INCOME TAXES

3 Months Ended

Mar. 31, 2022

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 2015. Tax returns have been filed through the year 2020.

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 $3,250,000 at March 31, 2022 and $2,403,000 at December 31, 2021.

The tax effect of significant differences representing deferred tax assets and liabilities are as follows:

($ in thousands)	As of March 31,  2022		As of December 31,  2021
General expenses	$	1,513	$	1,548
Unearned premiums	1,476		1,436
Claims liabilities	755		751
NOL carryforward	1,138		1,459
Impairment on real estate owned	147		147
Unrealized losses on trading securities	3		—
Unrealized losses on securities available-for-sale	599		—
Deferred tax assets	5,631		5,341
Depreciation	(96)		(99)
Deferred policy acquisition costs	(1,518)		(1,540)
Pre-1984 policyholder surplus account	(248)		(265)
Unrealized gains on securities available-for-sale	—		(537)
Unrealized gains on equity securities	(519)		(497)
Deferred tax liabilities	(2,381)		(2,938)
Net deferred tax asset	$	3,250	$	2,403

The appropriate income tax effects of changes in temporary differences are as follows:

($ in thousands)	Three months ended March 31,
	2022		2021
Deferred policy acquisition costs	$	(22)	$	(4)
Trading securities	(3)		(2)
Unearned premiums	(40)		(82)
General expenses	35		(8)
Depreciation	(3)		(2)
Claims liabilities	(4)		13
Impact of repeal of special provision on pre-1984 policyholder surplus	(17)		(17)
NOL carryforward	321		336
Unrealized gains (losses) on equity securities	22		—
Deferred income tax expense	$	289	$	234

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

	Three months ended March 31,
	2022		2021
Federal income tax rate applied to pre-tax income (loss)	21.0	%	21.0	%
Dividends received deduction and tax-exempt interest	(0.2)	%	(0.3)	%
Company owned life insurance	5.9	%	1.3	%
Other, net	0.1	%	(0.1)	%
Effective federal income tax rate	26.8	%	21.9	%

At March 31, 2022, the Company has approximately $5,419,000 of net operating loss carryforwards available ($1,138,000 tax benefit) to be applied to future periods. These carryforwards expire in 2040.