FIRST AMENDMENT TO LOAN AGREEMENT AND GUARANTOR CONSENT


     THIS FIRST AMENDMENT TO LOAN AGREEMENT AND GUARANTOR CONSENT (the
 First Amendment ) is made as of July ___, 1997, among HALLMARK FINANCE
CORPORATION, referred to herein as the "Borrower," HALLMARK FINANCIAL
SERVICES, INC., HALLMARK CLAIMS SERVICE, INC., AMERICAN HALLMARK GENERAL
AGENCY, INC., ACO HOLDINGS, INC., and AMERICAN HALLMARK AGENCIES, INC.
(collectively, the  Guarantors ), and NATIONSBANK OF TEXAS, N.A., a
national banking association, referred to herein as the "Lender."

                         R E C I T A L S:

     A.   The Borrower and the Lender are parties to a Loan Agreement
dated as of March 17, 1997 (the "Original Loan Agreement").

     B.   The Guarantors executed Guaranty Agreements in favor of the
Lender pursuant to the Original Loan Agreement.

     C.   The parties desire to amend the Original Loan Agreement as
hereinafter provided, and the Guarantors desire to consent to such
amendment.

     NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

     1.   Same Terms.  All terms used herein which are defined in the
Original Loan Agreement have the same meanings when used herein unless
the context hereof otherwise requires or provides.  In addition, all
references in the Loan Documents to the "Agreement" mean the Original
Loan Agreement, as amended by this First Amendment, as the same are
hereafter amended from time to time.

     2.   Amendment to Original Loan Agreement.   Effective as of the
date above, the Original Loan Agreement is hereby amended as follows:

     (a)  Section 1.0 is amended to add the following:

      CGA Agreement  means an agreement arising out of a transaction
where Crown Managing General Insurance Agency, Inc. is the managing
agent and by which an insured or prospective insured promises to pay the
Borrower the amount advanced to AH with respect to liability policies on
behalf of State and County Mutual Fire Insurance Company or with respect
to physical damage policies on behalf of Adriatic Insurance Company,
Bismark, North Dakota, so  long as Adriatic Insurance Company maintains
an A.M. Best rating of  A  or higher.

     (b)  Section 1.0 is amended to delete the definition of  Eligible
Premium Finance Agreements  contained therein and substituting in lieu
thereof the following:

     "Eligible Premium Finance Agreements" means all amounts (subject to
the proviso hereafter) due from makers pursuant to Premium Finance
Agreements and CGA Agreements, all prepared on forms approved by the
Texas Department of Insurance which comply with all requirements of the
Texas Insurance Code and the Texas Department of Insurance Regulations
and which have been created in the ordinary course of Borrower's
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business and upon which Borrower's right to receive payment is absolute,
unconditional and not contingent upon the fulfillment of any condition
whatsoever, and shall not include any of the following:

     (a)  any Premium Finance Agreement or CGA Agreement, the payment of
which an insurer or reinsurer has disputed or denied;

     (b)  any Premium Finance Agreement or CGA Agreement, the payment of
which an insurer or reinsurer has a right of setoff, defense or discount;

     (c)  any Premium Finance Agreement or CGA Agreement which reflects
a transaction having less than ten percent (10%) equity in the premium
(i.e., representing the financing of more than 90% of the insurance
premium of the particular insurance product);

     (d)  any Premium Finance Agreement or CGA Agreement in default
which has a balance due from its maker after realization against all
collateral securing such Premium Finance Agreement;

     (e)  any Premium Finance Agreement or CGA Agreement arising out of
the funding of an insurance premium for an insurance product issued by,
pursuant to, or in the Texas Automobile Insurance Plan;

     (f)  any Premium Finance Agreement or CGA Agreement arising out of
the funding of an insurance premium for any insurance product originated
by an agent doing business outside  of the State of Texas or which is an
insurance product otherwise governed by or subject to the laws of a
state other than the State of Texas;

     (g)  any Premium Finance Agreement other than an CGA Agreement
arising out of a transaction where the insurance product is issued or
written by an entity other than AH on behalf of State and County Mutual
Fire Insurance Company;

     (h)  any Premium Finance Agreement or CGA Agreement which does not
have 75% or more of the premium balance reinsured by a third party
insurance company with an A.M. Best rating of A- or higher; or

     (i)  any Premium Finance Agreement other than an CGA Agreement
arising out of a transaction where the managing agent therefor is an
entity other than AHGA provided that not more than $150,000 of amounts
due under CGA Agreements shall be included in determining the amount of
Eligible Premium Finance Agreements.

     (c)  Exhibit B is amended by deleting the form attached to the
Original Loan Agreement and substituting in lieu thereof the form
attached hereto as Appendix A.

     3.   Certain Representations.

     (a)  The Borrower represents and warrants that, as of the date
hereof:  (i) the Borrower has full power and authority to execute this
First Amendment, and this First Amendment constitutes the legal, valid
and binding obligation of the Borrower enforceable in accordance with
its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other similar
laws affecting the enforcement of creditors' rights generally; and (ii)
no authorization, approval, consent or other action by, notice to, or
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filing with, any governmental authority or other person is required for
the execution, delivery and performance by the Borrower of this First
Amendment.

     (b)  Each Guarantor represents and warrants that, as of the date
hereof:  (i) such Guarantor has full power and authority to execute this
First Amendment, and this First Amendment constitutes the legal, valid
and binding obligation of such Guarantor enforceable in accordance with
its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other similar
laws affecting the enforcement of creditors' rights generally; and (ii)
no authorization, approval, consent or other action by, notice to, or
filing with, any governmental authority or other person is required for
the execution, delivery and performance by such Guarantor of this First
Amendment.
     4.   Concerning the Guaranty Agreements.  By its execution below,
each Guarantor reaffirms the obligations under each Guaranty Agreement
executed and delivered by it in connection with the Loan Documents and
acknowledges that the execution and delivery of this First Amendment
shall not reduce or modify in any respect such Guarantor s liability
under such Guaranty Agreement.

     5.   Limitation on Agreements.  The modifications set forth herein
are limited precisely as written and shall not be deemed (a) to be a
consent under or a waiver of or an amendment to any other term or
condition in the Original Loan Agreement or any of the Loan Documents,
or (b) to prejudice any right or rights which the Lender now has or may
have in the future under or in connection with the Original Loan
Agreement and the Loan Documents, each as amended hereby, or any of the
other documents referred to herein or therein. This First Amendment
constitutes a Loan Document for all purposes.

     6.   Entirety, Etc.  This instrument together with all of the other
Loan Documents embodies the entire agreement between the parties.  THIS
AGREEMENT AND ALL OF THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. 
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

     IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment to Loan Agreement to be effective as of the date and year
first above written.


                                   BORROWER:

Address:                           HALLMARK FINANCE CORPORATION

__________________________
__________________________
__________________________              By:
                                         Name:
                                         Title:


<PAGE>
                                   GUARANTORS:

Address:                           HALLMARK FINANCIAL SERVICES,
                                   INC.
__________________________
__________________________
__________________________
                                   By:
                                         Name:
                                         Title:



Address:                           HALLMARK CLAIMS SERVICE, INC.

__________________________
__________________________
__________________________              By:
                                         Name:
                                         Title:



Address:                           AMERICAN HALLMARK GENERAL
                                   AGENCY, INC.
__________________________
__________________________
__________________________
                                   By:
                                         Name:
                                         Title:



Address:                           ACO HOLDINGS, INC.

__________________________
__________________________
__________________________         By:
                                        Name:
                                        Title:



Address:                           AMERICAN HALLMARK AGENCIES,
                                   INC.
__________________________
__________________________
__________________________
                                   By:
                                         Name:
                                         Title:


<PAGE>
                                   LENDER:

Address:                           NATIONSBANK OF TEXAS, N.A.

__________________________
__________________________
__________________________          By:
                                         Name:
                                         Title:
                                                                    
                                    EXHIBIT B

                           BORROWING BASE CERTIFICATE

Status as of                       , 199__


     In accordance with the terms of the Loan Agreement dated March 17,
1997, by and between HALLMARK FINANCE CORPORATION, and NATIONSBANK OF
TEXAS, N.A., we hereby represent and warrant as follows:

Prior Period Balance of Eligible
Premium Finance Agreements                                       $       

PLUS:     ELIGIBLE PREMIUM FINANCE AGREEMENTS 
          ISSUED DURING THE PERIOD ENDING 
          ___________, 19__                                      $       

PLUS/LESS THE FOLLOWING ADJUSTMENTS WITH
RESPECT TO ELIGIBLE PREMIUM FINANCE AGREEMENTS:

     (+/-)     Eligible Premium Finance Agreement Amendments     $       
     
     (+/-)     Miscellaneous Eligible Premium Finance Agreement
               Corrections                                       $       

     (+/-)     Cash Receipts                                     $       

     (+/-)     Cancellations                                     $  

     (+/-)     Earned Late Charges                               $       

     (+/-)     Earned Setup Fees                                 $       

     (+/-)     Returned Checks (Uncollected)                     $  

     (+/-)     Returned Check Charges                            $   

     (+/-)     Interest and Write-offs                           $  

     (-)       Change in Unearned Interest                       $       

     (+)       Return Premiums in Course of Collections          $       

     (-)       Amount of Eligible Premium Finance Agreements
               Constituting CGA Agreements in Excess of
               $150,000                                          $       
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     Total Adjusted Eligible Premium Finance Agreements          $       

LESS THE FOLLOWING NON-ELIGIBLE PREMIUM
FINANCE AGREEMENTS AND CGA AGREEMENTS:

     Premium Finance Agreements and CGA Agreements disputed
     or denied by insurer or reinsurer                           $       

     Premium Finance Agreements and CGA Agreements subject to
     a right of insurer or reinsurer to setoff, defense or
     discount                                                    $       

     Premium Finance Agreements and CGA Agreements with less
     than 10% equity in the premium                              $       

     Premium Finance Agreements and CGA Agreements in default
     which have balances due from makers after realization of
     all collateral                                              $       

     Premium Finance Agreements and CGA Agreements resulting
     from TAIP                                                   $       

     Premium Finance Agreements and CGA Agreements funding
     policies outside Texas                                      $       

     Premium Finance Agreements other than CGA Agreements where
     AH is not the issuer on behalf of State and County Mutual   $       

     Premium Finance Agreements and CGA Agreements which do not
     have 75% or more premium balances reinsured with third
     party reinsurer with A. M. Best Rating of A- or higher      $       

     Premium Finance Agreements other than CGA Agreements where
     AHGA is not the Managing Agent                              $       

     Return premiums in course of collection greater than
     five (5) days past due from the original due date as 
     required by applicable Governmental Authorities             $       

     Total Adjusted Eligible Premium Finance Agreements          $       
     
LESS:

     Bank Reserve                                                $       

CALCULATION OF BORROWING BASE:

[(Total Adjusted Eligible Premium Finance Agreements - Bank
  Reserve) x 60%] = Maximum amount of borrowings
  (not to exceed $8,000,000)                                     $       

LESS:  Outstandings                                              $       

Available Amount/Overadvance Due Bank
  (Amount of Borrowing Base - Outstandings)                      $       

<PAGE>
BORROWER:

HALLMARK FINANCE CORPORATION

By:
Name:
Title: