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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

7.

Income Taxes

The Company’s deferred income tax assets and liabilities are as follows:

 

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(in thousands)

 

Deferred income tax assets:

 

 

 

 

 

 

 

 

Discounting of net unpaid loss and loss adjustment expenses

 

$

18,018

 

 

$

19,297

 

Unearned premiums

 

 

6,560

 

 

 

6,984

 

Accrued expenses and other

 

 

2,385

 

 

 

2,947

 

State income tax

 

 

2,135

 

 

 

2,212

 

Accrued policyholder dividends

 

 

1,989

 

 

 

2,020

 

Accrued insurance-related assessments

 

 

1,901

 

 

 

1,963

 

Total deferred tax assets

 

 

32,988

 

 

 

35,423

 

Less: Valuation allowance

 

 

—

 

 

 

(2,169

)

Net deferred tax assets

 

 

32,988

 

 

 

33,254

 

 

 

 

 

 

 

 

 

 

Deferred income tax liabilities:

 

 

 

 

 

 

 

 

Deferred policy acquisition costs

 

 

(4,430

)

 

 

(4,547

)

Unrealized gain on securities available-for-sale

 

 

(7,791

)

 

 

(7,194

)

Property and equipment and other

 

 

(298

)

 

 

(260

)

Salvage and subrogation

 

 

(428

)

 

 

(516

)

Loss reserves adjustment

 

 

(5,657

)

 

 

(7,072

)

Total deferred income tax liabilities

 

 

(18,604

)

 

 

(19,589

)

Net deferred income taxes

 

$

14,384

 

 

$

13,665

 

 

The components of consolidated income tax expense (benefit) are as follows:

 

  

 

Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

 

 

(in thousands)

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

11,368

 

 

$

17,760

 

 

$

20,658

 

State

 

 

1,055

 

 

 

900

 

 

 

1,297

 

 

 

 

12,423

 

 

 

18,660

 

 

 

21,955

 

Deferred:

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

 

2,943

 

 

 

1,403

 

 

 

732

 

State

 

 

(1,673

)

 

 

254

 

 

 

140

 

 

 

 

1,270

 

 

 

1,657

 

 

 

872

 

Total

 

$

13,693

 

 

$

20,317

 

 

$

22,827

 

 

As of December 31, 2021 the Company had no valuation allowance against its deferred income tax assets and liabilities.  As of December 31, 2020 and 2019, the Company had a valuation allowance against its deferred income tax benefits of $2.2 million and $2.0 million, respectively.

Income tax expense from operations is different from the amount computed by applying the U.S. federal income tax statutory rate of 21% to income before income taxes as follows:

 

 

 

Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

 

 

(in thousands)

 

Income tax computed at federal statutory tax rate

 

$

16,684

 

 

$

22,453

 

 

$

24,258

 

Tax-exempt interest, net

 

 

(2,511

)

 

 

(3,226

)

 

 

(2,999

)

State income tax

 

 

911

 

 

 

1,080

 

 

 

(591

)

Dividends received deduction

 

 

(107

)

 

 

(89

)

 

 

(59

)

Valuation allowance

 

 

(1,803

)

 

 

46

 

 

 

2,025

 

Prior year adjustments

 

 

344

 

 

 

3

 

 

 

30

 

Other

 

 

175

 

 

 

50

 

 

 

163

 

 

 

$

13,693

 

 

$

20,317

 

 

$

22,827

 

 

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic.  The bill intended to bolster the U.S. economy, among other things, and provide emergency assistance to qualifying businesses and individuals.  The Company was able to take advantage of a provision in the Act delaying payment of certain payroll taxes until 2021 and 2022.  The CARES Act had no material impact on the Company’s financial statements.

 

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. There were no uncertain tax positions as of December 31, 2021, 2020 and 2019.

Tax years 2018 through 2021 are subject to examination by the federal and state taxing authorities.