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 June 30, 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 August 12, 2000.
<PAGE>


                                  PART I
                           FINANCIAL INFORMATION

 Item 1.   Financial Statements


                     INDEX TO FINANCIAL STATEMENTS

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


 Consolidated Balance Sheets at June 30, 2000                3
 (unaudited) and December 31, 1999

 Consolidated Statements of Income (unaudited) for           4
 the three and six months ended June 30, 2000 and

 Consolidated Statements of Cash Flows (unaudited)           5
 for the six months ended June 30, 2000 and June

 Notes to Consolidated Financial Statements                  6
 (unaudited)

<PAGE>
<TABLE>

              HALLMARK FINANCIAL SERVICES, INC. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS
                                   --------
<CAPTION>

                                                      June 30       December 31
                     ASSETS                             2000            1999
                                                    (Unaudited)
                                                    -----------     -----------
 <S>                                               <C>             <C>
 Investments:
    Debt securities, held-to-maturity, at
      amortized cost                               $  5,947,411    $  3,831,657
    Equity securities, available-for-sale, at
      market value                                      142,345         142,901
    Short-term investments, at cost which
      approximates market value                       6,933,080       6,373,491
                                                    -----------     -----------
             Total investments                       13,022,836      10,348,049

 Cash and cash equivalents                            4,439,648       5,786,069
 Restricted cash                                      3,440,297       3,422,297
 Prepaid reinsurance premiums                        10,141,424       7,673,196
 Premiums receivable from lender (net of
   allowance for doubtful accounts of
   $148,348 in 2000 and $68,287 in 1999)             12,078,702       9,058,958
 Premiums receivable                                  1,531,416         741,613
 Reinsurance recoverable                             18,745,297      15,673,241
 Deferred policy acquisition costs                    3,466,442       2,741,076
 Excess of cost over net assets acquired (net
   of accumulated amortization of $1,563,587
   in 2000 and $1,485,080 in 1999)                    4,666,627       4,745,134
 Deferred federal income taxes                          324,727         212,059
 Accrued investment income                               90,543          52,721
 Other assets                                         1,033,656         547,820
                                                    -----------     -----------
                                                   $ 72,981,615    $ 61,002,233
                                                     ==========     ===========
<PAGE>

      LIABILITIES AND STOCKHOLDERS' EQUITY
 Liabilities:
    Notes payable                                  $ 10,872,291    $  9,288,366
    Unpaid losses and loss adjustment expenses       20,722,304      17,804,254
    Unearned premiums                                15,349,131      11,761,723
    Reinsurance balances payable                      3,595,796       2,623,603
    Deferred ceding commissions                       2,884,994       2,142,097
    Drafts outstanding                                1,272,195         901,471
    Current federal income taxes payable                  7,776          46,124
    Accrued ceding commission refund                  1,490,047       1,251,614
    Accounts payable and other accrued expenses       3,571,550       2,516,222
    Accrued litigation costs                            950,000         950,000
                                                    -----------     -----------
          Total liabilities                          60,716,084      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                                 2,092,277       1,543,304
    Accumulated other comprehensive income              (14,429)        (14,228)
    Treasury stock, 806,477 shares, at cost          (1,043,167)     (1,043,167)
                                                    -----------     -----------
          Total stockholders' equity                 12,265,531      11,716,759
                                                    -----------     -----------
                                                   $ 72,981,615    $ 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                     Six Months Ended
                                                     June 30                               June 30
                                           -----------------------------        ------------------------------
                                               2000              1999               2000               1999
                                           -----------       -----------        -----------        -----------
 <S>                                      <C>               <C>                <C>                <C>
 Gross premiums written                   $ 12,870,742      $  8,241,565       $ 26,098,589       $ 18,407,258
 Ceded premiums written                     (7,662,205)       (4,723,427)       (15,401,396)       (10,693,734)
                                           -----------       -----------        -----------        -----------
       Net Premiums written               $  5,208,537      $  3,518,138       $ 10,697,193       $  7,713,524
                                           ===========       ===========        ===========        ===========
 Revenues:
    Gross premiums earned                   11,863,434         8,259,477         22,511,182         16,019,209
    Earned premiums ceded                   (6,831,799)       (4,822,930)       (12,933,169)        (9,489,605)
                                           -----------       -----------        -----------        -----------
       Net Premiums earned                   5,031,635         3,436,547          9,578,013          6,529,604

    Investment income, net of expenses         292,550           178,920            518,347            352,476
    Finance charges                              -               528,567           -                   966,288
    Processing and service fees              1,318,337           542,674          2,690,329          1,006,624
    Other income                                82,033            91,370            166,761            193,333
                                           -----------       -----------        -----------        -----------
        Total revenues                       6,724,555         4,778,078         12,953,450          9,048,325
                                           -----------       -----------        -----------        -----------

 Benefits, losses and expenses:
    Losses and loss adjustment expenses     11,571,810         6,281,791         21,118,143         11,538,522
    Reinsurance recoveries                  (7,654,285)       (4,015,104)       (14,044,111)        (7,451,304)
                                           -----------       -----------        -----------        -----------
 Net losses and loss adjustment expenses     3,917,525         2,266,687          7,074,032          4,087,218

 Acquisition costs, net                         83,546          (114,077)            17,531           (388,542)
 Other acquisition and underwriting
   expenses                                    958,248         1,176,582          2,123,396          2,509,196
 Operating expenses                          1,137,221           925,144          2,282,175          1,634,623
 Interest expense                              273,273           148,076            504,747            295,023
 Amortization of intangible assets              39,253            39,253             78,507             78,507
                                           -----------       -----------        -----------        -----------
 Total benefits, losses and expenses         6,409,066         4,441,665         12,080,388          8,216,025
                                           -----------       -----------        -----------        -----------
 Income from operations before
   federal income taxes                        315,489           336,413            873,062            832,300
 Federal income tax expense                    120,362           139,641            324,089            329,807
                                           -----------       -----------        -----------        -----------
 Net income                               $    195,127      $    196,772       $    548,973       $    502,493
                                           ===========       ===========        ===========        ===========

 Basic and diluted earnings per share     $       0.02      $       0.02       $       0.05       $       0.05
                                           ===========       ===========        ===========        ===========
 Common stock shares outstanding            11,048,133        11,048,133         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)

                                                        Six Months Ended
                                                            June 30
                                                     -----------------------
                                                        2000         1999
                                                     ----------   ----------
 <S>                                                <C>          <C>
 Cash flows from operating activities:
    Net income                                      $   548,973  $   502,493

    Adjustments to reconcile net loss to cash
      provided by (used in) operating activities:
       Depreciation and amortization expense            164,443      132,553
       Change in deferred Federal income taxes         (112,668)      29,148
       Change in prepaid reinsurance premiums        (2,468,228)  (1,204,129)
       Change in premiums receivable                   (789,803)    (121,514)
       Change in deferred policy acquisition           (725,366)    (693,956)
       Change in deferred ceding commissions            742,897      305,414
       Change in unpaid losses and loss               2,918,050      (57,894)
       Change in unearned premiums                    3,587,408    2,388,049
       Change in reinsurance recoverable             (3,072,056)     131,904
       Change in reinsurance balances payable           972,193       23,549
       Change in current federal income tax             (38,348)     320,279
       Change in accrued ceding commission refund       238,433      329,609
       Change in all other liabilities                1,426,052      526,539
       Change in all other assets                      (524,190)      50,192
                                                     ----------   ----------
           Net cash provided by operating             2,867,790    2,662,236
                                                     ----------   ----------
 Cash flows from investing  activities:
    Purchases of property and equipment                 (85,604)     (27,208)
    Premium finance notes originated                (18,295,128) (12,096,418)
    Premium finance notes repaid                     15,275,384   10,295,533
    Change in restricted cash                           (18,000)     (26,000)
    Purchases of debt securities                     (3,101,030)         -
    Maturities and redemptions of
      investment securities                             985,831    1,795,338
    Purchase of short-term investments               (9,559,589)  (8,386,203)
    Maturities of short-term investments              9,000,000    3,800,000
                                                     ----------   ----------
       Net cash used in investing activities         (5,798,136)  (4,644,957)
                                                     ----------   ----------
 Cash flows from financing activities:
     Repayment of borrowings                           (215,298)     (31,732)
     Net advances from lender                         1,799,223          -
                                                     ----------   ----------
         Net cash provided by (used in)
           financing activities                       1,583,925      (31,732)
                                                     ----------   ----------
 Decrease in cash and cash equivalents               (1,346,421)  (2,014,453)
 Cash and cash equivalents at beginning of period     5,786,069    6,776,274
                                                     ----------   ----------
 Cash and cash equivalents at end of period         $ 4,439,648  $ 4,761,821
                                                     ==========   ==========

             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 June  30,
 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 June  30, 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 between the
 Company and  its reinsurers.   During  the  periods presented,  the  Company
 retained 25% and ceded 75% of the risk to their reinsurers.  Effective  July
 1, 2000, the Company  has entered into a  new reinsurance agreement  whereby
 the Company retains 35% of the risk.
<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 $1,391,006 as  of June 30, 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 June 30, 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.  Prior to July  1,
 2000, the  Company's principal  reinsurers, GE  Reinsurance Corporation  and
 Dorinco  Reinsurance  Company  ("Dorinco"),  collectively  assumed  75%   of
 Hallmark's risk.   Effective July 1,  2000, Dorinco assumed 65% of the  risk
 with Hallmark retaining  the remaining 35%.   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
 was $0.2 million greater during the first six months of 2000 than during the
 first six months  of 1999.   This increase is  principally due to  increased
 annual policy premium  volume. Cash used  by investing activities  increased
 approximately $1.2 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
 $1.6 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 $1.4  million
 during the  first six  months of  2000.    The  Company's total  cash,  cash
 equivalents and investments (excluding restricted  cash of $3.4 million)  at
 June 30, 2000 and  December 31, 1999 were  $17.5 million and $16.1  million,
 respectively.  This increased liquidity is primarily due to increased policy
 production during fiscal 2000.
<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 $17.5 million at June 30, 2000, $1.2
 million  (as compared  to approximately $0.9 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
 six months of  2000 and 1999,  Hallmark paid or  accrued management fees  of
 $100,000 and $325,000,  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 six months of 2000, the amount of funding available  to
 fund premium finance notes under the secured financing arrangement with  the
 unaffiliated third  party was  increased to $10.0 million from $8.0 million.
 As of June 30, 2000,  HFC had an outstanding  balance on advances under  the
 financing arrangement of approximately $8.6 million  at an interest rate  of
 10%.   Under  the financing  arrangement,  the maximum  additional  advances
 available to HFC at June 30, 2000 were $1.4 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  approximately  $12.2
 million during the  first six  months of 2000  as compared  to $7.5  million
 during the first six months of 1999.   During the first six months of  2000,
 AHGA received  $2.5 million  in commissions  related  to this  program  from
 Hallmark, and  paid  earned commissions  of  approximately $1.5  million  to
 independent agents.  This has  resulted in increased unrestricted  liquidity
 for the Company.  During  the first six months  of 1999, AHGA received  $1.6
 million in  commissions related  to this  program  from Hallmark,  and  paid
 earned commissions of $0.9 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 approximately $2.9 million at  June 30, 2000 from $2.1  million
 at December 31, 1999.  Deferred policy acquisition costs as of June 30, 2000
 increased $0.7 million as  compared to 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.
<PAGE>

     Premium receivable from lender  increased $3.0 million during 2000 as  a
 result of increased annual policy production during the first six months  of
 2000 as  compared to  the last  six  months of  1999.   Prepaid  reinsurance
 premiums, unpaid  losses  and  LAE,  reinsurance  recoverable  and  unearned
 premiums increased  as  expected in relation  to increased premium writings.
 Accounts payable  and  other  accrued expenses  increased  as  a  result  of
 increased commissions due to independent agents under the earned  commission
 program.

     At  June  30,  2000,  Hallmark's  statutory  capital  and  surplus   was
 approximately $6.2 million, which  reflects a 3%  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 June  30,
 2000 was 2.98 to 1 as compared to 2.57 to 1 for the year ended December  31,
 1999 and 2.88 to 1  at June 30, 1999.  Management does not presently  expect
 Hallmark  to  require  additional  capital  during  2000  to  fund  existing
 operations, due,  in part,  to its  election to  discontinue reinsuring  two
 unaffiliated MGA programs as discussed below.

     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 cash management, underwriting and  rate-
 setting reviews, underwriting and 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.  Effective July 1,  2000, two of the unaffiliated  MGA
 programs have discontinued writing new business due to non-renewal of  their
 reinsurance treaties.   The Company will  continue to  perform functions  as
 defined in the respective contracts during the run-off period.

     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)  for the  three and  six
 months  ended  June   30,  2000   increased  approximately   56%  and   42%,
 respectively, in relation to gross premiums written during the same  periods
 in 1999. Net  premiums written  (after reinsurance)  for the  three and  six
 months ended June  30, 2000 increased  48% and 39%,  respectively, over  the
 same periods  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.

     Premiums earned  (prior to  reinsurance) for  the three  and six  months
 ended June 30, 2000  increased approximately 44%  and 41%, respectively,  as
 compared to the same periods of  1999.  For the  three and six months  ended
 June 30, 2000,  net premiums earned  (after reinsurance)  increased 46%  and
 47%,  respectively,  as  compared   to  the  same   periods  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.
<PAGE>

     Net  incurred  loss  ratios  (computed  on  net  premiums  earned  after
 reinsurance) for the three and six months  ended June 30, 2000 were 78%  and
 74%,  respectively, compared to  66%  and 63% for the  same periods of 1999.
 Hail damage during 2000 accounted for approximately 2% of the increased loss
 ratio.  The remaining increase is attributable to the increased loss  ratios
 on the  core  State &  County  business  and the  assumed  unaffiliated  MGA
 business.   Two  of  the  unaffiliated  MGA  programs  have  been  cancelled
 effective July 1,  2000.   The loss ratios  on these  two programs  exceeded
 113%.

     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
 increase in the debit 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  for the  three  and  six
 months  ended  June   30,  2000   decreased  approximately   19%  and   15%,
 respectively, as compared  to the  same periods 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
 service/consulting fees.  Operating expenses increased approximately 23% and
 40%, respectively, during the  three and six months  ended June 30, 2000  as
 compared to the  same periods of  1999.  The  majority of  this increase  is
 attributable to the  variable expenses related  to increased  volume in  the
 Company's premium finance operations, the deployment of management and staff
 resources to  the development,  administration  and/or processing  of  third
 party  contracts  and  the  development  of  technological  improvements  in
 information systems.

     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
 service fees.

<PAGE>
     Processing and  service fees represent  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  three   and  six  months  of  2000   increased
 approximately $0.8 million and $1.7 million as compared to 1999  principally
 as  a  result  of  the  premium  finance  servicing  arrangement  with   the
 unaffiliated third party.

     Although total revenues for the three and six months ended June 30, 2000
 increased  approximately  41%  and  43%,  respectively, compared to the same
 periods  of  1999,   net  inceome  for  both  periods  was  flat.  Marketing
 fragmentation  and capital over-capacity in the  insurance industry over the
 last several years have depressed premium rates.  The  cumulative  effect of
 inadequate rates, coupled with hail storm claims in  the first  half of  the
 year mitigated the impact of increased revenues on profitability.

 Recent Developments

      Management believes that recent trends emerging in the Texas  insurance
 industry may provide the foundation  for increasing future profitability  of
 the Company.   Initial  indicators reflect  a marketplace  characterized  by
 higher premium rates and a decrease in active competitors.  The Company  has
 been strategically increasing premium rates since November 1999, and intends
 to  systematically   implement  additional   rate  increases   to   optimize
 underwriting  profits.    As  part  of  the  continual  management  of   its
 independent  agents,  the  Company  is  actively  working  to  increase  the
 profitability of the business  produced by its  agent base through  targeted
 rate increases, more stringent underwriting guidelines and heightened  agent
 performance  requirements   (including  agency   underwriting   performance,
 operational quality standards and premium production commitments).

      Additionally, management is  in the  process of  implementing a  phased
 program to  strengthen its  information technology  capabilities in  several
 areas.  The  thrust of  the first  phase is  to enhance  Company and  agency
 relationships by improving content and timeliness of information to  support
 its agents in servicing their customers.   The Company is currently  testing
 the first phase  internally.   The Company  expects to  commence testing  by
 selected agents  during  the third  quarter  of  fiscal 2000,  with  a  full
 implementation beginning in the fourth quarter.  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 policy holders.   Testing
 of this phase is  scheduled for early 2001.   When fully implemented,  these
 information technology enhancements should result  in cost savings for  both
 the Company and its participating agents.
<PAGE>

      The expectation of increased premium rates in the Texas marketplace  is
 largely the result of recent tightening  in the availability of  reinsurance
 on acceptable terms.  Partially as  a result of this development,  effective
 July 1,  2000,  Hallmark  entered into  a  new  reinsurance  agreement  with
 Dorinco, one  of  the  two primary  reinsurers under the  prior arrangement.
 Under the  new  reinsurance  agreement,  Hallmark  has  increased  its  risk
 retention to 35% (from 25% under the previous arrangements) and Dorinco,  as
 the sole  reinsurer, has  increased its  participation  to 65%  (from  37.5%
 previously).   In  addition, the  new  agreement increases  the  provisional
 ceding commission  from 30% to 32%; decreases the minimum ceding  commission
 from 27.5%  to 21%;  and increases  the ratio  for computing  earned  ceding
 commissions above  the  minimum from  0.7:1  to  1:1 (i.e.,  the  number  of
 percentage points  by which  the earned  commission  is increased  over  the
 minimum is  now  equal to  the  number of  percentage  points by  which  the
 reinsurance loss ratio decreases from an established benchmark).  Under  the
 agreement, Hallmark retains  the provisional commission  (also the  maximum)
 received from July 1, 2000, through the third quarter of 2002, at which time
 the earned  ceding commission  will be  determined  based on  the  developed
 reinsurance loss ratio as of June 30, 2002.

      Management  believes  that  Hallmark's  new  reinsurance  agreement  is
 advantageous to the  Company  in light  of the  current  reinsurance market.
 Although the decrease in the minimum  ceding commission exposes Hallmark  to
 reduced ceding commission income (especially in the near term), the increase
 in both the provisional ceding commission and the ratio for computing earned
 ceding commissions provides the potential for enhancing future profits.   In
 addition, short term liquidity will be favorably impacted by the increase in
 the  provisional  ceding  commissions,  as  well  as  Hallmark's   continued
 retention of 100% of policy fees.

     Principally  as a  result  of the  inability  of many  MGA's  to  secure
 acceptable reinsurance terms,  the Company has  curtailed active pursuit  of
 full  service  third  party  program  administration  contracts.    For  the
 foreseeable future, the Company plans to limits its marketing of third party
 services primarily to claims handling contracts.
<PAGE>

 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.


               The  Company's Annual Meeting of  Shareholders was  held on
       ( a )   May 25, 2000.  Of the 11,048,133 shares  of common stock of
               the  Company entitled  to vote  at  the meeting,  8,885,984
               shares were present in person or by proxy.

       ( b )   The   following  individuals  were  elected  to   serve  as
               directors  for the Company:   Ramon  D. Phillips, Linda  H.
               Sleeper,  Raymond A.  Kilgore, James  H. Graves, George  R.
               Manser and C. Jeffrey Rogers.

       ( c )   There was no other business to come before the meeting.


      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
               14 is filed herewith.

         (b)   The  Company  did not  file  any  Form 8-K  Current  Reports
               during the second quarter of 2000.
<PAGE>


                                  Exhibit Index



    Exhibit
    Number                         Description
    -------                        -----------
    10(a)        Seventh  Amendment  to  Office  Lease  for 14651  Dallas
                 Parkway,  Suite  900,  dated  January  1, 1995,  between
                 American Hallmark  Insurance Company of  Texas and Fults
                 Management   Company,  as   agent  for   The  Prudential
                 Insurance Company of America.

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

                              /s/ John J. DePuma
                              ---------------------------------------
                              John J. DePuma, Chief Financial Officer