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

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

                      For the Quarter Ended March 31, 1998

     [ ] 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. 0-16880

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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.)

                         301 Camp Craft Road, Suite 200
                               Austin, Texas 78746
               (Address of principal executive offices) (Zip Code)



       Registrant's telephone number, including area code: (512) 327-3065

--------------------------------------------------------------------------------


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 March 31, 1998, the Registrant had 23,311,944  shares of Common Stock,  no
par value, outstanding.

Transitional Small Business Disclosure Format  (check one)  Yes___ No__X__


<PAGE>
Item 1.  Financial Statements

                       BNL FINANCIAL CORPORATION AND SUBSIDIARY
                             CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>


                                                March 31
     ASSETS                                       1998       December 31,
                                              (Unaudited)        1997
                                              -----------    ------------
<S>                                         <C>             <C>

Investments:
   Investments available for sale, at
        fair value .......................   $11,310,663     $11,765,947
   Equity securities, common stock .......         5,438          20,438
   Cash and cash investments .............     1,630,495         714,539
                                             -----------     -----------
        Total Investments                     12,946,596      12,500,924
Accrued investment income ................       196,735         225,042
Furniture and equipment ..................       250,041         261,312
Deferred policy acquisition costs ........       427,209         433,695
Receivable from reinsurer ................        26,677          26,677
Premiums due and unpaid...................       406,787         355,793
Other assets .............................       343,803         344,410
                                             -----------      ----------
       TOTAL ASSETS                          $14,597,848     $14,147,853
                                             ===========      ==========
     LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
   Liability for future policy benefits .     $1,394,548      $1,352,555
   Policy claims payable.................      2,023,000       1,368,630
   Premium deposit fund .................        122,238         127,697
   Annuity deposits .....................      3,325,983       3,336,323
   Deferred annuity profits .............        617,872         615,737
   Supplementary contracts without
       life contingencies ...............         52,275          56,031
   Advanced and unallocated premium......        356,813         328,814 
   Commissions payable...................        202,401         184,677
   Other liabilities ....................        328,189         364,429
                                              ----------      ----------
       Total liabilities                       8,423,319       7,734,893
                                              ----------      ----------
SHAREHOLDERS' EQUITY:
   Common stock .........................        466,239         466,239
   Additional paid-in capital ...........     14,308,230      14,308,230
   Unrealized appreciation (depreciation)
        of securities ...................         93,522         170,530
   Treasury stock .......................        (64,105)        (64,105)
   Accumulated deficit ..................     (8,629,357)     (8,467,934)
                                              ----------     -----------
     Total shareholders' equity                6,174,529       6,412,960
                                              ----------      ----------
TOTAL LIABILITIES & SHAREHOLDER'S EQUITY     $14,597,848     $14,147,853
                                              ==========      ==========
<FN>
       (See Notes to Consolidated Financial Statements)
</FN>
</TABLE>
                                        2
<PAGE>

                      BNL FINANCIAL CORPORATION AND SUBSIDIARY
                       CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
                      
                                                             Three Months Ended 
                                                                March 31,        
                                                        ---------------------------  
                                                            1998            1997     
                                                        -----------     -----------  
<S>                                                     <C>             <C>          

REVENUES:
   Premium income ..................................   $  4,350,247    $  2,267,090  
   Investment income ...............................        218,904         209,567  
   Realized gains on investments ...................         52,174          18,764  
                                                        -----------     -----------  
    Total income ...................................      4,621,325       2,495,421  
                                                        -----------     -----------  

EXPENSES:
   Policy benefits and other insurance costs .......      3,737,908       1,878,840  
   Increase in liability for future policy benefits          41,993          19,189  
   Amortization of deferred policy acquisition costs          6,486           9,468  
   Operating expenses ..............................        843,327         664,099  
   Taxes, other than on income .....................        153,034         108,780  
                                                        -----------     -----------  

    Total expenses .................................      4,782,748       2,680,376  
                                                        -----------     -----------  

    OPERATING INCOME (LOSS) ........................       (161,423)       (184,955) 

Provision for income taxes .........................              0               0  
                                                        -----------     -----------  

    NET INCOME (LOSS) ..............................   ($   161,423)  ($    184,955) 
                                                        ===========     ===========  

   Net loss per share ..............................   ($      0.01)  ($       0.01) 
                                                        ===========     ===========  

    Weighted average number
    of shares ......................................     23,311,944      23,311,944  
                                                        ===========     =========== 


<FN>

                  (See Notes to Consolidated Financial Statements)
</FN>                  
</TABLE>
                                        3
<PAGE>

       

<TABLE>

                 BNL FINANCIAL CORPORATION AND SUBSIDIARY
                   CONSOLIDATED STATEMENT OF CASH FLOWS
                              (Unaudited)
<CAPTION>

                                                                   Three Months
                                                               Ended          Ended
                                                              03/31/98       03/31/97
                                                              --------       --------
<S>                                                         <C>            <C>
Cash flows from operating activities:
Net loss ...................................................($  161,423)   ($  184,955)
Adjustments to reconcile  net loss to net cash
  provided by (used in) operating activities:
 Realized (gain) loss on investments .......................    (52,175)       (22,843)
 Realized (gain) loss on sale of furniture and equipment....          0          4,079
 Depreciation ..............................................     24,148         22,921
 Amortization of deferred acquisition
    costs and state licenses acquired ......................      7,263          9,468
 Accretion of bond discount ................................       (895)        (1,038)

Change in assets and liabilities:
 (Increase) decrease in accrued investment income ..........     28,307         (8,939)
 Increase in receivable from reinsurer......................    (50,994)       (17,704)  
 Decrease in premium deposit fund ..........................     (5,459)       (37,757)
 Decrease in annuity deposits and deferred profits..........     (8,205)       (33,416)
 Increase in liability for future policy
    benefits ...............................................     41,993         25,689 
 Increase in policy claims payable..........................    654,370        133,500
 Increase in advanced and unallocated premium...............     27,999         60,808
 Increase in commissions payable............................     17,724         20,039
 Other net .................................................    (35,923)      (319,893)                                             
                                                              ----------      ---------
     Total Adjustments .....................................    648,153       (165,086)
                                                              ----------      ---------
     Total cash provided by (used in)
         operating activities ..............................    486,730       (350,041)

Cash flows from investing activities:
  Sales of debt securities .................................  3,350,156        726,760
  Sales of equity securities ...............................          0              0 
  Sales of furniture and equipment .........................          0            201
  Purchase of equity securities ............................          0              0
  Purchase of furniture and equipment ......................    (13,363)       (30,269)
  Purchase of fixed maturity securities .................... (2,903,811)      (799,250)
                                                              ---------      ---------
      Net cash provided by (used in) investing activities       432,982       (102,558)
                                                              ---------      ---------
Cash flows from financing activities:
  Payments on supplementary contracts ......................     (3,757)        (3,560)
                                                               ---------     ----------
      Net cash provided by (used in) financing activities        (3,757)        (3,560)
                                                              ---------     ----------
Net increase (decrease) in cash and cash equivalents .......    915,955       (456,159)

Cash and cash equivalents, beginning of year ............       714,539        702,769
                                                              ---------      ---------
Cash and cash equivalents, end of period ................   $ 1,630,494    $   246,610
                                                              =========      =========
<FN>
        (See notes to Consolidated Financial Statements)
</FN>
</TABLE>
                                        4
<PAGE>


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


The financial  statements  included herein reflect all adjustments which are, in
the opinion of management,  necessary to present a fair statement of the interim
results on a basis  consistent  with the prior period.  The statements have been
prepared to conform to the  requirements  of Form 10-QSB 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-KSB
for the year ended December 31, 1998, previously filed with the Commission,  for
financial  statements  for  the  year  ended  December  31,  1998,  prepared  in
accordance  with GAAP.  Net income  (loss) per share of common stock is based on
the weighted average number of outstanding common shares.


                                       5


<PAGE>




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

Liquidity and Capital Resources

At March 31, 1998,  the Company had liquid assets of  $1,630,495 in cash,  money
market savings accounts and short-term certificates of deposit, all of which can
readily be converted to cash

The major  components of operating cash flows are premium,  annuity deposits and
investment income. In the first three months of 1998, BNLAC collected $4,422,400
of premiums and annuity deposits (gross before  reinsurance) and the Company had
consolidated investment income of $218,904.

The  Company's  investments  are  primarily in U.S.  Government  and  Government
Agencies and other  investment  grade bonds which have been marked to market and
classified as available for sale.

The  Company's  insurance  operations  are  conducted  through its wholly  owned
subsidiary,  Brokers National Life Assurance Company (BNLAC). At March 31, 1998,
BNLAC had  statutory  capital and surplus  exceeding  $5.076  million.  BNLAC is
required  to  maintain  minimum  levels of  statutory  capital  and surplus as a
condition to conducting business in the states in which it is licensed.  Each of
these states had  different  rules  regarding  the minimum  level of capital and
surplus  required  in that  state.  The  state of  Arkansas,  which is the legal
domicile of BNLAC, requires a minimum of $2,300,000 in capital and surplus.

Results of Operations
Premium  income for the first three  months of 1998 was  $4,350,247  compared to
$2,267,090 for the same period in 1997. The increase of $2,083,157,  or 92%, was
due to an increase in group dental  insurance  premiums  written during 1997 and
the first quarter of 1998.

Net investment  income was $218,904 for the period ended March 31, 1998 compared
to $209,567 for the same period in 1997.  The increase was due to an increase in
invested assets in 1998.

Realized  gains on  investments  were  $52,175 in the first three months of 1998
compared to $18,764 for the same period in 1997.  The increase in realized gains
was due to bonds sold in the normal course of the Company's investment activity.

In the first three months of 1998,  policy  benefits and other  insurance  costs
were $3,737,908 compared to $1,878,840 for the same period in 1997. The increase
was due to an increase in claims and commissions  resulting from the increase in
dental business in force.

For the period ended March 31, 1998, the increase in liability for future policy
benefits was $41,933  compared to $19,189 in 1997.  The increase in 1998 was due
to an increase in group dental unearned premium reserves.

Amortization of deferred policy acquisition costs were $6,486 and $9,468 for the
first quarter of 1998 and 1997  respectively.  Amortization  of deferred  policy
acquisition costs may vary in the future in relation to new life insurance sales
and lapses or surrenders of existing policies.

Operating  expenses  increased to $843,327 in the first quarter of 1998 compared
to $664,099 for the same period in 1997. The increase in operating  expenses was
primarily  due to an increase  in data  processing  expense,  payroll and claims
administrative  expense - which are all  attributable  to the increase volume of
dental insurance in force. An increase in legal expense of approximately $54,000
relating to legal proceedings  described in Part II, Item 1, was another primary
factor in the increase in operating expense.

Taxes,  other than on income,  fees and assessments  were $153,034 for the first
quarter of 1998  compared to $108,780 for the same period in 1997.  The increase
was  primarily  due to an increase in premium  taxes on the  increased  premiums
collected.

The net loss from operations for the first quarter of 1998 was $161,423 compared
to $184,955 for the same period in 1997.  The  decrease is  primarily  due to an
increase  in  realized  gains and a  reduction  in  general  and  administrative
expenses  as a  percentage  of premium  income in 1998 versus  1997.  Management
anticipates that with a continuing  increase of premium income,  this trend will
continue.

                                       6
<PAGE>

                          PART II -- OTHER INFORMATION


Item 1.  Legal Proceedings.
On April  30,  1996,  Myra Jo  Pearson  and Paul  Pearson  filed a class  action
complaint in the Circuit Court of Pulaski County, Arkansas (3rd Division) naming
the Company,  BNL Equity  Corporation  and several  officers of the Company,  as
defendants.  The  plaintiffs  have  alleged  that the  defendants  violated  the
Arkansas  Securities  Act in  several  respects  in  connection  with the public
offerings of securities made by United Arkansas  Corporation  ("UAC") (now known
as BNL Equity  Corporation)  during the period from  January,  1989,  until May,
1992.

The Company has  retained  the firm of Friday,  Eldredge & Clark,  Little  Rock,
Arkansas,  to handle the defense of the action on behalf of all defendants.  The
company  believes the action is frivolous and that  substantial  evidence exists
which directly refutes the allegations.  The Company is vigorously defending the
matter and is in the process of seeking sanctions against appropriate parties.


Item 2.  Changes in Securities.
None of the  rights  of the  holders  of any of the  Company's  securities  were
materially  modified during the period covered by this report.  In addition,  no
class of  securities  of the  Company was issued or  modified  which  materially
limited or qualified any class of its registered securities.

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.
No  matters  were  submitted  to a vote of  security  holders  during the period
covered by this report.

Item 5.  Other Information.
None

  
                                        7

<PAGE>


<TABLE>
<CAPTION>

 Item 6. Exhibits and Reports on Form 10-QSB
  No.                            Description                                      Page or Method of Filing
---------    ----------------------------------------------------    ---------------------------------------------------
<S>          <C>                                                     <C> 

  3.1        Articles  of  Incorporation   of  BNL  Financial        Incorporated  by reference to Exhibit 3.1 of the 
             Corporation  (formerly  United Iowa Corporation),       Company's  Annual  Report on Form 10-K for the dated
             January 27, 1984 and Amendment to Articles              period ending  December 31, 1993.
             of Incorporation of BNL Financial Corporation,
             dated November 13, 1987.

  3.2        Bylaws 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             Incorporated by reference to Exhibit 4 of the
             holders, including indentures                           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        Incorporated  by reference to Exhibit 3.1 of the
             Corporation  (formerly  United Iowa Corporation),       Company's  Annual  Report on Form 10-K for the 
             dated January 27, 1984 and Amendment to Articles        period ending  December 31, 1993.
             of  Incorporation on BNL Financial Corporation,
             dated November 13, 1987.

  10.1       Form of Agreement between Commonwealth Industries       Filed with 10-QSB for the period ended September
             Corporation, American Investors Corporation and         30, 1994.
             Wayne E. Ahart regarding rights to purchase shares
             of the Company.

  10.2       Agreement dated December 21, 1990 between               Filed with 10-QSB for the period ended March 31,
             Registrant and C. Donald Byrd granting Registrant       1996.
             right of first refusal as to future transfers of
             Mr. Byrd's shares of the Company's common stock.


  10.3       Subscription Agreement dated March 2, 1994              Incorporated by reference to S-4 Registration
                                                                     Statement No. 33-70318

  10.4       Stock Escrow Agreement dated February 28, 1994          Incorporated by reference to S-4 Registration
                                                                     Statement No. 33-70318

  10.5       Merger Agreement between United Arkansas                Incorporated by reference to S-4 Registration
             Corporation and USSA Acquisition Inc. dated             Statement No. 33-70318
             February 11, 1994

  10.6       Merger Agreement between Iowa Life Assurance            Filed with 10-QSB for the period ended March 31,
             Company and United Arkansas Life Assurance Company      1994
             dated March  2, 1994

  10.7       Office lease dated March 24, 1994, between Brokers      Filed with 10-QSB for the period ended September
             National Life Assurance Company (formerly Iowa          30, 1994
             Life Assurance Company) and Enclave KOW, Ltd., for
             premises in Austin, Texas.


  10.8       Amendment Number Two to the Quota Share                 Filed with Form 8-K dated January 18, 1995
             Reinsurance Agreement dated 8/10/91 between
             Registrant and UniLife Insurance Co. of San
             Antonio, Texas

  10.9       Stock Bonus Agreement between BNL Financial             Filed with 10-QSB for the period ended June
             Corporation and C. Donald Bryd and Kenneth Tobey        30, 1997

   11        Statement re computation of per share earnings          Not applicable

   12        Statements re computation of ratios                     Not applicable

   22        BNL Brokerage Corporation, Brokers National Life
             Assurance Company and BNL Equity Corporation, all
             wholly owned by Registrant


</TABLE>


(b) Reports on Form 8-K
The Company filed no reports on Form 8-K for the period covered by this report





                                   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: April 28, 1998                  /s/ Wayne E. Ahart
                                      --------------------------------   
                                      By: Wayne E. Ahart, Chairman of the Board
                                          (Chief Executive Officer)


Date: April 28, 1998                 /s/ Barry N. Shamas
                                     ---------------------------------   
                                     By: Barry N. Shamas, Executive V.P.
                                         (Chief Financial Officer)


                                    8


<PAGE>