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

12 Months Ended

Dec. 31, 2014

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, 2014 and 2013

(In thousands)

	2014		2013
ASSETS
Cash and cash equivalents	$	11,839	$	8,063
Investment in subsidiaries		325,608		316,295
Deferred federal income taxes		747		930
Other assets		4,061		3,729
	$	342,255	$	329,017
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Revolving credit facility payable	$	-	$	1,473
Subordinated debt securities		56,702		56,702
Current federal income tax payable		64		3,353
Accounts payable and other accrued expenses		33,452		29,371
		90,218		90,899
Stockholders’ equity:
Common stock, $.18 par value, authorized 33,333,333 shares; issued 20,872,831 shares in 2014 and in 2013		3,757		3,757
Capital in excess of par value		123,194		122,827
Retained earnings		119,638		106,209
Accumulated other comprehensive income		17,801		16,883
Treasury stock (1,655,306 shares in 2014 and 1,609,374 in 2013), at cost		(12,353)		(11,558)
Total stockholders’ equity		252,037		238,118
Total liabilities and stockholders’ equity	$	342,255	$	329,017

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, 2014, 2013 and 2012

(In thousands)

	2014		2013		2012
Investment income (loss), net of expenses	$	133	$	(190)	$	(181)
Dividend income from subsidiaries		8,000		-		-
Management fee income		9,614		8,518		8,485
		17,747		8,328		8,304
Operating expenses		9,759		7,764		8,079
Interest expense		4,576		4,599		4,634
Amortization of intangible assets		-		-		17
		14,335		12,363		12,730
Income (loss) before equity in undistributed earnings (loss) of subsidiaries and income tax benefit		3,412		(4,035)		(4,426)
Income tax benefit		(1,623)		(1,227)		(1,627)
Income (loss) before equity in undistributed earnings (loss) of subsidiaries		5,035		(2,808)		(2,799)
Equity in undistributed share of earnings in subsidiaries		8,395		11,053		6,323
Net income	$	13,430	$	8,245	$	3,524
Comprehensive income	$	14,347	$	17,229	$	4,977

See accompanying report of independent registered public accounting firm.

FINANCIAL STATEMENT SCHEDULES

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, 2014, 2013 and 2012

(In thousands)

	2014		2013		2012
Cash flows from operating activities:
Net income	$	13,430	$	8,245	$	3,524
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization expense		68		92		113
Deferred income tax expense (benefit)		183		1,182		(1,725)
Undistributed share of earnings of subsidiaries		(8,395)		(11,053)		(6,323)
Change in current federal income tax (recoverable)payable		(3,289)		(3,694)		4,030
Change in all other liabilities		4,081		12,232		357
Change in all other assets		(132)		63		450
Net cash provided by operating activities		5,946		7,067		426
Cash flows from investing activities:
Purchases of property and equipment, net		(47)		(116)		(46)
Net cash used in investing activities		(47)		(116)		(46)
Cash flows from financing activities:
Proceeds from exercise of employee stock options		1,155		-		-
Purchase of treasury shares		(1,805)		-		-
Activity under revolving credit facility, net		(1,473)		-		(2,577)
Net cash used in financing activities		(2,123)		-		(2,577)
Increase (decrease) in cash and cash equivalents		3,776		6,951		(2,197)
Cash and cash equivalents at beginning of year		8,063		1,112		3,309
Cash and cash equivalents at end of year	$	11,839	$	8,063	$	1,112
Supplemental cash flow information:
Interest paid	$	(4,576)	$	(4,599)	$	(4,656)
Income taxes (paid) recovered	$	(1,481)	$	(1,285)	$	3,932

See accompanying report of independent registered public accounting firm.