SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C. 20549

                                  FORM 10-Q

           Quarterly report pursuant to Section 13 or 15(d) of the

                       Securities Exchange Act of 1934

                 For the quarterly period ended June 30, 2005

                        Commission file number 0-16090


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


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


  777 Main Street, Suite 1000, Fort Worth, Texas           76102
  ----------------------------------------------        ----------
     (Address of principal executive offices)           (Zip Code)


    Registrant's telephone number, including area code:  (817) 348-1600

 Indicate by  check  mark  whether the registrant  (1) has filed all  reports
 required  to be  filed by Section 13 or 15(d) of the Securities Exchange Act
 of 1934  during the preceding 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 ___

 Indicate  by check mark whether the registrant is an accelerated  filer  (as
 defined in Rule 12b-2 of the  Exchange Act). Yes ___  No  X


                     APPLICABLE ONLY TO CORPORATE ISSUERS

 Indicate the number of shares outstanding of each of the issuer's classes of
 common stock,  as of the latest practicable date:  Common Stock,  par  value
 $.03 per share - 86,841,791 shares outstanding as of August 5, 2005.

<PAGE>

                                      PART I
                               FINANCIAL INFORMATION

 Item 1.   Financial Statements


                     INDEX TO FINANCIAL STATEMENTS

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

 Consolidated Balance Sheets at June 30, 2005                    3
 (unaudited) and December 31, 2004

 Consolidated Statements of Operations (unaudited)               4
 for the three months and six months ended June 30,
 2005 and June 30, 2004

 Consolidated Statements of Stockholders' Equity and             5
 Comprehensive Income (unaudited) for the three months
 and six months ended June 30, 2005 and June 30, 2004

 Consolidated Statements of Cash Flows (unaudited) for           6
 the six months ended June 30, 2005 and June 30, 2004

 Notes to Consolidated Financial Statements (unaudited)          7


<PAGE>

                       Hallmark Financial Services, Inc.
                          Consolidated Balance Sheets
                               ($ in thousands)

                                                      June 30     December 31
                    ASSETS                              2005          2004
                    ------                           ----------    ----------
                                                     (unaudited)    (audited)
 Investments:
   Debt securities, available-for-sale,
     at market value                                $    35,223   $    28,206
   Equity securities, available-for-sale,
     at market value                                      4,315         3,580
   Short-term investments, available-for-sale,
     at market value                                        335           335
                                                     ----------    ----------
            Total investments                            39,873        32,121

 Cash and cash equivalents                               81,756        12,901
 Restricted cash and investments                          6,579         6,509
 Premiums receivable                                      3,832         4,103
 Accounts receivable                                      2,411         3,494
 Reinsurance recoverable                                  1,431         3,083
 Deferred policy acquisition costs                        8,103         7,475
 Excess of cost over fair value
   of net assets acquired                                 4,836         4,836
 Intangible assets                                          472           486
 Deferred federal income taxes                            4,782         5,173
 Other assets                                             3,973         2,330
                                                     ----------    ----------
            Total assets                            $   158,048   $    82,511
                                                     ==========    ==========

     LIABILITIES AND STOCKHOLDERS' EQUITY
     ------------------------------------
 Liabilities:
   Unpaid losses and loss adjustment expenses          $ 18,501    $   19,648
   Unearned premiums                                      5,962         6,192
   Unearned revenue                                      12,122        11,283
   Note payable                                          30,928             -
   Accrued agent profit sharing                             941         1,875
   Accrued ceding commission payable                      1,201         1,695
   Pension liability                                      2,145         2,180
   Current federal income tax payable                       183         1,343
   Accounts payable and other accrued expenses            4,620         5,639
                                                     ----------    ----------
            Total liabilities                            76,603        49,855

 Commitments and Contingencies

 Stockholders' equity:
   Common stock, $.03 par value (authorized
     100,000,000 shares; issued 86,856,610
     shares in 2005 and 36,856,610 shares
     in 2004)                                             2,606         1,106
   Additional paid in capital                            62,898        19,647
   Retained earnings                                     16,922        13,103
   Accumulated other comprehensive income                  (964)         (759)
   Treasury stock, at cost (14,819 shares
     in 2005 and 379,319 in 2004)                           (17)         (441)
                                                     ----------    ----------
            Total stockholders' equity                   81,445        32,656
                                                     ----------    ----------
                                                    $   158,048   $    82,511
                                                     ==========    ==========

                  The accompanying notes are an integral part
                   of the consolidated financial statements

<PAGE>
<TABLE>
                       Hallmark Financial Services, Inc.
                     Consolidated Statements of Operations
                                 (Unaudited)
                   ($ in thousands, except per share amounts)


                                         Three Months Ended            Six Months Ended
                                              June 30                      June 30
                                        ---------------------       ----------------------
                                          2005         2004           2005          2004
                                        --------     --------       --------      --------
 <S>                                   <C>          <C>            <C>           <C>
 Gross premiums written                $   8,839    $   7,011      $  19,473     $  15,764
 Ceded premiums written                        -            1              -            25
                                        --------     --------       --------      --------
   Net premiums written                    8,839        7,012         19,473        15,789
   Change in unearned premiums               824          932            230           419
                                        --------     --------       --------      --------
   Net premiums earned                     9,663        7,944         19,703        16,208

 Investment income, net of expenses          451          344            862           623
 Realized loss                               (41)           -            (41)            -
 Finance charges                             509          536          1,049         1,083
 Commission and fees                       5,628        5,295         10,440        10,490
 Processing and service fees               1,570        1,524          3,204         3,004
 Other income                                  5            7             13            15
                                        --------     --------       --------      --------
   Total revenues                         17,785       15,650         35,230        31,423

 Losses and loss adjustment expenses       5,515        4,422         11,541         9,649
 Other operating costs and expenses        9,150        9,004         17,855        17,443
 Interest expense                            102           21            105            45
 Amortization of intangible asset              7            7             14            14
                                        --------     --------       --------      --------
   Total expenses                         14,774       13,454         29,515        27,151

 Income before tax                         3,011        2,196          5,715         4,272

 Income tax expense                        1,007          703          1,896         1,367
                                        --------     --------       --------      --------
 Net income                            $   2,004    $   1,493      $   3,819     $   2,905
                                        ========     ========       ========      ========

 Net income per share:
       Basic                           $    0.03    $    0.04      $    0.08     $    0.07
                                        ========     ========       ========      ========
       Diluted                         $    0.03    $    0.04      $    0.07     $    0.07
                                        ========     ========       ========      ========


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

                       Hallmark Financial Services, Inc.
   Consolidated Statements of Stockholders' Equity and Comprehensive Income
                                 (Unaudited)
                               ($ in thousands)


                                         Three Months Ended            Six Months Ended
                                              June 30                      June 30
                                        ---------------------       ----------------------
                                          2005         2004           2005          2004
                                        --------     --------       --------      --------
 <S>                                   <C>          <C>            <C>           <C>
 Common Stock
 Balance, beginning of period          $   1,106    $   1,106      $   1,106     $   1,106
 Issuance of common stock in
   rights offering (50,000,000
   shares in 2005)                         1,500            -          1,500             -
                                        --------     --------       --------      --------
 Balance, end of period                    2,606        1,106          2,606         1,106

 Additional Paid-In Capital
 Balance, beginning of period             19,640       19,641         19,647        19,693
 Issuance of common stock in
   rights offering (50,000,000
   shares in 2005), net of $78
   in expenses                            43,422            -         43,422             -
 Equity based compensation                    14            7             23            14
 Exercise of stock options                  (178)           -           (194)          (59)
                                        --------     --------       --------      --------
 Balance, end of period                   62,898       19,648         62,898        19,648

 Retained Earnings
 Balance, beginning of period             14,918        8,666         13,103         7,254
 Net income                                2,004        1,493          3,819         2,905
                                        --------     --------       --------      --------
 Balance, end of period                   16,922       10,159         16,922        10,159

 Accumulated Other Comprehensive
   Income (Loss)
 Balance, beginning of period             (1,240)         212           (759)          (93)
 Additional minimum pension liability,
   net of tax                                  -            -             30             -
 Unrealized gains (losses) on
   securities, net of tax                    276         (683)          (235)         (378)
                                        --------     --------       --------      --------
 Balance, end of period                     (964)        (471)          (964)         (471)

 Treasury Stock
 Balance, beginning of period               (412)        (476)          (441)         (563)
 Exercise of stock options                   395            -            424            87
                                        --------     --------       --------      --------
 Balance, end of period                      (17)        (476)           (17)         (476)

                                        --------------------------------------------------
 Stockholders' Equity                  $  81,445    $  29,966      $  81,445     $  29,966
                                        ==================================================

 Net income                            $   2,004    $   1,493      $   3,819     $   2,905
 Additional minimum pension
   liability, net of tax                       -            -             30             -
 Unrealized gains (losses)
   on securities, net of tax                 276         (683)          (235)         (378)
                                        --------------------------------------------------
 Comprehensive Income                  $   2,280    $     810      $   3,614     $   2,527
                                        ==================================================

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

                       Hallmark Financial Services, Inc.
                      Consolidated Statement of Cash Flows
                                  (Unaudited)
                                ($ in thousands)

                                                        Six Months Ended
                                                             June 30
                                                     ------------------------
                                                        2005          2004
                                                     ----------    ----------
 Cash flows from operating activities:
   Net income                                       $     3,819   $     2,905

 Adjustments to reconcile net income to cash
   provided by (used in) operating activities:
    Depreciation and amortization expense                   178           224
    Deferred federal income tax expense                     512           122
    Realized loss on investments                             41             -
    Change in prepaid reinsurance premiums                    -           283
    Change in premiums receivable                           271           313
    Change in accounts receivable                         1,083           739
    Change in deferred policy acquisition costs            (628)         (597)
    Change in unpaid losses and loss adjustment
      expenses                                           (1,147)       (6,290)
    Change in unearned premiums                            (230)         (702)
    Change in unearned revenue                              839         1,420
    Change in accrued agent profit sharing                 (934)         (826)
    Change in reinsurance recoverable                     1,652         5,350
    Change in current federal income tax payable/
      recoverable                                        (1,160)          745
    Change in accrued ceding commission payable            (494)           44
    Change in all other liabilities                      (1,024)         (661)
    Change in all other assets                             (601)         (297)
                                                     ----------    ----------
      Net cash provided by operating activities           2,177         2,772
                                                     ----------    ----------
 Cash flows from investing activities:
   Purchases of property and equipment                     (164)          (75)
   Premium finance notes repaid,
     net of finance notes originated                          -            51
   Change in restricted cash and investments                (70)       (3,269)
   Purchases of debt and equity securities               (8,802)       (1,138)
   Maturities and redemptions of investment
     securities                                             538         2,634
   Net purchases of short-term investments                    3        (2,376)
                                                     ----------    ----------
   Net cash used in investing activities                 (8,495)       (4,173)
                                                     ----------    ----------
 Cash flows from financing activities:
    Proceeds from exercise of employee stock options        230            28
    Proceeds from stockholder rights offering            44,922             -
    Proceeds (repayments) of borrowings                  30,928          (364)
    Debt issuance costs                                    (907)            -
                                                     ----------    ----------
        Net cash provided by (used in)
          financing activities                           75,173          (336)
                                                     ----------    ----------
 Decrease in cash and cash equivalents                   68,855        (1,737)
 Cash and cash equivalents at beginning of period        12,901        10,520
                                                     ----------    ----------
 Cash and cash equivalents at end of period         $    81,756   $     8,783
                                                     ==========    ==========

 Supplemental Cash Flow Information:
   Interest paid                                    $         8   $        45
                                                     ----------    ----------
   Taxes paid                                       $     2,554   $       500
                                                     ----------    ----------

                  The accompanying notes are an integral part
                   of the consolidated financial statements

<PAGE>
                      Hallmark Financial Services, Inc.
            Notes to Consolidated Financial Statements (Unaudited)


 1. General

     Hallmark  Financial  Services,  Inc.,  ("Hallmark"  and,  together  with
 subsidiaries, "we", "us", "our") is an insurance holding company engaged  in
 the sale of property and casualty insurance products.  Our business involves
 the marketing and underwriting of non-standard personal automobile insurance
 in Texas, New Mexico and Arizona;  marketing commercial insurance  in Texas,
 New Mexico, Idaho, Oregon and Washington;  affiliate and third party  claims
 administration;  and  other  insurance  related  services.   We  pursue  our
 business  activities  through  integrated  insurance  groups  handling  non-
 standard personal  automobile insurance  (the  "Personal Lines  Group")  and
 commercial insurance (the  "Commercial Lines Group").  The  members  of  the
 Personal Lines  Group  are  American Hallmark  Insurance  Company  of  Texas
 ("AHIC"), an  authorized  Texas  property and  casualty  insurance  company;
 Phoenix Indemnity Insurance Company ("PIIC"), an authorized Arizona property
 and casualty  insurance  company;  American Hallmark  General  Agency,  Inc.
 ("AHGA"), a  managing general  agency; and  Hallmark Claims  Services,  Inc.
 ("HCS"), an affiliate and third party  claims administrator. The members  of
 the Commercial Lines Group are a  managing general agency, Hallmark  General
 Agency, Inc.  ("HGA"), and  a third  party claims  administrator,  Effective
 Claims Management, Inc. ("ECM").

     During  the  second  quarter of  2005,  we  completed  a  $45.0  million
 shareholder rights offering and a $30.0  million private placement  of trust
 preferred securities.  As a result of these capital enhancements,  A.M. Best
 announced on June 21, 2005 the upgrades of the financial strength ratings of
 AHIC to A-  (excellent) from B  (fair) and PIIC  to B+ (very  good) from  B-
 (fair).

     During the  third quarter of  2005, we intend to begin underwriting  and
 issuing AHIC policies for the commercial insurance business  produced by HGA
 in  order  to  capture  the  underwriting margin that  is currently  paid to
 a  third party  insurer.  After we  have  obtained  all required  regulatory
 approvals, we  also  intend to  consolidate  the underwriting  of  our  non-
 standard personal automobile insurance business  into PIIC during the  third
 quarter of 2005.  As a result of these  changes, we expect AHIC to become  a
 part of the Commercial Lines Group during the third quarter of 2005.


 2. Basis of Presentation

     Our  unaudited consolidated  financial statements  included herein  have
 been prepared in accordance with accounting principles generally accepted in
 the United  States of  America ("GAAP")  and include  our accounts  and  the
 accounts of our  subsidiaries.  All  significant inter-company accounts  and
 transactions have been eliminated in consolidation.  Certain information and
 footnote  disclosures  normally  included  in  financial statements prepared
 in  accordance  with GAAP have  been condensed or omitted  pursuant to rules
 and  regulations  of  the  Securities  and  Exchange  Commission ("SEC") for
 interim financial reporting.  These  financial  statements should be read in
 conjunction with  our  audited  financial  statements  for  the  year  ended
 December 31, 2004 included in our report on Form 10-K filed with the SEC.

     The  interim financial data  as of  June 30, 2005 and 2004 is unaudited.
 However, in  the  opinion  of management,  the  interim  data  includes  all
 adjustments, consisting only of normal recurring adjustments, necessary  for
 a  fair statement of  the results for  the interim periods.  The results  of
 operations for the period ended June 30, 2005 are not necessarily indicative
 of the operating results to be expected for the full year.

     Reclassification

     Certain previously reported  amounts have been reclassified in order  to
 conform to current year presentation.  Such reclassification had  no  effect
 on net income or stockholders' equity.

     Use of Estimates in the Preparation of the Financial Statements

      Our  preparation  of  financial  statements  in  conformity  with  GAAP
 requires us  to make  estimates and  assumptions  that affect  our  reported
 amounts of assets and  liabilities and our  disclosure of contingent  assets
 and liabilities at  the date  of our financial  statements, as  well as  our
 reported amounts  of revenues  and expenses  during the  reporting period.
 Actual results could differ materially from those estimates.

     Recently Issued Accounting Standards

     In  December 2004,  the Financial  Accounting Standards  Board  ("FASB")
 issued Statement No. 123R "Share-Based Payment" ("SFAS 123R"), which revises
 FASB Statement  No.  123 ("SFAS  123")  and  supersedes APB  25.  SFAS  123R
 eliminates an entity's ability to account for share-based payments using APB
 25 and requires  that all such  transactions be accounted  for using a  fair
 value based method.  In April 2005,  the SEC deferred the effective date  of
 SFAS 123R from the first interim  or annual period beginning after June  15,
 2005 to the next fiscal year  beginning after June 15, 2005.  SFAS  123R  is
 not expected  to have  a material  impact on  our results  of operations  or
 financial position.


 3. Equity Compensation Plans

     We have stock  options outstanding under stock-based compensation  plans
 for key employees and non-employee directors.  Effective January 1, 2003, we
 adopted  the  fair  value  recognition  provisions  of  SFAS  123,  and  the
 prospective method  of  adoption  provided under  FASB  Statement  No.  148,
 "Accounting for Stock-Based Compensation - Transition and Disclosure" ("SFAS
 148").  The  following table  illustrates  the  effect  on  net  income  and
 earnings per share if the  fair value based method  had been applied to  all
 outstanding and unvested awards in each period.

                                 Three Months Ended        Six Months Ended
                                      June 30,                 June 30,
  (in thousands)                 2005          2004       2005          2004
                                -------      -------     -------      -------
  Net income as reported       $  2,004     $  1,493    $  3,819     $  2,905

  Add:  Stock-based employee
  compensation expenses
  included in reported net
  income, net of related
  tax effects                         9            5          15           10

  Deduct:  Total stock-based
  employee compensation expense
  determined under fair value
  based method for all awards,
  net of related tax effect         (12)          (9)        (21)         (17)
                                -------      -------     -------      -------
  Pro forma net income         $  2,001     $  1,489    $  3,813     $  2,898
                                =======      =======     =======      =======
  Earnings per share:
    Basic-as reported          $   0.03     $   0.04    $   0.08     $   0.07
                                =======      =======     =======      =======
    Basic-pro forma            $   0.03     $   0.04    $   0.07     $   0.07
                                =======      =======     =======      =======
    Diluted-as reported        $   0.03     $   0.04    $   0.07     $   0.07
                                =======      =======     =======      =======
    Diluted-pro forma          $   0.03     $   0.03    $   0.07     $   0.07
                                =======      =======     =======      =======


 4. Segment Information

     The following  is business  segment information  for the three  and  six
 months ended June 30, 2005 and 2004 (in thousands):

                                 Three Months Ended        Six Months Ended
                                      June 30,                 June 30,
                                 2005          2004       2005          2004
                                -------      -------     -------      -------
 Revenues
 --------
   Personal Lines Group        $ 11,195     $  9,956    $ 22,356     $ 20,215
   Commercial Lines Group         6,575        5,693      12,855       11,206
   Corporate                         15            1          19            2
                                -------      -------     -------      -------
     Consolidated              $ 17,785     $ 15,650    $ 35,230     $ 31,423
                                =======      =======     =======      =======
 Pre-tax income (loss)
 ---------------------
   Personal Lines Group        $  2,460     $  2,099    $  4,902    $   3,885
   Commercial Lines Group         1,472          735       2,540        1,555
   Corporate                       (921)        (638)     (1,727)      (1,168 )
                                -------      -------     -------      -------
     Consolidated              $  3,011     $  2,196    $  5,715     $  4,272
                                =======      =======     =======      =======

     The  following is  additional business  segment  information as  of  the
 dates indicated (in thousands):

                                       June 30, 2005       Dec. 31, 2004
                                       -------------       -------------
                  Assets
                  ------
        Personal Lines Group             $   80,701          $   63,136
        Commercial Lines Group               75,197              18,557
        Corporate                             2,150                 818
                                          ---------           ---------
             Consolidated                $  158,048          $   82,511
                                          =========           =========

 5. Reinsurance

     Prior  to  April 1, 2003,  AHIC ceded  reinsurance  to  other companies.
 These reinsurance arrangements  are more fully  described in  Note 5 to  the
 Company's  Form  10-K  for the  year  ended  December 31,  2004.  We  remain
 obligated to our policyholders in the event that the reinsurers do not  meet
 their obligations under the reinsurance agreements.

     Under our  prior reinsurance arrangements,  we continue  to earn  ceding
 commissions based on incurred loss experience on the portion of the policies
 ceded.  We received a provisional commission as policies were produced as an
 advance against the later determination of the commission actually earned.

     The following  table shows earned  premiums ceded  and reinsurance  loss
 recoveries by period (in thousands):

                                 Three Months Ended        Six Months Ended
                                      June 30,                 June 30,
                                 2005          2004       2005          2004
                                -------      -------     -------      -------

     Ceded earned premiums     $      -     $      1    $      -     $    258
     Reinsurance recoveries    $     10     $    537    $   (381)    $    211


 6. Note Payable

      On June 21, 2005, our newly formed trust subsidiary completed a private
 placement  of  $30.0  million  of  30-year  floating  rate  trust  preferred
 securities.  Simultaneously,  we  borrowed  $30.9  million  from  the  trust
 subsidiary and  contributed  $30.0 million  to  AHIC in  order  to  increase
 policyholder  surplus.  The note bears  an initial interest  rate of  7.725%
 until  June 15, 2015, at which  time interest will  adjust quarterly to  the
 three month LIBOR rate plus  3.25  percentage points.  As of  June 30, 2005,
 the note balance was $30.9 million.


 7. Credit Facility

      On June 29,  2005, we  entered into a  credit facility  with The  Frost
 National Bank.  The credit facility was amended on July 15, 2005, to  reduce
 the interest rate.  Under this credit facility, the maximum amount available
 to us  from time  to time  is $7.5  million, which  may include  up to  $2.0
 million under  a revolving line of credit,  up to $3.5 million in  five-year
 term loans  and  up to $7.5 million in five-year stand-by letters of credit.
 The borrowings under our credit facility  will accrue interest at an  annual
 rate of three month LIBOR plus 2.00% and  we will pay letter of credit  fees
 at the rate of 1.00% per annum.  Our obligations under the  credit  facility
 are secured  by a  security interest  in the  capital stock  of all  of  our
 subsidiaries, guaranties  of  all of  our  subsidiaries and  the  pledge  of
 substantially all  of  our assets.  The credit  facility contains  covenants
 which, among  other things,  require us  to maintain  certain financial  and
 operating  ratios  and  restrict  certain  distributions,  transactions  and
 organizational  changes.  As of  June 30, 2005,  there  were no  outstanding
 amounts due under our credit facility, and we were in compliance with all of
 our covenants.


 8. Deferred Policy Acquisition Costs

     The  following   table  shows  total   deferred  and  amortized   policy
 acquisition costs by period (in thousands):

                                 Three Months Ended        Six Months Ended
                                      June 30,                 June 30,
                                 2005          2004       2005          2004
                                -------      -------     -------      -------
        Deferred               $ (5,537)    $ (5,189)   $(11,624)    $(11,337)
        Amortized                 5,280        5,101      10,996       10,740
                                -------      -------     -------      -------
        Net Deferred           $   (257)    $    (88)   $   (628)    $   (597)
                                =======      =======     =======      =======


 9. Earnings per Share

      The following  table  sets forth  basic  and diluted  weighted  average
 shares outstanding for the periods indicated (in thousands):

                                  Three Months Ended       Six Months Ended
                                       June 30,                June 30,
                                  2005          2004      2005          2004
                                 -------      -------    -------      -------
 Weighted average shares - basic  59,270       42,417     50,916       42,395
 Effect of dilutive securities       535          164        615          139
                                 -------      -------    -------      -------
 Weighted average shares -
   assuming dilution              59,805       42,581     51,531       42,534
                                 =======      =======    =======      =======

      For the three and  six months ended June  30, 2004, 126,000 shares  and
 526,000 shares, respectively, attributable to outstanding stock options were
 excluded from  the calculation  of diluted  earnings per  share because  the
 exercise prices  of the  stock options  were greater  than or  equal to  the
 average price of  the common shares  and, therefore,  their inclusion  would
 have been anti-dilutive.  There were no outstanding stock options  that were
 excluded from the calculation  of diluted earnings per  share for the  three
 and six months ended June 30, 2005.

      In accordance with FASB Statement No.  128 "Earnings Per Share"  ("SFAS
 128"), we  have  restated the  basic  and diluted  weighted  average  shares
 outstanding for the three months and six months ended June 30, 2004 for  the
 effect of a  bonus element  from our  stockholder rights offering  that  was
 successfully completed  in  the second quarter  of 2005.  According to  SFAS
 128, there is  an assumed  bonus element in  a rights  issue whose  exercise
 price is less than the market value of the stock at the close of the  rights
 offering period.  This  bonus  element is treated  as a  stock dividend  for
 reporting earnings per share.


 10. Net Periodic Pension Cost

     We have recognized $33 thousand in net periodic pension cost during  the
 first six months of 2005.  The components of this cost are interest  cost of
 $363 thousand, amortization of net loss  of $38 thousand and expected return
 on plan assets of ($368) thousand.


 Item 2.   Management's Discussion and Analysis of Financial Condition and
           Results of Operations.

 Introduction

     Hallmark  Financial  Services,  Inc.,  ("Hallmark"  and,  together  with
 subsidiaries, "we", "us", "our") is an insurance holding company engaged  in
 the sale of property and casualty insurance products.  Our business involves
 the marketing and underwriting of non-standard personal automobile insurance
 in Texas, New Mexico and Arizona;  marketing commercial insurance in  Texas,
 New Mexico, Idaho, Oregon and Washington;  affiliate and third party  claims
 administration;  and  other  insurance  related  services.   We  pursue  our
 business  activities  through  integrated  insurance  groups  handling  non-
 standard personal  automobile insurance  (the  "Personal Lines  Group")  and
 commercial insurance  (the  "Commercial Lines Group").  The  members of  the
 Personal Lines  Group  are  American Hallmark  Insurance  Company  of  Texas
 ("AHIC"), an  authorized  Texas  property and  casualty  insurance  company;
 Phoenix Indemnity Insurance Company ("PIIC"), an authorized Arizona property
 and casualty  insurance  company;  American Hallmark  General  Agency,  Inc.
 ("AHGA"), a  managing general  agency; and  Hallmark Claims  Services,  Inc.
 ("HCS"), an affiliate and third party  claims administrator. The members  of
 the Commercial Lines Group are a  managing general agency, Hallmark  General
 Agency, Inc.  ("HGA"), and  a third  party claims  administrator,  Effective
 Claims Management, Inc. ("ECM").

     During  the  second  quarter of  2005,  we  completed  a  $45.0  million
 shareholder rights offering and a $30.0  million private placement of  trust
 preferred securities.  As a result of these capital enhancements, A.M.  Best
 announced on June 21, 2005 the upgrades of the financial strength ratings of
 AHIC to A-  (excellent) from B  (fair) and PIIC  to B+ (very  good) from  B-
 (fair).

     During  the third quarter  of 2005, we intend to begin underwriting  and
 issuing AHIC policies for the commercial insurance business produced  by HGA
 in order to  capture the  underwriting margin that  is currently  paid to  a
 third  party  insurer.  After  we  have  obtained  all  required  regulatory
 approvals, we  also  intend to  consolidate  the underwriting  of  our  non-
 standard personal automobile insurance business  into PIIC during the  third
 quarter of 2005.  As a result of these  changes, we expect AHIC to become  a
 part of the Commercial Lines Group during the third quarter of 2005.


 Financial Condition and Liquidity

     Sources  and  uses of funds.  Our sources  of funds  are from  insurance
 related operations,  financing  activities and investing  activities.  Major
 sources of funds from operations include  premiums collected (net of  policy
 cancellations and premiums ceded),  commissions, and processing and  service
 fees.   On  a  consolidated  basis,  our  cash  and  investments  (excluding
 restricted cash  and  investments) at  June  30, 2005  were  $121.6  million
 compared to $45.0 million  at December 31, 2004.  Most of this increase  was
 attributable to  net proceeds  of  $44.9 million from  a stockholder  rights
 offering and $29.1 million from the issuance of trust preferred securities.

     Net  cash provided  by our  consolidated operating  activities was  $2.2
 million for the first six  months of 2005 compared  to $2.8 million for  the
 first six months  of  2004.  The decrease in  operating cash flow  primarily
 resulted from increased tax payments of $2.0 million over the prior year and
 increased paid operating expenses of $0.5 million caused mostly by incentive
 compensation  payments  of $0.9  million paid in the  first quarter of 2005.
 These amounts were partially offset by $1.9 million from increased retention
 of non-standard automobile premium in 2005 and increased commercial  premium
 production, net  of  resulting  paid  loss  and  loss  adjustment  expenses,
 collected ceding commissions and claims fees.

     Cash used by  investing activities during the  first six months of  2005
 was  $8.5 million as compared  to $4.2 million  for the same period in 2004.
 The increase in cash used in investing activities is mainly due to increased
 purchases of debt and  equity securities of $7.7  million and a decrease  in
 net maturities and redemptions  of securities of $2.1  million.  These  were
 partially offset  by  a  $3.2  million  decrease  in  cash  and  investments
 transferred to  restricted  accounts and  a  $2.4 million  decrease  in  net
 purchases of short-term investments.

     Cash provided  by financing activities  during the first  six months  of
 2005 was $75.2 million as compared  to cash used  in financing activities of
 $0.3  million for the  same period of 2004.  The cash  provided in 2005  was
 from net proceeds  of $44.9 million  from the  stockholder rights  offering,
 $30.0 million  from the  issuance  of  trust  preferred  securities,  net of
 related  debt issuance costs  and  $0.2 million  from the exercise  of stock
 options.  The cash  used  in 2004 was  from  $0.4 million  repaid on  a note
 payable  that  was partially  offset  by  $28  thousand in proceeds from the
 exercise of stock options.

     As a  holding company, Hallmark  is dependent on  dividend payments  and
 management fees from its  subsidiaries to meet  operating expenses and  debt
 obligations.  As of  June 30, 2005,  Hallmark had $0.2  million in cash  and
 invested assets.  Cash and invested assets of our non-insurance subsidiaries
 were $7.0 million as of June 30, 2005.

     Property  and casualty  insurance companies  domiciled in  the State  of
 Texas are limited in the payment  of dividends to their shareholders in  any
 twelve-month  period,  without  the  prior  written  consent  of  the  Texas
 Department of Insurance ("TDI"), to the greater of statutory net income  for
 the prior calendar year or 10% of statutory policyholders' surplus as of the
 prior year end. Dividends may only  be paid  from unassigned  surplus funds.
 During 2005,  AHIC's  ordinary  dividend capacity  is  $1.5  million.  PIIC,
 domiciled in Arizona, is limited in  the payment of dividends to the  lesser
 of 10% of prior year policyholder's  surplus or prior year's net  investment
 income, without  prior  written  approval from  the  Arizona  Department  of
 Insurance ("AZDOI").  During 2005, PIIC's ordinary dividend capacity is $0.8
 million.  Neither AHIC nor PIIC paid a dividend to Hallmark during the first
 six months of 2005.

     TDI  regulates  financial  transactions  between  AHIC  and   affiliated
 companies.  Applicable  regulations  require  TDI's approval  of  management
 fees, expense sharing contracts  and  similar transactions.  AHGA paid  $0.8
 million and $0.3 million in management fees to Hallmark during the first six
 months of 2005 and 2004, respectively.

     AZDOI  regulates  financial transactions  between  PIIC  and  affiliated
 companies.  Applicable  regulations require AZDOI's  approval of  management
 fees, expense sharing contracts  and  similar transactions.  PIIC paid  $0.6
 million in management fees to AHGA during  the first six months of both 2005
 and 2004.

     Credit facility.  On June 29, 2005,  we  entered into a credit  facility
 with The Frost National Bank.  The  credit facility was amended  on July 15,
 2005, to reduce the interest rate.  Under this credit facility, the  maximum
 amount available to us from time to time is $7.5 million, which may  include
 up to $2.0 million under a revolving line  of credit, up to $3.5 million  in
 five-year term loans and up to $7.5 million in five-year stand-by letters of
 credit.  The borrowings under our credit facility will accrue interest at an
 annual rate of three month LIBOR plus 2.00% and we will pay letter of credit
 fees at the  rate of  1.00% per  annum.  Our obligations  under  the  credit
 facility are secured by a security interest  in the capital stock of all  of
 our subsidiaries, guaranties of  all of our subsidiaries  and the pledge  of
 substantially all  of  our assets.  The credit  facility contains  covenants
 which, among  other things,  require us  to maintain  certain financial  and
 operating  ratios  and  restrict  certain  distributions,  transactions  and
 organizational  changes.  As of  June 30,  2005, there  were no  outstanding
 amounts due under our credit facility, and we were in compliance with all of
 our covenants.

     Trust preferred securities.  On June 21, 2005,  our newly  formed  trust
 subsidiary completed  a  private  placement  of  $30.0  million  of  30-year
 floating rate trust preferred securities.  Simultaneously, we borrowed $30.9
 million from the trust subsidiary and  contributed $30.0 million to AHIC  in
 order to increase policyholder surplus.  The note bears an initial  interest
 rate of  7.725% until  June 15,  2015, at  which time  interest will  adjust
 quarterly to the three month LIBOR rate plus 3.25 percentage points.  As  of
 June 30, 2005, the note balance was $30.9 million.

 Results of Operations

     Management Overview.  During  the second  quarter  of  fiscal 2005,  our
 total revenues were $17.8  million, representing a  13.6% increase over  the
 $15.7 million in total revenues for  the comparable period  of fiscal  2004.
 For the  first six  months of  fiscal 2005,  our total  revenues were  $35.2
 million, which was 12.1% more than  the $31.4 million in total revenues  for
 the comparable  period  in  fiscal 2004.  We reported  net  income  of  $2.0
 million and $3.8 million for the three  and six months ended June 30,  2005,
 respectively.  This  represents  a 34.2%  and 31.5%  increase over  our  net
 income for the three and six months ended June 30, 2004, respectively.  On a
 diluted per share basis, net  income was $0.03 and  $0.07 for the three  and
 six months ended June 30, 2005, respectively, as compared to $0.04 and $0.07
 for the same periods in the prior year.  During the second quarter  of 2005,
 we issued  50.0  million  shares  in  a stockholder rights  offering,  which
 diluted the per share results in 2005 as compared to 2004.

     The increase in total revenues for  the first six months of fiscal  2005
 as  compared  to  the  first  six  months  of  fiscal  2004  was   primarily
 attributable to increased premium assumption by the Personal Lines Group  as
 a result  of  changes in  Hallmark's  reinsurance arrangements  and  to  the
 combined impact of increased premium volume and improved commission terms in
 the Commercial Lines Group.  The  increase in net  income for the first  six
 months of 2005 versus the same  period in 2004 reflects ongoing  initiatives
 to improve  underwriting  performance  in both  operating  units,  increased
 premium assumption by  the Personal  Lines Group  and additional  commission
 revenue in the Commercial Lines Group.

     The following is additional  business segment information for the  three
 and six months ended June 30, 2005 and 2004 (in thousands):

                                 Three Months Ended        Six Months Ended
                                      June 30,                 June 30,
                                 2005          2004       2005          2004
                                -------      -------     -------      -------
 Revenues
 --------
   Personal Lines Group        $ 11,195     $  9,956    $ 22,356     $ 20,215
   Commercial Lines Group         6,575        5,693      12,855       11,206
   Corporate                         15            1          19            2
                                -------      -------     -------      -------
     Consolidated              $ 17,785     $ 15,650    $ 35,230     $ 31,423
                                =======      =======     =======      =======
 Pre-tax income (loss)
 ---------------------
   Personal Lines Group        $  2,460     $  2,099    $  4,902    $   3,885
   Commercial Lines Group         1,472          735       2,540        1,555
   Corporate                       (921)        (638)     (1,727)      (1,168)
                                -------      -------     -------      -------
     Consolidated              $  3,011     $  2,196    $  5,715     $  4,272
                                =======      =======     =======      =======

 Second Quarter 2005 as compared to the Second Quarter 2004

 Personal Lines Group

     Net premium written increased $1.8 million during the second quarter  of
 2005 to $8.8 million compared to $7.0 million in the second quarter of 2004.
 The  increase was due mainly to AHIC assuming 100% of the Texas non-standard
 automobile business  produced by  AHGA and  underwritten by  a third  party,
 effective October 1, 2004.  Prior to October 1, 2004, AHIC assumed only  45%
 of this business.  Total premium  production for the second quarter of  2005
 declined $1.5 million,  or 14.7%,  from the  $10.4 million  produced in  the
 second quarter of 2004.  The  decline in produced premium was reflective  of
 increased competition.

     Revenue for  the Personal Lines Group  increased 12.4% to $11.2  million
 for the second quarter  of 2005 from  $10.0 million for  the same period  in
 2004.  Increased net  premium earned of $1.7  million due to higher  assumed
 premium volume was the primary cause of this increase.  This increase in net
 premiums earned was partially  offset by a $0.4  million decrease in  ceding
 commission income  due  to AHIC  assuming  100% of  the  Texas  non-standard
 automobile business effective October 1, 2004.

     Pre-tax income for the  Personal Lines Group increased $0.4 million,  or
 17.2%, for the  second quarter  of 2005 compared  to the  second quarter  of
 2004.  Taking into consideration the effect on ceding commissions, increased
 loss and loss adjustment expenses and premium production costs, the  changes
 in premium volume produced  and  assumed  contributed  $0.2 million  to  the
 increase in pre-tax income.  Lower  salary and related expenses  contributed
 $0.1 million, lower  technical service  costs from  integrating PIIC's  back
 office systems that were previously outsourced contributed $0.1 million  and
 increased investment income contributed $0.1  million to the increased  pre-
 tax income for the second quarter  of 2005.  These increases were  partially
 offset by a loss ratio (defined as loss and loss adjustment expenses divided
 by net premiums earned) of 57.2% for the second quarter of 2005 as  compared
 to 56.0% for the same period in 2004, which decreased pre-tax income by $0.1
 million.

 Commercial Lines Group

     Total revenue  for the Commercial  Lines Group of  $6.6 million for  the
 second quarter of 2005 was $0.9 million more than the $5.7 million  reported
 in the second quarter  of 2004.  This  15.5% increase  in total revenue  was
 primarily  due  to  additional  commission  revenue  of  $0.7 million in the
 first quarter of 2005  as  compared  to the same  period in 2004.  Increased
 commercial premium volume  and improved  commission terms  were the  primary
 causes of the increased commission revenue for the quarter.  Earned  premium
 generated by the Commercial Lines Group  for the second quarter of 2005  was
 $19.2 million as compared  to  $18.1 million  in the second quarter of 2004.
 We do not  currently bear the  primary underwriting risk  for this  business
 and, therefore, the resulting premiums and  claims are not reflected in  our
 reported results.

     Pre-tax income for  the Commercial Lines Group  of $1.5 million for  the
 second quarter of  2005 increased  $0.7 million,  or 100.3%,  over the  $0.7
 million  reported  for  the  second  quarter  of  2004.  Increased  revenue,
 as  discussed  above,  was  the  primary  reason for the increase in pre-tax
 income, partially  offset by additional  agent commissions of  $0.2  million
 attributable to the increased premium volume.

 Corporate

      Corporate pre-tax loss was $0.9 million for the second quarter of  2005
 as compared to $0.6 million for the same  period in 2004.  The increase  was
 due mostly to the  transfer of accounting positions  from both the  Personal
 Lines Group and Commercial Lines Group to Corporate.

 Year-to-Date 2005 as compared to Year-to-Date 2004

 Personal Lines Group

     Net premium written increased  $3.7 million during the first six  months
 of 2005 to  $19.5  million compared to  $15.8 million in the same period  of
 2004.  The increase was due mainly to  AHIC assuming 100% of the Texas  non-
 standard automobile business produced  by AHGA and  underwritten by a  third
 party,  effective October 1, 2004.  Prior to  October 1, 2004, AHIC  assumed
 only  45%  of this  business.  Total premium  production for  the first  six
 months of  2005 declined  $3.9 million,  or 16.7%,  from the  $23.2  million
 produced in the first six months of  2004.  The decline in produced  premium
 was reflective of increased competition.

     Revenue for  the Personal Lines Group  increased 10.6% to $22.4  million
 for the first six months of 2005 from  $20.2 million for the same period  in
 2004.  Increased net  premium earned of $3.5  million due to higher  assumed
 premium volume was the primary cause of this increase.  This increase in net
 premiums earned was partially  offset by a $1.3  million decrease in  ceding
 commission income  due  to AHIC  assuming  100% of  the  Texas  non-standard
 automobile business effective October 1, 2004.

     Pre-tax income for the  Personal Lines Group increased $1.0 million,  or
 26.2%, for the first six months of 2005 compared to the same period of 2004.
  Taking into consideration the effect on ceding commissions, increased  loss
 and loss adjustment expenses  and premium production  costs, the changes  in
 premium volume produced and  assumed contributed approximately $0.3  million
 to  the  increase in  pre-tax income.  Lower  technical service  costs  from
 integrating PIIC's  back  office  systems that  were  previously  outsourced
 contributed $0.3 million, lower salary and related expenses contributed $0.2
 million, and a  loss ratio  of 58.7% for  the first  six months  of 2005  as
 compared to 59.9% for  the same period in  2004 contributed $0.2 million  to
 the increase in pre-tax income.

 Commercial Lines Group

     Total revenue for  the Commercial Lines Group  of $12.8 million for  the
 first six  months of  2005 was  $1.6  million more  than the  $11.2  million
 reported in the same period  of 2004.  This 14.7% increase in total  revenue
 was primarily due to  additional commission revenue of  $1.3 million in  the
 first six months of 2005 as compared  to the same period in 2004.  Increased
 commercial premium volume  and improved  commission terms  were the  primary
 causes of the increased commission revenue.  There was also additional claim
 fee revenue of $0.3 million due to increased commercial premium produced  in
 2005.  Earned premium generated by the Commercial Lines Group for the  first
 six months of 2005  was $38.1 million  as compared to  $35.6 million in  the
 same period of 2004.  We do not currently bear the primary underwriting risk
 for this business and, therefore, the resulting premiums and claims are  not
 reflected in our reported results.

     Pre-tax income for  the Commercial Lines Group  of $2.5 million for  the
 first  six  months  of 2005  increased  $1.0  million,  or  63.3%,  over the
 $1.5 million reported  for the  same  period  of  2004.  Increased  revenue,
 as  discussed  above,  was  the primary  reason  for the increase in pre-tax
 income, partially  offset by additional agent commissions  of  $0.6  million
 attributable to the increased premium volume.

 Corporate

      Corporate pre-tax loss  was $1.7 million  for the first  six months  of
 2005 as compared to $1.2 million for the same period in 2004.  The  increase
 was due  mostly  to the  transfer  of  accounting positions  from  both  the
 Personal Lines Group and Commercial Lines Group to Corporate.


 Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

      As of June 30, 2005, there had  been no material changes in the  market
 risks described in the Company's  Form 10-K for the year ended  December 31,
 2004.


 Item 4.  Controls and Procedures.

     The Chief Executive Officer  and Chief Financial Officer of the  Company
 have evaluated the  Company's disclosure  controls  and  procedures and have
 concluded  that,  as  of  the  end  of  the  period covered  by this report,
 such disclosure controls and procedures  were  effective  in  ensuring  that
 information required to be disclosed by  the Company in the reports that  it
 files or  submits  under the  Securities  Exchange  Act of  1934  is  timely
 recorded, processed, summarized  and reported. The  Chief Executive  Officer
 and Chief Financial Officer also concluded that such disclosure controls and
 procedures were  effective  in  ensuring that  information  required  to  be
 disclosed by the Company in the reports that it files or submits under  such
 Act is accumulated and communicated  to the Company's management,  including
 its Chief Executive Officer and Chief Financial Officer, as appropriate,  to
 allow timely  decisions  regarding required  disclosure.  During  the  most
 recent fiscal quarter, there have been no changes in the Company's  internal
 controls over  financial reporting  that have  materially affected,  or  are
 reasonably likely to materially affect, the Company's internal control  over
 financial reporting.

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

     This Form  10-Q 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, weather-related events 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-Q  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.


                                   PART II
                              OTHER INFORMATION


 Item 1.  Legal Proceedings.

          The Company  is  engaged  in  legal  proceedings in  the  ordinary
          course  of  business,  none  of  which,  either individually or in
          the  aggregate, are believed likely to  have  a  material  adverse
          effect  on  the consolidated financial position of the Company  or
          the  results of  operations,  in the  opinion  of management.  The
          various  legal  proceedings to  which the  Company is a  party are
          routine in nature and incidental to the Company's business.


 Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

          None.


 Item 3.  Defaults Upon Senior Securities.

          None.


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

          (a)  The Company's Annual Meeting of Shareholders was held on
               May 26, 2005.  Of the 36,856,610 shares  of common stock
               of  the  Company  entitled  to  vote   at  the  meeting,
               35,970,948 shares were present in person or by proxy.

          (b)  At  the Annual Meeting,  the following  individuals were
               elected  to  serve  as  directors  of  the  Company  and
               received  the number of  votes set  forth opposite their
               respective names:

                      Director                  Shares Voted For
                   --------------               ----------------
                   Mark E. Schwarz                 35,951,338

                   James H. Graves                 35,967,538

                   George R. Manser                35,967,538

                   Scott T. Berlin                 35,967,538

                   James C. Epstein                35,967,388

          (c)  At the Annual Meeting, the 2005 Long Term Incentive Plan
               was approved with 25,327,777 shares voting for the Plan.
               There  was  no other business to  come before the Annual
               Meeting.


 Item 5.  Other Information.

          None.


 Item 6.  Exhibits.

          The following exhibits are filed herewith or
          incorporated herein by reference:

    Exhibit
    Number                       Description
    ------                       -----------

     3(a)     Articles of Incorporation of the registrant, as amended
              (incorporated by reference to Exhibit 3(a) to the
              registrant's Annual Report on Form 10-KSB for the
              fiscal year ended December 31, 1993).

     3(b)     By-Laws of the registrant, as amended.

     4(a)     Specimen certificate for Common Stock, $0.03 par value
              per share, of the registrant (incorporated by reference
              to Exhibit 4 to the registrant's Annual Report on Form
              10-KSB for the fiscal year ended December 31, 1991).

     4(b)     Indenture dated as of June 21, 2005, between Hallmark
              Financial Services, Inc. and JPMorgan Chase Bank,
              National Association (incorporated by reference to
              Exhibit 4.1 to the registrant's Form 8-K filed June 27,
              2005).

     4(c)     Amended and Restated Declaration of Trust of Hallmark
              Statutory Trust I dated as of June 21, 2005, among
              Hallmark Financial Services, Inc., as sponsor, Chase
              Bank USA, National Association, as Delaware trustee,
              and JPMorgan Chase Bank, National Association, as
              institutional trustee, and Mark Schwarz and Mark
              Morrison, as administrators (incorporated by reference
              to Exhibit 4.2 to the registrant's Form 8-K filed June
              27, 2005).

     4(d)     Form of Junior Subordinated Debt Security Due 2035
              (incorporated by reference to Exhibit 4.1 to the
              registrant's Form 8-K filed June 27, 2005).

     4(e)     Form of Capital Security Certificate (incorporated by
              reference to Exhibit 4.2 to the registrant's Form 8-K
              filed June 27, 2005).

     4(f)     Credit Agreement dated June 29, 2005, between Hallmark
              Financial Services, Inc. and The Frost National Bank
              (incorporated by reference to Exhibit 4.1 to the
              registrant's Form 8-K filed July 6, 2005).

     4(g)     First Amendment to Credit Agreement dated July 15, 2005,
              between Hallmark Financial Services, Inc. and The Frost
              National Bank.


    Exhibit
    Number                       Description
    ------                       -----------
    31(a)     Certification of Chief Executive Officer required by
              Rule 13a-14(a) or Rule 15d-14(a).

    31(b)     Certification of Chief Financial Officer required by
              Rule 13a-14(a) or Rule 15d-14(a).

    32(a)     Certification of Chief Executive Officer Pursuant to 18
              U.S.C. 1350.

    32(b)     Certification of Chief Financial Officer Pursuant to 18
              U.S.C. 1350.


                                  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 5, 2005        /s/ Mark E. Schwarz
                             ---------------------------------------------
                             Mark E. Schwarz, Chairman
                             (Chief Executive Officer)


 Date: August 5, 2005        /s/ Mark J. Morrison
                             ---------------------------------------------
                             Mark J. Morrison, Executive Vice President
                             (Chief Operating Officer and Chief Financial
                             Officer)