Ownership Submission
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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(Print or Type Responses)
1. Name and Address of Reporting Person *
NEWCASTLE PARTNERS L P
   2. Issuer Name and Ticker or Trading Symbol
HALLMARK FINANCIAL SERVICES INC [HAF] 		5. Relationship of Reporting Person(s) to Issuer
(Check all applicable)
__X__ Director __X__ 10% Owner
__X__ Officer (give title below) _____ Other (specify below)
C.E.O. & Chairman
(Last)
(First)
(Middle)
300 CRESCENT COURT, STE 1110		 3. Date of Earliest Transaction (Month/Day/Year)
05/25/2006
(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 05/25/2006   C   9,863,785 (3) A $ 1.28 77,677,072 D (1) (2)  
Common Stock 05/25/2006   C   9,785,187 (4) A $ 1.28 87,462,259 D (1) (5)  

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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
Convertible Note $ 1.28 05/25/2006   C     $ 12,550,000 05/25/2006 07/27/2007 Common Stock 9,863,785 (3) $ 0 0 D (1) (2)  
Convertible Note $ 1.28 05/25/2006   C     $ 12,450,000 05/25/2006 07/27/2007 Common Stock 9,785,187 (4) $ 0 0 D (1) (5)  

Reporting Owners

Reporting Owner Name / Address Relationships
 Director  10% Owner  Officer  Other
NEWCASTLE PARTNERS L P
300 CRESCENT COURT
STE 1110
DALLAS, TX 75201		   X   X   C.E.O. & Chairman  
NEWCASTLE CAPITAL MANAGEMENT LP
300 CRESCENT COURT
STE 1110
DALLAS, TX 75201		   X   X   C.E.O. & Chairman  
NEWCASTLE CAPITAL GROUP LLC
300 CRESCENT COURT
STE 1110
DALLAS, TX 75201		   X   X   C.E.O. & Chairman  
SCHWARZ MARK E
300 CRESCENT COURT
STE 1110
DALLAS, TX 75201		   X   X   C.E.O. & Chairman  

Signatures

 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   06/02/2006
**Signature of Reporting Person Date
 Newcastle Capital Management, L.P., By: Newcastle Capital Group, L.L.C. its general partner, By: /s/ Mark E. Schwarz, its managing member   06/02/2006
**Signature of Reporting Person Date
 Newcastle Capital Group, L.L.C., By: /s/ Mark E. Schwarz, its managing member   06/02/2006
**Signature of Reporting Person Date
 /s/ Mark E. Schwarz   06/02/2006
**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   06/02/2006
**Signature of Reporting Person Date
 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   06/02/2006
**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) Newcastle Capital Management, L.P. ("NCM") is the general partner of each of Newcastle Partners, L.P. ("NP"), Newcastle Special Opportunity Fund I, L.P. (NSOFI") and Newcastle Special Opporunity Fund II, L.P. ("NSOFII"). Newcastle Capital Group, L.L.C. ("NCG") is the general partner of NCM and Mark E. Schwarz ("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 them.
(2) Owned by NSOFI.
(3) Includes 9,804,687 shares issued in respect of the conversion of the entire outstanding pricipal amount of the convertible note held by NSOFI and 59,098 shares issued in respect of the conversion of accrued and unpaid interest thereon.
(4) Includes 9,726,562 shares issued in respect of the conversion of the entire outstanding pricipal amount of the convertible note held by NSOFII and 58,625 shares issued in respect of the conversion of accrued and unpaid interest thereon.
(5) Owned by NSOFII.

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