Schedule II - Condensed Financial Information of Registrant (Parent Company Only)

12 Months Ended

Dec. 31, 2018

Condensed Financial Information Of Parent Company Only Disclosure [Abstract]

Condensed Financial Information of Parent Company Only Disclosure

Schedule II – Condensed Financial Information of Registrant (Parent Company Only)

HALLMARK FINANCIAL SERVICES, INC.

BALANCE SHEETS

December 31, 2018 and 2017

(In thousands)

	2018		2017
ASSETS
Debt securities, available-for-sale, at fair value (amortized cost; $150 in 2018 and $150 in 2017)	$	786	$	150
Cash and cash equivalents		10,159		12,194
Investment in subsidiaries		344,904		344,496
Deferred federal income taxes		442		493
Federal income tax recoverable		6,133		3,914
Other assets		3,784		3,571
Total assets	$	366,208	$	364,818
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Revolving credit facility payable	$	30,000	$	30,000
Subordinated debt securities (less unamortized debt issuance cost of $898 in 2018 and $949 in 2017)		55,804		55,753
Accounts payable and other accrued expenses		24,872		27,947
Total liabilities		110,676		113,700
Stockholders’ equity:
Common stock, $.18 par value, authorized 33,333,333 shares; issued 20,872,831 shares in 2018 and in 2017		3,757		3,757
Additional paid-in capital		123,168		123,180
Retained earnings		161,195		136,474
Accumulated other comprehensive income		(6,660)		12,234
Treasury stock (2,846,131 shares in 2018 and  2,703,803 in 2017), at cost		(25,928)		(24,527)
Total stockholders’ equity		255,532		251,118
Total liabilities and stockholders’ equity	$	366,208	$	364,818

See accompanying report of independent registered public accounting firm.

Schedule II (Continued) – Condensed Financial Information of Registrant (Parent Company Only)

HALLMARK FINANCIAL SERVICES, INC.

STATEMENTS OF OPERATIONS

For the years ended December 31, 2018 and 2017

(In thousands)

	2018		2017
Investment income, net of expenses	$	290	$	210
Dividend income from subsidiaries		5,525		11,375
Net realized losses		—		(759)
Management fee income		14,736		11,896
Total revenues		20,551		22,722
Operating expenses		11,395		10,265
Interest expense		4,545		4,512
Total expenses		15,940		14,777
Income before equity in undistributed earnings (loss) of subsidiaries and income tax benefit		4,611		7,945
Income tax benefit		(306)		(947)
Income before equity in undistributed earnings (loss) of subsidiaries		4,917		8,892
Equity in undistributed share of earnings (loss) in subsidiaries		5,430		(20,445)
Net income (loss)	$	10,347	$	(11,553)
Comprehensive income (loss)	$	5,827	$	(9,690)

See accompanying report of independent registered public accounting firm.

Schedule II (Continued) – Condensed Financial Information of Registrant (Parent Company Only)

HALLMARK FINANCIAL SERVICES, INC.

STATEMENTS OF CASH FLOWS

For the years ended December 31, 2018 and 2017

(In thousands)

	2018		2017
Cash flows from operating activities:
Net income (loss)	$	10,347	$	(11,553)
Adjustments to reconcile net income (loss) to cash (used in) provided by operating activities:
Depreciation and amortization expense		377		367
Deferred income tax expense (benefit)		51		(160)
Net realized losses		—		759
Undistributed share of (earnings) loss of subsidiaries		(5,430)		20,445
Change in current federal income tax recoverable		(2,219)		(1,158)
Change in all other liabilities		(3,075)		306
Change in all other assets		(466)		632
Net cash (used in) provided by operating activities		(415)		9,638
Cash flows from investing activities:
Purchases of property and equipment		(55)		(97)
Purchase of investment securities		—		(1,304)
Net cash used in investing activities		(55)		(1,401)
Cash flows from financing activities:
Proceeds from exercise of employee stock options		242		231
Purchase of treasury shares		(1,807)		(5,308)
Net cash used in financing activities		(1,565)		(5,077)
(Decrease) increase in cash and cash equivalents		(2,035)		3,160
Cash and cash equivalents at beginning of year		12,194		9,034
Cash and cash equivalents at end of year	$	10,159	$	12,194
Supplemental cash flow information:
Interest paid	$	4,842	$	4,506
Income taxes paid	$	1,996	$	372

See accompanying report of independent registered public accounting firm.