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

12 Months Ended

Dec. 31, 2022

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, 2022 and 2021

(In thousands)

	2022		2021
ASSETS
Cash and cash equivalents		35,884		32,482
Investment in subsidiaries		148,846		239,832
Deferred federal income taxes		—		50
Federal income tax recoverable		—		9,028
Other assets		18,792		19,913
Total assets	$	203,522	$	301,305
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Senior unsecured notes due 2029 (less unamortized debt issuance cost of $648 in 2022 and $746 in 2021)	$	49,352	$	49,254
Subordinated debt securities (less unamortized debt issuance cost of $691 in 2022 and $744 in 2021)		56,011		55,959
Federal income tax payable		12,315		—
Deferred federal income taxes		11,020		—
Accounts payable and other accrued expenses		14,530		20,571
Total liabilities		143,228		125,784
Stockholders’ equity:
Common stock, $1.00 par value, authorized 3,333,333 shares; issued 2,087,283 shares in 2022 and in 2021		2,087		2,087
Additional paid-in capital		124,740		124,514
Retained earnings		(33,407)		74,703
Accumulated other comprehensive income		(8,492)		(1,035)
Treasury stock (268,801 shares in 2022 and 270,036 in 2021), at cost		(24,634)		(24,748)
Total stockholders’ equity		60,294		175,521
Total liabilities and stockholders’ equity	$	203,522	$	301,305

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, 2022 and 2021

(In thousands)

	2022		2021
Investment income, net of expenses	$	36	$	28
Dividend income from subsidiaries		6,000		3,000
Gain on sale of our excess surplus lines operations		33,523		—
Other income		3,067		—
Management fee income		27,046		31,714
Total revenues		69,672		34,742
Operating expenses		17,566		13,513
Interest expense		5,902		4,993
Total expenses		23,468		18,506
Income before equity in undistributed earnings of subsidiaries and income tax benefit		46,204		16,236
Income tax expense (benefit)		33,223		3,858
Income before equity in undistributed earnings of subsidiaries		12,981		12,378
Equity in undistributed share of loss in subsidiaries		(121,091)		(3,374)
Net income (loss)	$	(108,110)	$	9,004
Comprehensive income (loss)	$	(115,567)	$	7,586

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, 2022 and 2021

(In thousands)

	2022		2021
Cash flows from operating activities:
Net income (loss)	$	(108,110)	$	9,004
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization expense		726		832
Deferred income tax expense (benefit)		11,070		235
Net realized gains		—		—
Undistributed share of loss of subsidiaries		121,091		3,374
Change in current federal income tax payable (recoverable)		21,343		3,478
Change in all other liabilities		(19,311)		(27,254)
Change in all other assets		14,307		13,942
Net cash provided by operating activities		41,116		3,611
Cash flows from investing activities:
Purchases of property and equipment		(152)		(1,195)
Purchase of investment securities		—		—
Maturities, sales and redemptions of investment securities		—		—
Capital contribution to subsidiaries		(37,562)		—
Net cash (used in) provided by investing activities		(37,714)		(1,195)
Increase in cash and cash equivalents		3,402		2,416
Cash and cash equivalents at beginning of year		32,482		30,066
Cash and cash equivalents at end of year	$	35,884	$	32,482
Supplemental cash flow information:
Interest paid	$	3,208	$	3,181
Income taxes (recovered) paid	$	(47)	$	148

See accompanying report of independent registered public accounting firm.