CONFORMED COPY

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                 FORM 10-QSB

              Quarterly report under Section 13 or 15(d) of the
                       Securities Exchange Act of 1934

                For the quarterly period ended March 31, 2000

                      Commission file number 0-16090

                      Hallmark Financial Services, Inc.
                      ---------------------------------
     (Exact name of small business issuer as specified in its charter)

                Nevada                                87-0447375
     -------------------------------               -------------------
     (State or other jurisdiction of                (I.R.S. Employer
     Incorporation or organization)                Identification No.)

      14651 Dallas Parkway, Suite 900 Dallas, Texas          75240
      ---------------------------------------------        ---------
        (Address of principal executive offices)           (Zip Code)

       Issuer's telephone number, including area code:  (972) 404-1637

       Check whether the  issuer (1) has filed all reports required  to
       be filed by  Section 13 or 15(d) of the Securities Exchange  Act
       during the past  12 months (or for such shorter period that  the
       registrant was required to file such reports), and (2)  has been
       subject to such filing requirements for the past 90 days.

                            Yes   X       No


                     APPLICABLE ONLY TO CORPORATE ISSUERS

       State the number  of shares outstanding of each of the  issuer's
       classes  of common equity,  as of the  latest practicable  date:
       Common  Stock, par  value  $.03 per  share -  11,048,133  shares
       outstanding as of May 12, 2000.


<PAGE>
                                      PART I
                               FINANCIAL INFORMATION

 Item 1.   Financial Statements


                   INDEX TO FINANCIAL STATEMENTS

                                                        Page Number
                                                         -----------


     Consolidated Balance Sheets at March 31, 2000           3
     (unaudited) and December 31, 1999

     Consolidated Statements of Income (unaudited)           4
     for the three months

     Consolidated Statements of Cash Flows                   5
     (unaudited) for the three months ended March

     Notes to Consolidated Financial Statements              6
     (unaudited)

<PAGE>
<TABLE>

                 HALLMARK FINANCIAL SERVICES, INC. AND SUBSIDIARIES
                             CONSOLIDATED BALANCE SHEETS
                                      --------
<CAPTION>
                                                     March 31       December 31
                    ASSETS                             2000            1999
                                                    (Unaudited)
                                                    -----------     -----------
 <S>                                               <C>             <C>
 Investments:
    Debt securities, held-to-maturity, at
      amortized cost                               $  2,937,181    $  3,831,657
    Equity securities, available-for-sale,
      at market value                                   142,417         142,901
    Short-term investments, at cost which
      approximates market value                      10,352,829       6,373,491
                                                    -----------     -----------
             Total investments                       13,432,427      10,348,049

 Cash and cash equivalents                            5,446,697       5,786,069
 Restricted cash                                      3,431,297       3,422,297
 Prepaid reinsurance premiums                         9,311,018       7,673,196
 Premiums receivable from lender (net of
   allowance for doubtful accounts of
   $59,434 in 2000 and $68,287 in 1999)              10,931,926       9,058,958
 Premiums receivable                                  1,652,448         741,613
 Reinsurance recoverable                             17,007,486      15,673,241
 Deferred policy acquisition costs                    3,297,535       2,741,076
 Excess of cost over net assets acquired
   (net of accumulated amortization of
   $1,524,333 in 2000 and $1,485,080 in 1999)         4,705,880       4,745,134
 Deferred federal income taxes                          257,982         212,059
 Accrued investment income                               13,610          52,721
 Other assets                                           630,974         547,820
                                                    -----------     -----------
                                                   $ 70,119,280    $ 61,002,233
                                                    ===========     ===========
<PAGE>

     LIABILITIES AND STOCKHOLDERS' EQUITY
 Liabilities:
    Notes payable                                  $ 11,377,225    $  9,288,366
    Unpaid losses and loss adjustment expenses       18,796,135      17,804,254
    Unearned premiums                                14,341,822      11,761,723
     Reinsurance balances payable                     4,041,176       2,623,603
     Deferred ceding commissions                      2,632,541       2,142,097
     Drafts outstanding                               1,087,584         901,471
     Current federal income taxes payable               190,644          46,124
     Accrued ceding commission refund                 1,408,571       1,251,614
     Accounts payable and other accrued expenses      3,223,227       2,516,222
     Accrued litigation costs                           950,000         950,000
                                                    -----------     -----------
          Total liabilities                          58,048,925      49,285,474
                                                    -----------     -----------
 Stockholders' equity
     Common stock, $.03 par value, authorized
       100,000,000 shares issued 11,854,610
       shares in 2000 and 1999                          355,638         355,638
     Capital in excess of par value                  10,875,212      10,875,212
     Retained earnings                                1,897,150       1,543,304
     Accumulated other comprehensive income             (14,478)        (14,228)
     Treasury stock, 806,477 shares, at cost         (1,043,167)     (1,043,167)
                                                    -----------     -----------
          Total stockholders' equity                 12,070,355      11,716,759
                                                    -----------     -----------
                                                           -               -
                                                   $ 70,119,280    $ 61,002,233
                                                     ==========     ===========

              The accompanying notes are an integral part
                of the consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
             HALLMARK FINANCIAL SERVICES, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF OPERATIONS

                                                    Three Months Ended
                                                        March 31
                                              ------------------------------
                                                  2000               1999
                                              -----------        -----------
  <S>                                        <C>                <C>
  Gross premiums written                     $ 13,227,847       $ 10,165,693
  Ceded premiums written                       (7,739,191)        (5,970,307)
                                              -----------        -----------
        Net Premiums written                 $  5,488,656       $  4,195,386
                                              ===========        ===========
  Revenues:
     Gross premiums earned                     10,647,748          7,759,732
     Earned premiums ceded                     (6,101,370)        (4,666,676)
                                              -----------        -----------
        Net Premiums earned                     4,546,378          3,093,056

     Investment income, net of expenses           225,797            173,557
     Finance charges                              -                  437,721
     Processing and service fees                1,371,992            463,950
     Other income                                  84,727            101,963
                                              -----------        -----------
         Total revenues                         6,228,894          4,270,247
                                              -----------        -----------
  Benefits, losses and expenses:
     Losses and loss adjustment expenses        9,546,333          5,256,731
     Reinsurance recoveries                    (6,389,826)        (3,436,200)
                                              -----------        -----------
  Net losses and loss adjustment expenses       3,156,507          1,820,531

  Acquisition costs, net                          (66,015)          (274,466)
  Other acquisition and underwriting expenses   1,165,148          1,332,601
  Operating expenses                            1,144,955            709,492
  Interest expense                                231,474            146,947
  Amortization of intangible assets                39,253             39,255
                                              -----------        -----------
  Total benefits losses and expenses            5,671,322          3,774,360
                                              -----------        -----------
  Income from operations before federal
    income taxes                                  557,572            495,887
  Federal income tax expense                      203,726            190,165
                                              -----------        -----------

  Net income                                 $    353,846       $    305,722
                                              ===========        ===========

  Basic and diluted earnings per share       $       0.03       $       0.03
                                              ===========        ===========
  Common stock shares outstanding              11,048,133         11,048,133
                                              ===========        ===========

                The accompanying notes are an integral part
                 of the consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
              HALLMARK FINANCIAL SERVICES, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (Unaudited)
                                                       Three Months Ended
                                                            March 31
                                                      -------------------------
                                                         2000           1999
                                                      ----------     ----------
 <S>                                               <C>              <C>
 Cash flows from operating activities:
    Net income                                     $     353,846    $   305,722

    Adjustments to reconcile net loss to cash
       Depreciation and amortization expense             100,923         79,807
       Change in deferred Federal income taxes           (45,923)       (13,650)
       Change in prepaid reinsurance premiums         (1,637,822)    (1,303,632)
       Change in premiums receivable                    (910,835)      (109,753)
       Change in deferred policy acquisition            (556,459)      (628,669)
       Change in deferred ceding commissions             490,444        354,204
       Change in unpaid losses and loss                  991,881       (316,090)
       Change in unearned premiums                     2,580,099      2,405,960
       Change in reinsurance recoverable              (1,334,245)       371,973
       Change in reinsurance balances payable          1,417,573      1,038,828
       Change in current federal income tax               -             150,031
       Change in current federal income tax              144,520        153,405
       Change in accrued ceding commission refund        156,957        216,717
       Change in all other liabilities                   892,868        279,633
       Change in all other assets                        (74,466)       (52,792)
                                                      ----------     ----------
           Net cash provided by operating              2,569,361      2,931,694
                                                      ----------     ----------
 Cash flows from investing  activities:
    Purchases of property and equipment                  (31,247)        (5,883)
    Premium finance notes originated                  (9,101,758)    (6,756,533)
    Premium finance notes repaid                       7,228,790      5,188,928
    Change in restricted cash                             (9,000)       (14,000)
    Maturities and redemptions of investment             894,960      1,181,473
    Purchase of short-term investments                (6,479,337)    (5,425,562)
    Maturities of short-term investments               2,500,000      1,700,000
                                                      ----------     ----------
       Net cash used in investing activities          (4,997,592)    (4,131,577)
                                                      ----------     ----------
 Cash flows from financing activities:
     Repayment of short-term borrowings                  (17,309)       (43,632)
     Net advances from lender                          2,106,168        -
                                                      ----------     ----------
         Net cash provided by (used in) financing      2,088,859        (43,632)
                                                      ----------     ----------

 Decrease in cash and cash equivalents                  (339,372)    (1,243,515)
 Cash and cash equivalents at beginning of period      5,786,069      6,776,274
                                                      ----------     ----------
 Cash and cash equivalents at end of period          $ 5,446,697    $ 5,532,759
                                                       =========       ========

             The accompanying notes are an integral part
              of the consolidated financial statements
</TABLE>
<PAGE>

              HALLMARK FINANCIAL SERVICES, INC. AND SUBSIDIARIES


 Item 1.  Notes to Consolidated Financial Statements (Unaudited).

 Note 1 - Summary of Accounting Policies

     In the  opinion of management,  the accompanying consolidated  financial
 statements contain all adjustments, consisting primarily of normal recurring
 adjustments, necessary to present fairly the financial position of  Hallmark
 Financial Services, Inc. and  subsidiaries (the "Company")  as of March  31,
 2000 and  the consolidated  results of  operations and  cash flows  for  the
 periods presented.  The accompanying financial statements have been prepared
 by the Company without audit.

     Certain  information  and disclosures  normally  included  in  financial
 statements prepared  in  accordance  with  accounting  principles  generally
 accepted in  the  United States  ("GAAP") have  been  condensed  or omitted.
 Reference is made to the Company's annual consolidated  financial statements
 for the  year  ended December  31,  1999  for a  description  of  accounting
 policies and certain other disclosures.   Certain items in the 1999  interim
 financial  statements  have  been  reclassified  to  conform  to  the   2000
 presentation.

     The results of  operations for the period ended  March 31, 2000 are  not
 necessarily indicative of the operating results to be expected for the  full
 year.

 Note 2 - Reinsurance

     The Company  is involved in  the assumption and  cession of  reinsurance
 from/to other companies.  The Company remains obligated to its policyholders
 in the  event  that reinsurers  do  not  meet their  obligations  under  the
 reinsurance agreements.

     Effective  March  1,  1992,  the  Company  entered  into  a  reinsurance
 arrangement with  State &  County Mutual  Fire Insurance  Company ("State  &
 County"), an unaffiliated company,  to assume 100%  of the nonstandard  auto
 business produced by the  Company and underwritten by  State & County.   The
 arrangement is supplemented by  a separate retrocession agreement  effective
 July 1,  1997 between  the Company,  GE Reinsurance  Company ("GE  RE")  and
 Dorinco Reinsurance Company  ("Dorinco"). Under the  agreement, the  Company
 retains 25% and cedes 75% of the risk to the reinsurers.
<PAGE>
 Note 3 - Commitments and Contingencies

     In March  1997, a jury  returned a verdict  against the  Company and  in
 favor of a  former director  and officer  of the  Company in  the amount  of
 approximately  $517,000   on  the   basis  of   contractual  and   statutory
 indemnification claims.   The  court  subsequently granted  the  plaintiff's
 motion for  attorneys'  fees  of  approximately  $271,000,  court  costs  of
 approximately $39,000  and  pre-judgment  and  post-judgment  interest,  and
 rendered final judgment on the verdict.  The Company believes the outcome in
 this case was  both legally  and factually  incorrect and  has appealed  the
 judgment.   During  the  fourth  quarter  of  1997,  the  Company  deposited
 $1,248,758 into the registry of the court in order to stay execution on  the
 judgment pending  the  result  of  such  appeal.    The  amount  on  deposit
 (including interest) with the court of  $1,382,006 as of March 31, 2000  has
 been included as restricted cash in the accompanying balance sheet.

     Although  the Company  intends to  aggressively pursue  its appeal,  the
 Company is  presently unable  to determine  the  likelihood of  a  favorable
 result.  Further, a  favorable ruling on some  portions of the appeal  could
 entail the necessity for a new trial.  Therefore, the Company established  a
 reserve of $950,000 during the fourth quarter of 1997 for loss contingencies
 related to this case.  This reserve remains unchanged as of March 31,  2000.
  The possible  range of  loss  in the  event  of an  ultimately  unfavorable
 outcome to this case exceeds the amount presently reserved.  Conversely,  in
 the event of a favorable resolution of the case, the expenses incurred could
 be less  than the  reserve amount.   Therefore,  future adjustments  to  the
 reserve may be required.




                      [This space left blank intentionally]


 Item 2.  Management's Discussion and Analysis or Plan of Operation.

     Introduction.  Hallmark Financial Services, Inc. ("HFS") and its  wholly
 owned subsidiaries (collectively referred to herein as the "Company") engage
 in the sale  of property and  casualty insurance products.    The  Company's
 business primarily involves marketing, underwriting and premium financing of
 non-standard automobile insurance,  as well  as claims  adjusting and  other
 insurance related services.

     The  Company  pursues its  business  activities  through  an  integrated
 insurance group, (collectively, the "Insurance Group"), the members of which
 are an authorized  Texas property and  casualty insurance company,  American
 Hallmark Insurance Company of Texas ("Hallmark"); a managing general  agent,
 American Hallmark General  Agency, Inc.  ("AHGA"); a  network of  affiliated
 insurance agencies  known  as  the  American  Hallmark  Agencies  ("Hallmark
 Agencies"); a premium finance company, Hallmark Finance Corporation ("HFC");
 and a claims  handling and adjustment  firm, Hallmark  Claims Service,  Inc.
 ("HCS").  The Company operates only in Texas.
<PAGE>
     Hallmark provides non-standard automobile liability and physical  damage
 insurance  through  reinsurance   arrangements  with  several   unaffiliated
 companies.  Through arrangements with State  & County Mutual Fire  Insurance
 Company ("State & County"), Hallmark provides insurance primarily for  high-
 risk  drivers  who  do  not  qualify  for  standard-rate  insurance.   Under
 supplementary  quota-share   reinsurance   agreements,  Hallmark   cedes   a
 substantial portion of  its risk  and retains  the balance.   The  Company's
 principal  reinsurers,  GE  Reinsurance   Company  ("GE  RE")  and   Dorinco
 Reinsurance Company ("Dorinco"), collectively assume 75% of Hallmark's risk.
 HFC  finances  annual  and  six-month policy  premiums through  its  premium
 finance program.   AHGA manages the marketing of Hallmark policies through a
 network of  retail  insurance  agencies which  operate  under  the  American
 Hallmark Agencies name, and through independent agents operating under their
 own respective  names.    Additionally, AHGA  provides  premium  processing,
 underwriting, reinsurance accounting  and cash  management for  unaffiliated
 managing general agents ("MGAs").  HCS provides fee-based claims adjustment,
 salvage, subrogation  recovery  and  litigation  services  to  Hallmark  and
 unaffiliated MGAs.

 Financial Condition and Liquidity

     The Company's  sources of funds are  principally derived from  insurance
 related operations.  Major sources of funds from operations include premiums
 collected  (net  of  policy   cancellations  and  premiums  ceded),   ceding
 commissions, processing  fees,  and premium  finance  service fees.    Other
 sources of funds are from financing and investment activities.

     Net cash  provided by  the Company's  consolidated operating  activities
 decreased approximately  $0.4  million  during the  first  quarter  of  2000
 compared to  the first  quarter of  1999.   This decrease  is primarily  the
 result of  the  combined  effect of  increased  assumed  premium  volume  of
 unaffiliated MGAs, and  the fact that  these assumed  premiums are  received
 from the reinsurer on  a collected basis rather  than a written basis.  This
 decrease is partially offset  by increases in various  liabilities.     Cash
 used by investing  activities increased approximately  $0.9 million.   As  a
 result of  increased  annual  policy premium  volume,  HFC  originated  more
 premium finance notes  than it received  in premium  finance payments.  Cash
 provided by financing activities increased $2.1  million as a result of  net
 advances under  HFC's secured  financing  arrangement with  an  unaffiliated
 third party.

     On a consolidated basis, the Company's liquidity increased $2.7  million
 during the  first  quarter  of  2000.     The  Company's  total  cash,  cash
 equivalents and investments (excluding restricted cash of approximately $3.4
 million) at March  31, 2000  and December 31,  1999 were  $18.9 million  and
 $16.1 million respectively.   This increased liquidity  is primarily due  to
 the increased policy production relative to year-end 1999.
<PAGE>
     A  substantial  portion  of the  Company's  liquid  assets  is  held  by
 Hallmark and  is not  available  for general  corporate  purposes.   Of  the
 Company's consolidated liquid  assets of $18.9  million at  March 31,  2000,
 $1.1 million   (as compared  to approximately  $.9 million  at December  31,
 1999) represents  non-restricted cash.   Since  state insurance  regulations
 restrict  financial  transactions  between  an  insurance  company  and  its
 affiliates, HFS is limited in its ability to use Hallmark funds for its  own
 working capital purposes.  Furthermore, dividends  and loans by Hallmark  to
 the Company  are restricted  and subject  to Texas  Department of  Insurance
 ("TDI") approval.   However, TDI has  sanctioned the  payment of  management
 fees,  commissions  and  claims  handling  fees  by  Hallmark  to  HFS   and
 affiliates.  During the first three  months of 2000 and 1999, Hallmark  paid
 or accrued management fees of $50,000 and $175,000, respectively. Management
 anticipates that Hallmark will continue to pay management fees  periodically
 during the remainder  of 2000,  and this should  continue to  be a  moderate
 source of unrestricted liquidity. The Company has never received a  dividend
 from Hallmark and there is no immediate plan to pay a dividend.

     During the  first quarter of  2000, the amount  of funding available  to
 fund premium finances notes under the secured financing arrangement with the
 unaffiliated third party was increased to $10.0 million from $8.0 million.

     Commissions from  the Company's  annual policy  program for  independent
 agents represent  a  source of  unrestricted  liquidity when  annual  policy
 production is level or increasing from  the most recent previous quarters.
 Under this  program, AHGA  offers independent  agents the  ability to  write
 annual policies and six-month policies, but commissions to substantially all
 independent agents  are  paid  monthly  on  an  "earned"  basis.    However,
 consistent with customary industry practice, Hallmark pays total commissions
 up-front to AHGA based  on the entire  annual/six-months premiums written.
 Independent agent production of annual policies was $6.1 million during  the
 first quarter of 2000 as compared  to $4.5 million during the first  quarter
 of 1999.  During the  first quarter of 2000,  AHGA received $1.3 million  in
 commissions  related  to  this  program   from  Hallmark  and  paid   earned
 commissions of $0.7  million to independent  agents.  This  has resulted  in
 increased unrestricted liquidity for the Company.  During the first  quarter
 of 1999, AHGA received $0.9 million  in commissions related to this  program
 from Hallmark and  paid earned commissions  of $0.4  million to  independent
 agents.

     Ceding commission  income represents a  significant source  of funds  to
 the Company.  A portion of  ceding commission income and policy  acquisition
 costs is deferred  and recognized as  income and  expense, respectively,  as
 related  net  premiums  are  earned.    Deferred  ceding  commission  income
 increased to $2.6 million  at March 31, 2000  from $2.1 million at  December
 31, 1999.  Deferred  policy acquisition costs increased  to $3.3 million  at
 March 31, 2000  from $2.7 million  at December 31,  1999.   The increase  in
 deferred ceding commission income and  deferred policy acquisition costs  is
 primarily due to  the increase in  Hallmark's core State  and County  annual
 premium volume.

     Prepaid  reinsurance  premiums,  unpaid  losses  and  LAE,   reinsurance
 recoverable  and  unearned  premiums  generally  increased  as  expected  in
 relation to increased premium writings.
<PAGE>

     At March  31, 2000, Hallmark reported  statutory capital and surplus  of
 approximately $6.1  million,  which  reflects a  slight  increase  over  the
 balance reported at December 31, 1999.   On a rolling-twelve months  premium
 basis, Hallmark's premium-to-surplus ratio for the twelve months ended March
 31, 2000 was 2.75 to 1 as compared to 2.57 to 1 for the year ended  December
 31, 1999  and  2.24  to  1 for  the  twelve  months  ended  March 31,  1999.
 Management does not presently expect Hallmark to require additional  capital
 during 2000 to fund existing operations.

     The  Company  continues  to  pursue  third  party  claims  handling  and
 administrative contracts.  The  Company provides program administration  for
 three unaffiliated MGAs and claims  handling services for four  unaffiliated
 MGAs.   Under  these  contracts,  the  Company,  as  program  administrator,
 performs certain  administrative functions,  including but  not limited  to,
 cash management, underwriting  and rate-setting  reviews, policy  processing
 (on two of the  programs) and claims handling.  Hallmark assumes a  pro-rata
 share of the business produced under each of the unaffiliated MGAs  programs
 (ranging from 15%  to 25%)  with the  remaining percentage  of the  business
 assumed by Hallmark's principal reinsurers.

 Management  believes  that  in  order  to  effectively  compete  in  today's
 marketplace, the Company must expand its offerings of products and  services
 and enhance its information technology capabilities.  To better serve agents
 and insureds, as well as to diversify risk and revenue sources, the  Company
 intends to begin offering homeowners  and renters insurance commencing  June
 2000.  The program will be offered through an alliance with an  unaffiliated
 MGA.  Marketing  and administration of  the program will  be handled by  the
 Company, while underwriting functions will  be retained by the  unaffiliated
 MGA.  The Company will not  assume any underwriting risk in connection  with
 this program.

 Additionally, management plans to implement  a phased program to  strengthen
 its information technology capabilities in several areas.  The thrust of the
 first phase will be to enhance Company and agency relationships by improving
 content and  timeliness  of  information  to  support  agents  in  servicing
 insureds.  The target date for commencement of testing by certain agents  is
 August 2000, with a full roll-out beginning in the fourth quarter of  fiscal
 2000.  The emphasis of the second phase will be to implement  point-of-sale-
 technology to support agents in more promptly and efficiently producing  new
 business, as well  as to improve  the quality and  timeliness of service  to
 existing insureds.   Roll-out of this  phase  is  scheduled  for early 2001.
 When fully  implemented, these  information technology  enhancements  should
 result in significant cost savings for the Company as well as  participating
 agents.

 Management is continuing to investigate opportunities for future growth  and
 expansion.  Additional  capital or strategic  alliances may  be required  to
 fund future expansion of the Company.

 Results of Operations

     Gross premiums written  (prior to reinsurance) and net premiums  written
 (after reinsurance) for  the first quarter  of 2000 increased  30% and  31%,
 respectively, in  relation to  premiums written  during the  same period  in
 1999.  The increase in premiums written was due to the increase in the  core
 State &  County premium  volume and  increased premium  volume from  assumed
 business produced by unaffiliated MGAs as compared to the prior year.
<PAGE>

     Gross premiums  earned (prior to reinsurance)  for the first quarter  of
 2000 increased 37% as compared to  the same period of  1999.  For the  first
 quarter of 2000, net  premiums earned (after  reinsurance)  increased 47% in
 relation to  the  same period  of  1999.   The  disproportionate  change  in
 premiums earned prior to and after reinsurance is due to policy fees and the
 assumption of increased premiums produced by the unaffiliated  MGAs, both of
 which are fully retained by  the Company and thus  have a greater impact  on
 net premiums earned.

     Net  incurred  loss  ratio   (computed  on  net  premiums  earned  after
 reinsurance) for the first quarter of 2000  was 69% compared to 59%  for the
 same respective period of  1999. Hail incurred during  the first  quarter of
 2000 accounted  for 1%  of the  10% increase  in the  net loss  ratio.   The
 remaining increase is attributable to the increased loss ratios on  the core
 State & County business and the assumed unaffiliated MGA business.

     Acquisition costs, net represents the amortization of acquisition  costs
 (and credits)  deferred over  the past  twelve months  and the  deferral  of
 acquisition  costs  (and  credits)  incurred in  the  current  period.   The
 decrease in the credit balance of acquisition costs, net is primarily due to
 a larger increase in ceding commission income (credits) than in  acquisition
 costs (debits) along with an increase in the deferral rate (of both  credits
 and debits).

     Other acquisition and underwriting expenses decreased approximately  13%
 during the first quarter of 2000  as compared to the same respective  period
 of 1999.  The decrease in expenses is primarily attributable to the combined
 effect of (1) increased  ceding commission income as  a result of  increased
 core State & County  premium volume and  (2) increased management  resources
 spent on  premium  finance operations  and  third party  administrative  and
 claims handling  contracts. Management  resources  focused on  building  the
 third party processing and program administration business are allocated  to
 operating expenses rather than acquisition and underwriting expenses.  These
 decreases are partially offset by an increase in commission expenses related
 to assumption of business  written by unaffiliated  MGAs and other  variable
 expenses associated with increased premium volume.

     Operating  expenses   include  expenses  related   to  premium   finance
 operations, general corporate overhead,  and third party administrative  and
 claims handling  contracts.    Related revenues  are  derived  from  finance
 charges  and  service/consulting   fees.     Operating  expenses   increased
 approximately 61% for  the first  quarter of 2000  as compared  to the  same
 period of 1999.   The  majority of this  increase in  operating expenses  is
 attributable to the  variable expenses related  to increased  volume in  the
 Company's premium finance operations as well as the deployment of management
 and staff  resources  devoted  to  the  development,  administration  and/or
 processing of third party contracts.

     During 1999,  the Company earned finance  charges (interest) on  premium
 notes issued by HFC.  The Company has not earned finance charges during 2000
 as the  result of  a secured  financing and  servicing arrangement  with  an
 unaffiliated third party  to fund HFC's  premium finance  activities.   This
 arrangement was  initiated  during the  fourth  quarter  of 1999.    As  HFC
 services the premium finance notes for the unaffiliated third party,  income
 derived from  the  premium finance  notes  is reflected  in  processing  and
 servicing fees.
<PAGE>

     Processing and  service fees represents income  earned on the  servicing
 arrangement with the unaffiliated third party (as discussed above) and third
 party processing and servicing contracts with unaffiliated MGAs.  Processing
 and service  fees for  the first  quarter of  2000 increased   $0.9  million
 (196%) principally as a result of the premium finance servicing  arrangement
 with the unaffiliated third party.


 Risks Associated with Forward-Looking Statements  Included in this Form  10-
 QSB

     This Form 10-QSB contains certain forward-looking  statements within the
 meaning of Section 27A of the Securities Act of 1933 and Section 21E of  the
 Securities Exchange Act  of 1934, which  are intended to  be covered  by the
 safe harbors  created  thereby.   These  statements include  the  plans  and
 objectives  of  management  for  future  operations,  including  plans   and
 objectives relating to  future growth of  the Company's business  activities
 and availability of funds.   The forward-looking statements included  herein
 are  based  on  current  expectations   that  involve  numerous  risks   and
 uncertainties.  Assumptions relating to the foregoing involve judgments with
 respect to,  among other  things, future  economic, competitive  and  market
 conditions, regulatory  framework, and  future  business decisions,  all  of
 which are difficult or  impossible to predict accurately  and many of  which
 are beyond the control of the  Company.  Although the Company believes  that
 the assumptions underlying  the forward-looking  statements are  reasonable,
 any of the assumptions could be  inaccurate and, therefore, there can be  no
 assurance that the forward-looking statements  included in this Form  10-QSB
 will prove  to be  accurate.   In  light  of the  significant  uncertainties
 inherent in the forward-looking statements included herein, the inclusion of
 such information should not be regarded  as a representation by the  Company
 or any other person  that the objectives  and plans of  the Company will  be
 achieved.
<PAGE>
                                   PART II
                              OTHER INFORMATION



     Item 1.  Legal Proceedings.


              Except for routine litigation incidental to the business of
              the Company and as described in  Note 3 to the Consolidated
              Financial Statements of  the Company, neither  the Company,
              nor any of the properties of the Company was subject to any
              material pending or threatened legal  proceedings as of the
              date of this report.




    Item 2.    Changes in Securities.

               None.



    Item 3.    Defaults on Senior Securities.

               None.



     Item 4.   Submission of Matters to a Vote of Security-Holders.

               None




      Item 5.  Other Information.

               None.



      Item 6.  Exhibits and Reports on Form 8-K.

          (a)  The  exhibit listed in the Exhibit Index appearing  on page

          (b)  The  Company  did not  file  any  Form 8-K  Current  Reports

<PAGE>

                                Exhibit Index


  Exhibit                        Description
  Number
  ------
  10 (a)                  Automobile  Physical damage catastrophe Excess of
                          Loss  Reinsurance Contract effective July 1, 1999
                          between  American  Hallmark Insurance  Company of
                          Texas and GE Reinsurance Corporation.

<PAGE>
                                  SIGNATURES

 In accordance with the requirements of the Exchange Act, the registrant  has
 caused this report to be signed on its behalf by the undersigned,  thereunto
 duly authorized.


                           HALLMARK FINANCIAL SERVICES, INC.
                           (Registrant)



 Date: May 12, 2000       /s/ Ramon D. Phillips
                          -----------------------------------
                          Ramon D. Phillips, President (Chief
                          Executive Officer)


 Date: May 12, 2000       /s/ John J. DePuma
                          -----------------------------------
                          John J. DePuma, Chief Financial Officer