FORM 4 Check this box if no longer subject to Section 16. Form 4 or Form 5 obligations may continue. See Instruction 1(b).

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP OF SECURITIES Filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, Section 17(a) of the Public Utility Holding Company Act of 1935 or Section 30(h) of the Investment Company Act of 1940

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1. Name and Address of Reporting Person * NEWCASTLE SPECIAL OPPORTUNITY FUND II, L.P.   2. Issuer Name and Ticker or Trading Symbol HALLMARK FINANCIAL SERVICES INC [HALL] 5. Relationship of Reporting Person(s) to Issuer (Check all applicable) __X__ Director __X__ 10% Owner __X__ Officer (give title below) __X__ Other (specify below) Chairman / see attached explanation (Last) (First) (Middle) 200 CRESCENT COURT, SUITE 1400 3. Date of Earliest Transaction (Month/Day/Year) 01/11/2012 (Street) DALLAS, TX 75201 4. If Amendment, Date Original Filed(Month/Day/Year) 6. Individual or Joint/Group Filing(Check Applicable Line) ___ Form filed by One Reporting Person _X_ Form filed by More than One Reporting Person (City) (State) (Zip) Table I - Non-Derivative Securities Acquired, Disposed of, or Beneficially Owned

1.Title of Security (Instr. 3) 2. Transaction Date (Month/Day/Year) 2A. Deemed Execution Date, if any (Month/Day/Year) 3. Transaction Code (Instr. 8) 4. Securities Acquired (A) or Disposed of (D) (Instr. 3, 4 and 5) 5. Amount of Securities Beneficially Owned Following Reported Transaction(s) (Instr. 3 and 4) 6. Ownership Form: Direct (D) or Indirect (I) (Instr. 4) 7. Nature of Indirect Beneficial Ownership (Instr. 4) Code V Amount (A) or (D) Price Common Stock 01/11/2012   J(1)   500,000 D $ 0 0 D (2) (3) (4)

Reminder: Report on a separate line for each class of securities beneficially owned directly or indirectly.
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Table II - Derivative Securities Acquired, Disposed of, or Beneficially Owned
(e.g., puts, calls, warrants, options, convertible securities)

1. Title of Derivative Security (Instr. 3)

2. Conversion or Exercise Price of Derivative Security

3. Transaction Date (Month/Day/Year)

3A. Deemed Execution Date, if any (Month/Day/Year)

4. Transaction Code (Instr. 8)

5. Number of Derivative Securities Acquired (A) or Disposed of (D) (Instr. 3, 4, and 5)

6. Date Exercisable and Expiration Date (Month/Day/Year)

7. Title and Amount of Underlying Securities (Instr. 3 and 4)

8. Price of Derivative Security (Instr. 5)

9. Number of Derivative Securities Beneficially Owned Following Reported Transaction(s) (Instr. 4)

10. Ownership Form of Derivative Security: Direct (D) or Indirect (I) (Instr. 4)

11. Nature of Indirect Beneficial Ownership (Instr. 4)

Code

V

(A)

(D)

Date Exercisable

Expiration Date

Title

Amount or Number of Shares

Reporting Owners

Reporting Owner Name / Address	Relationships
	Director	10% Owner	Officer	Other
NEWCASTLE SPECIAL OPPORTUNITY FUND II, L.P. 200 CRESCENT COURT SUITE 1400 DALLAS, TX 75201	X	X	Chairman	see attached explanation
NEWCASTLE PARTNERS L P 200 CRESCENT COURT STE 1400 DALLAS, TX 75201				see attached explanation
NEWCASTLE CAPITAL MANAGEMENT LP 200 CRESCENT COURT STE 1400 DALLAS, TX 75201				see attached explanation
NEWCASTLE CAPITAL GROUP LLC 200 CRESCENT COURT STE 1400 DALLAS, TX 75201				see attached explanation
Newcastle Focus Fund II LP 200 CRESCENT COURT SUITE 1400 DALLAS, TX 75201				see attached explanation
NEWCASTLE SPECIAL OPPORTUNITY FUND I, L.P. 200 CRESCENT COURT SUITE 1400 DALLAS, TX 75201				see attached explanation
DETROIT STOKER Co 1510 E. FIRST ST. MONROE, MI 48161				see attached explanation
DSC Services, Inc. 200 CRESCENT COURT SUITE 1400 DALLAS, TX 75201				see attached explanation
SCHWARZ MARK E 200 CRESCENT COURT STE 1400 DALLAS, TX 75201	X	X	Chairman	see attached explanation

Signatures

Newcastle Special Opportunity Fund II, L.P., By: Newcastle Capital Management, L.P., its general partner, By: Newcastle Capital Group, L.L.C. its general partner, By: /s/ Mark E. Schwarz, its managing member		01/11/2012
**Signature of Reporting Person		Date
Newcastle Partners, L.P., By: Newcastle Capital Management, L.P., its general partner, By: Newcastle Capital Group, L.L.C. its general partner, By: /s/ Mark E. Schwarz, its managing member		01/11/2012
**Signature of Reporting Person		Date
Newcastle Capital Management, L.P., its general partner, By: Newcastle Capital Group, L.L.C. its general partner, By: /s/ Mark E. Schwarz, its managing member		01/11/2012
**Signature of Reporting Person		Date
Newcastle Capital Group, L.L.C. its general partner, By: /s/ Mark E. Schwarz, its managing member		01/11/2012
**Signature of Reporting Person		Date
Newcastle Special Opportunity Fund I, L.P., By: Newcastle Capital Management, L.P., its general partner, By: Newcastle Capital Group, L.L.C. its general partner, By: /s/ Mark E. Schwarz, its managing member		01/11/2012
**Signature of Reporting Person		Date
Focus Fund II, L.P., By: Newcastle Capital Management, L.P., its general partner, By: Newcastle Capital Group, L.L.C. its general partner, By: /s/ Mark E. Schwarz, its managing member		01/11/2012
**Signature of Reporting Person		Date
DSC Services, Inc.		01/11/2012
**Signature of Reporting Person		Date
Detroit Stoker Company, L.L.C.		01/11/2012
**Signature of Reporting Person		Date
/s/ Mark E. Schwarz		01/11/2012
**Signature of Reporting Person		Date

Explanation of Responses:

*	If the form is filed by more than one reporting person, see Instruction 4(b)(v).
**	Intentional misstatements or omissions of facts constitute Federal Criminal Violations. See 18 U.S.C. 1001 and 15 U.S.C. 78ff(a).
(1)	Constitutes a distribution as of January 11, 2012 of 492,561 shares to partners of NSOFII and 7,439 shares to NSOFI to reimburse an advance which funded operating expenses.
(2)	The Reporting Persons are members of a "group" for the purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended and accordingly may be deemed to beneficially own Shares of the Issuer's Common Stock owned in the aggregate by the other members of the Section 13(d) group. The Section 13(d) group consists of Newcastle Partners, L.P. ("NP"), Newcastle Capital Management, L.P. (NCM"), Newcastle Capital Group, L.L.C. ("NCG"), Newcastle Special Opportunity Fund I, L.P. ("NSOF I"), Newcastle Special Opportunity Fund II, L.P. ("NSOF II"), Newcastle Focus Fund II, L.P. ("NFF"), DSC Services, Inc. ("DSC"), Detroit Stoker Company, LLC ("Detroit Stoker"), Mark E. Schwarz ("Schwarz"), John Murray ("Murray") and Clinton J. Coleman ("Coleman"). Each Reporting Person disclaims beneficial ownership of the shares of the Issuer's Common Stock owned by the other members of the Section 13(d) group except to the extent of its pecuniary interest therein.
(3)	NCM is the general partner of each of NP, NSOFI, NSOFII and NFF. NCG is the general partner of NCM, and Schwarz is the managing member of NCG. Accordingly, each of NCM, NCG and Schwarz may be deemed to beneficially own the shares directly owned by any of NP, NSOFI, NSOFII and NFF. In addition, DSC is the parent company of Detroit Stoker, and Schwarz and NCG together own all of the outstanding shares of DSC. Accordingly, each of Schwarz and DSC may be deemed to beneficially own the shares directly owned by Detroit Stoker.
(4)	Murray and Coleman are officers of NCM.

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