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 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)  

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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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