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| IOWA                                     | 42-1239454                           |
|------------------------------------------|--------------------------------------|
| (State of incorporation)                 | (I.R.S. Employer Identification No.) |
|                                     |                                 |
| 7010 Hwy 71 W., Ste 100                  |                                 |
| Austin, Texas                            | 78735                                |
| (Address of principal executive offices) | (Zip Code)                           |

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Table of Contents

Table of Contents

|                                     |                                                                                  | Page   |
|------------------------------------------|---------------------------------------------------------------------------------------|--------|
| PART I   Financial Information |                                                                                  |
|                                     |                                                                                  |   |
| Item 1.                                  | Financial Statements                                                                  | 3      |
| Item 2.                                  | Management's Discussion and Analysis of Financial Condition and Results of Operations | 13     |
| Item 3.                                  | Quantitative and Qualitative Disclosures About Market Risk                            | 15     |
| Item 4.                             | Internal Control and Procedures                                                  | 15     |
| Item 4T.                                 | Controls and Procedures                                                               | 15     |
|                                     |                                                                                  |   |
| PART II  Other Information          |                                                                                  |
|                                     |                                                                                  |   |
| Item 1.                                  | Legal Proceedings                                                                     | 16     |
| Item 1A.                            | Risk Factors                                                                          | 16     |
| Item 2.                                  | Unregistered Sales of Equity Securities and Use of Proceeds                           | 16     |
| Item 3.                                  | Defaults Upon Senior Securities                                                       | 16     |
| Item 4.                                  | Submission of Matters to a Vote of Security Holders.                                  | 16     |
| Item 5.                                  | Other Information                                                                     | 17     |
| Item 6.                                  | Exhibits                                                                              | 18     |
| Signatures                               | 19                                                                                    |

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Item 1. Financial Statements

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Table of Contents

|                                                                                                                    |   | June 30          |       |   | December 31,   |   |
|-------------------------------------------------------------------------------------------------------------------------|--------|------------------|------------|--------|----------------|--------|
| ASSETS                                                                                                        |   | 2009 (Unaudited) |       |   | 2008 (Audited) |   |
| Cash and cash equivalents                                                                                               |   | $                | 7,897,202  |   |           | $      | 4,989,381 |   |
| Investment in fixed maturities, at fair value Available for Sale (amortized cost $260,976; $444,976, respectively)      |   |             | 380,750    |   |           |   | 543,925 |   |
| Investment in fixed maturities, at amortized cost, Held to Maturity (fair value $18,167,717; $19,393,473, respectively) |   |             | 18,320,511 |   |           |   | 19,597,008 |   |
| Other long-term investments (fair value $929,403, $951,436)                                                             |   |             | 1,202,577  |   |           |   | 1,224,609 |   |
| Investment in equity securities (cost $699,829)                                                                         |   |             | 496,875    |   |           |   | 429,745 |   |
| Total Investments, Including Cash and Cash Equivalents                                                                  |   |             | 28,297,915 |   |           |   | 26,784,668 |   |
|                                                                                                                    |   |             |       |   |           |   |   |   |
| Accrued investment income                                                                                               |   |             | 173,668    |   |           |   | 181,522 |   |
| Furniture and equipment, net                                                                                            |   |             | 934,204    |   |           |   | 1,048,673 |   |
| Deferred policy acquisition costs                                                                                       |   |             | 278,428    |   |           |   | 283,561 |   |
| Policy loans                                                                                                            |   |             | 196,865    |   |           |   | 191,010 |   |
| Receivable from reinsurer                                                                                               |   |             | 46,554     |   |           |   | 46,554 |   |
| Premiums due and unpaid                                                                                                 |   |             | 1,048,984  |   |           |   | 1,113,301 |   |
| Income tax assets                                                                                                       |   |             | 111,000    |   |           |   | 97,000 |   |
| Intangible assets                                                                                                       |   |             | 128,315    |   |           |   | 131,212 |   |
| Other assets                                                                                                            |   |             | 142,493    |   |           |   | 135,282 |   |
| Total Assets                                                                                                            |   | $                | 31,358,426 |   |           | $      | 30,012,783 |   |
|                                                                                                                    |   |             |       |   |           |   |   |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                    |   |             |       |   |           |   |   |   |
|                                                                                                                    |   |             |       |   |           |   |   |   |
| Liabilities:                                                                                                            |   |             |       |   |           |   |   |   |
| Liabilities for future policy benefits                                                                                  |   | $                | 2,249,116  |   |           | $      | 2,208,948 |   |
| Policy claims payable                                                                                                   |   |             | 1,638,368  |   |           |   | 1,712,140 |   |
| Annuity deposits                                                                                                        |   |             | 2,566,130  |   |           |   | 2,523,185 |   |
| Deferred annuity profits                                                                                                |   |             | 302,948    |   |           |   | 231,263 |   |
| Premium deposit funds                                                                                                   |   |             | 21,196     |   |           |   | 21,849 |   |
| Supplementary contracts without life contingencies                                                                      |   |             | 32,571     |   |           |   | 2,782 |   |
| Advanced and unallocated premium                                                                                        |   |             | 1,361,190  |   |           |   | 1,036,123 |   |
| Commissions payable                                                                                                     |   |             | 589,225    |   |           |   | 595,488 |   |
| Accrued taxes and expenses                                                                                              |   |             | 463,015    |   |           |   | 566,809 |   |
| Bonds payable                                                                                                           |   |             | 1,379,341  |   |           |   | 1,443,282 |   |
| Other liabilities                                                                                                       |   |             | 1,006,239  |   |           |   | 1,062,497 |   |
| Total Liabilities                                                                                                       |   |             | 11,609,339 |   |           |   | 11,404,366 |   |
|                                                                                                                    |   |             |       |   |           |   |   |   |
| Shareholders' Equity:                                                                                                   |   |             |       |   |           |   |   |   |
| Common stock, $.02 stated value, 45,000,000 shares authorized, 15,463,965  shares issued and outstanding      |   |             | 309,279    |   |           |   | 309,279 |   |
| Additional paid-in capital                                                                                              |   |             | 5,748,465  |   |           |   | 5,748,465 |   |
| Accumulated other comprehensive loss                                                                                    |   |             | ( 88,010   | )      |           |   | (160,934 | ) |
| Accumulated surplus                                                                                                     |   |             | 14,210,079 |   |           |   | 13,032,655 |   |
| Treasury stock, at cost; 343,554; 256,838 shares respectively                                                           |   |             | (430,726   | )      |           |   | (321,048 | ) |
| Total Shareholders' Equity                                                                                              |   |             | 19,749,087 |   |           |   | 18,608,417 |   |
| Total Liabilities and Shareholders' Equity                                                                              |   | $                | 31,358,426 |   |           | $      | 30,012,783 |   |

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|                                                              |   | Three Months EndedJune 30 |       |   | Six Months EndedJune 30 |   |
|-------------------------------------------------------------------|--------|---------------------------|------------|--------|-------------------------|--------|
|                                                              |   | 2009 (Unaudited)          |       |   | 2008 (Unaudited)        |   |   | 2009 (Unaudited) |   |   | 2008 (Unaudited) |   |
| Income:                                                           |   |                      |       |   |                    |   |   |   |   |   |   |   |
| Premium income                                                    |   | $                         | 10,395,720 |   |                    | $      | 10,983,178 |   |   | $ | 20,940,846 |   |   | $ | 22,125,851 |   |
| Vision insurance income                                           |   |                      | 587,522    |   |                    |   | 522,722 |   |   |   | 1,189,040 |   |   |   | 1,150,275 |   |
| Net investment income                                             |   |                      | 310,613    |   |                    |   | 257,827 |   |   |   | 607,345 |   |   |   | 569,604 |   |
| Realized gains on debt retirement                                 |   |                      | 4,017      |   |                    |   | 3,375 |   |   |   | 15,985 |   |   |   | 13,187 |   |
| Realized gains (loss)                                             |   |                      | 2,497      |   |                    |   | (202,729 | ) |   |   | 2,694 |   |   |   | (193,891 | ) |
|                                                              |   |                      |       |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Total Income                                                      |   |                      | 11,300,369 |   |                    |   | 11,564,373 |   |   |   | 22,755,910 |   |   |   | 23,665,025 |   |
|                                                              |   |                      |       |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Expenses:                                                         |   |                      |       |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Liability for future policy benefits expense                      |   |                      | 83,432     |   |                    |   | 175 |   |   |   | 40,168 |   |   |   | 31,115 |   |
| Policy benefits and other insurance costs                         |   |                      | 8,073,895  |   |                    |   | 8,253,364 |   |   |   | 16,127,308 |   |   |   | 16,756,175 |   |
| Amortization of deferred policy acquisition  costs      |   |                      | 9,116      |   |                    |   | 11,435 |   |   |   | 5,134 |   |   |   | 5,835 |   |
| Operating expenses                                                |   |                      | 2,241,346  |   |                    |   | 2,312,370 |   |   |   | 4,339,500 |   |   |   | 4,505,343 |   |
| Taxes, other than income, fees and assessments                    |   |                      | 399,284    |   |                    |   | 367,271 |   |   |   | 821,371 |   |   |   | 821,990 |   |
|                                                              |   |                      |       |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Total Expenses                                                    |   |                      | 10,807,073 |   |                    |   | 10,944,614 |   |   |   | 21,333,481 |   |   |   | 22,120,458 |   |
|                                                              |   |                      |       |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Income from Operations before Income Taxes                        |   |                      | 493,296    |   |                    |   | 619,758 |   |   |   | 1,422,429 |   |   |   | 1,544,567 |   |
|                                                              |   |                      |       |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Provision for income taxes                                        |   |                      | 81,566     |   |                    |   | 150,504 |   |   |   | 245,005 |   |   |   | 323,824 |   |
|                                                              |   |                      |       |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Net Income                                                        |   | $                         | 411,730    |   |                    | $      | 469,254 |   |   | $ | 1,177,424 |   |   | $ | 1,220,743 |   |
|                                                              |   |                      |       |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Net income per common share (basic and diluted)                   |   | $                         | 0.03       |   |                    | $      | 0.03 |   |   | $ | 0.08 |   |   | $ | 0.08 |   |
|                                                              |   |                      |       |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of fully paid common shares               |   |                      | 15,120,897 |   |                    |   | 15,210,863 |   |   |   | 15,161,277 |   |   |   | 15,212,084 |   |
|                                                              |   |                      |       |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income (loss), net of tax:                    |   |                      |       |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized gains (losses) on securities:                          |   |                      |       |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized holding gain (loss) arising during period (net of tax) |   | $                         | 57,265     |   |                    | $      | (36,057 | ) |   | $ | 75,160 |   |   | $ | (165,303 | ) |
| Reclassification adjustment for loss included in net income       |   |                      | (2,073     | )      |                    |   | (3,911 | ) |   |   | (2,235 | ) |   |   | (7,916 | ) |
|                                                              |   |                      |       |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Other Comprehensive Income (loss)                                 |   |                      | 55,192     |   |                    |   | (39,968 | ) |   |   | 72,925 |   |   |   | (173,219 | ) |
|                                                              |   |                      |       |   |                    |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive Income                                              |   | $                         | 466,922    |   |                    | $      | 429,286 |   |   | $ | 1,250,348 |   |   | $ | 1,047,524 |   |

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|                                                                              |   | Six Months EndedJune 30, |       |
|-----------------------------------------------------------------------------------|--------|--------------------------|------------|
|  Cash flows from operating activities:                                       |   | 2009(Unaudited)          |       |   | 2008(Unaudited) |   |
| Net income                                                                        |   | $                        | 1,177,424  |   |   | $ | 1,220,743 |   |
| Adjustments to reconcile net income to net cash provided by operating activities: |   |                     |       |   |   |   |   |   |
| Realized (gain) loss on investments                                               |   |                     | (2,694     | ) |   |   | 193,891 |   |
| Realized gain on debt retirement                                                  |   |                     | (15,985    | ) |   |   | (13,187 | ) |
| Decrease in deferred tax asset                                                    |   |                     | (29,000    | ) |   |   | (7,602 | ) |
| Depreciation                                                                      |   |                     | 147,038    |   |   |   | 151,475 |   |
| Amortization of deferred acquisition costs, and intangibles                       |   |                     | 8,041      |   |   |   | 8,743 |   |
| Accretion of bond discount                                                        |   |                     | 1,522      |   |   |   | (906 | ) |
| Change in assets and liabilities:                                                 |   |                     |       |   |   |   |   |   |
| Decrease in accrued investment income                                             |   |                     | 7,854      |   |   |   | 32,974 |   |
| Decrease in premiums due and unpaid                                               |   |                     | 64,317     |   |   |   | 446,952 |   |
| Increase in liability for future policy benefits                                  |   |                     | 40,168     |   |   |   | 31,116 |   |
| Decrease in policy claims payable                                                 |   |                     | (73,772    | ) |   |   | (475,797 | ) |
| Increase in annuity deposits and deferred profits                                 |   |                     | 114,630    |   |   |   | 17,073 |   |
| Decrease in premium deposit funds                                                 |   |                     | (653       | ) |   |   | (2,297 | ) |
| Increase (decrease) in advanced and unallocated premium                           |   |                     | 325,067    |   |   |   | (653,228 | ) |
| Increase (decrease) in commissions payable                                        |   |                     | (6,263     | ) |   |   | 33,951 |   |
| Other, increase (decrease)                                                        |   |                     | (178,242   | ) |   |   | 101,320 |   |
| Net Cash Provided By Operating Activities                                         |   |                     | 1,579,452  |   |   |   | 1,087,221 |   |
|                                                                              |   |                     |       |   |   |   |   |   |
| Cash flows from investing activities:                                             |   |                     |       |   |   |   |   |   |
| Proceeds from maturity or redemption - Held to Maturity Investments               |   |                     | 6,979,475  |   |   |   | 9,355,669 |   |
| Purchase of equity securities                                                     |   |                     | -          |   |   |   | (260,347 | ) |
| Purchase of furniture and equipment                                               |   |                     | (32,571    | ) |   |   | (82,090 | ) |
| Purchase of fixed maturity securities - Held to Maturity Investments              |   |                     | (5,512,934 | ) |   |   | (5,023,844 | ) |
| Other investments – Line of credit payments received                        |   |                     | 22,033     |   |   |   | 20,023 |   |
| Net Cash Provided By Investing Activities                                         |   |                     | 1,456,003  |   |   |   | 4,009,411 |   |
|                                                                              |   |                     |       |   |   |   |   |   |
| Cash flows from financing activities:                                             |   |                     |       |   |   |   |   |   |
| Net (payments) deposits on supplementary contracts                                |   |                     | (1,533     | ) |   |   | 29,691 |   |
| Purchase of treasury stock                                                        |   |                     | (109,679   | ) |   |   | (6,750 | ) |
| Bonds payable purchased                                                           |   |                     | (16,422    | ) |   |   | (19,221 | ) |
| Exercised stock options                                                           |   |                     | -          |   |   |   | 12,000 |   |
| Net Cash Provided By (Used In) Financing Activities                               |   |                     | (127,634   | ) |   |   | 15,720 |   |
| Net Increase In Cash and Cash Equivalents                                         |   |                     | 2,907,821  |   |   |   | 5,110,352 |   |
| Cash And Cash Equivalents, Beginning Of Period                                    |   |                     | 4,989,381  |   |   |   | 4,937,983 |   |
| Cash And Cash Equivalents, End Of Period                                          |   | $                        | 7,897,202  |   |   | $ | 10,048,335 |   |

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|  Portfolio Designated “Held to Maturity” June 30, 2009           |   |  Amortized Cost |       |   | Gross Unrealized Gains |   |          | Gross Unrealized Losses |   |   | Estimated Market Value |   |
|----------------------------------------------------------------------------------------|--------|----------------------|------------|--------|------------------------|--------|---------------|-------------------------|--------|--------|------------------------|--------|
| US Treasury securities and obligations of US government corporations and agencies |   | $                    | 8,335,181  |   |                   | $      | 55,704        |                    |   | $      | 34,486                 |   |   | $ | 8,356,399 |   |
| Corporate securities                                                                   |   |                 | 4,117,785  |   |                   |   | 110,306       |                    |   |   | 377,961                |   |   |   | 3,850,130 |   |
| Mortgage-backed securities   GNMA and FNMA CMO                          |   |                 | 5,867,545  |   |                   |   |  103,183 |                    |   |   |  9,540            |   |   |   | 5,961,188 |   |
|                                                                                   |   |                 |       |   |                   |   |          |                    |   |   |                   |   |   |   |   |   |
| Totals                                                                                 |   | $                    | 18,320,511 |   |                   | $      | 269,193       |                    |   | $      | 421,987                |   |   | $ | 18,167,717 |   |
|  Portfolio Designated “Available for Sale” June 30, 2009         |   |                 |       |   |                   |   |          |                    |   |   |                   |   |   |   |   |   |
| US Treasury securities and obligations of US government corporations and agencies |   | $                    | 202,976    |   |                   | $      | 73,774        |                    |   | $      | -                      |   |   | $ | 276,750 |   |
| Corporate securities                                                                   |   |                 | 58,000     |   |                   |   | 46,000        |                    |   |   | -                      |   |   |   | 104,000 |   |
|                                                                                   |   |                 |       |   |                   |   |          |                    |   |   |                   |   |   |   |   |   |
| Totals                                                                                 |   | $                    | 260,976    |   |                   | $      | 119,774       |                    |   | $      | -                      |   |   | $ | 380,750 |   |

|                                   |   | Held to Maturity |       |   | Available for Sale          |   |
|----------------------------------------|--------|------------------|------------|--------|-----------------------------|--------|
|                                   |   | June 30, 2009    |       |   | June 30, 2009               |   |
|                                   |   | Amortized Cost   |       |   | Estimated Market Value |   |   | Amortized Cost |   |   | Estimated Market Value |   |
| Due in one year or less                |   | $                | 1,066,568  |   |                        | $      | 1,097,020 |   |   | $ | - |   |   | $ | - |   |
| Due after one year through five years  |   |             | 4,481,945  |   |                        |   | 4,481,555 |   |   |   | - |   |   |   | - |   |
| Due after five years through ten years |   |             | 4,382,464  |   |                        |   | 4,158,002 |   |   |   | - |   |   |   | - |   |
| Due after ten years                    |   |             | 2,521,989  |   |                        |   | 2,469,952 |   |   |   | 260,976 |   |   |   | 380,750 |   |
|                                   |   |             | 12,452,966 |   |                        |   | 12,206,529 |   |   |   | 260,976 |   |   |   | 380,750 |   |
|                                   |   |             |       |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities             |   |             | 5,867,545  |   |                        |   | 5,961,188 |   |   |   | - |   |   |   | - |   |
|                                   |   |             |       |   |                        |   |   |   |   |   |   |   |   |   |   |   |
|                                   |   | $                | 18,320,511 |   |                        | $      | 18,167,717 |   |   | $ | 260,976 |   |   | $ | 380,750 |   |

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|                                    |   | 2009   |    |
|-----------------------------------------|--------|--------|---------|
|                                    |   | Cost   |    |   | MarketValue |   |
|                                    |   |   |    |   |   |   |
| Banks, trusts and insurance companies   |   | $      | 81,183  |   |   | $ | 28,400 |   |
| Industrial, savings and loans and other |   |   | 618,646 |   |   |   | 468,475 |   |
|                                    |   | $      | 699,829 |   |   | $ | 496,875 |   |

|                                        |   | 2009   |    |
|---------------------------------------------|--------|--------|---------|
| Beginning Balance                           |   | $      | 204,582 |   |
| Additions charged to operations             |   |   | -       |   |
| Direct write downs                          |   |   | -       |   |
| Recoveries previously charged to operations |   |   | -       |   |
| Ending Balance                              |   | $      | 204,582 |   |

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|                                                                                   |   | Less than 12 Months |      |   | 12 Months or Greater |   |    | Total      |   |
|----------------------------------------------------------------------------------------|--------|---------------------|-----------|--------|----------------------|--------|---------|------------|--------|
| Description of Securities                                                              |   | Fair Value          |      |   | Unrealized Losses    |   |    | Fair Value |   |   | UnrealizedLosses |   |   | Fair Value |   |   | UnrealizedLosses |   |
| Investment in Fixed Maturities, Held to Maturity                                  |   |                |      |   |                 |   |    |       |   |   |   |   |   |   |   |   |   |   |
| US Treasury securities and obligations of US government corporations and agencies |   | $              | 3,393,225 |   |                 | $      | 34,486  |       |   | $ | - |   |   | $ | - |   |   | $ | 3,393,225 |   |   | $ | 34,486 |   |
| Corporate securities                                                                   |   |                | 398,000   |   |                 |   | 9,871   |       |   |   | 620,000 |   |   |   | 368,090 |   |   |   | 1,018,000 |   |   |   | 377,961 |   |
|  Mortgage-backed securitiesGNMA and FNMA CMO                                      |   |                | 2,081,806 |   |                 |   | 9,540   |       |   |   | - |   |   |   | - |   |   |   | 2,081,806 |   |   |   | 9,540 |   |
| Totals                                                                                 |   |                | 5,873,031 |   |                 |   | 53,897  |       |   |   | 620,000 |   |   |   | 368,090 |   |   |   | 6,493,031 |   |   |   | 421,987 |   |
| Other Long-Term Investments                                                            |   |                | 929,403   |   |                 |   | 273,173 |       |   |   | - |   |   |   | - |   |   |   | 929,403 |   |   |   | 273,173 |   |
| Totals                                                                                 |   |                | 929,403   |   |                 |   | 273,173 |       |   |   | - |   |   |   | - |   |   |   | 929,403 |   |   |   | 273,173 |   |
|                                                                                   |   |                |      |   |                 |   |    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity Securities                                                                      |   |                | 156,015   |   |                 |   | 72,475  |       |   |   | 138,920 |   |   |   | 172,842 |   |   |   | 294,935 |   |   |   | 245,317 |   |
| Totals                                                                                 |   |                | 156,015   |   |                 |   | 72,475  |       |   |   | 138,920 |   |   |   | 172,842 |   |   |   | 294,935 |   |   |   | 245,317 |   |

| Corporate Bonds June 30, 2009 |   | S&P Rating |   |   | Amortized Book Value |    |      | Gross Unrealized Losses |   |    | Estimated Market Value |   |
|------------------------------------|--------|----------------|--------|--------|----------------------|---------|-----------|-------------------------|--------|---------|------------------------|--------|
| American General Finance           |   | BB+            |   |   | $                    | 200,000 |      |                    | $      | 120,000 |                   |   | $ | 80,000 |   |
| MBIA                               |   | BBB            |   |   |                 | 200,000 |      |                    |   | 120,000 |                   |   |   | 80,000 |   |
| Prudential                         |   | A              |   |   |                 | 150,000 |      |                    |   | 30,000  |                   |   |   | 120.000 |   |
| CIT Group                          |   | BBB            |   |   |                 | 100,000 |      |                    |   | 50,000  |                   |   |   | 50,000 |   |
| Bank of America                    |   | A-             |   |   |                 | 200,000 |      |                    |   | 30,000  |                   |   |   | 170,000 |   |
| Provident Companies Inc.           |   | BBB-           |   |   |                 | 138,090 |      |                    |   | 18,090  |                   |   |   | 120,000 |   |
| Principal Life Core                |   | AA-            |   |   |                 | 100,000 |      |                    |   | 8,000   |                   |   |   | 92,000 |   |
|                               |   |           |   |   |                 |    |      |                    |   |    |                   |   |   |   |   |   |
| Totals                             |   |           |   |   |                 | $       | 1,088,090 |                    |   | $       | 376,090                |   |   | $ | 712,000 |   |

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| Equity Securities June 30, 2009    |   |  Cost |    |   | Gross Unrealized Gains (Losses) |   |     | Estimated Market Value |   |
|-----------------------------------------|--------|------------|---------|--------|---------------------------------|--------|----------|------------------------|--------|
| Garmin LTD                              |   | $          | 220,322 |   |                            | $      | (137,372 | )                      |   | $ | 82,950 |   |
| Treaty Oak Bank                         |   |       | 50,813  |   |                            |   | (26,413  | )                      |   |   | 24,400 |   |
| Regions Financial Corporation           |   |       | 30,370  |   |                            |   | (26.370  | )                      |   |   | 4,000 |   |
| FCstone Group                           |   |       | 27,282  |   |                            |   | (19,202  | )                      |   |   | 8,080 |   |
| British Petroleum                       |   |       | 88,270  |   |                            |   | (17,035  | )                      |   |   | 71,235 |   |
| Powershare QQQ                          |   |       | 116,605 |   |                            |   | 10,305   |                   |   |   | 126,910 |   |
| Intel Corporation                       |   |       | 39,200  |   |                            |   | (6,340   | )                      |   |   | 32,860 |   |
| Kimberly Clark Corporation              |   |       | 62,125  |   |                            |   | (9,825   | )                      |   |   | 52,300 |   |
| Freeport McMoRan Copper & Gold Inc. |   |       | 42,972  |   |                            |   | 32,058   |                   |   |   | 75,030 |   |
| Conagra Foods                           |   |       | 21,870  |   |                            |   | (2,760   | )                      |   |   | 19,110 |   |
|                                    |   |       |    |   |                            |   |     |                   |   |   |   |   |
| Totals                                  |   | $          | 699,829 |   |                            | $      | (202,954 | )                      |   | $ | 496,875 |   |

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|                                             |   | Level 1 |      |   | Level 2 |   |       | Level 3 |   |   | Total   |   |
|--------------------------------------------------|--------|---------|-----------|--------|---------|--------|------------|---------|--------|--------|---------|--------|
| Fixed Maturities , held to maturity              |   | $       | -         |   |    | $      | 18,167,717 |    |   | $      | -       |   |   | $ | 18,167,717 |   |
| Fixed maturities, available for sale             |   |    | -         |   |    |   | 380,750    |    |   |   | -       |   |   |   | 380,750 |   |
| Equity securities, available for sale            |   |    | 496,875   |   |    |   | -          |    |   |   | -       |   |   |   | 496,875 |   |
| Other long term investments                      |   |    | -         |   |    |   | -          |    |   |   | 929,403 |   |   |   | 929,403 |   |
| Cash and cash equivalents                        |   |    | 4,507,016 |   |    |   | 3,390,186  |    |   |   | -       |   |   |   | 7,897,202 |   |
|                                             |   |    |      |   |    |   |       |    |   |   |    |   |   |   |   |   |
|       Total assets |   | $       | 5,003,891 |   |    | $      | 21,938,653 |    |   | $      | 929,403 |   |   | $ | 27,871,947 |   |

|                                        |   | Other Long-term Investments* |    |
|---------------------------------------------|--------|------------------------------|---------|
| Fair value, beginning of period             |   | $                            | 951,436 |   |
| Purchases, sales, issuances and settlements |   |                         | (22,033 | ) |
|                                        |   |                         |    |   |
|                                        |   | $                            | 929,403 |   |

|                                               |   | 2009     |       |
|----------------------------------------------------|--------|----------|------------|
|                                               |   | Carrying |       |   | Fair |   |   |
| Assets                                             |   | Amount   |       |   | Value |   |   |
|                                               |   |     |       |   |   |   |   |
| Cash and Cash Equivalents                          |   | $        | 7,897,202  |   |   | $ | 7,897,202 |   | (a) |
| Investments-fixed maturity, available for sale     |   |     | 380,750    |   |   |   | 380,750 |   | (b) |
| Investments-fixed maturity, held to maturity       |   |     | 18,320,511 |   |   |   | 18,167,717 |   | (b) |
| Investments –equity securities               |   |     | 496,875    |   |   |   | 496,875 |   | (b) |
| Other long term investments                        |   |     | 1,202,577  |   |   |   | 929,403 |   | (b) |
| Other financial instruments-Assets                 |   |     | 423,974    |   |   |   | 423,974 |   | (a) |
|                                               |   |     |       |   |   |   |   |   |   |
| Total financial instruments-Assets                 |   |     | 28,721,889 |   |   |   | 28,295,921 |   |   |
|                                               |   |     |       |
| Liabilities                                        |   |     |       |   |   |   |   |   |   |
|                                               |   |     |       |   |   |   |   |   |   |
| Premium deposit funds                              |   | $        | 21,196     |   |   | $ | 21,196 |   | (a) |
| Bonds payable                                      |   |     | 1,379,341  |   |   |   | 1,379,341 |   | (a) |
| Supplementary contracts without life contingencies |   |     | 32,571     |   |   |   | 32,571 |   | (a) |
| Annuity deposits                                   |   |     | 2,566,130  |   |   |   | 2,566,130 |   | (a) |
|                                               |   |     |       |   |   |   |   |   |   |
| Total financial instruments-Liabilities            |   | $        | 3,999,238  |   |   | $ | 3,999,238 |   |   |

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

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Item 4. Internal Control and Procedures

Item 4T.  Controls and Procedures

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Item 1. Legal Proceedings.

Item 1A.  Risk Factors.

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

|     Period    |   | (a)TotalNumber ofSharesPurchased |   |   | (b)AveragePricePaidPer Share |   | (c)Total number of shares purchased as part of publicly announced plans or programs | (d)Maximum number of shares that may yet be purchased under the plans or programs |
|-----------------------------------|--------|----------------------------------|--------|--------|------------------------------|--------|-------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------|
| Month #1, Jan 1 thru Jan 31, 2009 |   |                             | 11,064 |   |                         | $      | 1.25                                                                                |                                                                              | None | None |
| Month #1, Feb 1 thru Feb 28, 2009 |   |                             | 5,880  |   |                         | $      | 1.25                                                                                |                                                                              | None | None |
| Month #3, Mar 1 thru 31, 2009     |   |                             | 15,284 |   |                         | $      | 1.25                                                                                |                                                                              | None | None |
| Month #4, Apr 1 thru 30, 2009     |   |                             | 11,700 |   |                         | $      | 1.25                                                                                |                                                                              | None | None |
| Month #5 May 1 thru 31, 2009      |   |                             | 14,625 |   |                         | $      | 1.25                                                                                |                                                                              | None | None |
| Month #6 June 1 thru 30, 2009     |   |                             | 28,162 |   |                         | $      | 1.28                                                                                |                                                                              | None | None |
| Totals                            |   |                             | 86,715 |   |                         |   |                                                                                |                                                                              |   |   |

Item 3. Defaults Upon Senior Securities.

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

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|   Name       |   |  Votes FOR |       |   | Votes AGAINST or Withheld |   |   |  Abstentions |   |   | Broker No Votes |   |
|------------------------|--------|-----------------|------------|--------|---------------------------|--------|--------|-------------------|--------|--------|-----------------|--------|
| Wayne E. Ahart         |   |            | 12,133,454 |   |                      |   | 10,400 |              |   |   | -               |   |   |   | - |   |
| C. Donald Byrd         |   |            | 12,133,664 |   |                      |   | 10,400 |              |   |   | -               |   |   |   | - |   |
| Kenneth Tobey          |   |            | 12,133,664 |   |                      |   | 10,400 |              |   |   | -               |   |   |   | - |   |
| Barry N. Shamas        |   |            | 12,133,664 |   |                      |   | 10,400 |              |   |   | -               |   |   |   | - |   |
| Cecil Alexander        |   |            | 12,134,625 |   |                      |   | 10,400 |              |   |   | -               |   |   |   | - |   |
| Richard Barclay        |   |            | 12,135,765 |   |                      |   | 10,400 |              |   |   | -               |   |   |   | - |   |
| Eugene A. Cernan       |   |            | 12,134,265 |   |                      |   | 10,400 |              |   |   | -               |   |   |   | - |   |
| Hayden Fry             |   |            | 12,126,964 |   |                      |   | 10,400 |              |   |   | -               |   |   |   | - |   |
| John Greig             |   |            | 12,127,764 |   |                      |   | 10,400 |              |   |   | -               |   |   |   | - |   |
| Roy Ledbetter          |   |            | 12,134,265 |   |                      |   | 10,400 |              |   |   | -               |   |   |   | - |   |
| C. James McCormick     |   |            | 12,129,465 |   |                      |   | 10,400 |              |   |   | -               |   |   |   | - |   |
| John E. Miller         |   |            | 12,132,765 |   |                      |   | 10,400 |              |   |   | -               |   |   |   | - |   |
| Robert R. Rigler       |   |            | 12,131,265 |   |                      |   | 10,400 |              |   |   | -               |   |   |   | - |   |
| L. Stanley Schoelerman |   |            | 12,120,265 |   |                      |   | 10,400 |              |   |   | -               |   |   |   | - |   |

| Votes FOR  |   | Votes AGAINST or Withheld |   | Abstentions |   | Broker No Votes |
|------------|--------|---------------------------|--------|-------------|--------|-----------------|
| 12,116,923 |   | 3,300                     |   | 16,481      |   | -               |

Item 5. Other Information.

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Item 6. Exhibits and Reports on Form 10-Q.

| No.    |   | Description                                                                                                                                                                                   |   | Page or Method of Filing                                                                                                                                                                      |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                          |   |                                                                                                                                                                                          |
| 3.1    |   | Articles of Incorporation of BNL Financial Corporation, dated January 27, 1984 and Amendment to Articles of Incorporation of BNL Financial Corporation, dated November 13, 1987.              |   | Incorporated by reference to Exhibit 3.1 of the Company's Annual Report on Form 10-K for the period ending December 31, 1993.                                                                 |
| 3.2    |   | By-laws of BNL Financial Corporation.                                                                                                                                                         |   | Incorporated by reference to Exhibit 3.2 of the Company’s Registration Statement No. 33-70318                                                                                           |
| 4.1    |   | Instruments defining the rights of security holders, including indentures.                                                                                                                    |   | Incorporated by reference to Exhibit 4 of the Company's Registration Statement No. 2-94538 and Exhibits 3.5 and 4 of Post-Effective Amendment No. 3 thereto.                                  |
| 4.2    |   | Articles of Incorporation of BNL Financial Corporation, dated January 27, 1984 and Amendment to Articles of Incorporation on BNL Financial Corporation, dated November 13, 1987.              |   | Incorporated by reference to Exhibits 4.2 of the Company's Annual Report on Form 10-KSB for the period ending December 31, 1998.                                                              |
| 10.1   |   | Form of Agreement between Commonwealth Industries Corporation, American Investors Corporation and Wayne E. Ahart regarding rights to purchase shares of the Company.                          |   | Incorporated by reference to Exhibit I of the Company's Quarterly Report on 10-QSB for the period ended September 30, 1994.                                                                   |
| 10.2   |   | Agreement dated December 21, 1990 between Registrant and C. Donald Byrd granting Registrant right of first refusal as to future transfers of Mr. Byrd's shares of the Company's common stock. |   | Incorporated by reference to Exhibit I of the Company's Quarterly Report on 10-QSB for the period ended March 31, 1996.                                                                       |
| 10.3   |   | Convertible Debenture Agreement dated July 25, 2001 between BNL Equity Corporation and EPSI Benefits Inc.                                                                                     |   | Incorporated by reference to Exhibit 10.9 of the Company's Annual Report on 10-K for the period ended December 31, 2005.                                                                      |
| 10.4   |   | Claims Service Agreement dated June 1, 1999 between Brokers National Life Assurance Company and Employer Plan Services Inc.                                                                   |   | Incorporated by reference to Exhibit 10.5 of the Company's Annual Report on 10-K for the period ended December 31, 2005.                                                                      |
| 10.5   |   | Office lease agreement dated January 21, 2005, between Brokers National Life Assurance Company and KIMCO for premises in Austin.                                                              |   | Incorporated by reference to Exhibit 10.6 of the Company's Annual Report on 10-K for the period ended December 31, 2005.                                                                      |
| 10.6   |   | Line of Credit Agreement dated October 15, 2004 between Brokers National Life Assurance Company and Employer Plan Services Inc.                                                               |   | Incorporated by reference to Exhibit 10.7 of the Company's Annual Report on 10-K for the period ended December 31, 2005.                                                                      |
| 10.7   |   | Marketing Agreement dated July 25, 2001 between BNL Equity Corporation and Employer Plan Services Inc. and EPSI Benefits Inc.                                                                 |   | Incorporated by reference to Exhibit 10.8 of the Company's Annual Report on 10-K for the period ended December 31, 2005.                                                                      |
| 10.8   |   | Outsourcing Agreement dated May 1, 2007 between Brokers National Life Assurance Company and Virtual Item Processing Systems, Inc.                                                             |   | Incorporated by reference as filed with the Company’s Annual Report on 10-K for the period ended December 31, 2007                                                                      |
| 10.9   |   | Amended Convertible Debenture Date July 14, 2008 between BNL Financial Corporation and EPSI Benefits Inc.                                                                                     |   | Incorporated by reference to Exhibit 1 of the Company’s periodic Report on Form 8-K dated July 14, 2008.                                                                                |
| 11     |   | Statement Re computation of per share earnings.                                                                                                                                               |   | Reference is made to the computation of per share earnings as shown page 5 herein and the explanation in Note 1 to the Notes to Consolidated Financial Statements (unaudited), page 5 herein. |
| 18     |   | Letter Re Change in accounting principles                                                                                                                                                     |   | None.  Not applicable.                                                                                                                                                              |
| 22     |   | Published report regarding matters submitted to vote of security holders                                                                                                                      |   | The Company’s definitive proxy statement dated May 2, 2009, as filed with the SEC on Schedule 14A on April 28, 2009, is incorporated by reference herein.                               |
| 23     |   | Consents of experts and counsel incorporated by reference into a previously filed Securities Act registration statement                                                                       |   | Not applicable.                                                                                                                                                                               |
| 31.1   |   | Certification of Chief Executive OfficerSection 302                                                                                                                                           |   | Filed herewith - E1                                                                                                                                                                           |
| 31.2   |   | Certification of Chief Financial OfficerSection 302                                                                                                                                           |   | Filed herewith – E2                                                                                                                                                                     |
| 32     |   | Certification of Chief Executive Officer and Chief Financial OfficerSection 906                                                                                                               |   | Filed herewith – E3                                                                                                                                                                     |

|  No items were reported on Form 8-K during the period covered by this report. |
|------------------------------------------------------------------------------------|

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SIGNATURES

|                        |   | BNL FINANCIAL CORPORATION                                                                                                                                                                   |
|-----------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                        |   | (Registrant)                                                                                                                                                                                |
|                        |   |                                                                                                                                                                                        |
|                        |   | /s/ Wayne E. Ahart                              |
| Date: August 12, 2009       |   | By: Wayne E. Ahart, Chairman of the Board                                                                                                                                                   |
|                        |   | (Chief Executive Officer)                                                                                                                                                                   |
|                        |   |                                                                                                                                                                                        |
|                        |   | /s/ Barry N. Shamas                             |
| Date: August 12, 2009  |   | By: Barry N. Shamas, Executive V.P.                                                                                                                                                         |
|                        |   | (Chief Financial Officer)                                                                                                                                                                   |

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