Income taxes (Tables)

12 Months Ended

Dec. 31, 2017

Components of Income Tax Expense (Benefit)

Income tax expense includes the following components for the years ending December 31, 2017, 2016 and 2015:



	Year Ended December 31,
	2017		2016		2015
	(in thousands)
Current federal income tax expense	$	12,555	$	12,808	$	12,163
Deferred federal income tax expense (benefit)	1,065		561		(879		)
Income tax expense	$	13,620	$	13,369	$	11,284

Effective Income Tax Rate Reconciliation

The Company’s effective income tax rate on income before income taxes differs from the prevailing federal income tax rate and is summarized as follows:



	Year ended December 31,
	2017			2016			2015
	(in thousands)
Income tax expense at federal income tax rate of 35%	$	13,482		$	13,837		$	11,745
Tax-exempt investment income	(1,064		)	(528		)	(436		)
Stock options exercised	(471		)	—			—
Effect of tax rate change	1,915			—			—
Other	(242		)	60			(25		)
Total	$	13,620		$	13,369		$	11,284

Deferred Tax Assets and Liabilities

The significant components of the net deferred tax asset are summarized as follows:



	December 31,
	2017			2016
	(in thousands)
Deferred tax assets:
Unpaid losses and loss adjustment expenses	$	7,001		$	4,528
Unearned premiums	3,748			5,308
Organizational costs	230			1,513
State operating loss carryforwards	645			476
Allowance for doubtful accounts	449			693
Other	431			438
Deferred tax assets before allowance	12,504			12,956
Less: valuation allowance	(690		)	(623		)
Total deferred tax assets	11,814			12,333

Deferred tax liabilities:
Unrealized gain on investments	2,375			620
Deferred policy acquisition costs, net of ceding commissions	2,473			3,553
Intangible assets	743			1,238
Transition adjustment for loss reserve discount	3,524			—
Other	207			317
Total deferred tax liabilities	9,322			5,728
Net deferred tax asset	$	2,492		$	6,605

Unrecognized Tax Benefits

A reconciliation of the beginning and ending amounts of unrecognized tax benefits for 2017 and 2016 was as follows:



	December 31,
	2017			2016
	(in thousands)
Balance at beginning of year	$	1,003		$	1,125
Deductions for tax positions taken during prior years	(1,003		)	(122		)
Balance at end of year	$	—		$	1,003