Income Taxes (Tables)

6 Months Ended

Jun. 30, 2018

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, 2018			As of December 31, 2017
General expenses	$	1,071		$	1,069
Unearned premiums	1,348			1,269
Claims liabilities	470			484
AMT credit	788			1,575
Impairment on real estate owned	116			116
Unrealized losses on securities available-for-sale	310			—
Unrealized loss on interest rate swaps	72			128
Deferred tax assets	4,175			4,641

Depreciation	(82		)	(88		)
Deferred policy acquisition costs	(1,710		)	(1,706		)
Pre-1984 policyholder surplus account	(496		)	(529		)
Unrealized gains on securities available-for-sale	—			(831		)
Unrealized gains on equity securities	(482		)	—
Deferred tax liabilities	(2,770		)	(3,154		)
Net deferred tax asset	$	1,405		$	1,487

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,
	2018			2017
Deferred policy acquisition costs	$	4		$	57
Unearned premiums	(79		)	(163		)
General expenses	(2		)	30
Depreciation	(6		)	(4		)
Claims liabilities	14			(109		)
AMT credit	787			(47		)
Impact of repeal of special provision on pre-1984 policyholder surplus	(33		)	—
Unrealized gains on equity securities	(77		)	—
Deferred income tax expense (benefit)	$	608		$	(236	)

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,
	2018		2017
Federal income tax rate applied to pre-tax income/loss	21.0	%	34.0	%
Dividends received deduction and tax-exempt interest	(1.2	)%	1.4	%
Company owned life insurance	2.3	%	0.8	%
Small life deduction	—	%	11.5	%
Other, net	1.7	%	(1.4	)%
Effective federal income tax rate	23.8	%	46.3	%