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

12 Months Ended

Dec. 31, 2020

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, 2020 and 2019

(In thousands)

	2020		2019
ASSETS
Debt securities, available-for-sale, at fair value (amortized cost; $ 0 in 2020 and $150 in 2019)	$	—	$	1,024
Cash and cash equivalents		30,066		19,637
Investment in subsidiaries		247,839		358,436
Deferred federal income taxes		285		1,053
Federal income tax recoverable		12,506		5,904
Other assets		19,844		21,278
Total assets	$	310,540	$	407,332
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Senior unsecured notes due 2029 (less unamortized debt issuance cost of $844 in 2020 and $942 in 2019)	$	49,156	$	49,058
Subordinated debt securities (less unamortized debt issuance cost of $795 in 2020 and $846 in 2019)		55,907		55,856
Accounts payable and other accrued expenses		34,555		39,136
Total liabilities		139,618		144,050
Stockholders’ equity:
Common stock, $.18 par value, authorized 33,333,333 shares; issued 20,872,831 shares in 2020 and in 2019		3,757		3,757
Additional paid-in capital		122,893		123,468
Retained earnings		68,915		160,570
Accumulated other comprehensive income		383		688
Treasury stock (2,730,673 shares in 2020 and 2,749,738 in 2019), at cost		(25,026)		(25,201)
Total stockholders’ equity		170,922		263,282
Total liabilities and stockholders’ equity	$	310,540	$	407,332

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, 2020 and 2019

(In thousands)

	2020		2019
Investment income, net of expenses	$	20	$	47
Dividend income from subsidiaries		12,000		15,500
Net realized gains		744		830
Management fee income		22,844		16,044
Total revenues		35,608		32,421
Operating expenses		17,101		14,185
Interest expense		5,326		5,410
Total expenses		22,427		19,595
Income before equity in undistributed earnings of subsidiaries and income tax benefit		13,181		12,826
Income tax expense		(5,592)		(732)
Income before equity in undistributed earnings of subsidiaries		18,773		13,558
Equity in undistributed share of loss in subsidiaries		(110,428)		(14,183)
Net loss	$	(91,655)	$	(625)
Comprehensive (loss) income	$	(91,960)	$	6,723

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, 2020 and 2019

(In thousands)

	2020		2019
Cash flows from operating activities:
Net loss	$	(91,655)	$	(625)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization expense		835		381
Deferred income tax expense (benefit)		768		(611)
Net realized gains		(744)		(830)
Undistributed share of loss of subsidiaries		110,428		14,183
Change in current federal income tax (recoverable) payable		(6,602)		229
Change in all other liabilities		(17,851)		994
Change in all other assets		14,368		(2,339)
Net cash provided by operating activities		9,547		11,382
Cash flows from investing activities:
Purchases of property and equipment		(716)		(1,211)
Purchase of investment securities		—		(1,259)
Maturities, sales and redemptions of investment securities		1,598		1,405
Capital contribution to subsidiaries		—		(20,000)
Net cash provided by investing activities		882		(21,065)
Cash flows from financing activities:
Proceeds from exercise of employee stock options		—		1,520
Payment of revolving credit facility		—		(30,000)
Payment of debt issuance costs		—		(979)
Proceeds from senior unsecured note offering		—		50,000
Purchase of treasury shares		—		(1,380)
Net cash used provided by (used in) financing activities		—		19,161
Increase in cash and cash equivalents		10,429		9,478
Cash and cash equivalents at beginning of year		19,637		10,159
Cash and cash equivalents at end of year	$	30,066	$	19,637
Supplemental cash flow information:
Interest paid	$	4,860	$	4,289
Income taxes paid (recovered)	$	204	$	(448)

See accompanying report of independent registered public accounting firm.