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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q

        [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                    For the Quarter Ended September 30, 2004

     [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                 For the transition period from______to_____ .

                          Commission File No. 000-16880

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                            BNL FINANCIAL CORPORATION
             (Exact name of Registrant as specified in its charter)

          IOWA                                          42-1239454
 (State of incorporation)                  (I.R.S. Employer Identification No.)

     2100 W. William Cannon, Suite L
               Austin, Texas                                             78745
 (Address of principal executive offices)                             (Zip Code)



Registrant's telephone number, including area code:  (512) 383-0220

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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____
                                                                           -

As of September 30, 2004, the Registrant had 18,761,905 shares of Common Stock,
no par value, outstanding.




<PAGE>





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BNL FINANCIAL CORPORATION AND SUBSIDIARIES
------------------------------------------------------------------------------

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements



                                               INDEPENDENT ACCOUNTANTS' REPORT




To The Board of Directors
BNL Financial Corporation


We have reviewed the accompanying Consolidated Balance Sheet of BNL Financial
Corporation and Subsidiaries as of September 30, 2004 and the related
Consolidated Statements of Income and Comprehensive Income for the three-month
and nine-month periods ended September 30, 2004 and 2003 and the Consolidated
Statements of Cash Flows for the nine-month periods ended September 30, 2004 and
2003. These interim financial statements are the responsibility of the
Corporation's management.

We conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the accompanying interim consolidated financial statements for them
to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the Consolidated Balance Sheet of BNL
Financial Corporation and Subsidiaries as of December 31, 2003 and the related
Consolidated Statements of Income and Comprehensive Income, Changes in
Shareholders' Equity and Cash Flows for the year then ended (not presented
herein); and in our report dated February 9, 2004, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying Consolidated Balance Sheet as of
December 31, 2003 is fairly stated, in all material respects, in relation to the
Consolidated Balance Sheet from which it has been derived.








Oklahoma City, Oklahoma                              SMITH, CARNEY & CO., p.c.
November 12, 2004


<PAGE>

<TABLE>
<CAPTION>

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BNL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
-----------------------------------------------------------------------------------------------------------------------------------
  ASSETS
                                                                                   September 30             December 31,
                                                                                 2004 (Unaudited)          2003 (Audited)
                                                                                --------------------     -------------------
<S>                                                                             <C>                      <C>
Cash and cash equivalents                                                                $4,125,164             $ 3,398,661
Investment in fixed maturities, at fair value Available for Sale (amortized
  cost  $589,247, $1,245,558, respectively)                                                 633,375               1,457,988
Investment in fixed maturities, at amortized cost, Held to Maturity (fair
  value $15,424,628;  $15,173,490, respectively)                                         15,494,372              15,120,096
Other long-term investments                                                               1,557,407               1,527,407
 Investment in equity securities  (cost $388,874; $339,509, respectively)                   383,147                 373,214
                                                                                --------------------     -------------------
               Total Investments, Including Cash and                                     22,193,465
                     Cash Equivalents                                                                            21,877,366

Accrued investment income                                                                   212,120                 183,713
Furniture and equipment, net                                                                435,960                 486,000
Deferred policy acquisition costs                                                           339,962                 220,937
Policy loans                                                                                158,356                 144,122
Receivable from reinsurer                                                                    31,065                  31,065
Premiums due and unpaid                                                                     800,807               1,059,950
Income tax assets                                                                           192,000                 195,136
Intangible assets                                                                           158,170                 162,237
Other assets                                                                                226,254                 194,728
                                                                                --------------------     -------------------
               Total Assets                                                             $24,748,159             $24,555,254
                                                                                ====================     ===================

               LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
   Liabilities for future policy benefits                                               $ 2,201,791             $ 1,577,978
   Policy claims payable                                                                  2,490,414               2,578,992
   Annuity deposits                                                                       2,766,886               2,777,665
   Deferred annuity profits                                                                 383,634                 425,980
   Premium deposit funds                                                                     38,740                  40,260
   Supplementary contracts without life contingencies                                        54,426                  69,596
   Advanced and unallocated premium                                                         546,872               1,127,148
   Commissions payable                                                                      493,674                 433,257
   Accrued taxes and expenses                                                               593,066                 777,128
   Bonds payable                                                                          2,568,279               3,025,499
   Other liabilities                                                                        391,826                 370,569
                                                                                --------------------     -------------------
                              Total Liabilities                                          12,529,608              13,204,072
                                                                                --------------------     -------------------

COMMITMENTS AND CONTINGENCIES
   Contingent long-term liabilities                                                         448,967                 660,447
                                                                                --------------------     -------------------

          Total Commitments and Contingencies                                               448,967                 660,447
                                                                                --------------------     -------------------


Shareholders' Equity:
   Common stock, $.02 stated value, 45,000,000 shares authorized, 20,980,760;
    20,980,760 shares issued and outstanding, respectively                                  419,616                 419,616
   Additional paid-in capital                                                            10,814,222              10,787,911
   Accumulated other comprehensive income                                                    22,381                 177,768
   Accumulated surplus                                                                    2,125,067                 457,336
   Contingent Treasury stock, 299,311; 440,298 shares respectively                        (448,967)               (660,447)
   Treasury stock, at cost; 1,920,609; 1,098,493 shares respectively                    (1,162,735)               (491,449)
                                                                                --------------------     -------------------
               Total Shareholders' Equity                                                11,769,584              10,690,735
                                                                                --------------------     -------------------

          Total Liabilities and Shareholders' Equity                                    $24,748,159             $24,555,254
                                                                                ====================     ===================
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          (See accompanying notes and Independent Accountants' Report)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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BNL FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
-----------------------------------------------------------------------------------------------------------------------------------

                                                                    Three Months Ended                     Nine Months Ended
                                                                       September 30                           September 30
                                                        ---------------------------------------- -----------------------------------
                                                                2004              2003                2004               2003
                                                            (Unaudited)        (Unaudited)         (Unaudited)        (Unaudited)
                                                           ---------------    --------------     ----------------    --------------
<S>                                                        <C>                <C>                <C>                 <C>
Income:
   Premium income                                             $10,863,281       $10,204,943         $ 32,372,886       $30,635,896
   Net investment income                                          242,661           231,602              732,841           721,749
   Marketing fees                                                  40,972            37,353              124,048           103,602
   Realized gains                                                 114,716           144,455              434,620           244,914
                                                           ---------------    --------------     ----------------    --------------

               Total Income                                    11,261,630        10,618,353           33,664,395        31,706,161
                                                           ---------------    --------------     ----------------    --------------


Expenses:
   Liability for future policy benefits expense                   193,308          (22,057)              623,814            22,208
   Policy benefits and other insurance costs                    8,068,403         7,333,259           24,363,720        22,519,906
   Amortization of deferred policy acquisition costs                8,642             7,632               22,898            18,701
   Operating expenses                                           1,976,981         1,951,508            5,854,708         5,678,473
   Taxes, other than income, fees and assessments                 349,680           353,416              964,360         1,028,826
                                                           ---------------    --------------     ----------------    --------------

                Total Expenses                                 10,597,014         9,623,758           31,829,500        29,268,114
                                                           ---------------    --------------     ----------------    --------------

                Income from Operations before
                     Income Taxes                                 664,616           994,595            1,834,895         2,438,047

   Provision for income taxes                                       5,414           122,000              167,175           436,000
                                                           ---------------    --------------     ----------------    --------------

               Net Income                                       $ 659,202         $ 872,595          $ 1,667,720        $2,002,047
                                                           ===============    ==============     ================    ==============

Net income per common share (basic and diluted)                     $0.03             $0.04                $0.08             $0.09
                                                           ===============    ==============     ================    ==============

Weighted average number of fully
      paid common shares                                       19,063,704        20,193,332           19,282,426        20,199,625
                                                           ===============    ==============     ================    ==============

Other comprehensive income, net of tax:
     Unrealized gains on securities:
          Unrealized holding gain (loss) arising
           during period                                       $ (31,212)         $(43,609)           $ (29,539)          $194,651
       Reclassification adjustment for loss included
           in net income                                         (27,944)          (36,815)            (125,848)          (43,971)
                                                           ---------------    --------------     ----------------    --------------

                Other Comprehensive Income (Loss)               ( 59,156)          (80,424)            (155,387)           150,680
                                                           ---------------    --------------     ----------------    --------------

                Comprehensive Income                             $600,046          $792,171          $ 1,512,333        $2,152,727
                                                           ===============    ==============     ================    ==============







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          (See accompanying notes and Independent Accountants' Report)

</TABLE>
<PAGE>

<TABLE>
<CAPTION>
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BNL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
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                                                                                              Nine Months Ended
                                                                                                 September 30,
                                                                                        -------------------------------------
                                                                                              2004                2003
                                                                                          (Unaudited)          (Unaudited)
                                                                                        -----------------    ----------------
<S>                                                                                     <C>                  <C>
Cash flows from operating activities:
     Net income                                                                              $ 1,667,720         $ 2,002,047
     Adjustments to reconcile net income to net cash
          provided by operating activities:
            Realized gain                                                                      (437,884)           (244,914)
            Realized loss on furniture and fixtures                                                3,263                   0
            Decrease in deferred tax asset                                                        35,000              43,000
            Depreciation                                                                         176,353             180,585
            Amortization of deferred acquisition costs,
                  organization costs and intangibles                                              22,898              23,062
            Accretion of bond discount                                                             5,656               9,998
        Change in assets and liabilities:
             (Increase) decrease in accrued investment income                                   (28,407)               1,726
             Decrease in premiums due and unpaid                                                 259,142             123,266
             Increase in liability for future policy benefits                                    623,814              22,208
             Decrease in policy claims payable                                                  (88,578)           (188,833)
             Decrease in annuity deposits and deferred profits                                  (53,125)            (65,177)
             Decrease in premium deposit funds                                                   (1,520)             (2,136)
             Increase (decrease) in advanced and unallocated premium                           (580,275)             233,519
             Increase (decrease) in commissions payable                                           60,417            (17,937)
             Other, net                                                                        (355,894)              57,754
                                                                                        -----------------    ----------------

                    Net Cash Provided By Operating Activities                                  1,308,580           2,178,168
                                                                                        -----------------    ----------------

Cash flows from investing activities:
     Proceeds from sales of furniture and equipment                                               23,800               7,103
     Proceeds from maturity or redemption - Available for Sale Investments                       793,634           2,153,553
     Proceeds from maturity or redemption - Held to Maturity Investments                       6,158,875           2,150,000
     Proceeds from sales of equity securities                                                    121,590                   0
     Purchase of furniture and equipment                                                       (153,376)           (135,867)
    Purchase of fixed maturity securities - Held to Maturity Investments                     (6,547,058)         (9,256,299)
     Purchase of equity securities                                                             (160,442)
                                                                                                                    (69,841)
     Other investments - Line of credit advanced                                                (30,000)            (30,000)
                                                                                        -----------------    ----------------

                     Net Cash Provided By (Used In) Investing Activities                        207,023         (5,181,351)
                                                                                        -----------------    ----------------

Cash flows from financing activities:
     Net (payments) receipts on supplementary contracts                                         (15,170)            (16,295)
     Treasury shares purchased                                                                 (605,885)            (73,407)
     Treasury shares sold                                                                         88,791              62,550
     Bonds payable purchased                                                                   (281,076)            (75,583)
     Exercised stock options and stock bonus                                                      24,240              17,825
                                                                                        -----------------    ----------------

  Net Cash Used In Financing Activities
                                                                                               (789,100)            (84,910)
                                                                                        -----------------    ----------------

Net Increase (Decrease) In Cash and Cash Equivalents                                             726,503         (3,088,093)

Cash And Cash Equivalents, Beginning Of Period                                                 3,398,661           5,660,879
                                                                                        -----------------    ----------------

Cash And Cash Equivalents, End Of Period                                                     $ 4,125,164         $ 2,572,786
                                                                                        =================    ================

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          (See accompanying notes and Independent Accountant's Report)
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</TABLE>
<PAGE>

 BNL FINANCIAL CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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Note 1.
The accompanying Consolidated Financial Statements (unaudited) as of September
30, 2004 and September 30, 2003 have been reviewed by independent certified
public accountants. In the opinion of management, the aforementioned financial
statements contain all adjustments necessary to present fairly the financial
position as of September 30, 2004, and the results of operations for the three
and nine month periods ended September 30, 2004 and September 30, 2003, and the
cash flows for the nine month periods ended September 30, 2004 and September 30,
2003. All such adjustments are of a normal recurring nature except as described
in Note 2 below.

The statements have been prepared to conform to the requirements of Form 10-Q
and do not necessarily include all disclosures required by generally accepted
accounting principles (GAAP). The reader should refer to the Company's Annual
Report on Form 10-K for the year ended December 31, 2003, previously filed with
the Commission, for financial statements for the year ended December 31, 2003,
prepared in accordance with GAAP. Net income per share of common stock is based
on the weighted average number of outstanding common shares.

Note 2.
The liability for future policy benefits includes a benefit reserve of
approximately $551,000 for the individual dental policies in force at September
30, 2004. The Company has marketed this product since 2001 and was notified by
its actuary in the first quarter of 2004, that new reserve rules prescribed by
most state insurance departments now require additional reserves be established
to more properly match premiums and benefits for this product. The effect of
this change in reserve estimate on the net income in the nine month period ended
September 30, 2004 is approximately $327,000 ($.02 per share) after considering
the tax effect and a related increase in deferred acquisition costs.

Note 3.
In the third quarter of 2004, BNLAC received notification from the Arkansas
Insurance Department that its bond portfolio exceeded the 20% investment
limitation for certain federal agencies as they relate to its investment in
Federal Home Loan Bank bonds. The Company immediately sold $600,000, par value,
of its Federal Home Loan Bank bonds to initiate compliance with the Arkansas
statute. For GAAP purposes the bonds were classified as hold to maturity.
Further discussions with the Arkansas Insurance Department revealed the
Department's intent was not to have the Company dispose of any of its block of
Federal Home Loan Bank bonds, but instead request permission to exceed the 20%
investment limitation. The Company then requested and was granted permission by
the Arkansas Insurance Department to exceed the 20% investment limitation. The
Company has determined its hold to maturity fixed securities portfolio was not
tainted since the bond sales were due to an unusual and isolated occurrence that
could not be reasonably foreseen.

<PAGE>



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BNL FINANCIAL CORPORATION AND SUBSIDIARIES
-------------------------------------------------------------------------------

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS

In this section, we review the consolidated results of operations for the nine
months ended September 30, 2004 and 2003 and significant changes in the
consolidated financial condition of the Company. This discussion should be read
in conjunction with the accompanying consolidated financial statements, notes
and selected financial data.

FORWARD-LOOKING STATEMENTS

All statements, trend analyses and other information contained in this report
and elsewhere (such as in filings by us with the Securities and Exchange
Commission, press releases, presentations by us or our management or oral
statements) relative to markets for our products and trends in our operations or
financial results, as well as other statements including words such as
"anticipate," "believe," "plan," "estimate," "expect," "intend," and other
similar expressions, constitute forward-looking statements under the Private
Securities Litigation Reform Act of 1995. These forward-looking statements are
subject to known and unknown risks, uncertainties and other factors which may
cause actual results to be materially different from those contemplated by the
forward-looking statements. Such factors include, among other things: (i)
general economic conditions and other factors, including prevailing interest
rate levels and stock and credit market performance which may affect (among
other things) our ability to sell our products, our ability to access capital
resources and the costs associated therewith, the market value of our
investments and the lapse rate and profitability of policies; (ii) world
conflict, including but not limited to the war in Iraq, which may affect
consumers spending trends and priorities; (iii) customer response to new
products and marketing initiatives: (iv) mortality, morbidity and other factors
which may affect the profitability of our products; (v) changes in the federal
income tax laws and regulations which may affect the relative income tax
advantages of our products; (vi) regulatory changes or actions, including those
relating to regulation of financial services affecting (among other things) bank
sales and underwriting of insurance products and regulation of the sale,
underwriting and pricing of products; and (vii) the risk factors or
uncertainties listed from time to time in our filings with the Securities and
Exchange Commission.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2004, we had liquid assets of $4,125,164 in cash, money market
savings accounts, U.S. Treasury Bills and short-term certificates of deposit.
All of the non-cash liquid assets can readily be converted to cash.

The major components of operating cash flows are premium income and investment
income while policy benefits are the most significant cash outflow. In the first
three quarters of 2004, BNLAC collected $32,356,716 of premiums and annuity
deposits (gross before reinsurance) and we had consolidated investment income of
$732,840. Other sources of cash flow in 2004 were overwrite commissions of
$509,911 on vision products and marketing fees from EPSI Benefits Inc. of
$124,046. The Company paid $20,266,051 of policy benefits in the first nine
months of 2004.

The Company's investments are primarily in U.S. Government, Government Agency
and other investment grade bonds. We do not hedge our investment income through
the use of derivatives.

Other long term investments of $1,557,407 consists of, in part, a convertible
debenture loan in the amount of $1,357,407 from BNL Financial Corporation
(BNLF), to EPSI Benefits, Inc. (EBI), a Texas Corporation. The loan bears
interest at an annual rate of 14%, payable monthly, with principal payments
commencing September 15, 2008 and a maturity date of August 15, 2015. To protect
its interest, BNLF may convert the debenture into 51% of the outstanding common
stock of EBI, subject to regulatory approval. The note is one of several
agreements entered into by the Company's subsidiaries which expand the business
relationship with EBI and its subsidiary, Employer Plan Services, Inc. (EPSI),
which provides substantially all of the A&H claims processing and adjudication
for the Company's insurance subsidiary, Brokers National Life Assurance Company
("BNLAC"). BNLF receives a marketing fee from EBI under a related marketing
agreement

Other long-term investments include an operating line of credit agreement with
an advance amount of $200,000. On October 15, 2002 BNLAC and EPSI entered into a
loan agreement whereby BNLAC will provide EPSI with a $200,000 line of credit.
The line of credit is at prime, 5.00%, with interest payable monthly to BNLAC.
The line of credit was scheduled to mature October 15, 2004, however the Company
has extended the line of credit to August 15, 2005, at which time EPSI will make
monthly principal and interest payments to pay off the line of credit in five
years.

During the third quarter of 2003, the Company became a third party indemnitor by
entering into a series of bond indemnity and guarantee agreements totaling
approximately $445,000 in conjunction with a marketing agreement with a third
party, Employer Plan Services Inc. (EPSI). The Company received personal
guarantees from the owners of EPSI to effectively limit potential liability
under the guarantee agreement. With regard to the bond indemnities, the Company
will be obligated only if EPSI, EPSI'S parent and its shareholders, who are the
primary obligors, were all to become insolvent. Management considers the
likelihood of the Company realizing a liability under these agreements to be
remote.

We believe liquid assets, along with investment income, premium income and
marketing fees will be sufficient to meet our long and short-term liquidity
needs. We do not have any current plans to borrow money for operations.

Our insurance operations are conducted through BNLAC. At September 30, 2004,
BNLAC had statutory capital and surplus of $12,883,753. BNLAC is required to
maintain minimum levels of statutory capital and surplus, which differ from
state to state, as a condition to conducting business in those states in which
it is licensed. The State of Arkansas, which is the legal domicile of BNLAC,
requires a minimum of $2,300,000 in capital and surplus. The highest requirement
in any state in which BNLAC is licensed is $5,000,000. Management monitors the
minimum capital and surplus requirements to maintain compliance in each state in
which it is licensed.

CONSOLIDATED RESULTS OF OPERATIONS
Premium income for the third quarter of 2004 was $10,863,281 compared to
$10,204,943 for the same period in 2003. The increase of 6% for the quarter was
due to an increase in group and individual dental business. Premium income for
the first nine months of 2004 was $32,372,886 compared to $30,635,896 for the
same period in 2003. The increase of 6% was due to an increase in group and
individual dental premium in the first nine months of 2004 due to new sales
and increased renewal premiums from a reduction in the lapse rate on existing
business.

Net investment income was $242,661 for the third quarter of 2004 compared to
$231,602 for the third quarter of 2003. Net investment income for the first nine
months of 2004 was $732,841 compared to $721,749 for the same period in 2003.
The 5% increase for the quarter was due to an increase in fixed maturities in
2004 compared to 2003.

The Company received $40,972 of marketing fees from EPSI Benefits Inc. in the
third quarter of 2004 compared to $37,353 for the same period last year. For the
first nine months of 2004 marketing fees were $124,048 compared to $103,602 for
the same period of 2003. The increase in marketing fees in 2004 is due to an
increase in the number of clients serviced by EPSI Benefits Inc.

Realized gains on investments were $114,716 for the third quarter of 2004
compared to a gain of $144,455 for the same period in 2003. For the first nine
months of 2004 realized gains were $434,620 compared to $244,914 for the same
period in 2003. The realized gains in 2004 and 2003 are primarily due to the
purchase of a portion of the Company's outstanding debentures at less than face
value and in the second quarter of 2004 the Company had a realized gain of
approximately $103,000 on disposal of MCI bonds.

For the third quarter of 2004, liability for future policy benefits expense was
$193,308 compared to $(22,057) for the same period in 2003. For the nine-month
period ended September 30, 2004, liability for future policy benefits expense
was $623,814 compared to $22,208 for the same period in 2003. The increase for
the first nine months of 2004 and third quarter of 2004 was due to a $551,000
increase in benefit expense reserve for individual dental insurance.
Approximately $300,000 of the benefit expense reserve is attributable to
policies issued in previous years.  See Note 2 to the financial statements.

Policy  benefits and other  insurance costs were $8,068,043 in the third quarter
of 2004  compared to  $7,333,259  for the same period in 2003. In the first nine
months of 2004  policy  benefits  and other  insurance  costs  were  $24,363,720
compared to $22,519,906  for the same period in 2003. The increase was primarily
due to an increase in policy  benefits  from an increase in the claims ratio and
additional  commissions  on group and  individual  premium  collected as well as
commissions paid on a recruiting bonus program. The claims ratio on group dental
insurance,  which represents the ratio of claims incurred to premium earned, was
64.49% for the first nine  months of 2004  compared to 63.29% for the first nine
months of 2003.

Amortization of deferred policy acquisition costs was $8,462 and $7,632 for the
third quarter and $22,898 and $18,701 for the first nine months of 2004 and
2003, respectively. Amortization of deferred policy acquisition costs vary in
relation to lapses or surrenders of existing policies.

For the third quarter of 2004 operating expenses were $1,976,981 compared to
$1,951,509 for the same period in 2003. Operating expenses were $5,854,708 in
the first nine months of 2004 compared to $5,678,473 for the same period in
2003. The increase for both periods was primarily due to an increase in payroll
expense, group insurance expense and actuarial expense for new product
development and product modifications.

Taxes, other than on income, fees and assessments, were $349,680 for the third
quarter of 2004 compared to $353,416 for the third quarter of 2003. Taxes, other
than on income, fees and assessments, were $964,360 for the first nine months of
2004 compared to $1,028,826 for the same period in 2003. The decrease for the
year was primarily due to the refund of premium taxes in 2004, which is due to
overpayment of quarterly estimated tax payments in 2003.

The provision for income taxes in the third quarter of 2004 includes ($29,586)
current tax credit and $35,000 deferred tax expense compared to $112,000 current
tax expense and $10,000 deferred tax expense in the third quarter of 2003. The
provision for income taxes in the first nine months of 2004 was $164,039 current
tax expense and $3,136 deferred tax expense compared to $393,000 current expense
and $43,000 deferred tax expense for the same period in 2003. The current tax
expense decreased for the first nine months of 2004 compared to 2003 due to the
decrease in operating profits and the 2003 federal tax accrual was over stated
by $82,000.

Income from operations before income taxes for the third quarter of 2004 was
$664,616 compared to $994,595 for the same period in 2003. For the first nine
months of 2004 income from operations before income taxes was $1,834,895
compared to $2,438,047 for the same period in 2003. The decrease for the third
quarter was due to the increase in liability for future benefits and an increase
in policy benefits and other insurance costs. The decrease for the first nine
months of the year was primarily due to the increase in the benefit expense
reserve set up on the individual dental insurance and the increase in the claims
ratio described above.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk represents the potential loss resulting from adverse changes in the
value of financial instruments, either derivative or non-derivative, caused by
fluctuations in interest rates, foreign exchange rates, commodity prices, and
equity security prices. We handle market risks in accordance with our
established policies. We did not hold financial instruments to specifically
manage and reduce the impact of changes in interest rates at September 30, 2004
and December 31, 2003. We did however hold various financial instruments at
September 30, 2004 and 2003, consisting of financial assets reported in our
Consolidated Balance Sheets.

Interest Rate Risk - We are subject to interest rate risk through the investment
in fixed maturity securities, such as U.S. Government and Government Agency
securities and other investment grade bonds. The fair market value of long-term,
fixed-interest rate debt is subject to interest rate risk. Generally, the fair
value of fixed-interest rate debt will increase as interest rates fall and will
decrease as interest rates rise. The estimated fair value of our fixed maturity
securities at September 30, 2004 and December 31, 2003 was $16,058,003 and
$16,631,478, respectively.

Based on testing at December 31, 2003 a one percentage point increase would
result in a decrease in the estimated fair value of fixed maturity securities of
$469,000. Initial fair values were determined using the current rates at which
we could enter into comparable financial instruments with similar remaining
maturities. The estimated earnings and cash flows impact for the first nine
months of 2004 resulting from a one percentage point increase in interest rates
would be immaterial, holding other variables constant.

Foreign-Exchange Rate Risk - We currently have no exposure to foreign-exchange
rate risk because all of our financial instruments are denominated in U.S.
dollars.

Commodity Price Risk - We have no financial instruments subject to commodity
price risk.

Equity Security Price Risk - Equity securities at September 30, 2004 totaled
$383,147, or only 1.7% of total investments and cash on a consolidated basis.

The preceding discussion of estimated fair value of our financial instruments
and the sensitivity analyses resulting from hypothetical changes in interest
rates are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements reflect our current
expectations and involve uncertainties. These forward-looking market risk
disclosures are selective in nature and only address the potential impact from
financial instruments. They do not include other potential effects which could
impact our business as a result of changes in interest rates, foreign-exchange
rates, commodity prices, or equity security prices.

4. INTERNAL CONTROL AND PROCEDURES

The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's reports
pursuant to the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms, and that such information is accumulated and communicated
to the Company's management, including its Chief Executive Officer and its Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosures. In designing and evaluating the disclosure controls and procedures,
management recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurances of achieving the
desired control objectives, and management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures.

Within 90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures, as
that term is defined in Rule 13a-14(c) under the Securities Exchange Act of
1934, as amended. Based on this evaluation, the Chief Executive Officer and
Chief Financial Officer have concluded that the Company's disclosure controls
and procedures are effective in timely alerting the Company's Chief Executive
Officer and Chief Financial Officer to material information required to be
disclosed in the periodic reports filed with the SEC.

 In addition, the Company's Chief Executive Officer and Chief Financial Officer
have reviewed the Company's internal controls, and there have been no
significant changes in the Company's internal controls or in other factors that
could significantly affect those controls subsequent to the date of the last
evaluation.

























PART II -- OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

The Company was not a part of any new legal proceedings during the third quarter
of 2004.

In 2001, the Board of Directors of the Company approved a settlement in the
class action case brought by certain shareholders. The settlement, which was
approved by the Pulaski County Circuit Court and the Arkansas Insurance
Commissioner, was subject to various conditions, including the approvals by any
other applicable regulatory authorities and conditioned upon compliance with
federal and state securities laws. As of December 31, 2002, all requisite
approvals were received and redemption of the stock began in 2003.

As part of the settlement agreement, the Company issued its Bonds in the
principal amount of $1.50 in exchange for each share of common stock of BNL
owned by the members of the Class. The Bonds are for a term of twelve years,
effective December 15, 2002, with principal payable at maturity and bear
interest at the rate of 6% per annum payable annually from the previous fiscal
year's earnings of BNL and will impact earnings per share to the extent of
approximately $.013 per share. If any interest payment is not made, it will be
added to the principal and paid at maturity. The Bonds are fully callable and
redeemable at par at any time by BNL.

During 2003, the Company reclassified Contingent Long Term Liabilities and
Contingent Treasury Stock in the amount of $3,637,288 to Bonds Payable and
Treasury Stock, respectively, in accordance with the character of the litigation
settlement of 2001 and the performance of all duties there under. The $3,637,288
of Treasury Stock was retired and returned to authorized but not issued status.
The remaining Contingent Long Term Liabilities and Contingent Treasury Stock in
the amount of $448,967 represents shares that may or may not have rights to
exchange under the settlement and, as such, are contingent on determination of
their status.

The settlement is reflected in the third quarter of 2004 as bonds payable of
$2,568,279, contingent long-term liabilities of $448,967 and contingent treasury
stock of same amount and had no effect on the Statement of Cash Flows other than
the purchase of bonds mentioned above.

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

<TABLE>
<CAPTION>
                                                                                                      (d) Maximum Number
              (a) Total                                            (c) Total Number                       of Shares That May
                  Number of             (b) Average                    of Shares Purchased                Yet be Purchased
                  Shares                    Price Paid                 as Part of Publicly                Under the Plans
Period            Purchased                 Per Share                  Announced Plans or Programs        or Programs
<S>               <C>                       <C>                        <C>                                <C>

July 1-31, 2004          0                         0                             0                        1,666,666

Aug 1-31, 2004     784,951                      $.60                       784,951                          132,943  (1)

Sept 1-30, 2004     33,651                      $.60                        33,651                                0  (2)


</TABLE>



On June 10,  2004,  the Company  filed a Schedule  TO for the  purchase of up to
1,666,666 shares of its issued and outstanding  common stock, no par value, at a
purchase price of $.60 per share in cash ("Issuer Tender Offer"),  which expired
on July 30, 2004.  During August and September of 2004,  the Company  determined
which shares were properly  tendered,  accepted the tendered shares and paid for
them.  On  September 22,  2004,  the Company  filed its final  amendment to its
Schedule TO and reported  that a total of 818,602  shares were  purchased by the
Company in its Issuer Tender Offer.


     (1) This is the difference between the number of shares which may have been
properly  tendered and the amount  actually  purchased  in August 2004.

     (2) The  Issuer  Tender  Offer  expired  on July 30,  2004,  and the  final
purchases were made by the Company on or before  September 22, 2004, the date of
filing the  Company's  final  amendment to its Schedule TO for the Issuer Tender
Offer.

ITEM 3. DEFAULTS UPON SENIOR SECURITIEs.

During the period covered by this report there was no material default in the
payment of any principal, interest, sinking or purchase fund installment, or any
other material default not cured within 30 days with respect to any indebtedness
of the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

There were no matters submitted to a vote of security holders.

ITEM 5.  OTHER INFORMATION.

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 10-Q.

None


(b) Reports on Form 8-K.

The Company did not file a Form 8-K during the period covered by this document.





                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                                     BNL FINANCIAL CORPORATION
                                                          (Registrant)



Date: November 13, 2004                     /s/ Wayne E. Ahart
                                          ____________________________________
                                      By: Wayne E. Ahart, Chairman of the Board
                                          (Chief Executive Officer)

Date: November 13, 2004                     /s/ Barry N. Shamas
                                          ____________________________________
                                      By: Barry N. Shamas, Executive V.P.
                                         (Chief Financial Officer)





<PAGE>



==============================================================================

13


                                                               Exhibit 31.1
                                 Certifications

I, Wayne E. Ahart, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of BNL Financial
Corporation;

    2. Based on my knowledge, this quarterly report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this quarterly report;

    3. Based on my knowledge, the financial statements, and other financial
      information included in this quarterly report, fairly present in all
      material respects the financial condition, results of operations and cash
      flows of the registrant as of, and for, the periods presented in this
      quarterly report;

    4. The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

                 a) designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiaries, is made known to us
                  by others within those entities, particularly during the
                  period in which this quarterly report is being prepared;

                b) evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this quarterly report (the "Evaluation
                  Date"); and

               c) presented in this quarterly report our conclusions about the
                  effectiveness of the disclosure controls and procedures based
                  on our evaluation as of the Evaluation Date;

    5. The registrant's other certifying officers and I have disclosed, based on
       our most recent evaluation, to the registrant's auditors and the audit
       committee of registrant's board of directors (or persons performing the
       equivalent function):

               a) all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data and have identified for the registrant's
                  auditors any material weaknesses in internal controls; and

                b) any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal controls; and

     6. The registrant's other certifying officers and I have indicated in this
       quarterly report whether or not there were significant changes in
       internal controls or in other factors that could significantly affect
       internal controls subsequent to the date of our most recent evaluation,
       including any corrective actions with regard to significant deficiencies
       and material weaknesses.



      Date: November 13, 2004

       /s/ Wayne E. Ahart
      -----------------------
      Wayne E. Ahart
      Chairman of the Board


                                                               Exhibit 31.2
I, Barry N. Shamas, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of BNL Financial
Corporation;

    2. Based on my knowledge, this quarterly report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this quarterly report;

    3. Based on my knowledge, the financial statements, and other financial
      information included in this quarterly report, fairly present in all
      material respects the financial condition, results of operations and cash
      flows of the registrant as of, and for, the periods presented in this
      quarterly report;

    4. The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

                 a) designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiaries, is made known to us
                  by others within those entities, particularly during the
                  period in which this quarterly report is being prepared;

                b) evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this quarterly report (the "Evaluation
                  Date"); and

               c) presented in this quarterly report our conclusions about the
                  effectiveness of the disclosure controls and procedures based
                  on our evaluation as of the Evaluation Date;

     5. The registrant's other certifying officers and I have disclosed, based
       on our most recent evaluation, to the registrant's auditors and the audit
       committee of registrant's board of directors (or persons performing the
       equivalent function):

               a) all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data and have identified for the registrant's
                  auditors any material weaknesses in internal controls; and

                b) any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal controls; and

     6. The registrant's other certifying officers and I have indicated in this
       quarterly report whether or not there were significant changes in
       internal controls or in other factors that could significantly affect
       internal controls subsequent to the date of our most recent evaluation,
       including any corrective actions with regard to significant deficiencies
       and material weaknesses.



      Date: November 13, 2004

      /s/ Barry N. Shamas
      -----------------------
       Barry N. Shamas
       Chief Financial Officer





<PAGE>



                                       15


                                                                   Exhibit 32.1

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER
                          OF BNL FINANCIAL CORPORATION
                         PURSUANT TO 18 U.S.C. ss. 1350


In connection with the accompanying report on Form 10-Q for the period ending
September 30, 2004 and filed with the Securities and Exchange Commission on the
date hereof (the "Report"), I, Wayne E. Ahart, Chief Executive Officer of BNL
Financial Corporation, hereby certify, pursuant to 18 U.S.C. ss. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

      1. The Report fully complies with the requirements of Section 13 (a) or 15
         (d) of the Securities Exchange Act of 1934; and

      2. The information contained in this Report fairly presents, in all
         material respects the financial condition and results of operations of
         the Company.


 /s/ Wayne E. Ahart
-----------------------

Wayne E. Ahart
Chief Executive Officer
November 13, 2004



















                                                                   Exhibit 32.2

                    CERTIFICATION OF CHIEF FINANCIAL OFFICER
                          OF BNL FINANCIAL CORPORATION
                         PURSUANT TO 18 U.S.C. ss. 1350


In connection with the accompanying report on Form 10-Q for the period ending
September 30, 2004 and filed with the Securities and Exchange Commission on the
date hereof (the "Report"), I, Barry N. Shamas, Chief Financial Officer of BNL
Financial Corporation, hereby certify, pursuant to 18 U.S.C. ss. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

      1. The Report fully complies with the requirements of Section 13 (a) or 15
         (d) of the Securities Exchange Act of 1934; and

      2. The information contained in this Report fairly presents, in all
         material respects the financial condition and results of operations of
         the Company.


/s/ Barry N. Shamas
-----------------------

Barry N. Shamas
Chief Financial Officer
November 13, 2004