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 September 30, 1997



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 - 10,662,277 shares outstanding as of November 13,
1997.
<PAGE>
         HALLMARK FINANCIAL SERVICES, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF OPERATIONS
                             (Unaudited)

<TABLE>
                   Three Months Ended              Nine Months Ended
                      September 30                    September 30
                  1997         1996               1997            1996
     <S>           <C>         <C>                <C>              <C>
Gross premiums
 written        9,830,845  $10,880,687        $30,639,244     $33,135,617 
Ceded premiums
 written       (6,720,261)  (7,716,384)       (21,314,811)    (24,404,903)
 Net premiums
  written     $ 3,110,584  $ 3,164,303        $ 9,324,433      $8,730,714 

 Revenues:
  Premiums
   earned     $ 9,827,280  $11,898,965        $30,098,572     $36,480,706 
  Premiums
   ceded       (6,849,751)  (8,479,588)       (21,076,427)    (26,899,707)
  Net pre-
   miums
   earned       2,977,529    3,419,377          9,022,145       9,580,999 
  Investment
   income,
   net of
   expenses       164,602      224,912            563,882         671,996 
  Finance
   interest
   charges        312,084        1,194            312,084          25,509 
  Interest
   income -
   note
   receivable     130,098          -              320,343             -   
  Processing
   fees            64,428      423,584            773,433       1,477,834 
  Service fees    173,525       28,419            360,787          73,714 
     
  Other income    136,404       15,954            321,374          41,187 
     
 Total
   revenues     3,958,670    4,113,440         11,674,048      11,871,239   
Benefits,  
losses and 
expenses:
 Losses and
  loss adjust-
  ment
  expenses      6,420,718    8,492,819         20,149,936      24,909,437 
 Reinsurance
  recoveries   (4,672,376)  (6,393,702)       (14,859,824)    (18,759,990) 
Net losses and 
loss adjust-
ment expenses   1,748,342    2,099,117          5,290,112       6,149,447  
Acquisition
 costs, net      ( 11,549)    (278,921)          (504,552)       (422,422) 
<PAGE>
Other acquisi-
 tion and
 underwrit-
 ing expenses   1,219,114    1,512,525          4,056,735       3,430,840 
Operating
 expenses         351,092      550,664          1,194,879       1,474,115 
Interest
 expense          155,664       10,449            354,237          32,308 
Amortization
 of intan-
 gible assets      74,435       40,566            198,928         123,364    
Total benefits,
 losses and
 expenses       3,537,098    3,934,400         10,590,339      10,787,652   
Income from
 operations
 before federal
 income taxes     421,572      179,040          1,083,709       1,083,587 
Federal income
 tax              136,488       61,014            369,143         376,356    
 Net income    $  285,084   $  118,026        $   714,566     $   707,231   
Net income
 per share
 of common
 stock         $      .02   $      .01        $       .06     $       .06     
Weighted
 average
 shares out-
 standing      11,578,029   12,167,846         11,578,029      12,167,846
</TABLE>

           The accompanying notes are an integral part
             of the consolidated financial statements.
<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: November 17, 1997            /s/ Ramon D. Phillips
                                   Ramon D. Phillips, President 
                                   (Chief Executive Officer)


Date: November 17, 1997            /s/ John J. DePuma
                                   John J. DePuma,
                                   Chief Financial Officer