subsidiaries are typically reviewed and approved by each insurance department for the respective state in which the rates will apply.

All of our insurance companies have been assigned ratings by A.M. Best Co (Best).  On November 13, 2014, Best affirmed the financial strength rating (FSR) of B++ (Good) and the issuer credit rating (ICR) of "bbb" of NSFC. Best revised the outlook on both of NSFC's ratings from negative to stable. In addition, Best affirmed the FSR of B+(Good) and ICR of "bbb-" of Omega and NSIC. The outlook for all of these ratings is stable. Best also affirmed the ICR of "bb" of the parent holding company, NSEC, with a revised outlook from negative to stable. The property and casualty subsidiaries have been assigned ratings by Demotech, Inc. On November 22, 2014, Demotech affirmed a Financial Stability Rating of A (Exceptional) for both NSFC and Omega.

32

The two primary segments in which we report insurance operations are the personal lines property and casualty segment (NSFC) and the life, accident and health insurance segment (NSIC).  Due to Omega producing no earned premium revenue and the fact that Omega is a wholly owned subsidiary of NSFC authorized to underwrite similar lines of business, all references to NSFC in the remainder of this management discussion and analysis will include the insurance operations of both NSFC and Omega.  Our income is principally derived from net underwriting profits and investment income.  Net underwriting profit is principally derived from earned premiums received less claims paid, sales commissions to agents, costs of underwriting and insurance taxes and fees.  Investment income includes interest and dividend income and gains and losses on investment holdings.

The property and casualty segment can be impacted by severe storm activity resulting in incurred losses and loss adjustment expenses primarily from tornado, wind and hail related damage. These storm systems or other natural disasters are classified as catastrophes (referred to as "cat events" or "catastrophe events" throughout the remainder of this document) by Property Claim Service (PCS) when these events cause $25 million or more in industry wide direct insured losses and affect a significant number of policyholders and insurers.

Overview-Three Months and Six Months Ended June 30, 2015 compared to Three Months and Six Months Ended June 30, 2014

Financial results for the three months and six months ended June 30, 2015 and 2014 were as follows:

Consolidated Financial Summary	Three months ended June 30,						Six months ended June 30,
(dollars in thousands)	2015			2014			2015			2014
Gross premiums written	$	18,244		$	18,187		$	34,784		$	34,357
Net premiums written	$	17,000		$	16,373		$	32,034		$	30,765
Net premiums earned	$	14,880		$	14,100		$	29,586		$	27,924
Net investment income	784			1,030			1,758			1,978
Net realized investment gains	245			312			387			400
Gain on company owned life insurance	—			1,621			—			1,621
Other income	156			92			314			246
Total Revenues	16,065			17,155			32,045			32,169
Policyholder benefits and settlement expenses	9,435			9,155			17,697			17,019
Amortization of deferred policy acquisition costs	918			873			1,817			1,771
Commissions	2,089			1,967			4,144			3,994
General and administrative expenses	2,093			2,413			4,099			4,439
Taxes, licenses and fees	518			521			1,173			1,051
Interest expense	345			382			662			768
Total Benefits, Losses and Expenses	15,398			15,311			29,592			29,042
Income Before Income Taxes	667			1,844			2,453			3,127
Income tax expense (benefit)	44			(90		)	522			194
Net Income	$	623		$	1,934		$	1,931		$	2,933
Income Per Common Share	$	0.25		$	0.77		$	0.77		$	1.18
Reconciliation of Net Income to non-GAAP Measurement
Net income	$	623		$	1,934		$	1,931		$	2,933
Income tax expense (benefit)	44			(90		)	522			194
Realized investment gains, net	(245		)	(312		)	(387		)	(400		)
Gain on company owned life insurance	—			(1,621		)	—			(1,621		)
Pretax Income (Loss) From Insurance Operations	$	422		$	(89	)	$	2,066		$	1,106

33

Three months ended June 30, 2015 compared to three months ended June 30, 2014:

Premium Revenue:

For the quarter ended June 30, 2015, net premiums earned were up $780,000 at $14,880,000 for the second quarter of 2015 compared to $14,100,000 for the second quarter of 2014. The primary reasons for the increase were a 13.4% reduction in catastrophe reinsurance costs coupled with an increase in direct premium. The increase in direct premium was primarily related to the P&C segment which had a 6.5% rise in net earned premium revenue during the second quarter of 2015 compared to the same period in 2014.

Net Income:

For the three months ended June 30, 2015, the Company had net income of $623,000, $0.25 per share, compared to net income of $1,934,000, $0.77 per share, for the same period in 2014, a decrease of $1,311,000. The primary reason for the decline was a $1.6 million realized gain on company owned life insurance in the second quarter of last year; no such gain was realized in 2015.

Pretax income from insurance operations:

A primary non-GAAP financial measure used by management is pretax income from insurance operations. This measure consists of net income before income taxes adjusted for realized investment gains and losses. This measure provides a means of comparing the results of our core insurance operations without the impact of items that are more unpredictable and less consistent from year to year. A reconciliation of pretax income from insurance operations is presented in the table above.

For the three months ended June 30, 2015, pretax income from insurance operations was $422,000 compared to a pretax loss from insurance operations of $89,000 for the three months ended June 30, 2014. The primary factors contributing to the increase in pretax income from insurance operations were a $780,000 increase in net premiums earned coupled with a $320,000 decrease in general and administrative expenses. Partially offsetting these improvements was a moderate increase in consolidated claims cost, primarily due to an increase in property and casualty segment fire related claims.

Six months ended June 30, 2015 compared to six months ended June 30, 2014:

Premium Revenue:

For the six months ended June 30, 2015, net premiums earned were up $1,662,000 at $29,586,000 for the first half of 2015 compared to $27,924,000 for the first half of 2014. The primary reasons for the increase were a 13.4% reduction in catastrophe reinsurance costs coupled with increases in direct premium. The increase in direct premium was primarily related to the P&C segment which had a 7.1% increase in net earned premium during the first six months of 2015 compared to the first six months of 2014.

Net Income:

For the six months ended June 30, 2015, the Company had net income of $1,931,000, $0.77 per share, compared to net income of $2,933,000, $1.18 per share, for the same period in 2014, a decrease of $1,002,000. The primary reason for the decline was the $1.6 million gain on company owned life insurance received during the first half of 2014.

Pretax income from insurance operations:

For the six months ended June 30, 2015, pretax income from insurance operations was $2,066,000 compared to $1,106,000 for the six months ended June 30, 2014, an increase of $960,000. The primary factors contributing to the increase in pretax income from insurance operations were a $1,662,000 or 6.0% increase in net premiums earned coupled with a $340,000 decrease in general and administrative expenses. For the first six months of 2015, general and administrative expenses were 13.9% of net premiums earned compared to 15.9% for the same period in 2014. A continued focus by management to improve efficiency and implement cost saving measures to reduce general and administrative expenses was the primary reason for the decline. In addition, a slight reduction in the loss ratio of policyholder benefits as a percent of premium earned also contributed to the improved results. Policyholder benefits were 59.8% of net earned premium revenue in the first half of 2015 compared to 60.9% for the same period in 2014.

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Overview - Balance Sheet highlights at June 30, 2015 compared to December 31, 2014

Selected Balance Sheet Highlights	June 30, 2015		December 31, 2014
(dollars in thousands)
Invested Assets	$	107,984	$	109,549
Cash	$	8,378	$	6,426
Total Assets	$	146,493	$	144,865
Policy Liabilities	$	77,066	$	74,115
Total Debt	$	18,372	$	19,572
Accumulated Other Comprehensive Income	$	1,836	$	2,772
Shareholders' Equity	$	43,629	$	42,757
Book Value Per Share	$	17.37	$	17.05

Invested Assets:

Invested assets as of June 30, 2015 were $107,984,000 down $1,565,000, or 1.4%, compared to December 31, 2014. The decrease in invested assets was primarily due to the decline in market value of available for sale securities in our fixed income portfolio.

Cash:

The Company, primarily through its insurance subsidiaries, had $8,378,000 in cash and cash equivalents at June 30, 2015, compared to $6,426,000 at December 31, 2014. Positive cash flow from operations totaling $3,097,000 was the primarily contributor to the increase in cash for the six months ended June 30, 2015.

Total Assets:

Total assets as of June 30, 2015 were $146,493,000 compared to $144,865,000 at December 31, 2014. The $1,952,000 increase in cash during the first six months of 2015 was the primary contributor to the increase in total assets.

Debt Outstanding:

Total debt at June 30, 2015 was $18,372,000 compared to $19,572,000 at December 31, 2014. Debt was reduced $1,200,000 during the first six months in 2015. The primary reason for the decline was the reduction of balances in revolving lines of credit in the Holding Company.

Shareholders' Equity:

Shareholders' equity as of June 30, 2015 was $43,629,000 up $872,000 compared to December 31, 2014 Shareholders' equity of $42,757,000. Book value per share was $17.37 at June 30, 2015, compared to $17.05 per share at December 31, 2014, an increase of $0.32. The primary factor contributing to the increase in Shareholders' equity was net income of $1,931,000. Offsetting the increase in Shareholders' equity was a decrease in accumulated other comprehensive income of $936,000. The decline in accumulated other comprehensive income was primarily driven by decreases in market values of available for sale investment securities primarily in our fixed income portfolio.

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Three months ended June 30, 2015 compared to three months ended June 30, 2014:

Premium revenue:

The table below provides earned premium revenue by segment for the three months ended June 30, 2015 and 2014:

	Three months ended June 30,						Percent
(dollars in thousands)	2015			2014			increase (decrease)
Life, accident and health operations premiums earned:
Traditional life insurance	$	1,199		$	1,214		(1.2	)%
Accident and health insurance	420			431			(2.6	)%
Gross life, accident and health	1,619			1,645			(1.6	)%
Reinsurance premium ceded	(15		)	(12		)	25.0	%
Net life, accident and health premiums earned	$	1,604		$	1,633		(1.8	)%
Property and Casualty operations premiums earned:
Dwelling fire & extended coverage	$	8,403		$	7,910		6.2	%
Homeowners (Including mobile homeowners)	5,955			5,916			0.7	%
Other liability	480			443			8.4	%
Gross property and casualty	14,838			14,269			4.0	%
Reinsurance premium ceded	(1,562		)	(1,802		)	(13.3	)%
Net property and casualty premiums earned	$	13,276		$	12,467		6.5	%
Consolidated gross premiums earned	$	16,457		$	15,914		3.4	%
Reinsurance premium ceded	(1,577		)	(1,814		)	(13.1	)%
Consolidated net premiums earned	$	14,880		$	14,100		5.5	%

Consolidated net premium earned was up 5.5% for the quarter ended June 30, 2015, at $14,880,000 compared to $14,100,000 for the quarter ended June 30, 2014. The growth in net premium earned was due to a 6.5% increase in net premium earned in the P&C segment which was driven by increases in direct premium due to rate adjustments and a moderate increase in total policies in-force. A 13.3% reduction in catastrophe reinsurance cost also contributed to the increase in net premium earned in the P&C segment. The reduction in catastrophe reinsurance cost was due to a catastrophe reinsurance rate reduction in our 2015 calendar year contract renewal.

The reduction in ceded catastrophe reinsurance cost of 13.1% contributed to the improvement in underwriting margins in our property and casualty segment.

Investment income:

For the three months ended June 30, 2015, net investment income was $784,000 compared to $1,030,000 for the same period in 2014; a decrease of $246,000 or 23.9%. The primary reason for the decrease in net investment income in the second quarter of 2015 compared to the second quarter of 2014 was the change in value of our company owned life insurance (COLI). The change in value of the COLI decreased investment income $96,000 during the second quarter of 2015 while the change increased investment income $108,000 during the same period in 2014.

Realized investment gains and losses:

For the three months ended June 30, 2015, the Company had net realized capital gains totaling $245,000 compared to $312,000 for the same period in 2014. The $67,000 decrease was primarily related to timing of sales of fixed income portfolio holdings. The realization of capital gains in the investment portfolio is influenced by both market conditions and liquidity requirements and therefore can vary significantly from quarter to quarter and year to year. Other activities, such as tax planning strategies, may also lead to significant variation in realized capital gains from year to year.

Gain on company owned life insurance:

Gain on company owned life insurance consists of proceeds in excess of cash surrender value on life insurance contracts. The Company owns life insurance (COLI) contracts on certain management and supervisory employees each having a face amount of approximately $2,000,000 (including accumulated cash surrender value). The Company's original investment in company owned life insurance was $5,000,000 made in 2006 and 2007. The primary purpose of the program is to offset future employee benefit expenses through earnings on the cash value of the policies with

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cash values ultimately returned tax free in the form of death benefits. The Company pays all premium and is the owner and principal beneficiary of these policies. The life insurance contracts are carried on the Consolidated Balance Sheet at their cash surrender value on the balance sheet date. Changes in cash surrender values are included in income in the current period. The change in surrender value included in earnings for the three month periods ended June 30, 2015 and 2014 were a decrease of $96,000 and an increase of $108,000, respectively. Death proceeds from the contracts are recorded when the proceeds become payable under the terms of the policy and proceeds in excess of cash surrender value are recognized as a gain on company owned life insurance. There were no gains on COLI recognized in income during the three months ended June 30, 2015.  Gains on COLI in excess of cash surrender value of $1,621,000 were recognized in income during the three months ended June 30, 2014.

Other income:

Other income was $156,000 for the three months ended June 30, 2015, compared to $92,000 for the same period in 2014; an increase of $64,000. Other income consists primarily of fees related to the issuance of our property insurance policies as well as other miscellaneous income.

Policyholder benefits:

Policyholder claims were $9,435,000 for the three months ended June 30, 2015, compared to $9,155,000 for the three months ended June 30, 2014; an increase of $280,000 or 3.1%. Claims as a percentage of net premium earned was 63.4% in the second quarter of 2015 compared to 64.9% in the second quarter of 2014. Policyholder benefits were up due to an increase in P&C segment claims in the second quarter of 2015 compared to the same period in 2014. The components of the increase in P&C segment claims were $1,332,000 from reported fire losses as well as $299,000 from reported claims from cat events. However, offsetting the increases were a decline in non-catastrophe wind and hail claims totaling $626,000 in the P&C segment as well as a decrease in life segment claims totaling $688,000.

The table below provides a recap of P&C segment gross reported losses and LAE by catastrophe event and non-catastrophe wind and hail losses and LAE for the three months ended June 30, 2015 and 2014 (dollars in thousands):

For the three months ended June 30, 2015						For the three months ended June 30, 2014
Cat event	Reported Losses & LAE			Claim Count		Cat event	Reported Losses & LAE			Claim Count
Cat 64 (Feb 16-17)	$	1		3		Cat 32 (Jan 5-8)	$	—		—
Cat 68 (Feb 16-22)	(4		)	(1	)	Cat 34 (Feb 11-14)	(17		)	10
Cat 69 (Mar 3-5)	(2		)	—		Cat 37 (Mar 27-29)	9			3
Cat 70 (Mar 25-26)	61			12		Cat 40 (Apr 27-May 1)	1,681			357
Cat 71 (Mar 31-Apr 1)	221			50		Cat 43 (May 18-23)	148			57
Cat 73 (Apr 7-10)	40			6		Cat 45 (Jun 3-5)	31			13
Cat 74 (Apr 16-17)	4			1
Cat 75 (Apr 18-21)	360			97
Cat 76 (Apr 24-28)	590			183
Cat 79 (May 6-13)	473			90
Cat 80 (May 15-17)	30			10
Cat 81 (May 23-28)	340			83
Cat 82 (May 28-30)	37			11
Total Cat losses	$	2,151		545		Total Cat losses	$	1,852		440
Non-cat wind & hail	$	1,448		476		Non-cat wind & hail	$	2,074		690

Non-catastrophe wind and hail claims reported in the second quarter of 2015 totaled $1,448,000 compared to non-catastrophe wind and hail claims reported in the second quarter of 2014 totaling $2,074,000; a decline of $626,000 or 30.2%. During the three months ended June 30, 2015, the P&C segment had 476 non-cat wind and hail claims reported (an average of $3,000 per claim) compared to 690 claims reported during the three months ended June 30, 2014 (an average of $3,000 per claim). Non-cat wind and hail claims reported during the second quarter of 2015 accounted for

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15.3% of total P&C segment incurred losses and LAE in the current year. Non-cat wind and hail claims reported during the second quarter of 2014 accounted for 22.7% of total P&C segment incurred losses and LAE in 2014.

During the three months ended June 30, 2015, the P&C segment was impacted by nine catastrophe events and development from four catastrophe events from first quarter totaling $2,151,000 from 545 claims compared to reported losses and LAE from three cat events and development from three first quarter cat events totaling $1,852,000 from 440 claims for the three months ended June 30, 2014. Claims reported from second quarter 2015 cat events contributed 14.5 percentage points to the second quarter 2015 P&C segment loss ratio. In comparison, claims reported during the second quarter of 2014 from prior year cat events contributed 13.1 percentage points to the second quarter 2014 P&C segment loss ratio.

For the three months ended June 30, 2015, policyholder benefit payments were up in the property and casualty segment due to an increase in frequency of wind related losses. In addition, fire losses reported in the second quarter of 2015 were up $1,332,000 or 52.9% compared to fire losses reported during the second quarter of 2014. The P&C segment had 127 fire losses reported during the second quarter of 2015 totaling $3,850,000 compared to 114 claims reported during the second quarter of 2014 totaling $2,518,000. The average cost per claim was $30,300 for fire losses reported in the second quarter of 2015 compared to $22,100 for fire losses reported in the second quarter of 2014.

Policy acquisition cost (commissions and amortization of deferred acquisition cost):

For the three months ended June 30, 2015, policy acquisition costs were $3,007,000 compared to $2,840,000 for the same period in 2014; an increase of $167,000. Policy acquisition costs consist of amortization of previously capitalized distribution costs and current commission payments to agents. As a percentage of premium revenue, policy acquisition costs were 20.2% in the second quarter of 2015 compared to 20.1% for the same period in 2014.

General Expenses:

General and administrative expenses totaled $2,093,000 in the second quarter of 2015 compared to $2,413,000 in the second quarter of 2014; a 13.3% decrease. The primary reason for the $320,000 decline was a reduction in various general expenses, the most significant of which was a reduction in fees paid to actuarial consultants as well as payroll costs.

Taxes, licenses and fees:

Insurance taxes, licenses and fees were $518,000 for the three months ended June 30, 2015, compared to $521,000 for the same period in 2014. As a percentage of net premiums earned, insurance taxes, licenses and fees were 3.5% for the three months ended June 30, 2015 compared to 3.7% for the three months ended June 30, 2014.

Interest expense:

Interest expense for the second quarter of 2015 was $345,000 compared to $382,000 for the same period in 2014; a decrease of 9.7%. The primary reason for the $37,000 decline was a reduction in long-term debt.

Income taxes:

For the three month period ended June 30, 2015, the Company had pretax income of $667,000 compared to $1,844,000 for the same period in 2014. The $44,000 tax expense for the second quarter 2015 consisted of current tax expense of $161,000 and deferred tax benefit of $117,000. Tax benefit for the second quarter of 2014 consisted of current tax expense of $80,000 and deferred tax benefit of $170,000. The effective tax rate for the three month period ended June 30, 2015 and 2014 was 6.6% and (4.9)%, respectively.

Net income:

The Company ended the second quarter of 2015 with net income of $623,000 compared to net income of $1,934,000 for the same period in 2014. The primary factors contributing to the $1,311,000 decline in net income was an increase in reported fire related claims in the second quarter of 2015 as well as a gain on company owned life insurance in the second quarter of 2014 that was not realized in the current year.

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Six months ended June 30, 2015 compared to six months ended June 30, 2014:

Premium revenue:

The table below provides earned premium revenue by segment for the six months ended June 30, 2015 and 2014:

	Six months ended June 30,						Percent
(dollars in thousands)	2015			2014			increase (decrease)
Life, accident and health operations premiums earned:
Traditional life insurance	$	2,377		$	2,457		(3.3	)%
Accident and health insurance	841			862			(2.4	)%
Gross life, accident and health	3,218			3,319			(3.0	)%
Reinsurance premium ceded	(30		)	(35		)	(14.3	)%
Net life, accident and health premiums earned	$	3,188		$	3,284		(2.9	)%
Property and Casualty operations premiums earned:
Dwelling fire & extended coverage	16,603			15,580			6.6	%
Homeowners (Including mobile homeowners)	11,903			11,747			1.3	%
Other liability	945			870			8.6	%
Gross property and casualty	29,451			28,197			4.4	%
Reinsurance premium ceded	(3,053		)	(3,557		)	(14.2	)%
Net property and casualty premiums earned	$	26,398		$	24,640		7.1	%
Consolidated gross premiums earned	$	32,669		$	31,516		3.7	%
Reinsurance premium ceded	(3,083		)	(3,592		)	(14.2	)%
Consolidated net premiums earned	$	29,586		$	27,924		6.0	%

Consolidated net premium earned was up 6.0% for the year ended June 30, 2015, at $29,586,000 compared to $27,924,000 for the year ended June 30, 2014. The growth in net premium earned was due to a 7.1% increase in net premium earned in the P&C segment which was driven by increases in direct premium due to rate adjustments and a moderate increase in in-force policy count. A 14.2% reduction in catastrophe reinsurance cost also contributed to the increase in net premium earned in the P&C segment. The reduction in catastrophe reinsurance cost was due to a catastrophe reinsurance rate reduction in our 2015 calendar year contract renewal.

The reduction in ceded catastrophe reinsurance cost contributed to the improvement in underwriting margins in our property and casualty segment. The Company maintains catastrophe reinsurance coverage to mitigate loss exposure from catastrophic events. Our catastrophe retention remained unchanged at $4 million and we maintain catastrophe reinsurance covering incurred claims of a single catastrophe event up to $72.5 million after exceeding the retention. Our catastrophe reinsurance also covers the cost of a second event up to the same $72.5 million upper limit. In our reinsurance structure, management attempts to limit the impact on pretax earnings of a single modeled 100 year cat event to no more than $4 million. It is noted, however, that hurricane models are subject to significant risk and are only a tool to estimate the impact of catastrophe events. The Company also has risk associated with multiple smaller catastrophe events that individually may not exceed our $4 million retention.

Under the catastrophe reinsurance program in 2015, the Company retained the first $4,000,000 in losses from each event.  Reinsurance coverage is maintained in three layers as follows:

Layer	Reinsurers' Limits of Liability
First Layer	100% of $13,500,000 in excess of $4,000,000
Second Layer	100% of $25,000,000 in excess of $17,500,000
Third Layer	100% of $30,000,000 in excess of $42,500,000

Investment income:

For the six months ended June 30, 2015, net investment income was $1,758,000 compared to $1,978,000 for the same period in 2014; a decrease of $220,000. The primary reason for the decrease in net investment income in the first six months of 2015 compared to the same period in 2014 was a decrease in the value of company owned life

39

insurance. The change in value of the COLI decreased investment income $52,000 during the six months ended June 30, 2015, while the change increased investment income $138,000 during the same period in 2014.

Realized investment gains and losses:

For the six months ended June 30, 2015, the Company had net realized capital gains totaling $387,000 compared to $400,000 for the same period in 2014. The $13,000 change is primarily associated with timing of sales in fixed income investments. The realization of capital gains in the investment portfolio is influenced by both market conditions and liquidity requirements and therefore can vary significantly from quarter to quarter and year to year. Other activities, such as tax planning strategies, may also lead to significant variation in realized capital gains from year to year.

Gain on company owned life insurance:

Gain on company owned life insurance consists of proceeds in excess of cash surrender value on life insurance contracts. The Company owns life insurance (COLI) contracts on certain management and supervisory employees each having a face amount of approximately $2,000,000 (including accumulated cash surrender value). The Company's original investment in company owned life insurance was $5,000,000 made in 2006 and 2007. The primary purpose of the program is to offset future employee benefit expenses through earnings on the cash value of the policies with cash values ultimately returned tax free in the form of death benefits. The Company pays all premium and is the owner and principal beneficiary of these policies. The life insurance contracts are carried on the Consolidated Balance Sheet at their cash surrender value on the balance sheet date. Cash surrender value at June 30, 2015 and June 30, 2014 was $5,065,000 and $5,996,000, respectively. Changes in cash surrender values are included in income in the current period. The change in surrender value included in earnings for the six-month periods ended June 30, 2015 and 2014 were a decrease of $52,000 and an increase of $138,000, respectively. Death proceeds from the contracts are recorded when the proceeds become payable under the terms of the policy and proceeds in excess of cash surrender value are recognized as a gain on company owned life insurance. There were no gains on COLI recognized in income in 2015.  Gains on COLI in excess of cash surrender value of $1,621,000 were recognized in income in 2014.

Other income:

Other income was $314,000 for the six months ended June 30, 2015, compared to $246,000 for the same period in 2014; an increase of $68,000. Other income consists primarily of fees related to the issuance of our property insurance policies as well as other miscellaneous income.

Policyholder benefits:

Policyholder claims were $17,697,000 for the six months ended June 30, 2015, compared to $17,019,000 for the six months ended June 30, 2014; an increase of $678,000 or 4.0%. Claims as a percentage of premium earned was 59.8% in the first half of 2015 compared to 60.9% in the first half of 2014. Policyholder benefits were up due to an increase in P&C segment claims in the first six months of 2015 compared to the same period in 2014. The components of the increase in P&C segment claims were $1,574,000 from reported fire losses as well as $164,000 from reported claims from cat events. However, offsetting the increases were a decline in non-catastrophe wind and hail claims totaling $1,042,000 in the P&C segment as well as a decrease in life segment claims totaling $403,000.

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The table below provides a recap of P&C segment gross reported losses and LAE by catastrophe event and non-catastrophe wind and hail losses and LAE for the six months ended June 30, 2015 and 2014 (dollars in thousands):

For the six months ended June 30, 2015				For the six months ended June 30, 2014
Cat event	Reported Losses & LAE		Claim Count	Cat event	Reported Losses & LAE		Claim Count
Cat 64 (Feb 16-17)	$	28	12	Cat 32 (Jan 5-8)	4		2
Cat 68 (Feb 16-22)	61		23	Cat 34 (Feb 11-14)	578		337
Cat 69 (Mar 3-5)	1		2	Cat 37 (Mar 27-29)	12		4
Cat 70 (Mar 25-26)	433		81	Cat 40 (Apr 27-May 1)	1,681		357
Cat 71 (Mar 31-Apr 1)	221		50	Cat 43 (May 18-23)	148		57
Cat 73 (Apr 7-10)	40		6	Cat 45 (Jun 3-5)	31		13
Cat 74 (Apr 16-17)	4		1
Cat 75 (Apr 18-21)	360		97
Cat 76 (Apr 24-28)	590		183
Cat 79 (May 6-13)	473		90
Cat 80 (May 15-17)	30		10
Cat 81 (May 23-28)	340		83
Cat 82 (May 28-30)	37		11
Total Cat losses	$	2,618	649	Total Cat losses	$	2,454	770
Non-cat wind & hail	$	2,258	782	Non-cat wind & hail	$	3,300	1,154

Non-catastrophe wind and hail claims reported in the first half of 2015 totaled $2,258,000 compared to non-catastrophe wind and hail claims reported in the first half of 2014 totaling $3,300,000; a decline of $1,042,000 or 31.6%. During the first six months of 2015, the P&C segment had 782 non-cat wind and hail claims reported (an average of $2,900 per claim) compared to 1,154 claims reported during the first six months of 2014 (an average of $2,900 per claim). Non-cat wind and hail claims reported during the first half of 2015 accounted for 12.8% of total P&C segment incurred losses and LAE in the current year. Non-cat wind and hail claims reported during the first half of 2014 accounted for 19.4% of total P&C segment incurred losses and LAE in 2014.

During the first six months of 2015, the P&C segment was impacted by 13 catastrophe events totaling $2,618,000 from 649 claims compared to reported losses and LAE from six cat events totaling $2,454,000 from 770 claims in the first six months of 2014. Claims reported from year to date 2015 cat events contributed 8.8 percentage points to the 2015 P&C segment loss ratio. In comparison, claims reported during the first half of 2014 from prior year cat events also contributed 8.8 percentage points to the year to date 2014 P&C segment loss ratio. While the frequency of cat events was significantly higher in 2015 than 2014, reported cat event losses and LAE were up only moderately at 6.7% and reported claim counts were down 121.

Year to date policyholder benefit payments were up in the property and casualty segment due to an increase in frequency of wind related losses as well as an increase in reported fire losses in 2015 compared to the same period in the prior year. Reported fire losses were up $1,574,000 or 23.9% compared to fire losses reported during the first half of 2014. The P&C segment had 292 fire losses reported for the period ended June 30, 2015, totaling $8,169,000 compared to 275 fire claims reported for the same period in 2014 totaling $6,595,000. The average cost per claim was $28,000 for fire losses reported in 2015 compared to $24,000 for fire losses reported in 2014.

Policy acquisition cost (commissions and amortization of deferred acquisition cost):

For the six months ended June 30, 2015, policy acquisition costs were $5,961,000 compared to $5,765,000 for the same period in 2014; an increase of $196,000. Policy acquisition costs consist of amortization of previously capitalized distribution costs and current commission payments to agents. As a percentage of premium revenue, policy acquisition costs were 20.1% in the first half of 2015 compared to 20.6% for the same period in 2014.

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General Expenses:

Year to date general and administrative expenses totaled $4,099,000 in 2015 compared to $4,439,000 in 2014; a 7.7% decrease. The primary reason for the $340,000 decline was a reduction in various general expenses, the most significant of which was a reduction in fees paid to actuarial consultants, underwriting service related fees, and payroll costs.

Taxes, licenses and fees:

Insurance taxes, licenses and fees were $1,173,000 for the six months ended June 30, 2015, compared to $1,051,000 for the same period in 2014. The primary reason for the increase was the 1.2% increase in gross premium written in the first half of 2015 compared to the same period in 2014. As a percentage of net premiums earned, insurance taxes, licenses and fees were 4.0% for the six months ended June 30, 2015 compared to 3.8% for the six months ended June 30, 2014.

Interest expense:

Interest expense for the first half of 2015 was $662,000 compared to $768,000 for the same period in 2014; a decrease of 13.8%. The primary reason for the $106,000 decline was a decrease in interest expense at the holding company level due to a reduction in long-term debt during 2014.

Income taxes:

For the six month period ended June 30, 2015, the Company had pretax income of $2,453,000 compared to $3,127,000 for the same period in 2014. The $522,000 tax expense for the first half 2015 consisted of current tax expense of $632,000 and deferred tax benefit of $110,000. Tax expense of $194,000 for the first half of 2014 consisted of current tax expense of $168,000 and deferred tax expense of $26,000. The effective tax rate for the six month period ended June 30, 2015 and 2014 was 21.3% and 6.2%, respectively. The significantly lower effective tax rate in 2014 was due to the tax free gain on COLI benefits.

Net income:

The Company ended the first half of 2015 with net income of $1,931,000 compared to net income of $2,933,000 for the same period in 2014. The primary factors contributing to the $1,002,000 decline in net income was an increase in reported fire related claims in the first half of 2015 as well as a gain on company owned life insurance in the first half of 2014; no such gain was realized in 2015.

Liquidity and capital resources:

Due to regulatory restrictions, the majority of the Company's cash is required to be invested in investment-grade securities to provide protection for policyholders. The liabilities of the property and casualty insurance subsidiaries are of various terms, and therefore, those subsidiaries invest in securities with various effective maturities spread over periods usually not exceeding five years. The liabilities of the life insurance subsidiary are typically of a longer duration, and therefore, a higher percentage of securities in the life insurance subsidiary are invested for periods exceeding 10 years.

The liquidity requirements for the Company are primarily met by funds generated from operations of the life insurance and property/casualty insurance subsidiaries. All operations and virtually all investments are maintained by the insurance subsidiaries. Premium and investment income as well as maturities and sales of invested assets provide the primary sources of cash for both the life and property/casualty businesses, while applications of cash are applied by both businesses to the payment of policy benefits, the cost of acquiring new business (principally commissions), operating expenses, purchases of new investments, and in the case of life insurance, policy loans.

Virtually all invested assets of the Company are held in the insurance subsidiaries. As of June 30, 2015, the contractual maturity schedule for all bonds and notes held by the Company, stated at amortized cost, was as follows (dollars in thousands):

Maturity	Available- for-Sale		Held-to-Maturity		Total		Percentage of Total
Maturity in less than 1 year	$	808	$	—	$	808	0.92	%
Maturity in 1-5 years	13,319		117		13,436		15.34	%
Maturity in 5-10 years	28,913		120		29,033		33.14	%
Maturity after 10 years	41,916		2,412		44,328		50.60	%
	$	84,956	$	2,649	$	87,605	100.00	%

42

It should be noted that the above table represents maturities based on stated/contractual maturity. Due to call and prepayment features inherent in some debt securities and principal pay-downs on mortgage backed securities, actual repayment, or effective maturities, will differ from stated maturities. The Company routinely evaluates the impact of changing interest rates on the projected maturities of bonds in the portfolio and actively manages the portfolio in order to minimize the impact of interest rate risk. However, due to other factors, both regulatory and those associated with good investment management practices associated with asset/liability matching, we do have exposure to changes in market values of securities due to changes in interest rates. Currently, a 100 basis point immediate increase in interest rates would generate approximately a $2,899,000, or 3.3%, decline in the market value of fixed income investment. Alternatively, a 100 basis point decrease in interest rates will generate approximately $4,447,000, or 5.11%, in increases in market value of fixed income investments. Management has attempted, to the extent possible, to reduce risk in a rising rate environment. However, due to asset liability matching requirements, particularly in the life subsidiary portfolio, interest rate risk can not be eliminated.

At June 30, 2015, the Company had aggregate equity capital, unrealized investment gains (net of income taxes) and retained earnings of $43,629,000, up $872,000 compared to $42,757,000 at December 31, 2014.  Components of the change in equity were net income of $1,931,000, decrease in accumulated unrealized gains on investments of $875,000, a net unrealized loss of $61,000 related to interest rate swaps and cash dividends paid totaling $201,000. Also contributing to the change in equity were 4,000 shares of common stock issued to directors as compensation under the 2009 Equity Incentive Plan previously approved by shareholders and an associated $74,000 increase in additional paid in capital.

As discussed above, changing interest rates can have a significant impact on the market value of fixed income securities. Fixed income securities classified as available-for-sale increase the liquidity resources of the Company as they can be sold at any time to pay claims or meet other Company obligations. However, these securities are required to be carried at market value with net of tax accumulated unrealized gains and losses directly impacting shareholder's equity.

While the increase in interest rates causes near term declines in the value of fixed income securities, we are able to reap the benefit of reinvesting at higher rates as current fixed income investments are called, amortized (mortgage backed securities) or reach contractual maturity. Over the next twelve months, based on cash flow projection modeling that considers such factors as anticipated principal payments on mortgage backed securities, likelihood of call provisions being enacted and regular contractual maturities, we expect approximately 4.4% of our current fixed income portfolio to be reinvested or otherwise available to meet Company obligations.

The Company, primarily through its insurance subsidiaries, had $8,378,000 in cash and cash equivalents at June 30, 2015, compared to $6,179,000 at June 30, 2014. Cash provided by operating activities increased cash by $3,097,000 during the six months ended June 30, 2015 and was the primary contributor to the increase in cash compared to the previous year end. For the six months ended June 30, 2014, cash provided by operating activities totaled $4,297,000. Operating cash flow generated in the property and casualty segment was the primary contributor to cash provided by operating activities in both years.

Net cash provided in investing activities totaled $234,000 for the period ended June 30, 2015, compared to cash used of $2,567,000 for the same period last year. The reinvestment of maturities of fixed income securities was the primary cash related investment activity during the six months ended June 30, 2015. For the period ended June 30, 2014, the investment of positive cash flow from operations was the primary contributor to cash used in investing activities of $2,567,000.

Net cash used in financing activities totaled $1,379,000 for the period ended June 30, 2015, compared to $538,000 for the same period last year. During the six months ended June 30, 2015, the Company repaid a $500,000 long-term note payable and a $700,000 short-term note payable. As of June 30, 2015, a total of $6,000,000 remained outstanding on the note associated with the Mobile Attic settlement with the next installment due in November of 2015. This installment is $857,000 and is included in short-term notes payable. The Company maintains a $1,000,000 operating line of credit which matures in September 2017 as well as a $700,000 line of credit which matures in February of 2016, $1,700,000 of which was available at June 30, 2015.

The Company had a total of $17,515,000 of long-term debt outstanding as of June 30, 2015, compared to $18,715,000 at December 31, 2014, which includes $12,372,000 in trust preferred securities issued by the Company in addition to the installment note.

The ability of the Company to meet its commitments for timely payment of claims and other expenses depends, in addition to current cash flow, on the liquidity of its investments. The Company has relatively little exposure to below

43

investment grade fixed income investments, which might be especially subject to liquidity problems due to thinly traded markets.

The Company's liquidity requirements are primarily met by funds provided from operations of the insurance subsidiaries. The Company receives funds from its subsidiaries through payment of dividends, management fees, reimbursements for federal income taxes and reimbursement of expenses incurred at the corporate level for the subsidiaries.  These funds are used to pay stockholder dividends, principal and interest on debt, corporate administrative expenses, federal income taxes, and for funding investments in the subsidiaries. The Company maintains minimal liquidity in order to maximize liquidity within the insurance subsidiaries in order to support ongoing insurance operations. The Company has no separate source of revenue other than dividends and fees from the insurance subsidiaries. Also, dividends from the insurance subsidiaries are subject to regulatory restrictions and, therefore, are limited depending on capital levels and earnings of the subsidiaries.

Our P&C segment is the primary source of dividends to the holding company. Due to a combination of growth opportunities and continued risk of capital exposure to weather related events, management is maintaining a conservative stance with regard to paying of dividends to the holding company. While we have made significant progress over the past two years, strengthening capital levels in the insurance subsidiaries remains a priority. Also, due to very strong operating results in 2014, the P&C segment was able to pay additional dividends to the holding company which was used to reduce long term debt.

Dividends paid from the insurance subsidiaries are subject to regulatory restrictions and prior approval of the Alabama Department of Insurance. As disclosed in Note 12 to the audited Consolidated Financial Statements included in our 2014 Annual Report on Form 10-K, the amount that The National Security Group's insurance subsidiaries can transfer in the form of dividends to the parent company during 2015 is statutorily limited to $1,209,000 in the life insurance subsidiary and $6,591,000 in the property/casualty insurance subsidiary. Dividends are limited to the greater of net income (operating income for life subsidiary) or 10% of statutory capital, and regulators consider dividends paid within the preceding twelve months when calculating the available dividend capacity. Therefore, all of the above referenced dividend capacity will not be available for consideration of payment until dividends paid in the preceding twelve months have been considered on a rolling basis. The Company also has to continuously evaluate other factors such as subsidiary operating performance, subsidiary capital requirements and potential impact by rating agencies in making decisions on how much capital can be released from insurance subsidiaries for payment of dividends to NSG. These factors are considered along with the goal of growing year over year statutory surplus in the subsidiaries, and these considerations along with previous adverse impacts on regulatory surplus, will likely lead to dividend payments to NSG substantially below the above referenced regulatory maximums. The Company received $500,000 in dividends from its subsidiaries during the six months ended June 30, 2015.

The Company’s subsidiaries require cash in order to fund policy acquisition costs, claims, other policy benefits, interest expense, general expenses, and dividends to the Company.  Premium and investment income, as well as maturities, calls, and sales of invested assets, provide the primary sources of cash for both subsidiaries.  A significant portion of the Company’s investment portfolio, which is held by the insurance subsidiaries, consists of readily marketable securities, which can be sold for cash.

The Company continues to monitor liquidity and subsidiary capital closely. Improved underwriting results stemming from the discontinuation of unprofitable lines of business and streamlining of products offered combined with enhancements to the Company's rate development process and improvements in the Company's catastrophe reinsurance structure have reduced the pressure on subsidiary capital levels. However, due to modest levels of growth in premium revenue, it is still necessary to remain cautious and protect subsidiary capital.

Except as discussed above, the Company is unaware of any known trends, events, or uncertainties reasonably likely to have a material effect on its liquidity, capital resources, or operations.  Additionally, the Company has not been made aware of any recommendations of regulatory authorities, which if implemented, would have such an effect.

We have taken significant steps to improve our capital position. Over the past decade we have experienced a significant reduction in equity capital due to the adverse effects of six major hurricanes, the financial market meltdown in 2008, continued historically low interest rates, an unprecedented tornado outbreak in April of 2011 and the Mobile Attic litigation. While we have experienced significant improvement and have put some major obstacles behind us, we are in a position where we believe it necessary to continue to increase retained capital and reduce debt levels in the near term in order to put our Company in the best position to be successful moving forward. In order to maintain and improve our capital position, we will continue to monitor our dividend policy on a quarterly basis. While significant risk mitigation

44

efforts have been instituted and our capital position is much improved, we continue to caution investors, should we encounter a significant adverse capital event that leads to a year over year reduction in capital, such as a major hurricane, we could take action which could include the suspension of shareholder dividends. Due to various factors discussed herein, we must remain flexible in our dividend policy until we sufficiently increase capital and reduce debt levels. Major strides in both of these areas were made in 2014 with continued improvement in the first quarter of 2015.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Under smaller reporting company rules we are not required to disclose information required under Item 3. However, in order to provide information to our investors, we have elected to provide information related to market risk.

The Company's primary objectives in managing its investment portfolio are to maximize investment income and total investment returns while minimizing overall credit risk. Investment strategies are developed based on many factors including changes in interest rates, overall market conditions, underwriting results, regulatory requirements and tax position. Investment decisions are made by management and reviewed by the Board of Directors. Market risk represents the potential for loss due to adverse changes in fair value of securities. The three potential risks related to the Company's fixed maturity portfolio are interest rate risk, prepayment risk and default risk. The primary risk related to the Company's equity portfolio is equity price risk.

Since the Company's assets and liabilities are largely monetary in nature, the Company's financial position and earnings are subject to risks resulting from changes in interest rates at varying maturities, changes in spreads over U.S. Treasuries on new investment opportunities and changes in the yield curve and equity pricing risks.

The Company is exposed to equity price risk on its equity securities. The Company holds common stock with a fair value of $4.9 million. Our portfolio has historically been highly correlated to the S&P 500 with regard to market risk. Based on an evaluation of the historical risk measure of our portfolio relative to the S&P 500, if the market value of the S&P 500 Index decreased 10% from its June 30, 2015 value, the fair value of the Company's common stock investments would decrease by approximately $480,000.

Certain fixed interest rate market risk sensitive instruments may not give rise to incremental income or loss during the period illustrated but may be subject to changes in fair values. Note 5 in the condensed consolidated financial statements present additional disclosures concerning fair values of Financial Assets and Financial Liabilities and are incorporated by reference herein.

The Company limits the extent of its market risk by purchasing securities that are backed by entities considered to be financially stable, the majority of the assets are issued by U.S. government sponsored entities or corporate entities with debt considered to be "investment grade". Also, the majority of all of the subsidiaries' CMO's are Planned Amortization Class (PAC) bonds. PAC bonds are typically the lowest risk CMO's, and provide greater cash flow predictability. Such securities with reduced risk typically have a lower yield, but higher liquidity, than higher-risk mortgage backed bonds. To reduce the risk of losing principal should prepayments exceed expectations, the Company does not purchase mortgage backed securities at significant premiums over par value.

The Company's investment approach in the equity markets is based primarily on a fundamental analysis of value. This approach requires the investment committee to invest in well managed, primarily dividend paying companies, which have a low debt to capital ratio, above average return on capital for a sustained period of time, and low volatility rating (beta) relative to the market. The dividends provide a steady cash flow to help pay current claim liabilities, and it has been the Company's experience that by following this investment strategy, long term investment results have been superior to those offered by bonds, while keeping the risk of loss of capital to a minimum relative to the overall equity market.

As for shifts in investment allocations, the Company has used improved cash flows from insurance operations to increase allocations to corporate and US Government bonds.

Item 4. Controls and Procedures

Our management carried out an evaluation, with the participation of our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures as of June 30, 2015. Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities

45

Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

There has not been any change in our internal control over financial reporting in connection with the evaluation required by Rule 13A-15(d) under the Exchange Act that occurred during the six month period ended June 30, 2015, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 1.  Legal Proceedings

Please refer to Note 13 to the condensed consolidated financial statements included herein, and the 2014

Annual Report filed on Form 10-K.

Item 1A. Risk Factors

There has been no material change in risk factors previously disclosed under Item 1A. of the Company’s

Annual Report for 2014 on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.  Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information    

None

Item 6.   Exhibits

a.  Exhibits

31.1	Certification Pursuant to 18 U. S. C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification Pursuant to 18 U. S. C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification Pursuant to 18 U. S. C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1	Director Compensation Plan
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

b.  Reports on Form 8-K during the quarter ended June 30, 2015:

Date of Report	Date Filed	Description
April 10, 2015	April 10, 2015	Press release, dated April 10, 2015, issued by The National Security Group, Inc.
May 14, 2015	May 14, 2015	Press release, dated May 14, 2015, issued by The National Security Group, Inc.
May 22, 2015	May 26, 2015	Item 5.07 - announcement of annual meeting voting results
May 22, 2015	May 29, 2015	Item 5.02 - announcement of change in Director Stock Compensation Plan

46

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed by the undersigned duly authorized officer, on its behalf and in the capacity indicated.

The National Security Group, Inc.

/s/ Brian R. McLeod	/s/ William L. Brunson, Jr.
Brian R. McLeod	William L. Brunson, Jr.
Chief Financial Officer and Treasurer	President, Chief Executive Officer and Director

Date: August 13, 2015

47

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, William L. Brunson, Jr., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of The National Security Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2015

/s/ William L. Brunson, Jr.

William L. Brunson, Jr.

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Brian R. McLeod, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of The National Security Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2015

/s/ Brian R. McLeod

Brian R. McLeod

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Exhibit 32.1 Certification of Chief Executive Officer and Chief Financial Officer

Pursuant to 18 U.S.C. § 1350, the undersigned officer of the National Security Group, Inc. (the “Company”), hereby certifies, to such officer’s knowledge, that the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2015 (the “Report”) fully complies with the requirements of Section 13(a) or 15 (d), as applicable, of the Securities Exchange Act of 1934 and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 13, 2015
/s/ William L. Brunson, Jr.	/s/ Brian R. McLeod
Name: William L. Brunson, Jr. Title: Chief Executive Officer		Name: Brian R. McLeod, CPA Title: Chief Financial Officer

EX-99.1

THE NATIONAL SECURITY GROUP, INC.

DIRECTOR STOCK COMPENSATION PLAN

ARTICLE I

PURPOSE

The Board of Directors of The National Security Group, Inc. (the "Company") hereby establishes this plan to provide eligible directors equity based compensation as the predominant form of compensation for service on the Board of Directors of the Company for years commencing on January 1, 2012.

ARTICLE II

DEFINITIONS

The following words as used in the Plan shall have the meanings set forth below:

"Annual Meeting" shall mean the annual meeting of the stockholders of the Company at which persons are elected to serve on the Board.

"Board" shall mean the Board of Directors of the Company.

"Cash Compensation" shall mean that portion of the Plan Compensation payable in cash in accordance with this Plan.

"Cash Compensation Account" shall mean the account maintained under Article V. B to reflect the amount of the Cash Compensation to be paid under the Deferred Compensation Plan.

"Committee" shall mean the Compensation Committee of the Board unless the Board shall designate another committee of the Board or the Board acting as a whole to serve as the Committee under this Plan.

"Common Stock" shall mean the common stock of the Company, par value $1.00 per share.

"Company" shall mean The National Security Group, Inc.

"Deferred Compensation Plan" shall mean the Executive Nonqualified Deferred Compensation Plan of the Company dated as of January 1, 2006.

"Election Forms" shall mean the forms prescribed by the Company to make elections as to the form and time of payment of Plan Compensation under Article IV of this Plan.

"Eligible Person" shall mean a person who is elected and is currently serving s a non-employee member of the Board.

"Equity Plan" shall mean The National Security Group, Inc. 2009 Equity Incentive Plan, as amended.

"Fair Market Value" on any date shall mean (i) if the Shares are actively traded on any national securities exchange or reported on NASDAQ on a basis which reports closing prices, the closing sales price of the Shares on the day the value is to be determined or, if such exchange was not open for trading on such date, the next preceding day on which it was open; (ii) if the Shares are not traded on a basis which reports closing prices, the average of the closing high bid and low asked prices of the Shares on the over-the-counter market on the day such value is to be determined, or in the absence of such closing bids and asked prices on such day, the closing bid and asked prices on the next preceding day on which there were bid and asked prices; or (iii) if the Shares are not traded on the over-the-counter market, the Fair Market Value of the Shares as determined by the Committee in good faith based on such relevant information as may be available to the Committee, which may include opinions of independent experts, the price at which recent sales have been made, the book value of the Shares, and the Company's current and future earnings.

"Plan" shall mean the Director Stock Compensation Plan as set forth herein and as may be amended from time to time.

"Plan Compensation" shall mean the compensation that the Committee authorizes to be paid to an Eligible Person under Article III of this Plan.

"Shares" shall mean shares of the Common Stock of the Company.

"Stock Compensation" shall mean the portion of the Plan Compensation payable in Shares in accordance with this Plan.

"Stock Compensation Account" shall mean the account maintained under Article V. C. to reflect the amount of the Stock Compensation to be paid under the Deferred Compensation Plan.

ARTICLE III

PLAN COMPENSATION

At the first meeting of the Board of Directors following each Annual Meeting in each successive year beginning in 2013, the Committee will recommend to the Board the amount of Plan Compensation, if any, denominated in dollars to be paid to Eligible Persons for service on the Board in the year ending at the next Annual Meeting. If the Board approves the Committee's recommendation as submitted or with modifications, the amount of compensation approved by the Board shall be paid to each director who is an Eligible Person as Plan Compensation under the terms of this Plan. Notwithstanding the foregoing, the Board may provide for Plan Compensation to the directors who were Eligible Persons at the Annual Meeting held on May 17, 2013, at or after the adoption of this Plan.

ARTICLE IV

ELECTION AS TO FORM AND TIME OF PAYMENT

A.    Form of Payment Election. The Plan Compensation shall be payable as Stock Compensation, except that an Eligible Person may elect to receive up to 50% of his or her Plan Compensation as Cash Compensation. The number of Shares payable as Stock Compensation to each Eligible Person shall be determined by dividing (1) the dollar amount of the Plan Compensation after deducting the amount of Cash Compensation, if any, elected by the Eligible Person by (2) the Fair Market Value of a Share as of the date of the Annual Meeting immediately preceding the award of the Plan Compensation; provided that fractional shares shall be paid as Cash Compensation with the amount to be calculated based on the Fair Market Value on the date of said Annual Meeting. If an Eligible Person fails to make a timely election as to the form of payment, the Plan Compensation shall be payable as Stock Compensation except for any Cash Compensation required to pay for fractional shares.

B.    Current or Deferred Payment Election. Each Eligible Person may elect to receive all of his or her Plan Compensation in any year as either:

(1)    Current compensation in accordance with Article IV below; or

(2)    Deferred compensation in accordance with Article V hereof.

C.    Procedure for Making Elections. Subject to the provisions of Section IV.D. below, each Eligible Person may make a written election for each year that he or she is an Eligible Person as to the form of payment of his or her Plan Compensation under Section IV.A. above and as to the time of payment of his or her Plan Compensation in accordance with Section IV.B. above. Elections will be made on Election Forms that may be obtained from the office of the Chief Financial Officer of the Company. Election Forms must be fully completed, executed and returned to the office of the Chief Financial Officer on or before the applicable deadline under Section IV.D. hereof in order to be effective. If a completed and executed Election Form is not so returned by the applicable deadline, the Eligible Person will be deemed to have elected to continue the election made on the last Election Form submitted by such Eligible Person to the Company, or if the Eligible Person has not made a prior election, such Eligible Person shall be deemed to have elected to receive his or her Plan Compensation in the form of Stock Compensation under Section IV.A. hereof and as current compensation in accordance with Section IV.B.(1) hereof.

D.    Time for Elections. Election Forms must be submitted to the Company prior to the Annual Meeting immediately preceding the award of the Plan Compensation in order to be effective. Notwithstanding the foregoing, if an Eligible Person desires to defer the time of payment of the Plan Compensation under Section IV.B.(2) hereof, the Election Form must be submitted to the Company before January 1 of the calendar year for which the Plan Compensation is to be paid to or accrued for the benefit of the Eligible Person, or in the case of a person who first becomes an Eligible Person during the period commencing on January 1 and ending on the date of the Annual Meeting in the same calendar year, his or her election must be made within thirty (30) days following the date upon which he or she becomes an Eligible Person.

E.    Revocation of Elections. An Eligible Person revokes his or her election as to both form and time of payment of Plan Compensation if he or she makes a new election by submitting a new Election Form to the Company. The new election will be effective for the next Annual Meeting; provided that if the new Election Form makes an election

for deferred payment after the deadline therefor, the election to defer payment of the Plan Compensation will not be effective until the Annual Meeting in the calendar year following the election.

ARTICLE V

CURRENT COMPENSATION

Current payments of Plan Compensation will be made within thirty (30) days after the Annual Meeting. Stock Compensation will be paid by delivery to the Eligible Person of a stock certificate for the Shares registered in his or her name or by causing the Company's transfer agent to issue the Shares in the name of the Eligible Person by book entry; provided that Plan Compensation for 2012 that is awarded in 2013 prior to the 2013 Annual Meeting shall be paid within thirty (30) days of the 2013 Annual Meeting.

ARTICLE VI

DEFERRED COMPENSATION

A.    Deferred Compensation Account. If an Eligible Person elects to defer payment of the Plan Compensation, the Company will establish separate accounts for the Cash Compensation and Stock Compensation to be paid to the Eligible Person as Plan Compensation under the Deferred Compensation Plan. The amount of the Cash Compensation and Stock Compensation will be credited to the accounts within thirty days after the Annual Meeting.

B.    Cash Compensation Account. The amount reflected in the Cash Compensation Account shall be payable to the Eligible Person in cash as nonqualified deferred compensation subject to and in accordance with the Deferred Compensation Plan. The balance reflected in the Cash Compensation Account will be eligible to accrue earnings in the same manner as compensation otherwise deferred under the Deferred Compensation Plan and all accrued earnings shall be credited to the Cash Compensation Account.. The funds credited to the Cash Compensation Account, including earnings thereon, shall be paid to the Eligible Person at such times and subject to such terms, as provided for payments of deferred compensation under the Deferred Compensation Plan.

C.    Stock Compensation Account. The Shares credited to the Stock Compensation Account shall be payable to the Eligible Person in Shares as nonqualified deferred compensation subject to and in accordance with the Deferred Compensation Plan. The Shares credited to the Stock Compensation Account shall not be issued to the Eligible Person until the Stock Compensation is due to be paid under the Deferred Compensation Plan. Until the time of payment, the Eligible Person shall have no rights of ownership with respect to the Shares credited to the Stock Compensation Account; provided, however, that the Company shall be required to accrue as a liability to the Eligible Person an amount equal to all dividends and other distributions that would otherwise be payable with respect to the Shares held in the Stock Compensation Account. The amount of the dividends and other distributions accrued on the Shares in the Stock Compensation Account shall be credited to the Cash Compensation Account and shall be held and distributed in accordance with Section VI.B. hereof. The Shares credited to the Stock Compensation Account shall be payable in Shares to the Eligible Person at such times and subject to such terms as provided for payments of deferred compensation under the Deferred Compensation Plan.

ARTICLE VII

SOURCE OF PAYMENT

A.    Liability for Deferred Compensation. The Plan Compensation payable or distributable hereunder as deferred compensation will not be funded nor will Shares be issued and segregated to pay deferred Stock Compensation. The obligation to pay the Plan Compensation on a deferred basis shall be considered a liability of the Company to make benefit payments in the future to Eligible Persons subject to the claims of general unsecured creditors of the Company and shall be payable to the Eligible Person in consideration for the cancellation of such liability (and not for past service). In the event that the Company is involved in a bankruptcy proceeding at any time prior to the payment of the Plan Compensation, the liability of the Company to pay the Plan Compensation shall be subject to adjustment and discharge on the same basis as liabilities to the other general unsecured creditors of the Company. It is the intention of the Company that the Plan be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended.

B.    Source of Shares. The Shares to be distributed as Stock Compensation will be authorized as stock awards under the Company's 2009 Equity Incentive Plan. The Award Notices for the Stock Compensation payable hereunder shall be this Plan, the written record of the Compensation Committee recommending the Plan Compensation, and the Election Forms of the Eligible Persons who elect Stock Compensation. All Shares to be issued as Stock Compensation shall be issued only from the shares of the Common Stock available for issuance under the Equity Plan. Stock Compensation payable as deferred compensation under the Deferred Compensation Plan will continue

to be reserved therefor until payment of the Stock Compensation. Shares reflected in the Stock Compensation Account shall be subject to adjustments to prevent dilution or enlargement of rights resulting from corporate transactions in accordance with Section 13(a) of the Equity Plan, and the Compensation Committee is authorized to make discretionary adjustments to the Stock Compensation Account as permitted under Section 13(b)of the Equity Plan.

ARTICLE VIII

TERMINATION AND AMENDMENT OF PLAN

A.    Termination and Amendment. The Board may at any time terminate the Plan, and may at any time and from time to time and in any respect amend the Plan.

B.    Effect on Deferred Compensation Plan. No termination, amendment or modification of the Plan shall affect adversely the rights of an Eligible Person with respect to payment under the Deferred Compensation Plan, nor shall any Eligible Person be entitled to accelerate the terms and conditions for the payment of deferred compensation by reason of the termination, amendment or modification of this Plan.

ARTICLE IX

RELATIONSHIP TO OTHER COMPENSATION PLANS

The adoption of this Plan shall not affect any other stock option, incentive, or other compensation plans in effect for the Company or any of its subsidiaries; nor shall the adoption of this Plan preclude the Company or any of its subsidiaries from establishing any other form of incentive or other compensation plan for employees, officers, or directors of the Company or any of its subsidiaries.

ARTICLE X

MISCELLANEOUS

A.    Plan Binding on Successors. The Plan shall be binding upon the successors and assigns of the Company.

B.    Singular, Plural; Gender. Whenever used herein, nouns in the singular shall include the plural, and the masculine pronoun shall include the feminine gender.

C.    Holding Period. Each Eligible Person is required to hold the Shares issued as Stock Compensation for a minimum period of six (6) months from the date of grant of the Plan Compensation. Any stock certificate issued to the director with respect to such Shares may bear a restrictive legend evidencing such restriction and the Company may provide stop transfer instructions to its transfer agent with respect to this restriction.

D.    Spendthrift Provision. An Eligible Person's rights to payments under the Plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Eligible Person or the Eligible Person's beneficiary.

E.    Headings, etc. Headings of Articles and Sections hereof are inserted for convenience and reference; they do not constitute part of the Plan.

F.    Interpretation. Subject to the express provisions of the Plan, the Committee shall have complete authority to interpret the Plan, to prescribe, amend, and rescind rules and regulations relating to it, and to make all determinations necessary or advisable for the administration of the Plan. No member of the Committee or the board shall be liable to any person for any act or determination made in good faith with respect to the Plan or any Plan Compensation payable hereunder.

G.    Taxes.     Any amount payable to an Eligible Person under this Plan shall be subject to any applicable federal, state and local income and employment taxes and any other amounts that the Company is required by law to deduct and withhold from such payment. If the Company is required to collect and pay withholding taxes upon the payment of Stock Compensation to any Eligible Person, the Eligible Person shall deliver to the Company the required amount for the withholding taxes, or if not so delivered, the Company shall be authorized to pay the withholding taxes first from the Cash Compensation payable to the Eligible Person, and if the Cash Compensation is insufficient therefor, from the Stock Compensation by withholding the number of whole Shares having a Fair Market Value on date of payment that is not less the balance of the required withholding.

H.    Applicable Law. This Plan shall be administered, construed and enforced in accordance with the laws of the State of Delaware.

I.    409A Compliance. It is intended that this Plan, as written and in operation, will be exempt from Code Section 409A; provided, however, that if payments are deemed "nonqualified deferred compensation" under Code Section 409A, then payment will be made within the guidelines of Code Section 409A to the extent possible, and if a Participant is deemed to be a "specified employee" (within the meaning of Code Section 409A) then Shares payable under this Plan shall not be paid until the date that is six months after the date of the Participant's separation from service (within the meaning of Code Section 409A), or the date on which such Participant dies, if earlier.

J.    Conditions. Any Plan compensation under this Plan shall be subject to and conditioned upon (i) the listing of the Shares on NASDAQ; and (ii) the registration of the Shares under the Securities Act of 1933, as amended, and applicable state securities laws.

AMENDMENT NO. 1

TO

THE NATIONAL SECURITY GROUP, INC.

DIRECTOR STOCK COMPENSATION PLAN

The Board of Directors of The National Security Group, Inc. ("Company") by resolution adopted at the meeting held on May 22, 2015, has adopted the following amendment to The National Security Group, Inc. Stock Compensation Plan (the "Plan") in accordance with Section VIII. A. of the Plan. Capitalized terms not specifically defined herein shall have the meanings attributed to them in the Plan.

The Board of Directors of the Company desires to amend the Plan to allow each non-employee director who has satisfied his or her Stock Ownership Target to elect to receive 100% of his or her Plan Compensation as Cash Compensation. The Plan is hereby amended as follows:

1.    Article II of the Plan is hereby amended to define "Stock Ownership Target" by adding the following as an additional definition in Article II:

"Stock Ownership Target" means the number of shares of Common Stock that the Board may from time to time establish as the minimum number of shares of Common Stock that each director of the Company is required to own within a designated period of time. For purposes of this Plan, a director is deemed to own shares of Common Stock if the director is the record owner of the shares or if the shares are held in street name for the account of a director.

2.    Article IV of the Plan is hereby amended to allow a director who has satisfied his or her Stock Ownership Target to elect to receive 100% of his or her Plan Compensation as Cash Compensation by deleting Paragraph IV.A. in its entirety therefrom and by substituting in lieu thereof the following:

A.    Form of Payment Election. The Plan Compensation shall be payable as Stock Compensation, except that an Eligible Person may elect to receive all or part of his or her Plan Compensation as Cash Compensation in accordance with and subject to the following: (i) if at the time of the election the Eligible Person is the owner of the number of shares of Common Stock required to satisfy his or her Stock Ownership Target, the Eligible Person may elect to receive up to 100% of his or her Plan Compensation as Cash Compensation; or (ii) if at the time of the election the Eligible Person is not the owner of the number of shares of Common Stock required to satisfy his or her Stock Ownership Target, the Eligible Person may elect to receive up to 50% of his or her Plan Compensation as Cash Compensation. The number of shares payable as Stock Compensation to each Eligible Person shall be determined by dividing (1) the dollar amount of the Plan Compensation after deducting the amount of Cash Compensation, if any, elected by the Eligible Person by (2) the Fair Market Value of a Share as of the date of the Annual Meeting immediately preceding the award of the Plan Compensation; provided that fractional shares shall be paid as Cash Compensation with the amount to be calculated based on the Fair Market Value on the date of said Annual Meeting. If and Eligible Person fails to make a timely election as to the form of payment, the Plan Compensation shall be payable as Stock Compensation except for any Cash Compensation required to pay for fractional shares.

The effective date of this amendment shall be May 22, 2015. The terms and conditions of the Plan as amended hereby are hereby ratified and confirmed by the Board of Directors of the Company. The Plan as so amended shall continue to be binding and in full force and effect until further amended or terminated in accordance with the terms of the Plan.

/s/ Laura Williams Jordan

Laura Williams Jordan

Secretary

XML

Investments (Held-to-Maturity Securities) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	$ 2,649	$ 3,108
Held-to-maturity securities, unrealized gains	75	74
Held-to-maturity securities, unrealized losses	0	0
Fair Value	2,724	3,182
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	2,595	2,818
Held-to-maturity securities, unrealized gains	71	69
Held-to-maturity securities, unrealized losses	0	0
Fair Value	2,666	2,887
US Treasury Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	54	290
Held-to-maturity securities, unrealized gains	4	5
Held-to-maturity securities, unrealized losses	0	0
Fair Value	$ 58	$ 295

XML

Notes Payable and Long-Term Debt (Narrative) (Details) - Long-term Debt, Type [Domain] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014	Dec. 31, 2010	May. 26, 2010	Dec. 31, 2009	Mar. 19, 2009
Debt Instrument [Line Items]
Derivative, Notional Amount							$ 9,000		$ 3,000
Derivative, fixed interest rate							8.49%		7.02%
Cash flow hedge, derivative instrument liabilities at fair value	$ 1,330		$ 1,330		$ 1,238
Unrealized loss on interest rate swap	(56)	$ 98	61	$ 174	225
Available-for-sale securities pledged as collateral	$ 1,486		$ 1,486		$ 1,494
Interest Rate Swap [Member]
Debt Instrument [Line Items]
Cash flow hedge, liability at fair value								$ 244
Cash Flow Hedging [Member]
Debt Instrument [Line Items]
Cash flow hedge, liability at fair value						$ 1,086

XML

Fair Value of Financial Assets and Financial Liabilities (Fair Value of Assets and Liabilities) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Insurance Claims [Member]
Liabilities and Related Instruments [Abstract]
Carrying Value, Liabilities	$ 1,532	$ 1,510
Estimated Fair Value, Liabilities	1,532	1,510
Short-term Debt [Member]
Liabilities and Related Instruments [Abstract]
Carrying Value, Liabilities	857	857
Estimated Fair Value, Liabilities	857	857
Long-term Debt [Member]
Liabilities and Related Instruments [Abstract]
Carrying Value, Liabilities	17,515	18,715
Estimated Fair Value, Liabilities	17,515	18,715
Held-to-maturity Securities [Member]
Assets and Related Instruments [Abstract]
Carrying Value, Assets	2,649	3,108
Estimated Fair Value, Assets	2,724	3,182
Mortgage Loans on Real Estate [Member]
Assets and Related Instruments [Abstract]
Carrying Value, Assets	206	210
Estimated Fair Value, Assets	206	210
Policy Loans [Member]
Assets and Related Instruments [Abstract]
Carrying Value, Assets	1,570	1,530
Estimated Fair Value, Assets	1,570	1,530
Cash Surrender Value [Member]
Assets and Related Instruments [Abstract]
Carrying Value, Assets	5,065	5,513
Estimated Fair Value, Assets	5,065	5,513
Other Long-term Investments [Member]
Assets and Related Instruments [Abstract]
Carrying Value, Assets	3,366	3,553
Estimated Fair Value, Assets	$ 3,366	$ 3,553

XML

Notes Payable and Long-Term Debt (Short-Term Debt) (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Short-term Debt [Line Items]
Short-term notes payable	$ 857	$ 857
Unsecured Debt [Member]
Short-term Debt [Line Items]
Line of credit with variable interest rate equal to the WSJ prime rate, subject to a 5.0% floor; Maturity February 2016. Interest payments due quarterly. Unsecured.	0	0
Current portion of installment note payable November 2015 with variable interest rate equal to the WSJ prime rate plus 1%; Unsecured	857	857
Short-term notes payable	$ 857	$ 857
Interest rate description	WSJ	WSJ
Interest rate at period end	5.00%	5.00%
Payment terms	Interest payments due quarterly	Interest payments due quarterly
Description of variable rate basis	WSJ	WSJ
Basis spread on variable rate	1.00%	1.00%

XML

Fair Value of Financial Assets and Financial Liabilities (Assets/Liabilities Measured at Fair Value on a Recurring Basis) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities available-for-sale	$ 91,487	$ 91,881
Trading securities	107	19
Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total Financial Assets	91,594	91,900
Total Financial Liabilities	(1,330)	(1,238)
Fair Value, Measurements, Recurring [Member] | Interest Rate Swap [Member] | Derivative Financial Instruments, Liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total Financial Liabilities	(1,330)	(1,238)
Fair Value, Measurements, Recurring [Member] | Corporate Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities available-for-sale	32,839	38,667
Fair Value, Measurements, Recurring [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities available-for-sale	12,050	12,752
Fair Value, Measurements, Recurring [Member] | Mortgage-backed Securities, Issued by Private Enterprises [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities available-for-sale	6,567	1,296
Fair Value, Measurements, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities available-for-sale	15,925	15,899
Fair Value, Measurements, Recurring [Member] | US Government Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities available-for-sale	19,267	18,272
Fair Value, Measurements, Recurring [Member] | Trading Account Assets [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	107	19
Fair Value, Measurements, Recurring [Member] | Equity Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities available-for-sale	4,839	4,995
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total Financial Assets	23,076	22,170
Total Financial Liabilities	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Interest Rate Swap [Member] | Derivative Financial Instruments, Liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total Financial Liabilities	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Corporate Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities available-for-sale	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities available-for-sale	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Mortgage-backed Securities, Issued by Private Enterprises [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities available-for-sale	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | US States and Political Subdivisions Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities available-for-sale	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | US Government Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities available-for-sale	19,267	18,272
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Trading Account Assets [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	107	19
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Equity Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities available-for-sale	3,702	3,879
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total Financial Assets	67,381	68,614
Total Financial Liabilities	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Interest Rate Swap [Member] | Derivative Financial Instruments, Liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total Financial Liabilities	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Corporate Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities available-for-sale	32,839	38,667
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities available-for-sale	12,050	12,752
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Mortgage-backed Securities, Issued by Private Enterprises [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities available-for-sale	6,567	1,296
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | US States and Political Subdivisions Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities available-for-sale	15,925	15,899
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | US Government Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities available-for-sale	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Trading Account Assets [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Equity Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities available-for-sale	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total Financial Assets	1,137	1,116
Total Financial Liabilities	(1,330)	(1,238)
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Interest Rate Swap [Member] | Derivative Financial Instruments, Liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total Financial Liabilities	(1,330)	(1,238)
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Corporate Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities available-for-sale	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities available-for-sale	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Mortgage-backed Securities, Issued by Private Enterprises [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities available-for-sale	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | US States and Political Subdivisions Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities available-for-sale	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | US Government Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities available-for-sale	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Trading Account Assets [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Equity Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fixed maturities available-for-sale	$ 1,137	$ 1,116

XML

Segments (Tables)

6 Months Ended

Jun. 30, 2015

Segment Reporting, Disclosure of Entity's Reportable Segments [Abstract]

Schedule of Segment Reporting Information, by Segment

Total assets by industry segment at June 30, 2015 and at December 31, 2014 are summarized below (dollars in thousands):

	Total		P&C Insurance Operations		Life Insurance Operations		Non-Insurance Operations
June 30, 2015	$	146,493	$	83,147	$	56,526	$	6,820
December 31, 2014	$	144,865	$	81,648	$	56,541	$	6,676

Premium revenues and operating income by business segment for the three and six months ended June 30, 2015 and 2014 are summarized below (dollars in thousands):

Three months ended June 30, 2015	Total		P&C Insurance Operations		Life Insurance Operations		Non-Insurance Operations
REVENUE
Net premiums earned	$	14,880	$	13,276	$	1,604	$	—
Net investment income	784		336		429		19
Net realized investment gains (losses)	245		99		146		—
Other income	156		156		—		—
	16,065		13,867		2,179		19
BENEFITS AND EXPENSES
Policyholder benefits paid	9,435		8,534		901		—
Amortization of deferred policy acquisition costs	918		675		243		—
Commissions	2,089		1,997		92		—
General and administrative expenses	2,093		1,619		324		150
Taxes, licenses and fees	518		472		46		—
Interest expense	345		—		13		332
	15,398		13,297		1,619		482
Income (Loss) Before Income Taxes	$	667	$	570	$	560	$	(463	)

Three months ended June 30, 2014	Total		P&C Insurance Operations		Life Insurance Operations			Non-Insurance Operations
REVENUE
Net premiums earned	$	14,100	$	12,467	$	1,633		$	—
Net investment income	1,030		508		503			19
Net realized investment gains	312		1		310			1
Gain on company owned life insurance	1,621		1,621		—			—
Other income	92		92		—			—
	17,155		14,689		2,446			20
BENEFITS AND EXPENSES
Policyholder benefits paid	9,155		7,566		1,589			—
Amortization of deferred policy acquisition costs	873		641		232			—
Commissions	1,967		1,890		77			—
General and administrative expenses	2,413		1,532		598			283
Taxes, licenses and fees	521		457		64			—
Interest expense	382		—		14			368
	15,311		12,086		2,574			651
Income (Loss) Before Income Taxes	$	1,844	$	2,603	$	(128	)	$	(631	)

Six months ended June 30, 2015	Total		P&C Insurance Operations		Life Insurance Operations		Non-Insurance Operations
REVENUE
Net premiums earned	$	29,586	$	26,398	$	3,188	$	—
Net investment income	1,758		826		894		38
Net realized investment gains (losses)	387		130		257		—
Other income	314		313		1		—
	32,045		27,667		4,340		38
BENEFITS AND EXPENSES
Policyholder benefits paid	17,697		15,311		2,386		—
Amortization of deferred policy acquisition costs	1,817		1,350		467		—
Commissions	4,144		3,965		179		—
General and administrative expenses	4,099		3,159		633		307
Taxes, licenses and fees	1,173		1,016		157		—
Interest expense	662		—		23		639
	29,592		24,801		3,845		946
Income (Loss) Before Income Taxes	$	2,453	$	2,866	$	495	$	(908	)

Six months ended June 30, 2014	Total		P&C Insurance Operations		Life Insurance Operations			Non-Insurance Operations
REVENUE
Net premiums earned	$	27,924	$	24,640	$	3,284		$	—
Net investment income	1,978		963		977			38
Net realized investment gains	400		49		350			1
Gain on company owned life insurance	1,621		1,621		—			—
Other income	246		245		1			—
	32,169		27,518		4,612			39
BENEFITS AND EXPENSES
Policyholder benefits paid	17,019		14,230		2,789			—
Amortization of deferred policy acquisition costs	1,771		1,282		489			—
Commissions	3,994		3,835		159			—
General and administrative expenses	4,439		2,989		1,058			392
Taxes, licenses and fees	1,051		921		130			—
Interest expense	768		—		31			737
	29,042		23,257		4,656			1,129
Income (Loss) Before Income Taxes	$	3,127	$	4,261	$	(44	)	$	(1,090	)

Schedule of Gross and Net Premiums Written

The following table presents the Company’s gross and net premiums written for the property and casualty segment and the life and accident and health segment for the three and six months ended June 30, 2015 and 2014, respectively:

	Three months ended June 30,						Six months ended June 30,
	2015			2014			2015			2014
Life, accident and health operations premiums written:
Traditional life insurance	$	1,104		$	1,137		$	2,241		$	2,316
Accident and health insurance	422			431			841			875
Gross life, accident and health	1,526			1,568			3,082			3,191
Reinsurance premium ceded	(15		)	(12		)	(30		)	(35		)
Net life, accident and health premiums written	$	1,511		$	1,556		$	3,052		$	3,156
Property and Casualty operations premiums written:
Dwelling fire & extended coverage	$	9,454		$	9,219		$	18,182		$	17,548
Homeowners (Including mobile homeowners)	6,715			6,879			12,466			12,628
Other liability	549			521			1,054			990
Gross property and casualty	16,718			16,619			31,702			31,166
Reinsurance premium ceded	(1,229		)	(1,802		)	(2,720		)	(3,557		)
Net property and casualty written	$	15,489		$	14,817		$	28,982		$	27,609
Consolidated gross premiums written	$	18,244		$	18,187		$	34,784		$	34,357
Reinsurance premium ceded	(1,244		)	(1,814		)	(2,750		)	(3,592		)
Consolidated net premiums written	$	17,000		$	16,373		$	32,034		$	30,765

Schedule of Gross and Net Premiums Earned

The following table presents the Company’s gross and net premiums earned for the property and casualty segment and the life and accident and health segment three and six months ended June 30, 2015 and 2014, respectively:

	Three months ended June 30,						Six months ended June 30,
	2015			2014			2015			2014
Life, accident and health operations premiums earned:
Traditional life insurance	$	1,199		$	1,214		$	2,377		$	2,457
Accident and health insurance	420			431			841			862
Gross life, accident and health	1,619			1,645			3,218			3,319
Reinsurance premium ceded	(15		)	(12		)	(30		)	(35		)
Net life, accident and health premiums earned	$	1,604		$	1,633		$	3,188		$	3,284
Property and Casualty operations premiums earned:
Dwelling fire & extended coverage	$	8,403		$	7,910		$	16,603		$	15,580
Homeowners (Including mobile homeowners)	5,955			5,916			11,903			11,747
Other liability	480			443			945			870
Gross property and casualty	14,838			14,269			29,451			28,197
Reinsurance premium ceded	(1,562		)	(1,802		)	(3,053		)	(3,557		)
Net property and casualty earned	$	13,276		$	12,467		$	26,398		$	24,640
Consolidated gross premiums earned	$	16,457		$	15,914		$	32,669		$	31,516
Reinsurance premium ceded	(1,577		)	(1,814		)	(3,083		)	(3,592		)
Consolidated net premiums earned	$	14,880		$	14,100		$	29,586		$	27,924

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Reinsurance (Reinsurers' Limits of Liability) (Details) - USD ($)	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Reinsurance Maintained by Layers [Line Items]
Catastrophe reinsurance retention	$ 4,000,000
Life insurance policy reinsurance limit	50,000
Reinsurance recoverable	1,410,000	$ 939,000
Single Reinsurer [Member]
Reinsurance Maintained by Layers [Line Items]
Reinsurance recoverable	$ 6,000	$ 37,000
First Layer [Member]
Reinsurance Maintained by Layers [Line Items]
Percent of reinsured losses covered by layer	100.00%
Covered losses	$ 13,500,000
Reinsurer's limit of liability	$ 17,500,000
Second Layer [Member]
Reinsurance Maintained by Layers [Line Items]
Percent of reinsured losses covered by layer	100.00%
Covered losses	$ 25,000,000
Reinsurer's limit of liability	$ 42,500,000
Third Layer [Member]
Reinsurance Maintained by Layers [Line Items]
Percent of reinsured losses covered by layer	100.00%
Covered losses	$ 30,000,000
Reinsurer's limit of liability	$ 72,500,000

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Investments (Tables)

6 Months Ended

Jun. 30, 2015

Investments [Abstract]

Schedule of Amortized Cost and Aggregate Fair Values of Investments in Available-for-Sale Securities

The amortized cost and aggregate fair values of investments in available-for-sale securities as of June 30, 2015 are as follows (dollars in thousands):

Available-for-sale securities:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Corporate debt securities	$	32,203	$	1,100	$	464	$	32,839
Mortgage backed securities	12,037		182		169		12,050
Private label mortgage backed securities	6,629		32		94		6,567
Obligations of states and political subdivisions	15,146		829		50		15,925
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	18,941		482		156		19,267
Total fixed maturities	84,956		2,625		933		86,648
Equity securities	2,420		2,568		149		4,839
Total	$	87,376	$	5,193	$	1,082	$	91,487

The amortized cost and aggregate fair values of investments in available-for-sale securities as of December 31, 2014 are as follows (dollars in thousands):

Available-for-sale securities:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Corporate debt securities	$	37,299	$	1,773	$	405	$	38,667
Mortgage backed securities	12,691		214		153		12,752
Private label mortgage backed securities	1,261		38		3		1,296
Obligations of states and political subdivisions	14,919		993		13		15,899
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	17,854		525		107		18,272
Total fixed maturities	84,024		3,543		681		86,886
Equity securities	2,420		2,745		170		4,995
Total	$	86,444	$	6,288	$	851	$	91,881

Schedule of Amortized Cost and Aggregate Fair Values of Investments in Held-to-Maturity Securities

The amortized cost and aggregate fair values of investments in held-to-maturity securities as of June 30, 2015 are as follows (dollars in thousands):

Held-to-maturity securities:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Mortgage backed securities	$	2,595	$	71	$	—	$	2,666
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	54		4		—		58
Total	$	2,649	$	75	$	—	$	2,724

The amortized cost and aggregate fair values of investments in held-to-maturity securities as of December 31, 2014 are as follows (dollars in thousands):

Held-to-maturity securities:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Mortgage backed securities	$	2,818	$	69	$	—	$	2,887
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	290		5		—		295
Total	$	3,108	$	74	$	—	$	3,182

Schedule of Amortized Cost and Aggregate Fair Value of Debt Securities, by Contractual Maturity

The amortized cost and aggregate fair value of debt securities at June 30, 2015, by contractual maturity, are presented in the following table (dollars in thousands).  Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

(Dollars in Thousands)	Amortized Cost		Fair Value
Available-for-sale securities:
Due in one year or less	$	808	$	813
Due after one year through five years	13,319		14,014
Due after five years through ten years	28,913		29,116
Due after ten years	41,916		42,705
Total	$	84,956	$	86,648
Held-to-maturity securities:
Due in one year or less	$	—	$	—
Due after one year through five years	117		122
Due after five years through ten years	120		132
Due after ten years	2,412		2,470
Total	$	2,649	$	2,724

Schedule of Securities Available-for-Sale with Unrealized Losses

A summary of securities available-for-sale with unrealized losses as of December 31, 2014, along with the related fair value, aggregated by the length of time that investments have been in a continuous unrealized loss position, is as follows (dollars in thousands):

	Less than 12 months				12 months or longer				Total
December 31, 2014	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Total Securities in a Loss Position
Fixed maturities
Corporate debt securities	$	6,306	$	364	$	1,843	$	41	$	8,149	$	405	18
Mortgage backed securities	1,386		4		1,855		149		3,241		153		12
Private label mortgage backed securities	—		—		97		3		97		3		1
Obligations of state and political subdivisions	—		—		651		13		651		13		2
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	1,475		6		3,499		101		4,974		107		10
Equity securities	—		—		1,116		170		1,116		170		1
	$	9,167	$	374	$	9,061	$	477	$	18,228	$	851	44

A summary of securities available-for-sale with unrealized losses as of June 30, 2015, along with the related fair value, aggregated by the length of time that investments have been in a continuous unrealized loss position, is as follows (dollars in thousands):

	Less than 12 months				12 months or longer				Total
June 30, 2015	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Total Securities in a Loss Position
Fixed maturities
Corporate debt securities	$	10,343	$	315	$	2,582	$	149	$	12,925	$	464	27
Mortgage backed securities	4,364		55		1,135		114		5,499		169		14
Private label mortgage backed securities	4,526		92		84		2		4,610		94		7
Obligations of state and political subdivisions	865		38		330		12		1,195		50		3
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	4,264		82		2,442		74		6,706		156		13
Equity securities	—		—		1,137		149		1,137		149		1
	$	24,362	$	582	$	7,710	$	500	$	32,072	$	1,082	65

Summary of Major Categories of Investment Income

Major categories of investment income are summarized as follows (dollars in thousands):

	Three months ended June 30,					Six months ended June 30,
	2015			2014		2015			2014
Fixed maturities	$	868		$	857	$	1,762		$	1,716
Equity securities	30			29		60			58
Mortgage loans on real estate	4			3		8			7
Investment real estate	2			1		4			3
Policy loans	30			28		59			55
Company owned life insurance change in surrender value	(96		)	108		(52		)	138
Other	33			74		75			128
	871			1,100		1,916			2,105
Less: Investment expenses	87			70		158			127
Net investment income	$	784		$	1,030	$	1,758		$	1,978

Schedule of Realized Investments Gains (Losses)

Major categories of investment gains and losses are summarized as follows (dollars in thousands):

	Three months ended June 30,					Six months ended June 30,
	2015			2014		2015			2014
Fixed maturities	$	250		$	159	$	392		$	249
Other, principally real estate	(5		)	153		(5		)	151
Net realized investment gains	$	245		$	312	$	387		$	400

Schedule of Net Change in Unrealized Appreciation

An analysis of the net change in unrealized appreciation on available-for-sale securities follows (dollars in thousands):

	June 30, 2015			December 31, 2014
Net change in unrealized appreciation on available-for-sale securities before deferred tax	$	(1,326	)	$	3,123
Deferred income tax	451			(1,062		)
Net change in unrealized appreciation on available-for-sale securities	$	(875	)	$	2,061

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Income Taxes (Narrative) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Income Tax Disclosure [Abstract]
Net deferred tax asset position	$ 3,782	$ 3,189

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Investments (Major Categories of Investment Income) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Gross investment income	$ 871	$ 1,100	$ 1,916	$ 2,105
Less: Investment expenses	87	70	158	127
Net investment income	784	1,030	1,758	1,978
Fixed Maturities [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Gross investment income	868	857	1,762	1,716
Equity Securities [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Gross investment income	30	29	60	58
Mortgage Loans on Real Estate [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Gross investment income	4	3	8	7
Investment Real Estate [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Gross investment income	2	1	4	3
Policy Loans [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Gross investment income	30	28	59	55
Company Owned Life Insurance [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Gross investment income	(96)	108	(52)	138
Other, Principally Short-term Investments [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Gross investment income	$ 33	$ 74	$ 75	$ 128

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Investments (Narrative) (Details) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Gain (Loss) on Investments [Line Items]
Securities held-to-maturity with unrealized losses	$ 0	$ 0
Other-than-temporary impairments, available-for-sale securities	$ 0	$ 0
Maximum [Member]
Gain (Loss) on Investments [Line Items]
Percent of investment portfolio below investment grade	2.84%

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Income Taxes (Schedule of Income Tax Effects of Changes in Temporary Differences) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income Tax Disclosure [Abstract]
Deferred policy acquisition costs			$ 41	$ 63
Unearned premiums			(169)	(219)
General expenses			(96)	(33)
Depreciation			(9)	(11)
Claims liabilities			4	(187)
AMT credit			119	0
NOL carryforward			0	413
Deferred income tax expense	$ (117)	$ (170)	$ (110)	$ 26

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Supplemental Cash Flow Information (Details) - USD ($)	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Supplemental Cash Flow Elements [Abstract]
Interest paid	$ 561,000	$ 568,000
Income taxes paid	1,000,000	$ 111,000
Noncash Transaction, Common Stock Issued	4,000
Adjustments to Additional Paid in Capital, Other	$ 74,000

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Accumulated Other Comprehensive Income (Changes in AOCI) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance			$ 2,772
Other comprehensive income (loss), net of tax	$ (1,184)	$ 982	(936)	$ 1,979	$ 1,836
Ending balance	1,836	2,915	1,836	2,915	2,772
Gains and Losses on Cash Flow Hedges [Member]
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance			(816)	(591)	(591)
Other comprehensive income (loss) before reclassifications			(61)	(174)
Amounts reclassified from accumulated other comprehensive income			0	0
Other comprehensive income (loss), net of tax			(61)	(174)
Ending balance	(877)	(765)	(877)	(765)	(816)
Unrealized Gains and Losses on Available-for-Sale Securities [Member]
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance			3,588	1,527	1,527
Other comprehensive income (loss) before reclassifications			(618)	2,319
Amounts reclassified from accumulated other comprehensive income			(257)	(166)
Other comprehensive income (loss), net of tax			(875)	2,153
Ending balance	$ 2,713	$ 3,680	$ 2,713	$ 3,680	$ 3,588

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Fair Value of Financial Assets and Financial Liabilities (Level 3 Reconciliation) (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Equity Securities Available-for-Sale
Ending balance	$ 1,137
Interest Rate Swap
Ending balance	(1,330)
Fair Value, Measurements, Recurring [Member] | Interest Rate Swap [Member]
Interest Rate Swap
Beginning balance	(1,238)	$ (897)
Included in earnings	0	0
Included in other comprehensive income	(92)	(341)
Purchases:	0	0
Sales:	0	0
Issuances:	0	0
Settlements:	0	0
Transfers in/(out) of Level 3	0	0
Ending balance	(1,330)	(1,238)
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held	0	0
Fair Value, Measurements, Recurring [Member] | Available-for-sale Securities [Member]
Equity Securities Available-for-Sale
Beginning balance:	1,116	875
Included in earnings	0	0
Included in other comprehensive income	21	241
Purchases:	0	0
Sales:	0	0
Issuances:	0	0
Settlements:	0	0
Transfers in/(out) of Level 3	0	0
Ending balance	1,137	1,116
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held	$ 0	$ 0

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Significant Accounting Policies

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Significant Accounting Policies

SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of The National Security Group, Inc. (the Company) and its wholly-owned subsidiaries:  National Security Insurance Company (NSIC), National Security Fire and Casualty Company (NSFC) and NATSCO, Inc. (NATSCO).  NSFC includes a wholly-owned subsidiary, Omega One Insurance Company (Omega).  The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).  In the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the condensed consolidated financial statements have been included. All significant intercompany transactions and accounts have been eliminated. The financial information presented herein should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, which includes information and disclosures not presented herein.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Among the more significant estimates included in these condensed consolidated financial statements are reserves for future life insurance policy benefits, liabilities for losses and loss adjustment expenses, reinsurance recoverable associated with loss and loss adjustment expense liabilities, deferred policy acquisition costs, deferred income tax assets and liabilities, assessments of other-than-temporary impairments on investments and accruals for contingencies.  Actual results could differ from these estimates.

Earnings Per Share

Earnings per share of common stock is based on the weighted average number of shares outstanding during each year. The adjusted weighted average shares outstanding were 2,508,551 in 2015 and 2,495,770 in 2014.

Reclassifications

Certain 2014 amounts have been reclassified from the prior year consolidated financial statements to conform to the 2015 presentation.

Concentration of Credit Risk

The Company maintains cash balances which are generally held in non-interest bearing demand deposit accounts subject to FDIC insured limits of $250,000 per entity. At June 30, 2015, the net amount exceeding FDIC insured limits was $3,998,000 at one financial institution. The Company has not experienced any losses in such accounts. Management of the Company reviews financial information of financial institutions on a quarterly basis and believes the Company is not exposed to any significant credit risk on cash and cash equivalents.

Policy receivables are reported at unpaid balances. Policy receivables are generally offset by associated unearned premium liabilities and are not subject to significant credit risk. Receivables from agents, less provision for credit losses, are composed of balances due from independent agents. At June 30, 2015, the single largest balance due from one agent totaled $1,314,000.

Reinsurance contracts do not relieve the Company of its obligations to policyholders. A failure of a reinsurer to meet their obligation could result in losses to the insurance subsidiaries. Allowances for losses are established if amounts are believed to be uncollectible. At June 30, 2015 and December 31, 2014, no amounts were deemed uncollectible. The Company, at least annually, evaluates the financial condition of all reinsurers and evaluates any potential concentrations of credit risk. At June 30, 2015, management does not believe the Company is exposed to any significant credit risk related to its reinsurance program.

Accounting Changes Not Yet Adopted

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (FASB) issued guidance on a comprehensive new revenue recognition standard. This standard will not impact accounting for insurance contracts, leases, financial instruments and guarantees. For those contracts that are impacted by the new guidance, the guidance will require an entity to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to, in exchange for those goods or services. The guidance requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued a deferral of the effective date by one year. This guidance is effective retrospectively for fiscal years beginning after December 15, 2017 and interim periods within those years. Early adoption of this standard is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Although insurance contracts are specifically scoped out of this new guidance, the Company has minor services that may be subject to the new revenue recognition guidance and are still in the process of evaluating the impact, if any, the guidance may have on its consolidated financial statements.

Presentation of Financial Statements - Going Concern

In August 2014, the FASB issued guidance on determining when and how to disclose going concern uncertainties in the financial statements, and requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. The updated guidance is effective for annual periods ending after December 15, 2016 and interim periods thereafter. Early adoption is permitted. The Company does not expect the adoption to have a material impact on its financial position or results of operations.

Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items

In January 2015, the FASB issued guidance that eliminates from GAAP the concept of extraordinary items. The guidance is effective for fiscal periods ending after December 15, 2015 and interim periods thereafter. Early adoption is permitted. The Company does not expect the adoption to have a material impact on its financial position or results of operations.

Amendments to the Consolidation Analysis

In February 2015, the FASB issued additional guidance regarding the consolidation of certain legal entities. The guidance modifies the evaluation of whether or not limited partnerships and similar legal entities are variable interest entities (VIEs) and the consolidation analysis of entities involved with VIEs, particularly those that have fee arrangements and related party relationships. This guidance is effective for fiscal years beginning after December 15, 2015. The Company does not expect the adoption to have a material impact on its financial position or results of operations.

Disclosure about Short-Duration Contracts

In May 2015, the FASB issued guidance that enhances disclosure about short-duration insurance liabilities to help users understand the nature, amount, timing and uncertainty of future cash flows related to insurance liabilities and the effect of those cash flows on the statement of comprehensive income. This guidance is effective for annual periods beginning after December 15, 2015 and for interim periods within annual periods beginning after December 15, 2016. The Company does not expect the adoption to have a material impact on its financial position or results of operations.

Recently Adopted Accounting Standards

Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures

In June 2014, the FASB issued guidance requiring secured borrowing accounting treatment for repurchase-to-maturity transactions and provides guidance on accounting for repurchase financing arrangements. This ASU is effective for interim and annual reporting periods beginning after December 15, 2014. The Company adopted this standard on January 1, 2015. The Company is the counter party to repurchase agreements and as such, the adoption did not have a material impact on its financial position or results of operations.

Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity

In April 2014, the FASB issued guidance which modifies the definition of discontinued operations by limiting discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have (or will have) a major effect on an entity’s operations and financial results. Also, this update requires additional financial statement disclosures about discontinued operations, as well as disposals of an individually significant component of an entity that do not qualify for discontinued operations presentation. This ASC update is effective for all disposals (or classifications as held for sale) of components of an entity that occur within annual and interim periods beginning on or after December 15, 2014 and for all businesses that, on acquisition, are classified as held for sale that also occur within interim and annual periods beginning on or after December 15, 2014. The Company adopted this standard on January 1, 2015. The Company has no discontinued operations, and the adoption of this standard did not have a material impact on its financial position or results of operations.

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Accumulated Other Comprehensive Income (Amounts reclassified out of AOCI) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
Net realized investment gains (losses)	$ 245	$ 312	$ 387	$ 400
Tax (expense) or benefit	(44)	90	(522)	(194)
Net income	$ 623	$ 1,934	1,931	2,933	$ 7,616
Reclassification out of Accumulated Other Comprehensive Income [Member] | Unrealized Gains and Losses on Available-for-Sale Securities [Member]
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
Net realized investment gains (losses)			390	252
Total before tax			390	252
Tax (expense) or benefit			(133)	(86)
Net income			$ 257	$ 166

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Investments (Major Categories of Investment Gains and Losses) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Gain (Loss) on Investments [Line Items]
Net realized investment gains (losses)	$ 245	$ 312	$ 387	$ 400
Fixed Maturities [Member]
Gain (Loss) on Investments [Line Items]
Net realized investment gains (losses)	250	159	392	249
Other, Principally Real Estate [Member]
Gain (Loss) on Investments [Line Items]
Net realized investment gains (losses)	$ (5)	$ 153	$ (5)	$ 151

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Notes Payable and Long-Term Debt (Tables)

6 Months Ended

Jun. 30, 2015

Debt Disclosure [Abstract]

Schedule of Short-term Debt

Short-term debt and current portion of long-term debt consisted of the following as of June 30, 2015 and December 31, 2014 (dollars in thousands):

	2015		2014
Line of credit with variable interest rate equal to the Wall Street Journal (WSJ) prime rate, subject to a 5.0% floor; maturity February 2016.  Interest payments due quarterly.  Unsecured.	$	—	$	—
Current portion of installment note payable due November 2015 with variable interest rate equal to the WSJ prime rate plus 1%. Unsecured.	857		857
	$	857	$	857

Schedule of Long-term Debt Instruments

Long-term debt consisted of the following as of June 30, 2015 and December 31, 2014 (dollars in thousands):

	2015		2014
Line of credit with variable interest rate equal to the WSJ prime rate, subject to a 5.0% floor; maturity February 2016.  Interest payments due quarterly.  Unsecured.	$	—	$	700
Line of credit with variable interest rate equal to the WSJ prime rate, subject to a 4.5% floor; maturity September 2017.  Interest payments due monthly.  Secured.	—		500
Long term portion of installment note with variable interest rate equal to the WSJ prime rate plus 1% and adjustable each November; maturity November 2021. Interest payable annually with principal payable in equal annual installments. Next principal installment on long term portion due November 2015. Unsecured.	5,143		5,143
Subordinated debentures issued on December 15, 2005 with fixed interest rate of 8.83% each distribution period thereafter until December 15, 2015 when the coupon rate shall equal the 3-Month LIBOR plus 3.75% applied to the outstanding principal; maturity December 2035.  Interest payments due quarterly.  All may be redeemed at any time following the tenth anniversary of issuance.  Unsecured.	9,279		9,279
Subordinated debentures issued on June 21, 2007 with a floating interest rate equal to the 3-Month LIBOR plus 3.40% applied to the outstanding principal; maturity June 15, 2037. Interest payments due quarterly.  All may be redeemed at any time following the fifth anniversary of issuance.  Unsecured.	3,093		3,093
	$	17,515	$	18,715

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Income Taxes (Tables)

6 Months Ended

Jun. 30, 2015

Income Tax Disclosure [Abstract]

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 June 30, 2015			As of December 31, 2014
General expenses	$	1,467		$	1,371
Unearned premiums	2,130			1,961
Claims liabilities	845			849
Litigation settlement	2,040			2,040
AMT credit	1,121			1,240
Impairment on real estate owned	187			187
Unrealized loss on interest rate swaps	453			421
Deferred tax assets	8,243			8,069
Depreciation	(102		)	(111		)
Deferred policy acquisition costs	(2,962		)	(2,921		)
Unrealized gains on securities available-for-sale	(1,397		)	(1,848		)
Deferred tax liabilities	(4,461		)	(4,880		)
Net deferred tax asset	$	3,782		$	3,189

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,
	2015			2014
Deferred policy acquisition costs	$	41		$	63
Unearned premiums	(169		)	(219		)
General expenses	(96		)	(33		)
Depreciation	(9		)	(11		)
Claims liabilities	4			(187		)
AMT credit	119			—
NOL carryforward	—			413
Deferred income tax expense	$	(110	)	$	26

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:

	Six months ended June 30,
	2015		2014
Federal income tax rate applied to pre-tax income/loss	34.0	%	34.0	%
Dividends received deduction and tax-exempt interest	(2.1	)%	(2.0	)%
Company owned life insurance	0.7	%	(19.1	)%
Small life deduction	(7.7	)%	(8.9	)%
Other, net	(3.6	)%	2.2	%
Effective federal income tax rate	21.3	%	6.2	%

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Notes Payable and Long-Term Debt (Schedule of Long-Term Debt) (Details) - USD ($) $ in Thousands		6 Months Ended
	Dec. 15, 2005	Jun. 30, 2015	Dec. 31, 2014
Debt Instrument [Line Items]
Long-term debt		$ 17,515	$ 18,715
Promissory Note [Member] | Unsecured Debt [Member]
Debt Instrument [Line Items]
Long-term debt		$ 5,143	5,143
Payment terms		Annual installment payments.
Trust Preferred Security Offering, 2005 [Member] | Unsecured Debt [Member]
Debt Instrument [Line Items]
Long-term debt		$ 9,279	9,279
Fixed interest rate	8.83%
Payment terms		Interest payments due quarterly.
Trust Preferred Security Offering, 2007 [Member] | Unsecured Debt [Member]
Debt Instrument [Line Items]
Long-term debt		$ 3,093	3,093
Payment terms		Interest payments due quarterly.
Line of Credit [Member] | Unsecured Debt [Member]
Debt Instrument [Line Items]
Amount outstanding		$ 0	700
Payment terms		Interest payment
Line of Credit [Member] | Secured Debt [Member]
Debt Instrument [Line Items]
Amount outstanding		$ 0	$ 500
Payment terms		Interest payments due monthly.
Prime Rate [Member] | Promissory Note [Member] | Unsecured Debt [Member]
Debt Instrument [Line Items]
Basis spread on variable rate		1.00%
Prime Rate [Member] | Line of Credit [Member] | Unsecured Debt [Member]
Debt Instrument [Line Items]
Percentage bearing variable interest, percentage rate		5.00%
Prime Rate [Member] | Line of Credit [Member] | Secured Debt [Member]
Debt Instrument [Line Items]
Percentage bearing variable interest, percentage rate		4.50%
Three-month LIBOR [Member] | Trust Preferred Security Offering, 2005 [Member] | Unsecured Debt [Member]
Debt Instrument [Line Items]
Basis spread on variable rate	3.75%
Three-month LIBOR [Member] | Trust Preferred Security Offering, 2007 [Member] | Unsecured Debt [Member]
Debt Instrument [Line Items]
Basis spread on variable rate	3.40%

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Investments (Schedule of Unrealized Appreciation) (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Investments [Abstract]
Net change in unrealized appreciation on available-for-sale securities before deferred tax	$ (1,326)	$ 3,123
Deferred income tax	451	(1,062)
Net change in unrealized appreciation on available-for-sale securities	$ (875)	$ 2,061

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Reinsurance (Tables)

6 Months Ended

Jun. 30, 2015

Reinsurance Disclosures [Abstract]

Schedule of Reinsurance

Catastrophe reinsurance coverage is maintained in three layers as follows:

Layer	Reinsurers' Limits of Liability
First Layer	100% of $13,500,000 in excess of $4,000,000
Second Layer	100% of $25,000,000 in excess of $17,500,000
Third Layer	100% of $30,000,000 in excess of $42,500,000

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Shareholders' Equity (Tables)

6 Months Ended

Jun. 30, 2015

Stockholders' Equity Note [Abstract]

Schedule of Stock by Class

The table below provides information regarding the Company's preferred and common stock as of June 30, 2015 and December 31, 2014:

	June 30, 2015			December 31, 2014
	Authorized	Issued	Outstanding	Authorized	Issued	Outstanding
Preferred Stock, $1 par value	500,000	—	—	500,000	—	—
Class A Common Stock, $1 par value	2,000,000	—	—	2,000,000	—	—
Common Stock, $1 par value	3,000,000	2,512,425	2,512,425	3,000,000	2,507,452	2,507,452

On May 22, 2015, 4,973 shares of common stock were issued to directors as compensation under the 2009 Equity Incentive Plan previously approved by shareholders.

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Statement of Cash Flows [Abstract]
Net income	$ 1,931	$ 2,933
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense and amortization/accretion, net	165	262
Decrease (increase) in cash surrender value of company owned life insurance	52	(138)
Net realized gains on investments	(387)	(400)
Deferred income taxes	(110)	26
Amortization of deferred policy acquisition costs	1,817	1,771
Change in accrued investment income	(4)	15
Change in reinsurance recoverable	(471)	712
Policy acquisition costs deferred	(1,937)	(1,955)
Change in accrued income taxes	(334)	58
Change in net policy liabilities and claims	1,438	2,459
Changes in other assets/liabilities, net	929	(1,459)
Other, net	8	13
Net cash provided by operating activities	3,097	4,297
Cash Flows from Investing Activities:
Available-for-sale securities	(14,290)	(8,619)
Trading securities and short-term investments	88	0
Property and equipment	(103)	(123)
Held-to-maturity securities	470	83
Available-for-sale securities	13,668	5,865
Real estate held for investment	201	0
Property and equipment	5	219
Other invested assets, net	371	8
Net cash provided by (used in) investing activities	234	(2,567)
Cash Flows from Financing Activities:
Change in other policyholder funds	22	36
Proceeds from long-term debt	0	275
Repayments of long-term debt	(500)	0
Change in short-term notes payable	(700)	(700)
Dividends paid	(201)	(149)
Net cash used in financing activities	(1,379)	(538)
Net change in cash and cash equivalents	1,952	1,192
Cash and cash equivalents, beginning of year	6,426	4,987
Cash and cash equivalents, end of period	$ 8,378	$ 6,179

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Accumulated Other Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2015

Equity [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

The following table presents changes in AOCI balances (dollars in thousands):

	Six months ended June 30,
	2015			2014
Gains and Losses on Cash Flow Hedges
Balance at beginning of period	$	(816	)	$	(591	)
Other comprehensive income (loss) for period:
Other comprehensive income (loss) before reclassifications	(61		)	(174		)
Amounts reclassified from accumulated other comprehensive income	—			—
Net current period other comprehensive income (loss)	(61		)	(174		)
Balance at end of period	$	(877	)	$	(765	)
Unrealized Gains and Losses on Available-for-Sale Securities
Balance at beginning of period	$	3,588		$	1,527
Other comprehensive income (loss) for period:
Other comprehensive income (loss) before reclassifications	(618		)	2,319
Amounts reclassified from accumulated other comprehensive income	(257		)	(166		)
Net current period other comprehensive income (loss)	(875		)	2,153
Balance at end of period	$	2,713		$	3,680
Total Accumulated Other Comprehensive Income at end of period	$	1,836		$	2,915

Reclassification out of Accumulated Other Comprehensive Income

The following table presents the amounts reclassified out of AOCI for the six months ended June 30, 2015 (dollars in thousands):

Details about Accumulated Other Comprehensive Income Components	Amounts Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income is Presented
Unrealized Gains and Losses on Available-for-Sale Securities	$	390		Net realized investment gains
	390			Total before tax
	(133		)	Tax (expense) or benefit
	$	257		Net of Tax

The following table presents the amounts reclassified out of AOCI for the six months ended June 30, 2014 (dollars in thousands):

Details about Accumulated Other Comprehensive Income Components	Amounts Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income is Presented
Unrealized Gains and Losses on Available-for-Sale Securities	$	252		Net realized investment gains
	252			Total before tax
	(86		)	Tax (expense) or benefit
	$	166		Net of Tax

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Investments (Amortized Cost and Aggregate Fair Value of Debt Securities, by Contractual Maturity) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Investments [Abstract]
Available-for-sale Securities, Due in one year or less, Amortized Cost	$ 808
Available-for-sale Securities, Due in one year or less, Fair Value	813
Available-for-sale Securities, Due after one year through five years, Amortized Cost	13,319
Available-for-sale Securities, Due after one year through five years, Fair Value	14,014
Available-for-sale Securities, Due after five years through ten years, Amortized Cost	28,913
Available-for-sale Securities, Due after five years through ten years, Fair Value	29,116
Available-for-sale Securities, Due after ten years, Amortized Cost	41,916
Available-for-sale Securities, Due after ten years, Fair Value	42,705
Available-for-sale securities, Amortized Cost	84,956	$ 84,024
Available-for-sale Securities, Fair Value	86,648
Held-to-maturity Securities, Due in one year or less, Amortized Cost	0
Held-to-maturity Securities, Due in one year or less, Fair Value	0
Held-to-maturity Securities, Due after one year through five years, Amortized Cost	117
Held-to-maturity Securities, Due after one year through five years, Fair Value	122
Held-to-maturity Securities, Due after five years through ten years, Amortized Cost	120
Held-to-maturity Securities, Due after five years through ten years, Fair Value	132
Held-to-maturity Securities, Due after ten years, Amortized Cost	2,412
Held-to-maturity Securities, Due after ten years, Fair Value	2,470
Held-to-maturity Securities, Amortized Cost	2,649	3,108
Held-to-maturity Securities, Fair Value	$ 2,724	$ 3,182

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Income Taxes (Schedule of Effective Income Tax Rate Reconciliation) (Details)	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Income Tax Disclosure [Abstract]
Federal income tax rate applied to pre-tax income/loss	34.00%	34.00%
Dividends received deduction and tax-exempt interest	(2.10%)	(2.00%)
Company owned life insurance	0.70%	(19.10%)
Small life deduction	(7.70%)	(8.90%)
Other, net	(3.60%)	2.20%
Effective federal income tax rate	21.30%	6.20%

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CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Investments
Fixed maturities held-to-maturity, at amortized cost (estimated fair value: 2015 - $2,724; 2014 - $3,182)	$ 2,649	$ 3,108
Fixed maturities available-for-sale, at estimated fair value (cost: 2015 - $84,956; 2014 - $84,024)	86,648	86,886
Equity securities available-for-sale, at estimated fair value (cost: 2015 - $2,420; 2014 - $2,420)	4,839	4,995
Trading securities	107	19
Mortgage loans on real estate, at cost	206	210
Investment real estate, at book value	3,534	3,735
Policy loans	1,570	1,530
Company owned life insurance	5,065	5,513
Other invested assets	3,366	3,553
Total Investments	107,984	109,549
Cash	8,378	6,426
Accrued investment income	801	797
Policy receivables and agents' balances, net	12,430	10,948
Reinsurance recoverable	1,410	939
Deferred policy acquisition costs	8,712	8,592
Property and equipment, net	2,012	2,013
Deferred income tax asset, net	3,782	3,189
Other assets	984	2,412
Total Assets	146,493	144,865
LIABILITIES AND SHAREHOLDERS' EQUITY
Property and casualty benefit and loss reserves	8,882	8,321
Accident and health benefit and loss reserves	3,021	3,017
Life and annuity benefit and loss reserves	31,528	31,418
Unearned premiums	31,335	28,853
Policy and contract claims	768	996
Other policyholder funds	1,532	1,510
Short-term notes payable and current portion of long-term debt	857	857
Long-term debt	17,515	18,715
Accrued income taxes	153	487
Other liabilities	7,273	7,934
Total Liabilities	$ 102,864	$ 102,108
Contingencies
Shareholders' equity
Common stock	$ 2,512	$ 2,508
Additional paid-in capital	5,341	5,267
Accumulated other comprehensive income	1,836	2,772
Retained earnings	33,940	32,210
Total Shareholders' Equity	43,629	42,757
Total Liabilities and Shareholders' Equity	$ 146,493	$ 144,865

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Fair Value of Financial Assets and Financial Liabilities (Narrative) (Details) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Fair Value Disclosures [Abstract]
Fair value measurements of assets	$ 1,137,000
Fair value measurements of liabilities	(1,330,000)
Assets measured at fair values on a nonrecurring basis	0	$ 0
Liabilities measured at fair values on a nonrecurring basis	$ 0	$ 0

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Statement of Comprehensive Income [Abstract]
Reclassification adjustment	$ 257	$ 166

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Shareholders' Equity (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Net income	$ 623	$ 1,934	$ 1,931	$ 2,933	$ 7,616
Dividends paid			201		300
Other comprehensive income, net of tax	$ 1,184	$ (982)	$ 936	$ (1,979)	$ (1,836)
2009 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock issued during period, shares			4,973

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Significant Accounting Policies (Concentration of Credit Risk) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014	Jun. 30, 2014	Dec. 31, 2013
Concentration Risk [Line Items]
Cash	$ 8,378	$ 6,426	$ 6,179	$ 4,987
Policy receivables and agents' balances, net	12,430	$ 10,948
Uninsured Deposit Risk [Member]
Concentration Risk [Line Items]
Cash	3,998
Single Largest Agent Balance Due [Member]
Concentration Risk [Line Items]
Policy receivables and agents' balances, net	$ 1,314

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Segments (Schedule of Gross and Net Premiums Written) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Segment Reporting Information [Line Items]
Gross premiums written	$ 18,244	$ 18,187	$ 34,784	$ 34,357
Reinsurance premium ceded	(1,244)	(1,814)	(2,750)	(3,592)
Net premiums written	17,000	16,373	32,034	30,765
Life Insurance Operations [Member]
Segment Reporting Information [Line Items]
Gross premiums written	1,526	1,568	3,082	3,191
Reinsurance premium ceded	(15)	(12)	(30)	(35)
Net premiums written	1,511	1,556	3,052	3,156
Life Insurance Operations [Member] | Traditional Life Insurance [Member]
Segment Reporting Information [Line Items]
Gross premiums written	1,104	1,137	2,241	2,316
Life Insurance Operations [Member] | Accident and Health Insurance [Member]
Segment Reporting Information [Line Items]
Gross premiums written	422	431	841	875
P&C Insurance Operations [Member]
Segment Reporting Information [Line Items]
Gross premiums written	16,718	16,619	31,702	31,166
Reinsurance premium ceded	(1,229)	(1,802)	(2,720)	(3,557)
Net premiums written	15,489	14,817	28,982	27,609
P&C Insurance Operations [Member] | Dwelling Fire & Extended Coverage [Member]
Segment Reporting Information [Line Items]
Gross premiums written	9,454	9,219	18,182	17,548
P&C Insurance Operations [Member] | Homeowners (Including Mobile Homeowners) [Member]
Segment Reporting Information [Line Items]
Gross premiums written	6,715	6,879	12,466	12,628
P&C Insurance Operations [Member] | Other Liability [Member]
Segment Reporting Information [Line Items]
Gross premiums written	$ 549	$ 521	$ 1,054	$ 990

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Supplemental Cash Flow Information

6 Months Ended

Jun. 30, 2015

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Information

SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for interest during the six months ended June 30, 2015 was $561,000 ($568,000 in 2014). Cash paid for income taxes during the six months ended June 30, 2015 was $1,000,000 ($111,000 in 2014).

During the six months ended June 30, 2015, non-cash changes in equity included $4,000 in common stock issued to Directors in lieu of cash compensation along with a corresponding $74,000 increase in additional paid-in-capital.

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Variable Interest Entities (Details) - USD ($) $ in Thousands	1 Months Ended		6 Months Ended
	Jun. 30, 2007	Dec. 31, 2005	Jun. 30, 2015
Variable Interest Entity [Line Items]
Carrying amount of investments			$ 249
Trust Preferred Security Offering, 2005 [Member]
Variable Interest Entity [Line Items]
Payments to acquire trust preferred securities		$ 9,000
Subordinated debt		9,279
Proceeds from issuance of trust preferred securities		9,005
Equity investment		$ 279
Trust Preferred Security Offering, 2007 [Member]
Variable Interest Entity [Line Items]
Payments to acquire trust preferred securities	$ 3,000
Proceeds from issuance of trust preferred securities	2,995
Equity investment	93
Trust Preferred Security Offering, 2007 [Member] | Unsecured Debt [Member]
Variable Interest Entity [Line Items]
Subordinated debt	$ 3,093
Maximum [Member]
Variable Interest Entity [Line Items]
Limited partnership, percent owned			1.00%

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Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Principles of Consolidation and Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of The National Security Group, Inc. (the Company) and its wholly-owned subsidiaries:  National Security Insurance Company (NSIC), National Security Fire and Casualty Company (NSFC) and NATSCO, Inc. (NATSCO).  NSFC includes a wholly-owned subsidiary, Omega One Insurance Company (Omega).  The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).  In the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the condensed consolidated financial statements have been included. All significant intercompany transactions and accounts have been eliminated. The financial information presented herein should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, which includes information and disclosures not presented herein.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Among the more significant estimates included in these condensed consolidated financial statements are reserves for future life insurance policy benefits, liabilities for losses and loss adjustment expenses, reinsurance recoverable associated with loss and loss adjustment expense liabilities, deferred policy acquisition costs, deferred income tax assets and liabilities, assessments of other-than-temporary impairments on investments and accruals for contingencies.  Actual results could differ from these estimates.

Earnings Per Share

Earnings per share of common stock is based on the weighted average number of shares outstanding during each year. The adjusted weighted average shares outstanding were 2,508,551 in 2015 and 2,495,770 in 2014.

Reclassifications

Certain 2014 amounts have been reclassified from the prior year consolidated financial statements to conform to the 2015 presentation.

Concentration of Credit Risk

The Company maintains cash balances which are generally held in non-interest bearing demand deposit accounts subject to FDIC insured limits of $250,000 per entity. At June 30, 2015, the net amount exceeding FDIC insured limits was $3,998,000 at one financial institution. The Company has not experienced any losses in such accounts. Management of the Company reviews financial information of financial institutions on a quarterly basis and believes the Company is not exposed to any significant credit risk on cash and cash equivalents.

Policy receivables are reported at unpaid balances. Policy receivables are generally offset by associated unearned premium liabilities and are not subject to significant credit risk. Receivables from agents, less provision for credit losses, are composed of balances due from independent agents. At June 30, 2015, the single largest balance due from one agent totaled $1,314,000.

Reinsurance contracts do not relieve the Company of its obligations to policyholders. A failure of a reinsurer to meet their obligation could result in losses to the insurance subsidiaries. Allowances for losses are established if amounts are believed to be uncollectible. At June 30, 2015 and December 31, 2014, no amounts were deemed uncollectible. The Company, at least annually, evaluates the financial condition of all reinsurers and evaluates any potential concentrations of credit risk. At June 30, 2015, management does not believe the Company is exposed to any significant credit risk related to its reinsurance program.

Recently Adopted Accounting Standards

Accounting Changes Not Yet Adopted

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (FASB) issued guidance on a comprehensive new revenue recognition standard. This standard will not impact accounting for insurance contracts, leases, financial instruments and guarantees. For those contracts that are impacted by the new guidance, the guidance will require an entity to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to, in exchange for those goods or services. The guidance requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued a deferral of the effective date by one year. This guidance is effective retrospectively for fiscal years beginning after December 15, 2017 and interim periods within those years. Early adoption of this standard is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Although insurance contracts are specifically scoped out of this new guidance, the Company has minor services that may be subject to the new revenue recognition guidance and are still in the process of evaluating the impact, if any, the guidance may have on its consolidated financial statements.

Presentation of Financial Statements - Going Concern

In August 2014, the FASB issued guidance on determining when and how to disclose going concern uncertainties in the financial statements, and requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. The updated guidance is effective for annual periods ending after December 15, 2016 and interim periods thereafter. Early adoption is permitted. The Company does not expect the adoption to have a material impact on its financial position or results of operations.

Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items

In January 2015, the FASB issued guidance that eliminates from GAAP the concept of extraordinary items. The guidance is effective for fiscal periods ending after December 15, 2015 and interim periods thereafter. Early adoption is permitted. The Company does not expect the adoption to have a material impact on its financial position or results of operations.

Amendments to the Consolidation Analysis

In February 2015, the FASB issued additional guidance regarding the consolidation of certain legal entities. The guidance modifies the evaluation of whether or not limited partnerships and similar legal entities are variable interest entities (VIEs) and the consolidation analysis of entities involved with VIEs, particularly those that have fee arrangements and related party relationships. This guidance is effective for fiscal years beginning after December 15, 2015. The Company does not expect the adoption to have a material impact on its financial position or results of operations.

Disclosure about Short-Duration Contracts

In May 2015, the FASB issued guidance that enhances disclosure about short-duration insurance liabilities to help users understand the nature, amount, timing and uncertainty of future cash flows related to insurance liabilities and the effect of those cash flows on the statement of comprehensive income. This guidance is effective for annual periods beginning after December 15, 2015 and for interim periods within annual periods beginning after December 15, 2016. The Company does not expect the adoption to have a material impact on its financial position or results of operations.

Recently Adopted Accounting Standards

Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures

In June 2014, the FASB issued guidance requiring secured borrowing accounting treatment for repurchase-to-maturity transactions and provides guidance on accounting for repurchase financing arrangements. This ASU is effective for interim and annual reporting periods beginning after December 15, 2014. The Company adopted this standard on January 1, 2015. The Company is the counter party to repurchase agreements and as such, the adoption did not have a material impact on its financial position or results of operations.

Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity

In April 2014, the FASB issued guidance which modifies the definition of discontinued operations by limiting discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have (or will have) a major effect on an entity’s operations and financial results. Also, this update requires additional financial statement disclosures about discontinued operations, as well as disposals of an individually significant component of an entity that do not qualify for discontinued operations presentation. This ASC update is effective for all disposals (or classifications as held for sale) of components of an entity that occur within annual and interim periods beginning on or after December 15, 2014 and for all businesses that, on acquisition, are classified as held for sale that also occur within interim and annual periods beginning on or after December 15, 2014. The Company adopted this standard on January 1, 2015. The Company has no discontinued operations, and the adoption of this standard did not have a material impact on its financial position or results of operations.

Consolidation, Variable Interest Entity

The Company holds a passive interest in a limited partnership that is considered to be a Variable Interest Entity (VIE) under the provisions of ASC 810 Consolidation. The Company is not the primary beneficiary of the entity and is not required to consolidate under ASC 810. The entity is a private placement investment fund formed for the purpose of investing in private equity investments. The Company owns less than 1% of the limited partnership. The carrying value of the investment totals $249,000 and is included as a component of Other Invested Assets in the accompanying condensed consolidated balance sheets.

Marketable Securities

For securities in an unrealized loss position, the Company assesses whether the Company has the intent to sell the security or more-likely-than-not will be required to sell the security before the anticipated recovery.  If either of these conditions is met, the Company is required to recognize an other-than-temporary impairment with the entire unrealized loss reported in earnings.  For securities in an unrealized loss position that do not meet these conditions, the Company assesses whether the impairment of a security is other-than-temporary.  If the impairment is determined to be other-than-temporary, the Company is required to separate the other-than-temporary impairments into two components:  the amount representing the credit loss and the amount related to all other factors.  The credit loss is the portion of the amortized book value in excess of the net present value of the projected future cash flows discounted at the effective interest rate implicit in the debt security prior to impairment.  The credit loss component of other-than-temporary impairments is reported in earnings, whereas the amount relating to factors other than credit losses are recorded in other comprehensive income, net of taxes.

 In evaluating whether or not the equity loss positions were other-than-temporary impairments, Management evaluated financial information on each company and where available, reviewed analyst reports from at least two independent sources.

Fair Value

Fixed maturities available-for-sale — The fair values of the Company’s public fixed maturity securities are generally based on prices obtained from independent pricing services. Consistent with the fair value hierarchy described above, securities with validated quotes from pricing services are generally reflected within Level 2, as they are primarily based on observable pricing for similar assets and/or other market observable inputs.

Trading securities — Trading securities consist primarily of mutual funds whose fair values are determined consistent with similar instruments described above under “Fixed Maturities” and below under “Equity Securities.”

Equity securities — Equity securities consist principally of investments in common and preferred stock of publicly traded companies and privately traded securities. The fair values of our publicly traded equity securities are based on quoted market prices in active markets for identical assets and are classified within Level 1 in the fair value hierarchy.

Estimated fair values for our privately traded equity securities require a substantial level of judgment. Privately traded equity securities are classified within Level 3.

Interest rate swaps — Interest rate swaps are recorded at fair value either as assets, within other assets or as liabilities, within other liabilities. The fair values of our interest rate swaps are provided by a third-party broker and are classified within Level 3.

Our available-for-sale securities consists of fixed maturity and equity securities which are recorded at fair value in the accompanying condensed consolidated balance sheets.  The change in the fair value of these investments, unless deemed to be other-than-temporarily impaired, is recorded as a component of other comprehensive income.

We are permitted to elect to measure financial instruments and certain other items at fair value, with the change in fair value recorded in earnings.  We elected not to measure any eligible items using the fair value option.

Accounting standards define fair value as the price that would be received to sell an asset or would be paid to transfer a liability in an orderly transaction between market participants at the measurement date, and establishes a framework to make the measurement of fair value more consistent and comparable.  In determining fair value, we primarily use prices and other relevant information generated by market transactions involving identical or comparable assets.

The Company categorizes assets and liabilities carried at their fair value based upon a fair value hierarchy:

Level 1 – Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 1 assets and liabilities consist of money market fund deposits and certain of our marketable debt and equity instruments, including equity instruments offsetting deferred compensation, that are traded in an active market with sufficient volume and frequency of transactions.

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 2 assets include certain of our marketable debt and equity instruments with quoted market prices that are traded in less active markets or priced using a quoted market price for similar instruments. Level 2 assets also include marketable equity instruments with security-specific restrictions that would transfer to the buyer, marketable debt instruments priced using indicator prices which represent non-binding market consensus prices that can be corroborated by observable market quotes, as well as derivative contracts and debt instruments priced using inputs that are observable in the market or can be derived principally from or corroborated by observable market data.  Marketable debt instruments in this category generally include commercial paper, bank time deposits, repurchase agreements for fixed-income instruments, and a majority of floating-rate notes, corporate bonds, and municipal bonds.

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

Level 3 assets and liabilities include marketable debt instruments, non-marketable equity investments, derivative contracts, and company issued debt whose values are determined using inputs that are both unobservable and significant to the values of the instruments being measured. Level 3 assets also include marketable debt instruments that are priced using indicator prices that we were unable to corroborate with observable market quotes.

Marketable debt instruments in this category generally include asset-backed securities and certain floating-rate notes, corporate bonds, and municipal bonds.

The following methods and assumptions were used to estimate fair value of each class of financial instrument for which it is practical to estimate that value:

Cash and cash equivalents — the carrying amount is a reasonable estimate of fair value.

Fixed maturities held-to-maturity — the carrying amount is amortized cost; the fair values of the Company’s public fixed maturity securities that are classified as held-to-maturity are generally based on prices obtained from independent pricing services.

Mortgage loans — the carrying amount is a reasonable estimate of fair value due to the restrictive nature and limited marketability of the mortgage notes.

Policy loans — the carrying amount is a reasonable estimate of fair value.

Company owned life insurance — the carrying amount is a reasonable estimate of fair value.

Other invested assets — the carrying amount is a reasonable estimate of fair value.

Other policyholder funds — the carrying amount is a reasonable estimate of fair value.

Debt — the carrying amount is a reasonable estimate of fair value.

Derivatives

The Company is exposed to certain risks in the normal course of its business operations.  The primary risk that is managed through the use of derivatives is interest rate risk on floating rate borrowings.  This risk is managed through the use of interest rate swap agreements which are designated as cash flow hedges.  For cash flow hedges, the effective portion of the gain or loss on the interest rate swap is included as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged transaction is recognized in earnings.  The Company does not hold or issue derivatives that are not designated as hedging instruments. 

The swap liability is reported as a component of other liabilities on the condensed consolidated balance sheets.

We use dollar offset at the hedge's inception and for each reporting period thereafter to assess whether the derivative used in a hedging transaction is expected to be, and has been, effective in offsetting changes in the fair value of the hedged item. Since inception, no portion of the hedged item has been deemed ineffective. For all hedges, we discontinue hedge accounting if it is determined that a derivative is not expected to be, or has ceased to be, effective as a hedge.

Income Taxes

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. 

The Company recognizes tax-related interest and penalties as a component of tax expense. 

Reinsurance

Amounts recoverable from re-insurers are estimated in a manner consistent with the claim liability associated with the underlying insurance policies.  Amounts paid for prospective reinsurance contracts are reported as prepaid reinsurance premiums and amortized over the remaining contract period.

In the normal course of business, NSIC seeks to limit its exposure to loss on any single insured and to recover a portion of benefits paid by ceding reinsurance to reinsurance companies under excess coverage contracts.  NSIC retains a maximum of $50,000 of coverage per individual life.  The cost of reinsurance is amortized over the contract period of the reinsurance.

The Company's insurance operations utilize reinsurance in order to limit losses, minimize exposure to large risks, provide additional capacity for future growth and effect business-sharing arrangements. Life reinsurance is accomplished through yearly renewable term coverage. Property and casualty reinsurance is placed on an excess of loss basis to cover losses from catastrophe events. Reinsurance ceded arrangements do not discharge the insurance subsidiaries as the primary insurer, except for cases involving a novation. Failure of re-insurers to honor their obligations could result in losses to the insurance subsidiaries. The insurance subsidiaries evaluate the financial conditions of their reinsurance companies and monitor concentrations of credit risk arising from similar geographic regions, activities, or economic characteristics of the companies to minimize their exposure to significant losses from reinsurance insolvencies.

In the normal course of business, NSFC seeks to reduce the loss that may arise from catastrophes or other individually significant large loss events that cause unfavorable underwriting results by re-insuring certain levels of risk in various areas of exposure with reinsurance companies.  NSFC maintains a catastrophe reinsurance agreement to cover losses from catastrophic events, primarily hurricanes.

Business Segment

The Company’s property and casualty insurance operations comprise one business segment. The property and casualty insurance segment primarily underwrites home insurance coverage with primary lines of business consisting of:  dwelling fire and extended coverage, homeowners (including mobile homeowners) and other liability. The Company has ceased writing ocean marine coverages and no policies were in-force in this line of business during 2015.  

The Company’s life and accident and health operations comprise the second business segment.  The life and accident and health insurance segment consists of two lines of business: traditional life insurance and accident and health insurance.

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY - 6 months ended Jun. 30, 2015 - USD ($) $ in Thousands	Total	Retained Earnings [Member]	Accumulated Other Comprehensive Income [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]
Balance at December 31, 2014 (AUDITED) at Dec. 31, 2014	$ 42,757	$ 32,210	$ 2,772	$ 2,508	$ 5,267
Net income for the six months ended June 30, 2015	1,931	1,931
Other comprehensive loss (net of tax)	(936)		(936)
Cash dividends	(201)	(201)
Common stock issued	78			4	74
Balance at June 30, 2015 at Jun. 30, 2015	$ 43,629	$ 33,940	$ 1,836	$ 2,512	$ 5,341

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Investments
Fixed maturities held-to-maturity, at estimated fair value	$ 2,724	$ 3,182
Fixed maturities available-for-sale, at cost	84,956	84,024
Equity securities available-for-sale, at cost	$ 2,420	$ 2,420

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Employee Benefit Plans

6 Months Ended

Jun. 30, 2015

Compensation and Retirement Disclosure [Abstract]

Employee Benefit Plans

EMPLOYEE BENEFIT PLANS

The Company and its subsidiaries have an established retirement savings plan (401K Plan). All full-time employees are eligible to participate, and all employer contributions are fully vested for employees who have completed 1,000 hours of service in the year of contribution. Company matching contributions for the six months ended June 30, 2015 and 2014 amounted to $115,000 and $104,000, respectively. The Company contributes dollar-for-dollar matching contributions up to 5% of compensation subject to government limitations.

In January 2006, the Company established a non-qualified plan under which directors are allowed to defer all or a portion of directors' fees into various investment options.

The supplemental executive retirement plan (SERP) became effective March 1, 2008 and covers named executive officers with the Company contributing 15% of executive compensation to the plan. Contributions to the plan are fully vested upon the earlier of death, disability, change in control, or ten years of participation in the plan. Costs for amounts credited to the non-qualified deferred compensation plans for the six months ended June 30, 2015 and 2014 amounted to approximately $89,000 and $102,000, respectively.

The Company and its subsidiaries established an Employee Stock Ownership Plan (ESOP) in January 2010, to enable its eligible employees to acquire a proprietary interest in the Company's common stock and to provide retirement and other benefits to such employees. There were $158,000 costs incurred during the first six months of 2015 and $100,000 in costs incurred during the first six months of 2014 related to ESOP plan contributions. All contributions were made in cash for purchase of Company shares in the open market. The Company has not allocated shares directly to the plan and the plan has no debt.

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Document and Entity Information Document - shares	6 Months Ended
	Jun. 30, 2015	Aug. 13, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	NATIONAL SECURITY GROUP INC
Entity Central Index Key	0000865058
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Document Type	10-Q
Document Period End Date	Jun. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		2,512,425

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Shareholders' Equity

6 Months Ended

Jun. 30, 2015

Stockholders' Equity Note [Abstract]

Stockholders' Equity

SHAREHOLDERS' EQUITY

During the six months ended June 30, 2015, and year ended December 31, 2014, changes in shareholders' equity consisted of net income of $1,931,000 and $7,616,000, respectively; dividends paid of $201,000 in 2015 and $300,000 in 2014; changes in accumulated other comprehensive loss, net of applicable taxes, of $936,000 in 2015 and other comprehensive income, net of applicable taxes, of $1,836,000 in 2014.  Other comprehensive gains and loss consisted of accumulated unrealized gains and losses on securities available for sale and unrealized loss on interest rate swaps.

Preferred Stock

Preferred Stock may be issued in one or more series as shall from time to time be determined and authorized by the Board of Directors. The directors may make specific provisions regarding (a) the voting rights, if any (b) whether such dividends are to be cumulative or noncumulative (c) the redemption provisions, if any (d) participating rights, if any (e) any sinking fund or other retirement provisions (f) dividend rates (g) the number of shares of such series and (h) liquidation preference.

Common Stock

The holders of the Class A Common Stock will have one-twentieth of one vote per share, and the holders of the common stock will have one vote per share. There is currently no Class A Common Stock issued or outstanding.

In the event of any liquidation, dissolution or distribution of the assets of the Company remaining after the payments to the holders of the Preferred Stock of the full preferential amounts to which they may be entitled as provided in the resolution or resolutions creating any series thereof, the remaining assets of the Company shall be divided and distributed among the holders of both classes of common stock, except as may otherwise be provided in any such resolution or resolutions.

The table below provides information regarding the Company's preferred and common stock as of June 30, 2015 and December 31, 2014:

	June 30, 2015			December 31, 2014
	Authorized	Issued	Outstanding	Authorized	Issued	Outstanding
Preferred Stock, $1 par value	500,000	—	—	500,000	—	—
Class A Common Stock, $1 par value	2,000,000	—	—	2,000,000	—	—
Common Stock, $1 par value	3,000,000	2,512,425	2,512,425	3,000,000	2,507,452	2,507,452

On May 22, 2015, 4,973 shares of common stock were issued to directors as compensation under the 2009 Equity Incentive Plan previously approved by shareholders.

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
REVENUES
Net premiums earned	$ 14,880	$ 14,100	$ 29,586	$ 27,924
Net investment income	784	1,030	1,758	1,978
Net realized investment gains (losses)	245	312	387	400
Gain on company owned life insurance	0	1,621	0	1,621
Other income	156	92	314	246
Total Revenues	16,065	17,155	32,045	32,169
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits and settlement expenses	9,435	9,155	17,697	17,019
Amortization of deferred policy acquisition costs	918	873	1,817	1,771
Commissions	2,089	1,967	4,144	3,994
General and administrative expenses	2,093	2,413	4,099	4,439
Taxes, licenses and fees	518	521	1,173	1,051
Interest expense	345	382	662	768
Total Benefits, Losses and Expenses	15,398	15,311	29,592	29,042
Income Before Income Taxes	667	1,844	2,453	3,127
INCOME TAX EXPENSE (BENEFIT)
Current	161	80	632	168
Deferred	(117)	(170)	(110)	26
Total income tax expense	44	(90)	522	194
Net income	$ 623	$ 1,934	$ 1,931	$ 2,933
INCOME PER COMMON SHARE BASIC AND DILUTED (in dollars per share)	$ 0.25	$ 0.77	$ 0.77	$ 1.18
DIVIDENDS DECLARED PER SHARE	$ 0.04	$ 0.03	$ 0.08	$ 0.06

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Fair Value of Financial Assets and Financial Liabilities

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value of Financial Assets and Financial Liabilities

FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

Our available-for-sale securities consists of fixed maturity and equity securities which are recorded at fair value in the accompanying condensed consolidated balance sheets.  The change in the fair value of these investments, unless deemed to be other-than-temporarily impaired, is recorded as a component of other comprehensive income.

We are permitted to elect to measure financial instruments and certain other items at fair value, with the change in fair value recorded in earnings.  We elected not to measure any eligible items using the fair value option.

Accounting standards define fair value as the price that would be received to sell an asset or would be paid to transfer a liability in an orderly transaction between market participants at the measurement date, and establishes a framework to make the measurement of fair value more consistent and comparable.  In determining fair value, we primarily use prices and other relevant information generated by market transactions involving identical or comparable assets.

The Company categorizes assets and liabilities carried at their fair value based upon a fair value hierarchy:

Level 1 – Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 1 assets and liabilities consist of money market fund deposits and certain of our marketable debt and equity instruments, including equity instruments offsetting deferred compensation, that are traded in an active market with sufficient volume and frequency of transactions.

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 2 assets include certain of our marketable debt and equity instruments with quoted market prices that are traded in less active markets or priced using a quoted market price for similar instruments. Level 2 assets also include marketable equity instruments with security-specific restrictions that would transfer to the buyer, marketable debt instruments priced using indicator prices which represent non-binding market consensus prices that can be corroborated by observable market quotes, as well as derivative contracts and debt instruments priced using inputs that are observable in the market or can be derived principally from or corroborated by observable market data.  Marketable debt instruments in this category generally include commercial paper, bank time deposits, repurchase agreements for fixed-income instruments, and a majority of floating-rate notes, corporate bonds, and municipal bonds.

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

Level 3 assets and liabilities include marketable debt instruments, non-marketable equity investments, derivative contracts, and company issued debt whose values are determined using inputs that are both unobservable and significant to the values of the instruments being measured. Level 3 assets also include marketable debt instruments that are priced using indicator prices that we were unable to corroborate with observable market quotes.

Marketable debt instruments in this category generally include asset-backed securities and certain floating-rate notes, corporate bonds, and municipal bonds.

Assets/Liabilities Measured at Fair Value on a Recurring Basis

Financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2015 are summarized in the following table by the type of inputs applicable to the fair value measurements (in thousands):

	Fair Value Measurements at Reporting Date Using
Description	Total			Level 1		Level 2		Level 3
Financial Assets
Fixed maturities available-for-sale
Corporate debt securities	$	32,839		$	—	$	32,839	$	—
Mortgage backed securities	12,050			—		12,050		—
Private label mortgage backed securities	6,567			—		6,567		—
Obligations of states and political subdivisions	15,925			—		15,925		—
U.S. Treasury securities and obligations of U.S.    Government corporations and agencies	19,267			19,267		—		—
Trading securities	107			107		—		—
Equity securities available-for-sale	4,839			3,702		—		1,137
Total Financial Assets	$	91,594		$	23,076	$	67,381	$	1,137
Financial Liabilities
Interest rate swap	$	(1,330	)	$	—	$	—	$	(1,330	)
Total Financial Liabilities	$	(1,330	)	$	—	$	—	$	(1,330	)

The methods and assumptions the Company uses to estimate the fair value of assets and liabilities measured at fair value on a recurring basis are summarized below.

Fixed maturities available-for-sale — The fair values of the Company’s public fixed maturity securities are generally based on prices obtained from independent pricing services. Consistent with the fair value hierarchy described above, securities with validated quotes from pricing services are generally reflected within Level 2, as they are primarily based on observable pricing for similar assets and/or other market observable inputs.

Trading securities — Trading securities consist primarily of mutual funds whose fair values are determined consistent with similar instruments described above under “Fixed Maturities” and below under “Equity Securities.”

Equity securities — Equity securities consist principally of investments in common and preferred stock of publicly traded companies and privately traded securities. The fair values of our publicly traded equity securities are based on quoted market prices in active markets for identical assets and are classified within Level 1 in the fair value hierarchy.

Estimated fair values for our privately traded equity securities require a substantial level of judgment. Privately traded equity securities are classified within Level 3.

Interest rate swaps — Interest rate swaps are recorded at fair value either as assets, within other assets or as liabilities, within other liabilities. The fair values of our interest rate swaps are provided by a third-party broker and are classified within Level 3.

As of June 30, 2015, Level 3 fair value measurements of assets include $1,137,000 of equity securities in a local community bank whose value is based on an evaluation of the financial statements of the entity. The Company does not develop the unobservable inputs used in measuring fair value.

As of June 30, 2015, Level 3 fair value measurements of liabilities include $1,330,000 net fair value of various interest rate swap agreements whose value is based on analysis provided by a third party broker who utilizes financial modeling tools and assumptions on interest and other factors. The Company does not develop the unobservable inputs used in measuring fair value. Additional information regarding the interest rate swap agreements is provided in Note 7.

The table below presents a reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended June 30, 2015 (in thousands):

For the six months ended June 30, 2015	Equity Securities Available-for-Sale		Interest Rate Swap
Beginning balance	$	1,116	$	(1,238	)
Total gains or losses (realized and unrealized):
Included in earnings	—		—
Included in other comprehensive income	21		(92		)
Purchases:	—		—
Sales:	—		—
Issuances:	—		—
Settlements:	—		—
Transfers in/(out) of Level 3	—		—
Ending balance	$	1,137	$	(1,330	)
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held as of June 30, 2015:	$	—	$	—

For the six months ended June 30, 2015, there were no assets or liabilities measured at fair values on a nonrecurring basis.

Financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2014 are summarized in the following table by the type of inputs applicable to the fair value measurements (in thousands):

	Fair Value Measurements at Reporting Date Using
Description	Total			Level 1		Level 2		Level 3
Financial Assets
Fixed maturities available-for-sale
Corporate debt securities	$	38,667		$	—	$	38,667	$	—
Mortgage backed securities	12,752			—		12,752		—
Private label mortgage backed securities	1,296			—		1,296		—
Obligations of states and political subdivisions	15,899			—		15,899		—
U.S. Treasury securities and obligations of U.S.    Government corporations and agencies	18,272			18,272		—		—
Trading securities	19			19		—		—
Equity securities available-for-sale	4,995			3,879		—		1,116
Total Financial Assets	$	91,900		$	22,170	$	68,614	$	1,116
Financial Liabilities
Interest rate swap	$	(1,238	)	$	—	$	—	$	(1,238	)
Total Financial Liabilities	$	(1,238	)	$	—	$	—	$	(1,238	)

The table below presents a reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2014 (in thousands):

For the year ended December 31, 2014	Equity Securities Available-for-Sale		Interest Rate Swap
Beginning balance	$	875	$	(897	)
Total gains or losses (realized and unrealized):
Included in earnings	—		—
Included in other comprehensive income	241		(341		)
Purchases:	—		—
Sales:	—		—
Issuances:	—		—
Settlements:	—		—
Transfers in/(out) of Level 3	—		—
Ending balance	$	1,116	$	(1,238	)
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held as of December 31, 2014:	$	—	$	—

For the year ended December 31, 2014, there were no assets or liabilities measured at fair values on a nonrecurring basis.

The Company is exposed to certain risks in the normal course of its business operations.  The primary risk that is managed through the use of derivatives is interest rate risk on floating rate borrowings.  This risk is managed through the use of interest rate swap agreements which are designated as cash flow hedges.  For cash flow hedges, the effective portion of the gain or loss on the interest rate swap is included as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged transaction is recognized in earnings.  The Company does not hold or issue derivatives that are not designated as hedging instruments.  See Note 7 for additional information about the interest rate swap agreements.

The following methods and assumptions were used to estimate fair value of each class of financial instrument for which it is practical to estimate that value:

Cash and cash equivalents — the carrying amount is a reasonable estimate of fair value.

Fixed maturities held-to-maturity — the carrying amount is amortized cost; the fair values of the Company’s public fixed maturity securities that are classified as held-to-maturity are generally based on prices obtained from independent pricing services.

Mortgage loans — the carrying amount is a reasonable estimate of fair value due to the restrictive nature and limited marketability of the mortgage notes.

Policy loans — the carrying amount is a reasonable estimate of fair value.

Company owned life insurance — the carrying amount is a reasonable estimate of fair value.

Other invested assets — the carrying amount is a reasonable estimate of fair value.

Other policyholder funds — the carrying amount is a reasonable estimate of fair value.

Debt — the carrying amount is a reasonable estimate of fair value.

The carrying amount and estimated fair value of the Company’s financial instruments as of June 30, 2015 and December 31, 2014 are as follows (in thousands):

	June 30, 2015				December 31, 2014
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Assets and related instruments
Held-to-maturity securities	$	2,649	$	2,724	$	3,108	$	3,182
Mortgage loans	206		206		210		210
Policy loans	1,570		1,570		1,530		1,530
Company owned life insurance	5,065		5,065		5,513		5,513
Other invested assets	3,366		3,366		3,553		3,553
Liabilities and related instruments
Other policyholder funds	1,532		1,532		1,510		1,510
Short-term notes payable and current portion of long-term debt	857		857		857		857
Long-term debt	17,515		17,515		18,715		18,715

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Investments

6 Months Ended

Jun. 30, 2015

Investments [Abstract]

Investments

INVESTMENTS

The amortized cost and aggregate fair values of investments in available-for-sale securities as of June 30, 2015 are as follows (dollars in thousands):

Available-for-sale securities:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Corporate debt securities	$	32,203	$	1,100	$	464	$	32,839
Mortgage backed securities	12,037		182		169		12,050
Private label mortgage backed securities	6,629		32		94		6,567
Obligations of states and political subdivisions	15,146		829		50		15,925
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	18,941		482		156		19,267
Total fixed maturities	84,956		2,625		933		86,648
Equity securities	2,420		2,568		149		4,839
Total	$	87,376	$	5,193	$	1,082	$	91,487

The amortized cost and aggregate fair values of investments in held-to-maturity securities as of June 30, 2015 are as follows (dollars in thousands):

Held-to-maturity securities:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Mortgage backed securities	$	2,595	$	71	$	—	$	2,666
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	54		4		—		58
Total	$	2,649	$	75	$	—	$	2,724

The amortized cost and aggregate fair values of investments in available-for-sale securities as of December 31, 2014 are as follows (dollars in thousands):

Available-for-sale securities:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Corporate debt securities	$	37,299	$	1,773	$	405	$	38,667
Mortgage backed securities	12,691		214		153		12,752
Private label mortgage backed securities	1,261		38		3		1,296
Obligations of states and political subdivisions	14,919		993		13		15,899
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	17,854		525		107		18,272
Total fixed maturities	84,024		3,543		681		86,886
Equity securities	2,420		2,745		170		4,995
Total	$	86,444	$	6,288	$	851	$	91,881

The amortized cost and aggregate fair values of investments in held-to-maturity securities as of December 31, 2014 are as follows (dollars in thousands):

Held-to-maturity securities:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Mortgage backed securities	$	2,818	$	69	$	—	$	2,887
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	290		5		—		295
Total	$	3,108	$	74	$	—	$	3,182

The amortized cost and aggregate fair value of debt securities at June 30, 2015, by contractual maturity, are presented in the following table (dollars in thousands).  Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

(Dollars in Thousands)	Amortized Cost		Fair Value
Available-for-sale securities:
Due in one year or less	$	808	$	813
Due after one year through five years	13,319		14,014
Due after five years through ten years	28,913		29,116
Due after ten years	41,916		42,705
Total	$	84,956	$	86,648
Held-to-maturity securities:
Due in one year or less	$	—	$	—
Due after one year through five years	117		122
Due after five years through ten years	120		132
Due after ten years	2,412		2,470
Total	$	2,649	$	2,724

A summary of securities available-for-sale with unrealized losses as of June 30, 2015, along with the related fair value, aggregated by the length of time that investments have been in a continuous unrealized loss position, is as follows (dollars in thousands):

	Less than 12 months				12 months or longer				Total
June 30, 2015	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Total Securities in a Loss Position
Fixed maturities
Corporate debt securities	$	10,343	$	315	$	2,582	$	149	$	12,925	$	464	27
Mortgage backed securities	4,364		55		1,135		114		5,499		169		14
Private label mortgage backed securities	4,526		92		84		2		4,610		94		7
Obligations of state and political subdivisions	865		38		330		12		1,195		50		3
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	4,264		82		2,442		74		6,706		156		13
Equity securities	—		—		1,137		149		1,137		149		1
	$	24,362	$	582	$	7,710	$	500	$	32,072	$	1,082	65

There were no securities held-to-maturity with unrealized losses as of June 30, 2015.

A summary of securities available-for-sale with unrealized losses as of December 31, 2014, along with the related fair value, aggregated by the length of time that investments have been in a continuous unrealized loss position, is as follows (dollars in thousands):

	Less than 12 months				12 months or longer				Total
December 31, 2014	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Total Securities in a Loss Position
Fixed maturities
Corporate debt securities	$	6,306	$	364	$	1,843	$	41	$	8,149	$	405	18
Mortgage backed securities	1,386		4		1,855		149		3,241		153		12
Private label mortgage backed securities	—		—		97		3		97		3		1
Obligations of state and political subdivisions	—		—		651		13		651		13		2
U.S. Treasury securities and obligations of U.S. Government corporations and agencies	1,475		6		3,499		101		4,974		107		10
Equity securities	—		—		1,116		170		1,116		170		1
	$	9,167	$	374	$	9,061	$	477	$	18,228	$	851	44

There were no securities held-to-maturity with unrealized losses as of December 31, 2014.

The Company conducts periodic reviews to identify and evaluate securities in an unrealized loss position in order to identify other-than-temporary impairments. For securities in an unrealized loss position, the Company assesses whether the Company has the intent to sell the security or more-likely-than-not will be required to sell the security before the anticipated recovery.  If either of these conditions is met, the Company is required to recognize an other-than-temporary impairment with the entire unrealized loss reported in earnings.  For securities in an unrealized loss position that do not meet these conditions, the Company assesses whether the impairment of a security is other-than-temporary.  If the impairment is determined to be other-than-temporary, the Company is required to separate the other-than-temporary impairments into two components:  the amount representing the credit loss and the amount related to all other factors.  The credit loss is the portion of the amortized book value in excess of the net present value of the projected future cash flows discounted at the effective interest rate implicit in the debt security prior to impairment.  The credit loss component of other-than-temporary impairments is reported in earnings, whereas the amount relating to factors other than credit losses are recorded in other comprehensive income, net of taxes.

Management has evaluated each security in a significant unrealized loss position.  The Company has no material exposure to sub-prime mortgage loans and less than 2.84% of the fixed income investment portfolio is rated below investment grade.  In evaluating whether or not the equity loss positions were other-than-temporary impairments, Management evaluated financial information on each company and where available, reviewed analyst reports from at least two independent sources.  Based on a review of the available financial information, the prospect for future earnings of each company and consideration of the Company’s intent and ability to hold the securities until market values recovered, it was determined that the securities in an accumulated loss position in the portfolio were temporary impairments.

For the six months ended June 30, 2015 and year ended December 31, 2014, the Company realized no other-than-temporary impairments.

Major categories of investment income are summarized as follows (dollars in thousands):

	Three months ended June 30,					Six months ended June 30,
	2015			2014		2015			2014
Fixed maturities	$	868		$	857	$	1,762		$	1,716
Equity securities	30			29		60			58
Mortgage loans on real estate	4			3		8			7
Investment real estate	2			1		4			3
Policy loans	30			28		59			55
Company owned life insurance change in surrender value	(96		)	108		(52		)	138
Other	33			74		75			128
	871			1,100		1,916			2,105
Less: Investment expenses	87			70		158			127
Net investment income	$	784		$	1,030	$	1,758		$	1,978

Major categories of investment gains and losses are summarized as follows (dollars in thousands):

	Three months ended June 30,					Six months ended June 30,
	2015			2014		2015			2014
Fixed maturities	$	250		$	159	$	392		$	249
Other, principally real estate	(5		)	153		(5		)	151
Net realized investment gains	$	245		$	312	$	387		$	400

An analysis of the net change in unrealized appreciation on available-for-sale securities follows (dollars in thousands):

	June 30, 2015			December 31, 2014
Net change in unrealized appreciation on available-for-sale securities before deferred tax	$	(1,326	)	$	3,123
Deferred income tax	451			(1,062		)
Net change in unrealized appreciation on available-for-sale securities	$	(875	)	$	2,061

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Subsequent Events

6 Months Ended

Jun. 30, 2015

Subsequent Events [Abstract]

Subsequent Events

SUBSEQUENT EVENTS

Management has evaluated subsequent events and their potential effects on these condensed consolidated financial statements through the filing date of this Form 10-Q.

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Accumulated Other Comprehensive Income

6 Months Ended

Jun. 30, 2015

Equity [Abstract]

Accumulated Other Comprehensive Income

ACCUMULATED OTHER COMPREHENSIVE INCOME

Accumulated other comprehensive income (loss) ("AOCI") includes certain items that are reported directly within a separate component of shareholders' equity. The following table presents changes in AOCI balances (dollars in thousands):

	Six months ended June 30,
	2015			2014
Gains and Losses on Cash Flow Hedges
Balance at beginning of period	$	(816	)	$	(591	)
Other comprehensive income (loss) for period:
Other comprehensive income (loss) before reclassifications	(61		)	(174		)
Amounts reclassified from accumulated other comprehensive income	—			—
Net current period other comprehensive income (loss)	(61		)	(174		)
Balance at end of period	$	(877	)	$	(765	)
Unrealized Gains and Losses on Available-for-Sale Securities
Balance at beginning of period	$	3,588		$	1,527
Other comprehensive income (loss) for period:
Other comprehensive income (loss) before reclassifications	(618		)	2,319
Amounts reclassified from accumulated other comprehensive income	(257		)	(166		)
Net current period other comprehensive income (loss)	(875		)	2,153
Balance at end of period	$	2,713		$	3,680
Total Accumulated Other Comprehensive Income at end of period	$	1,836		$	2,915

The following table presents the amounts reclassified out of AOCI for the six months ended June 30, 2015 (dollars in thousands):

Details about Accumulated Other Comprehensive Income Components	Amounts Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income is Presented
Unrealized Gains and Losses on Available-for-Sale Securities	$	390		Net realized investment gains
	390			Total before tax
	(133		)	Tax (expense) or benefit
	$	257		Net of Tax

The following table presents the amounts reclassified out of AOCI for the six months ended June 30, 2014 (dollars in thousands):

Details about Accumulated Other Comprehensive Income Components	Amounts Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income is Presented
Unrealized Gains and Losses on Available-for-Sale Securities	$	252		Net realized investment gains
	252			Total before tax
	(86		)	Tax (expense) or benefit
	$	166		Net of Tax

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Notes Payable and Long-Term Debt

6 Months Ended

Jun. 30, 2015

Debt Disclosure [Abstract]

Notes Payable and Long-Term Debt

NOTES PAYABLE AND LONG-TERM DEBT

Short-term debt and current portion of long-term debt consisted of the following as of June 30, 2015 and December 31, 2014 (dollars in thousands):

	2015		2014
Line of credit with variable interest rate equal to the Wall Street Journal (WSJ) prime rate, subject to a 5.0% floor; maturity February 2016.  Interest payments due quarterly.  Unsecured.	$	—	$	—
Current portion of installment note payable due November 2015 with variable interest rate equal to the WSJ prime rate plus 1%. Unsecured.	857		857
	$	857	$	857

Long-term debt consisted of the following as of June 30, 2015 and December 31, 2014 (dollars in thousands):

	2015		2014
Line of credit with variable interest rate equal to the WSJ prime rate, subject to a 5.0% floor; maturity February 2016.  Interest payments due quarterly.  Unsecured.	$	—	$	700
Line of credit with variable interest rate equal to the WSJ prime rate, subject to a 4.5% floor; maturity September 2017.  Interest payments due monthly.  Secured.	—		500
Long term portion of installment note with variable interest rate equal to the WSJ prime rate plus 1% and adjustable each November; maturity November 2021. Interest payable annually with principal payable in equal annual installments. Next principal installment on long term portion due November 2015. Unsecured.	5,143		5,143
Subordinated debentures issued on December 15, 2005 with fixed interest rate of 8.83% each distribution period thereafter until December 15, 2015 when the coupon rate shall equal the 3-Month LIBOR plus 3.75% applied to the outstanding principal; maturity December 2035.  Interest payments due quarterly.  All may be redeemed at any time following the tenth anniversary of issuance.  Unsecured.	9,279		9,279
Subordinated debentures issued on June 21, 2007 with a floating interest rate equal to the 3-Month LIBOR plus 3.40% applied to the outstanding principal; maturity June 15, 2037. Interest payments due quarterly.  All may be redeemed at any time following the fifth anniversary of issuance.  Unsecured.	3,093		3,093
	$	17,515	$	18,715

The Company has entered into various swap agreements related to the trust preferred securities. On March 19, 2009, the Company entered into a forward swap effective September 17, 2012, with a notional amount of $3,000,000 and designated the swap as a hedge against changes in cash flows attributable to changes in the benchmark interest rate (LIBOR) associated with the subordinated debentures issued June 21, 2007. Quarterly, commencing September 17, 2012, under the terms of the forward swap, the Company will pay interest at a fixed rate of 7.02% until March 15, 2019. On May 26, 2010, the Company entered into a forward swap with a notional amount of $9,000,000 effective December 15, 2015, which will hedge against changes in cash flows following the termination of the fixed rate period. Quarterly, commencing March 16, 2016 under the terms of the forward swap, the Company will pay interest at a fixed rate of 8.49% until March 15, 2020.

The swaps entered into in 2009 and 2010 have fair values of $244,000 (liability) and $1,086,000 (liability), respectively, for a total liability of $1,330,000 at June 30, 2015 ($1,238,000 at December 31, 2014).  The swap liability is reported as a component of other liabilities on the condensed consolidated balance sheets.  A net valuation loss of $61,000 (net of tax) is included in accumulated other comprehensive income related to the swap agreements at June 30, 2015.  A net valuation loss of $225,000 (net of tax) was included in accumulated other comprehensive income related to the swap at December 31, 2014.

We use dollar offset at the hedge's inception and for each reporting period thereafter to assess whether the derivative used in a hedging transaction is expected to be, and has been, effective in offsetting changes in the fair value of the hedged item. Since inception, no portion of the hedged item has been deemed ineffective. For all hedges, we discontinue hedge accounting if it is determined that a derivative is not expected to be, or has ceased to be, effective as a hedge.

The Company’s interest rate swaps include provisions requiring the Company to post collateral when the derivative is in a net liability position.  At June 30, 2015, the Company has securities on deposit with fair market values of $1,486,000 (all of which is posted as collateral). At December 31, 2014, the Company had securities on deposit with fair market values of $1,494,000 (all of which is posted as collateral). See Note 4 for additional information about the interest rate swaps.

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Shareholders' Equity (Preferred and Common Stock) (Details) - $ / shares	Jun. 30, 2015	Dec. 31, 2014
Class of Stock [Line Items]
Preferred stock, par value	$ 1	$ 1
Preferred stock, shares authorized	500,000	500,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 1	$ 1
Common stock, shares authorized	3,000,000	3,000,000
Common stock, shares issued	2,512,425	2,507,452
Common stock, shares outstanding	2,512,425	2,507,452
Common Class A [Member]
Class of Stock [Line Items]
Common stock, par value	$ 1	$ 1
Common stock, shares authorized	2,000,000	2,000,000
Common stock, shares issued	0	0
Common stock, shares outstanding	0	0

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Property and Equipment

6 Months Ended

Jun. 30, 2015

Property, Plant and Equipment [Abstract]

Property and Equipment

PROPERTY AND EQUIPMENT

Major categories of property and equipment are summarized as follows (dollars in thousands):

	June 30, 2015		December 31, 2014
Building and improvements	$	3,348	$	3,367
Electronic data processing equipment	1,627		1,570
Furniture and fixtures	649		606
	5,624		5,543
Less accumulated depreciation	3,612		3,530
Property and equipment, net	$	2,012	$	2,013

Depreciation expense for the six months ended June 30, 2015 was $94,000 ($306,000 for the year ended December 31, 2014).

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Income Taxes

6 Months Ended

Jun. 30, 2015

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The Company recognizes tax-related interest and penalties as a component of tax expense.  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 2009. Tax returns have been filed through the year 2013.

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 asset positions of $3,782,000 at June 30, 2015 and $3,189,000 at December 31, 2014.

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

	As of June 30, 2015			As of December 31, 2014
General expenses	$	1,467		$	1,371
Unearned premiums	2,130			1,961
Claims liabilities	845			849
Litigation settlement	2,040			2,040
AMT credit	1,121			1,240
Impairment on real estate owned	187			187
Unrealized loss on interest rate swaps	453			421
Deferred tax assets	8,243			8,069
Depreciation	(102		)	(111		)
Deferred policy acquisition costs	(2,962		)	(2,921		)
Unrealized gains on securities available-for-sale	(1,397		)	(1,848		)
Deferred tax liabilities	(4,461		)	(4,880		)
Net deferred tax asset	$	3,782		$	3,189

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

	Six months ended June 30,
	2015			2014
Deferred policy acquisition costs	$	41		$	63
Unearned premiums	(169		)	(219		)
General expenses	(96		)	(33		)
Depreciation	(9		)	(11		)
Claims liabilities	4			(187		)
AMT credit	119			—
NOL carryforward	—			413
Deferred income tax expense	$	(110	)	$	26

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:

	Six months ended June 30,
	2015		2014
Federal income tax rate applied to pre-tax income/loss	34.0	%	34.0	%
Dividends received deduction and tax-exempt interest	(2.1	)%	(2.0	)%
Company owned life insurance	0.7	%	(19.1	)%
Small life deduction	(7.7	)%	(8.9	)%
Other, net	(3.6	)%	2.2	%
Effective federal income tax rate	21.3	%	6.2	%

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Reinsurance

6 Months Ended

Jun. 30, 2015

Reinsurance Disclosures [Abstract]

Reinsurance

REINSURANCE

The Company's insurance operations utilize reinsurance in order to limit losses, minimize exposure to large risks, provide additional capacity for future growth and effect business-sharing arrangements. Life reinsurance is accomplished through yearly renewable term coverage. Property and casualty reinsurance is placed on an excess of loss basis to cover losses from catastrophe events. Reinsurance ceded arrangements do not discharge the insurance subsidiaries as the primary insurer, except for cases involving a novation. Failure of re-insurers to honor their obligations could result in losses to the insurance subsidiaries. The insurance subsidiaries evaluate the financial conditions of their reinsurance companies and monitor concentrations of credit risk arising from similar geographic regions, activities, or economic characteristics of the companies to minimize their exposure to significant losses from reinsurance insolvencies.

In the normal course of business, NSFC seeks to reduce the loss that may arise from catastrophes or other individually significant large loss events that cause unfavorable underwriting results by re-insuring certain levels of risk in various areas of exposure with reinsurance companies.  NSFC maintains a catastrophe reinsurance agreement to cover losses from catastrophic events, primarily hurricanes.

Under the catastrophe reinsurance program, the Company retains the first $4,000,000 in losses from each catastrophe event.  Catastrophe reinsurance coverage is maintained in three layers as follows:

Layer	Reinsurers' Limits of Liability
First Layer	100% of $13,500,000 in excess of $4,000,000
Second Layer	100% of $25,000,000 in excess of $17,500,000
Third Layer	100% of $30,000,000 in excess of $42,500,000

Each reinsurance layer covers events occurring from January 1 through December 31 of the contract year.  All significant reinsurance companies under the program carry A.M. Best ratings of A- (Excellent) or higher, or equivalent ratings.

The Company's catastrophe reinsurance contract allows for one reinstatement. The Company maintains reinstatement premium protection (RPP) to cover reinstatement premiums incurred. The RPP further reduces risk from a major catastrophe and serves to strengthen the Company's capital position by reducing the modeled 100 year event net cost.

Amounts recoverable from re-insurers are estimated in a manner consistent with the claim liability associated with the underlying insurance policies.  Amounts paid for prospective reinsurance contracts are reported as prepaid reinsurance premiums and amortized over the remaining contract period.

In the normal course of business, NSIC seeks to limit its exposure to loss on any single insured and to recover a portion of benefits paid by ceding reinsurance to reinsurance companies under excess coverage contracts.  NSIC retains a maximum of $50,000 of coverage per individual life.  The cost of reinsurance is amortized over the contract period of the reinsurance.

At June 30, 2015, the largest reinsurance recoverable of a single reinsurer was $6,000 ($37,000 at December 31, 2014). Amounts reported as ceded incurred losses in both 2015 and 2014 were related to the development of losses from prior year catastrophes.

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Segments (Schedule of Segment Reporting Information, by Segment) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Segment Reporting Information [Line Items]
Assets	$ 146,493		$ 146,493		$ 144,865
Net premiums earned	14,880	$ 14,100	29,586	$ 27,924
Net investment income	784	1,030	1,758	1,978
Net realized investment gains (losses)	245	312	387	400
Gain on company owned life insurance	0	1,621	0	1,621
Other income	156	92	314	246
Total Revenues	16,065	17,155	32,045	32,169
Policyholder benefits paid	9,435	9,155	17,697	17,019
Amortization of deferred policy acquisition costs	918	873	1,817	1,771
Commissions	2,089	1,967	4,144	3,994
General and administrative expenses	2,093	2,413	4,099	4,439
Taxes, licenses and fees	518	521	1,173	1,051
Interest expense	345	382	662	768
Total Benefits, Losses and Expenses	15,398	15,311	29,592	29,042
Income Before Income Taxes	667	1,844	2,453	3,127
P&C Insurance Operations [Member]
Segment Reporting Information [Line Items]
Assets	83,147		83,147		81,648
Net premiums earned	13,276	12,467	26,398	24,640
Net investment income	336	508	826	963
Net realized investment gains (losses)	99	1	130	49
Gain on company owned life insurance		1,621		1,621
Other income	156	92	313	245
Total Revenues	13,867	14,689	27,667	27,518
Policyholder benefits paid	8,534	7,566	15,311	14,230
Amortization of deferred policy acquisition costs	675	641	1,350	1,282
Commissions	1,997	1,890	3,965	3,835
General and administrative expenses	1,619	1,532	3,159	2,989
Taxes, licenses and fees	472	457	1,016	921
Interest expense	0	0	0	0
Total Benefits, Losses and Expenses	13,297	12,086	24,801	23,257
Income Before Income Taxes	570	2,603	2,866	4,261
Life Insurance Operations [Member]
Segment Reporting Information [Line Items]
Assets	56,526		56,526		56,541
Net premiums earned	1,604	1,633	3,188	3,284
Net investment income	429	503	894	977
Net realized investment gains (losses)	146	310	257	350
Gain on company owned life insurance		0		0
Other income	0	0	1	1
Total Revenues	2,179	2,446	4,340	4,612
Policyholder benefits paid	901	1,589	2,386	2,789
Amortization of deferred policy acquisition costs	243	232	467	489
Commissions	92	77	179	159
General and administrative expenses	324	598	633	1,058
Taxes, licenses and fees	46	64	157	130
Interest expense	13	14	23	31
Total Benefits, Losses and Expenses	1,619	2,574	3,845	4,656
Income Before Income Taxes	560	(128)	495	(44)
Non-Insurance Operations [Member]
Segment Reporting Information [Line Items]
Assets	6,820		6,820		$ 6,676
Net premiums earned	0	0	0	0
Net investment income	19	19	38	38
Net realized investment gains (losses)	0	1	0	1
Gain on company owned life insurance		0		0
Other income	0	0	0	0
Total Revenues	19	20	38	39
Policyholder benefits paid	0	0	0	0
Amortization of deferred policy acquisition costs	0	0	0	0
Commissions	0	0	0	0
General and administrative expenses	150	283	307	392
Taxes, licenses and fees	0	0	0	0
Interest expense	332	368	639	737
Total Benefits, Losses and Expenses	482	651	946	1,129
Income Before Income Taxes	$ (463)	$ (631)	$ (908)	$ (1,090)

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Segments (Schedule of Gross and Net Premiums Earned) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Segment Reporting Information [Line Items]
Gross premiums earned	$ 16,457	$ 15,914	$ 32,669	$ 31,516
Reinsurance premium ceded	(1,577)	(1,814)	(3,083)	(3,592)
Net premiums earned	14,880	14,100	29,586	27,924
Life Insurance Operations [Member]
Segment Reporting Information [Line Items]
Gross premiums earned	1,619	1,645	3,218	3,319
Reinsurance premium ceded	(15)	(12)	(30)	(35)
Net premiums earned	1,604	1,633	3,188	3,284
Life Insurance Operations [Member] | Traditional Life Insurance [Member]
Segment Reporting Information [Line Items]
Gross premiums earned	1,199	1,214	2,377	2,457
Life Insurance Operations [Member] | Accident and Health Insurance [Member]
Segment Reporting Information [Line Items]
Gross premiums earned	420	431	841	862
P&C Insurance Operations [Member]
Segment Reporting Information [Line Items]
Gross premiums earned	14,838	14,269	29,451	28,197
Reinsurance premium ceded	(1,562)	(1,802)	(3,053)	(3,557)
Net premiums earned	13,276	12,467	26,398	24,640
P&C Insurance Operations [Member] | Dwelling Fire & Extended Coverage [Member]
Segment Reporting Information [Line Items]
Gross premiums earned	8,403	7,910	16,603	15,580
P&C Insurance Operations [Member] | Homeowners (Including Mobile Homeowners) [Member]
Segment Reporting Information [Line Items]
Gross premiums earned	5,955	5,916	11,903	11,747
P&C Insurance Operations [Member] | Other Liability [Member]
Segment Reporting Information [Line Items]
Gross premiums earned	$ 480	$ 443	$ 945	$ 870

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Segments (Narrative) (Details)	6 Months Ended
	Jun. 30, 2015 Segments
Segment Reporting [Abstract]
Number of operating segments	1

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Significant Accounting Policies (Earnings Per Share) (Details) - shares	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Accounting Policies [Abstract]
Weighted average number of shares outstanding	2,508,551	2,495,770

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Income Taxes (Deferred Tax Assets and Liabilities) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Income Tax Disclosure [Abstract]
General expenses	$ 1,467	$ 1,371
Unearned premiums	2,130	1,961
Claims liabilities	845	849
Litigation settlement	2,040	2,040
AMT Credit	1,121	1,240
Impairment on real estate owned	187	187
Unrealized loss on interest rate swaps	453	421
Deferred tax assets	8,243	8,069
Depreciation	(102)	(111)
Deferred policy acquisition costs	(2,962)	(2,921)
Unrealized gains on securities available-for-sale	(1,397)	(1,848)
Deferred tax liabilities	(4,461)	(4,880)
Net deferred tax asset	$ 3,782	$ 3,189

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Contingencies

6 Months Ended

Jun. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Contingencies

CONTINGENCIES

The Company and its subsidiaries continue to be named individually as parties to litigation related to the conduct of their insurance operations.  These suits involve alleged breaches of contracts, torts, including bad faith and fraud claims based on alleged wrongful or fraudulent acts of the Company's subsidiaries, and other miscellaneous causes of action. 

The Company's property & casualty subsidiaries are defending a limited number of matters filed in the aftermath of Gustav and Ike in Texas.  These actions include individual lawsuits with allegations of underpayment of hurricane-related claims.

The various suits seek a variety of remedies, including actual and/or punitive damages in unspecified amounts and/or declaratory relief.  The Company has reserves set up on litigated claims and the reserves are included in benefit and loss reserves.

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Fair Value of Financial Assets and Financial Liabilities (Tables)

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

Financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2015 are summarized in the following table by the type of inputs applicable to the fair value measurements (in thousands):

	Fair Value Measurements at Reporting Date Using
Description	Total			Level 1		Level 2		Level 3
Financial Assets
Fixed maturities available-for-sale
Corporate debt securities	$	32,839		$	—	$	32,839	$	—
Mortgage backed securities	12,050			—		12,050		—
Private label mortgage backed securities	6,567			—		6,567		—
Obligations of states and political subdivisions	15,925			—		15,925		—
U.S. Treasury securities and obligations of U.S.    Government corporations and agencies	19,267			19,267		—		—
Trading securities	107			107		—		—
Equity securities available-for-sale	4,839			3,702		—		1,137
Total Financial Assets	$	91,594		$	23,076	$	67,381	$	1,137
Financial Liabilities
Interest rate swap	$	(1,330	)	$	—	$	—	$	(1,330	)
Total Financial Liabilities	$	(1,330	)	$	—	$	—	$	(1,330	)

Financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2014 are summarized in the following table by the type of inputs applicable to the fair value measurements (in thousands):

	Fair Value Measurements at Reporting Date Using
Description	Total			Level 1		Level 2		Level 3
Financial Assets
Fixed maturities available-for-sale
Corporate debt securities	$	38,667		$	—	$	38,667	$	—
Mortgage backed securities	12,752			—		12,752		—
Private label mortgage backed securities	1,296			—		1,296		—
Obligations of states and political subdivisions	15,899			—		15,899		—
U.S. Treasury securities and obligations of U.S.    Government corporations and agencies	18,272			18,272		—		—
Trading securities	19			19		—		—
Equity securities available-for-sale	4,995			3,879		—		1,116
Total Financial Assets	$	91,900		$	22,170	$	68,614	$	1,116
Financial Liabilities
Interest rate swap	$	(1,238	)	$	—	$	—	$	(1,238	)
Total Financial Liabilities	$	(1,238	)	$	—	$	—	$	(1,238	)

Schedule of Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

The table below presents a reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2014 (in thousands):

For the year ended December 31, 2014	Equity Securities Available-for-Sale		Interest Rate Swap
Beginning balance	$	875	$	(897	)
Total gains or losses (realized and unrealized):
Included in earnings	—		—
Included in other comprehensive income	241		(341		)
Purchases:	—		—
Sales:	—		—
Issuances:	—		—
Settlements:	—		—
Transfers in/(out) of Level 3	—		—
Ending balance	$	1,116	$	(1,238	)
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held as of December 31, 2014:	$	—	$	—

The table below presents a reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended June 30, 2015 (in thousands):

For the six months ended June 30, 2015	Equity Securities Available-for-Sale		Interest Rate Swap
Beginning balance	$	1,116	$	(1,238	)
Total gains or losses (realized and unrealized):
Included in earnings	—		—
Included in other comprehensive income	21		(92		)
Purchases:	—		—
Sales:	—		—
Issuances:	—		—
Settlements:	—		—
Transfers in/(out) of Level 3	—		—
Ending balance	$	1,137	$	(1,330	)
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held as of June 30, 2015:	$	—	$	—

Schedule of Fair Value, by Balance Sheet Grouping

The carrying amount and estimated fair value of the Company’s financial instruments as of June 30, 2015 and December 31, 2014 are as follows (in thousands):

	June 30, 2015				December 31, 2014
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Assets and related instruments
Held-to-maturity securities	$	2,649	$	2,724	$	3,108	$	3,182
Mortgage loans	206		206		210		210
Policy loans	1,570		1,570		1,530		1,530
Company owned life insurance	5,065		5,065		5,513		5,513
Other invested assets	3,366		3,366		3,553		3,553
Liabilities and related instruments
Other policyholder funds	1,532		1,532		1,510		1,510
Short-term notes payable and current portion of long-term debt	857		857		857		857
Long-term debt	17,515		17,515		18,715		18,715

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Property and Equipment (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 5,624	$ 5,543
Less accumulated depreciation	3,612	3,530
Property and equipment, net	2,012	2,013
Depreciation expense	94	306
Building and improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	3,348	3,367
Electronic Data Processing Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	1,627	1,570
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 649	$ 606

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Investments (Schedule of Continuous Losses) (Details) $ in Thousands	Jun. 30, 2015 USD ($)	Dec. 31, 2014 USD ($)
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	$ 24,362	$ 9,167
Less than 12 Months, Gross Unrealized Losses	582	374
12 Months or Longer, Fair Value	7,710	9,061
12 Months or Longer, Gross Unrealized Losses	500	477
Total Fair Value	32,072	18,228
Total Gross Unrealized Losses	$ 1,082	$ 851
Total Securities in a Loss Position	65	44
Corporate Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	$ 10,343	$ 6,306
Less than 12 Months, Gross Unrealized Losses	315	364
12 Months or Longer, Fair Value	2,582	1,843
12 Months or Longer, Gross Unrealized Losses	149	41
Total Fair Value	12,925	8,149
Total Gross Unrealized Losses	$ 464	$ 405
Total Securities in a Loss Position	27	18
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	$ 4,364	$ 1,386
Less than 12 Months, Gross Unrealized Losses	55	4
12 Months or Longer, Fair Value	1,135	1,855
12 Months or Longer, Gross Unrealized Losses	114	149
Total Fair Value	5,499	3,241
Total Gross Unrealized Losses	$ 169	$ 153
Total Securities in a Loss Position	14	12
Private Label Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	$ 4,526	$ 0
Less than 12 Months, Gross Unrealized Losses	92	0
12 Months or Longer, Fair Value	84	97
12 Months or Longer, Gross Unrealized Losses	2	3
Total Fair Value	4,610	97
Total Gross Unrealized Losses	$ 94	$ 3
Total Securities in a Loss Position	7	1
US States and Political Subdivisions Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	$ 865	$ 0
Less than 12 Months, Gross Unrealized Losses	38	0
12 Months or Longer, Fair Value	330	651
12 Months or Longer, Gross Unrealized Losses	12	13
Total Fair Value	1,195	651
Total Gross Unrealized Losses	$ 50	$ 13
Total Securities in a Loss Position	3	2
US Treasury Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	$ 4,264	$ 1,475
Less than 12 Months, Gross Unrealized Losses	82	6
12 Months or Longer, Fair Value	2,442	3,499
12 Months or Longer, Gross Unrealized Losses	74	101
Total Fair Value	6,706	4,974
Total Gross Unrealized Losses	$ 156	$ 107
Total Securities in a Loss Position	13	10
Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	$ 0	$ 0
Less than 12 Months, Gross Unrealized Losses	0	0
12 Months or Longer, Fair Value	1,137	1,116
12 Months or Longer, Gross Unrealized Losses	149	170
Total Fair Value	1,137	1,116
Total Gross Unrealized Losses	$ 149	$ 170
Total Securities in a Loss Position	1	1

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Statement of Comprehensive Income [Abstract]
Net income	$ 623	$ 1,934	$ 1,931	$ 2,933
Other comprehensive income (loss), net of tax
Unrealized gains (losses) on securities, net of reclassification adjustment of $257 and $166 for 2015 and 2014, respectively	(1,240)	1,080	(875)	2,153
Unrealized gain (loss) on interest rate swap	56	(98)	(61)	(174)
Other comprehensive income (loss), net of tax	(1,184)	982	(936)	1,979
Comprehensive income (loss)	$ (561)	$ 2,916	$ 995	$ 4,912

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Variable Interest Entities

6 Months Ended

Jun. 30, 2015

Variable Interest Entities [Abstract]

Variable Interest Entities

VARIABLE INTEREST ENTITIES

The Company holds a passive interest in a limited partnership that is considered to be a Variable Interest Entity (VIE) under the provisions of ASC 810 Consolidation. The Company is not the primary beneficiary of the entity and is not required to consolidate under ASC 810. The entity is a private placement investment fund formed for the purpose of investing in private equity investments. The Company owns less than 1% of the limited partnership. The carrying value of the investment totals $249,000 and is included as a component of Other Invested Assets in the accompanying condensed consolidated balance sheets.

In December 2005, the Company formed National Security Capital Trust I, a statutory trust created under the Delaware Statutory Trust Act, for the sole purpose of issuing, in private placement transactions, $9,000,000 of trust preferred securities (TPS) and using the proceeds thereof, together with the equity proceeds received from the Company in the initial formation of the Trust, to purchase $9,279,000 of variable rate subordinated debentures issued by the Company. The Company owns all voting securities of the Trust and the subordinated debentures are the sole assets of the Trust. The Trust will meet the obligations of the TPS with the interest and principal paid on the subordinated debentures. The Company received net proceeds from the TPS transactions, after commissions and other costs of issuance, of $9,005,000. The Company also holds all the voting securities issued by the Trust and such trusts are considered to be VIE's. The Trust is not consolidated because the Company is not the primary beneficiary of the trust. The Subordinated Debentures, disclosed in Note 8, are reported in the accompanying condensed consolidated balance sheets as a component of long-term debt. The Company's equity investments in the Trust total $279,000 and are included in Other Assets in the accompanying condensed consolidated balance sheets.

In June 2007, the Company formed National Security Capital Trust II for the sole purpose of issuing, in private placement transactions, $3,000,000 of trust preferred securities (TPS) and using the proceeds thereof, together with the equity proceeds received from the Company in the initial formation of the Trust, to purchase $3,093,000 unsecured junior subordinated deferrable interest debentures. The Company owns all voting securities of the Trust and the subordinated debentures are the sole assets of the Trust. The Trust will meet the obligations of the TPS with the interest and principal paid on the subordinated debentures. The Company received net proceeds from the TPS transactions, after commissions and other costs of issuance, of $2,995,000. The Company also holds all the voting securities issued by the Trust and such trusts are considered to be VIE's. The Trust is not consolidated because the Company is not the primary beneficiary of the Trust. The Subordinated Debentures, disclosed in Note 7, are reported in the accompanying condensed consolidated balance sheets as a component of long-term debt. The Company's equity investments in the Trust total $93,000 and are included in Other Assets in the accompanying condensed consolidated balance sheets.

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Employee Benefit Plans (Details)	6 Months Ended
	Jun. 30, 2015 USD ($) hours	Jun. 30, 2014 USD ($)
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Minimum hours of service completed in year of contribution | hours	1,000
Matching contribution	$ 115,000	$ 104,000
Employer matching contribution, percent	5.00%
Cash contributions to ESOP	$ 158,000	100,000
Employee Stock Ownership Plan (ESOP), Debt Structure, Indirect Loan, Amount	0
Non-Qualified Deferred Compensation Plans [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Deferred compensation arrangement	$ 89,000	$ 102,000
Executive Officers [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Employer matching contribution, percent	15.00%

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Property and Equipment (Tables)

6 Months Ended

Jun. 30, 2015

Property, Plant and Equipment [Abstract]

Schedule of Property and Equipment

Major categories of property and equipment are summarized as follows (dollars in thousands):

	June 30, 2015		December 31, 2014
Building and improvements	$	3,348	$	3,367
Electronic data processing equipment	1,627		1,570
Furniture and fixtures	649		606
	5,624		5,543
Less accumulated depreciation	3,612		3,530
Property and equipment, net	$	2,012	$	2,013

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Investments (Available-for-Sale Securities) (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 87,376	$ 86,444
Gross Unrealized Gains	5,193	6,288
Gross Unrealized Losses	1,082	851
Fair Value	91,487	91,881
Corporate Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	32,203	37,299
Gross Unrealized Gains	1,100	1,773
Gross Unrealized Losses	464	405
Fair Value	32,839	38,667
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	12,037	12,691
Gross Unrealized Gains	182	214
Gross Unrealized Losses	169	153
Fair Value	12,050	12,752
Private Label Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	6,629	1,261
Gross Unrealized Gains	32	38
Gross Unrealized Losses	94	3
Fair Value	6,567	1,296
US States and Political Subdivisions Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	15,146	14,919
Gross Unrealized Gains	829	993
Gross Unrealized Losses	50	13
Fair Value	15,925	15,899
US Treasury Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	18,941	17,854
Gross Unrealized Gains	482	525
Gross Unrealized Losses	156	107
Fair Value	19,267	18,272
Available-for-sale Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	84,956	84,024
Gross Unrealized Gains	2,625	3,543
Gross Unrealized Losses	933	681
Fair Value	86,648	86,886
Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	2,420	2,420
Gross Unrealized Gains	2,568	2,745
Gross Unrealized Losses	149	170
Fair Value	$ 4,839	$ 4,995

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Segments

6 Months Ended

Jun. 30, 2015

Segment Reporting, Disclosure of Entity's Reportable Segments [Abstract]

Segments

SEGMENTS

The Company’s property and casualty insurance operations comprise one business segment. The property and casualty insurance segment primarily underwrites home insurance coverage with primary lines of business consisting of:  dwelling fire and extended coverage, homeowners (including mobile homeowners) and other liability. The Company has ceased writing ocean marine coverages and no policies were in-force in this line of business during 2015.  

Management organizes the business utilizing a niche strategy focusing on lower valued dwellings.  Our chief decision makers (Chief Executive Officer, Chief Financial Officer and President) review results and operating plans making decisions on resource allocations on a company-wide basis.  The Company’s products are primarily produced through agents within the states in which we operate.  

The Company’s life and accident and health operations comprise the second business segment.  The life and accident and health insurance segment consists of two lines of business: traditional life insurance and accident and health insurance.

Total assets by industry segment at June 30, 2015 and at December 31, 2014 are summarized below (dollars in thousands):

	Total		P&C Insurance Operations		Life Insurance Operations		Non-Insurance Operations
June 30, 2015	$	146,493	$	83,147	$	56,526	$	6,820
December 31, 2014	$	144,865	$	81,648	$	56,541	$	6,676

Premium revenues and operating income by business segment for the three and six months ended June 30, 2015 and 2014 are summarized below (dollars in thousands):

Three months ended June 30, 2015	Total		P&C Insurance Operations		Life Insurance Operations		Non-Insurance Operations
REVENUE
Net premiums earned	$	14,880	$	13,276	$	1,604	$	—
Net investment income	784		336		429		19
Net realized investment gains (losses)	245		99		146		—
Other income	156		156		—		—
	16,065		13,867		2,179		19
BENEFITS AND EXPENSES
Policyholder benefits paid	9,435		8,534		901		—
Amortization of deferred policy acquisition costs	918		675		243		—
Commissions	2,089		1,997		92		—
General and administrative expenses	2,093		1,619		324		150
Taxes, licenses and fees	518		472		46		—
Interest expense	345		—		13		332
	15,398		13,297		1,619		482
Income (Loss) Before Income Taxes	$	667	$	570	$	560	$	(463	)

Three months ended June 30, 2014	Total		P&C Insurance Operations		Life Insurance Operations			Non-Insurance Operations
REVENUE
Net premiums earned	$	14,100	$	12,467	$	1,633		$	—
Net investment income	1,030		508		503			19
Net realized investment gains	312		1		310			1
Gain on company owned life insurance	1,621		1,621		—			—
Other income	92		92		—			—
	17,155		14,689		2,446			20
BENEFITS AND EXPENSES
Policyholder benefits paid	9,155		7,566		1,589			—
Amortization of deferred policy acquisition costs	873		641		232			—
Commissions	1,967		1,890		77			—
General and administrative expenses	2,413		1,532		598			283
Taxes, licenses and fees	521		457		64			—
Interest expense	382		—		14			368
	15,311		12,086		2,574			651
Income (Loss) Before Income Taxes	$	1,844	$	2,603	$	(128	)	$	(631	)

Six months ended June 30, 2015	Total		P&C Insurance Operations		Life Insurance Operations		Non-Insurance Operations
REVENUE
Net premiums earned	$	29,586	$	26,398	$	3,188	$	—
Net investment income	1,758		826		894		38
Net realized investment gains (losses)	387		130		257		—
Other income	314		313		1		—
	32,045		27,667		4,340		38
BENEFITS AND EXPENSES
Policyholder benefits paid	17,697		15,311		2,386		—
Amortization of deferred policy acquisition costs	1,817		1,350		467		—
Commissions	4,144		3,965		179		—
General and administrative expenses	4,099		3,159		633		307
Taxes, licenses and fees	1,173		1,016		157		—
Interest expense	662		—		23		639
	29,592		24,801		3,845		946
Income (Loss) Before Income Taxes	$	2,453	$	2,866	$	495	$	(908	)

Six months ended June 30, 2014	Total		P&C Insurance Operations		Life Insurance Operations			Non-Insurance Operations
REVENUE
Net premiums earned	$	27,924	$	24,640	$	3,284		$	—
Net investment income	1,978		963		977			38
Net realized investment gains	400		49		350			1
Gain on company owned life insurance	1,621		1,621		—			—
Other income	246		245		1			—
	32,169		27,518		4,612			39
BENEFITS AND EXPENSES
Policyholder benefits paid	17,019		14,230		2,789			—
Amortization of deferred policy acquisition costs	1,771		1,282		489			—
Commissions	3,994		3,835		159			—
General and administrative expenses	4,439		2,989		1,058			392
Taxes, licenses and fees	1,051		921		130			—
Interest expense	768		—		31			737
	29,042		23,257		4,656			1,129
Income (Loss) Before Income Taxes	$	3,127	$	4,261	$	(44	)	$	(1,090	)

The following table presents the Company’s gross and net premiums written for the property and casualty segment and the life and accident and health segment for the three and six months ended June 30, 2015 and 2014, respectively:

	Three months ended June 30,						Six months ended June 30,
	2015			2014			2015			2014
Life, accident and health operations premiums written:
Traditional life insurance	$	1,104		$	1,137		$	2,241		$	2,316
Accident and health insurance	422			431			841			875
Gross life, accident and health	1,526			1,568			3,082			3,191
Reinsurance premium ceded	(15		)	(12		)	(30		)	(35		)
Net life, accident and health premiums written	$	1,511		$	1,556		$	3,052		$	3,156
Property and Casualty operations premiums written:
Dwelling fire & extended coverage	$	9,454		$	9,219		$	18,182		$	17,548
Homeowners (Including mobile homeowners)	6,715			6,879			12,466			12,628
Other liability	549			521			1,054			990
Gross property and casualty	16,718			16,619			31,702			31,166
Reinsurance premium ceded	(1,229		)	(1,802		)	(2,720		)	(3,557		)
Net property and casualty written	$	15,489		$	14,817		$	28,982		$	27,609
Consolidated gross premiums written	$	18,244		$	18,187		$	34,784		$	34,357
Reinsurance premium ceded	(1,244		)	(1,814		)	(2,750		)	(3,592		)
Consolidated net premiums written	$	17,000		$	16,373		$	32,034		$	30,765

The following table presents the Company’s gross and net premiums earned for the property and casualty segment and the life and accident and health segment three and six months ended June 30, 2015 and 2014, respectively:

	Three months ended June 30,						Six months ended June 30,
	2015			2014			2015			2014
Life, accident and health operations premiums earned:
Traditional life insurance	$	1,199		$	1,214		$	2,377		$	2,457
Accident and health insurance	420			431			841			862
Gross life, accident and health	1,619			1,645			3,218			3,319
Reinsurance premium ceded	(15		)	(12		)	(30		)	(35		)
Net life, accident and health premiums earned	$	1,604		$	1,633		$	3,188		$	3,284
Property and Casualty operations premiums earned:
Dwelling fire & extended coverage	$	8,403		$	7,910		$	16,603		$	15,580
Homeowners (Including mobile homeowners)	5,955			5,916			11,903			11,747
Other liability	480			443			945			870
Gross property and casualty	14,838			14,269			29,451			28,197
Reinsurance premium ceded	(1,562		)	(1,802		)	(3,053		)	(3,557		)
Net property and casualty earned	$	13,276		$	12,467		$	26,398		$	24,640
Consolidated gross premiums earned	$	16,457		$	15,914		$	32,669		$	31,516
Reinsurance premium ceded	(1,577		)	(1,814		)	(3,083		)	(3,592		)
Consolidated net premiums earned	$	14,880		$	14,100		$	29,586		$	27,924