Federal Income Tax

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Federal Income Tax

FEDERAL INCOME TAX

Federal income tax expense (benefit) is composed of the following:

Years Ended December 31,	2023		2022		2021
Current	$	(2,217)	$	1,627	$	11,081
Deferred	(7,803)		(4,581)		5,168
Total	$	(10,021)	$	(2,954)	$	16,249

A reconciliation of income tax expense (benefit) computed at the applicable federal tax rate of 21.0 percent in 2023, 2022 and 2021 to the amount recorded in the accompanying Consolidated Statements of Income and Comprehensive Income is as follows:

Years Ended December 31,	2023		2022		2021
Computed expected income tax expense (benefit)	$	(8,339)	$	2,536	$	20,337
Tax-exempt municipal bond interest income	(2,763)		(3,115)		(3,412)
Nontaxable dividend income	(269)		(378)		(361)
Compensation	596		582		770
Research & development credit	540		(1,591)		(1,545)
Other, net	215		(988)		460
Consolidated federal income tax expense (benefit)	$	(10,021)	$	(2,954)	$	16,249
Reconciliation of consolidated federal income tax expense (benefit) from:
Consolidated federal income tax expense (benefit)	$	(10,021)	$	(2,954)	$	16,249

We measure certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is 21.0 percent. The significant components of our net deferred tax liability at December 31, 2023 and 2022 are as follows:

December 31,	2023		2022
Deferred tax liabilities
Net unrealized appreciation on investment securities:
Equity securities	$	5,414	$	19,701
Deferred policy acquisition costs	26,572		21,887
Investments in partnerships	1,713		1,303
Over funded pension benefit	4,256		232
Prepaid pension cost	7,090		5,653
Net bond discount accretion	213		238
Depreciation	3,637		3,996
Revaluation of investment basis (1)	—		119
Identifiable intangible assets (1)	944		1,093
Capitalized Software	2,310		3,607
Other	2,432		1,550
Gross deferred tax liability	54,581		$	59,379
Deferred tax assets
Financial statement reserves in excess of income tax reserves	$	20,414	$	22,522
Unearned premium adjustment	20,618		18,513
Employee profit sharing	1,623		1,624
Other-than-temporary impairment of investments	451		1,109
Compensation expense related to stock options	1,760		1,822
Nonqualified deferred compensation	2,493		2,399
Net Unrealized Appreciation - all other securities	17,753		23,382
Revaluation of investment basis (1)	23		—
Other	3,067		3,539
Gross deferred tax asset	$	68,202	$	74,910
Valuation allowance	—		—
Deferred tax asset	$	68,202	$	74,910
Net deferred tax liability (asset)	$	(13,621)	$	(15,531)

(1) Related to our acquisition of Mercer Insurance Group, Inc.

Deferred tax assets are reduced by a valuation allowance when management believes it is more likely than not that some, or all, of the deferred taxes will not be realized. After considering all positive and negative evidence of taxable income in the carryback and carryforward periods and our tax planning strategy of holding debt securities with unrealized losses to recovery, we believe it is more likely than not that all the deferred assets will be realized. As a result, we have no valuation allowance at December 31, 2023 and 2022.