Exhibit 99.1
FOR IMMEDIATE RELEASE
HALLMARK FINANCIAL SERVICES, INC.
FIRST QUARTER 2006 EARNINGS RESULTS
FORT WORTH, Texas, (May 15, 2006) - Hallmark Financial Services, Inc. today
reported operating results for the first quarter of fiscal 2006. Net income
for the quarter ended March 31, 2006 was $2.4 million, as compared to $1.8
million for the same period in 2005. During the first quarter of fiscal
2006, Hallmark recorded a $1.1 million interest expense from amortization
attributable to the deemed discount on convertible promissory notes issued
in January, 2006. In the absence of this non-cash expense, net income
for the three months ended March 31, 2006 would have been $3.1 million,
representing a 72.5% increase over the similar period of fiscal 2005. The
increased net income reflected a 155.2% year-to-year increase in total
revenues to $44.5 million for the quarter ended March 31, 2006 from $17.4
million for the quarter ended March 31, 2005.
First quarter 2006 net income was $0.02 per common stockholder diluted
share, as compared to $0.04 per common stockholder diluted share for the
same period in 2005. The decrease in diluted earnings per share to common
stockholders was due to the combined impact of issuing 50.0 million shares
in a stockholders rights offering in the second quarter of 2005 and
allocating a portion of net income to the holders of convertible notes in
the first quarter of 2006.
"I am pleased to report another quarter of strong operating results," stated
Mark E. Schwarz, Chairman and Chief Executive Officer. "The moves we made
last year to retain our commercial business and the acquisitions made this
year have positioned us for continued growth and success," Mr. Schwarz
continued.
"The increase in total revenues for the quarter ended March 31, 2006, as
compared to the same period in 2005, was primarily attributable to the
acquisitions of Texas General Agency, Inc. and Aerospace Holding LLC in
January of 2006. In addition, total revenues were positively impacted by
the retention in American Hallmark Insurance Company of commercial business
written by Hallmark General Agency, Inc. that was previously produced for a
third party insurer," stated Mark J. Morrison, President and Chief Financial
Officer. "The increase in net income for the quarter ended March 31, 2006
versus the same period in 2005 was primarily attributable to our retention
of the Hallmark General Agency commercial business and the quarterly results
of Texas General Agency," Mr. Morrison concluded.
Hallmark Financial Services, Inc. engages primarily in sale of property and
casualty insurance products. The Company's business involves marketing and
underwriting commercial insurance in Texas, New Mexico, Idaho, Oregon,
Montana and Washington; marketing and underwriting non-standard personal
automobile insurance in Texas, New Mexico and Arizona; marketing of general
aviation insurance in 44 states; claims administration; and other insurance
related services. The Company is headquartered in Fort Worth, Texas and its
common stock is listed on the American Stock Exchange under the symbol
"HAF".
Forward-looking statements in this Release are made pursuant to the "safe
harbor" provisions of the Private Securities Litigation Act of 1995.
Investors are cautioned that actual results may differ substantially from
such forward-looking statements. Forward-looking statements involve risks
and uncertainties including, but not limited to, continued acceptance of the
Company's products and services in the marketplace, competitive factors,
interest rate trends, the availability of financing, underwriting loss
experience and other risks detailed from time to time in the Company's
periodic report filings with the Securities and Exchange Commission.
For further information, please contact:
Mark J. Morrison, President at 817.348.1600
www.hallmarkgrp.com
Hallmark Financial Services, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
($ in thousands, except per share amounts)
Three Months Ended
March 31
------------------------
2006 2005
---------- ----------
Gross premiums written $ 47,735 $ 10,634
Ceded premiums written (1,956) -
---------- ----------
Net premiums written 45,779 10,634
Change in unearned premiums (17,345) (594)
---------- ----------
Net premiums earned 28,434 10,040
Investment income, net of expenses 2,357 411
Realized loss (83) -
Finance charges 687 540
Commission and fees 12,264 4,812
Processing and service fees 857 1,634
Other income 4 8
---------- ----------
Total revenues 44,520 17,445
Losses and loss adjustment expenses 16,690 6,026
Other operating costs and expenses 21,026 8,705
Interest expense 1,585 3
Interest expense from amortization
of discount on convertible notes 1,117 -
Amortization of intangible asset 573 7
---------- ----------
Total expenses 40,991 14,741
Income before tax 3,529 2,704
Income tax expense 1,103 889
---------- ----------
Net income $ 2,426 $ 1,815
========== ==========
Common stockholders net income per share:
Basic $ 0.02 $ 0.04
========== ==========
Diluted $ 0.02 $ 0.04
========== ==========
Convertible noteholders net income per share:
Basic $ 0.02 n/a
==========
Diluted $ 0.02 n/a
==========
The following is a reconciliation of net income without interest expense
from amortization of discount on convertible notes to reported results
(in thousands). Management believes this reconciliation provides useful
supplemental information in evaluating the operating results of our
business. This disclosure should not be viewed as a substitute for net
income determined in accordance with GAAP:
Quarter Ended
March 31, 2006
--------------
Income excluding interest expense from
amortization of discount, net of tax $ 3,130
Interest expense from amortization of discount 1,117
Less related tax effect (413)
--------------
704
--------------
Net income $ 2,426
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