| 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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|                                                                                                                              |   | March      31                                                                       |                  | December      31,                                                                                          |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------|-----------------------|------------------------------------------------------------------------------------------------------------|--------|
| ASSETS                                                                                                                  |   | 2008      (Unaudited)                                                               |                  | 2007      (Audited)                                                                                        |   |
| Cash      and cash equivalents                                                                                                    |   | $                 11,456,329 |                  |     $            4,937,983 |   |
| Investment      in fixed maturities, at fair value Available for Sale (amortized cost      $590,473, $590,473, respectively)      |   |                                                                                | 583,600               |                                                                                                       |   | 599,600 |   |
| Investment      in fixed maturities, at amortized cost, Held to Maturity (fair value      $13,296,467; $19,027,913, respectively) |   |                                                                                | 13,395,490            |                                                                                                       |   | 19,087,747 |   |
| Other      long-term investments                                                                                                  |   |                                                                                | 1,460,132             |                                                                                                       |   | 1,470,054 |   |
| Investment      in equity securities (cost $567,451; $373,603,    respectively)                                                   |   |                                                                                | 588,736               |                                                                                                       |   | 534,725 |   |
| Total      Investments, Including Cash and Cash Equivalents                                                                       |   |                                                                                | 27,484,287            |                                                                                                       |   | 26,630,109 |   |
|                                                                                                                              |   |                                                                                |                  |                                                                                                       |   |   |   |
| Accrued      investment income                                                                                                    |   |                                                                                | 195,638               |                                                                                                       |   | 220,461 |   |
| Furniture      and equipment, net                                                                                                 |   |                                                                                | 1,126,678             |                                                                                                       |   | 1,147,453 |   |
| Deferred      policy acquisition costs                                                                                            |   |                                                                                | 329,724               |                                                                                                       |   | 324,125 |   |
| Policy      loans                                                                                                                 |   |                                                                                | 176,445               |                                                                                                       |   | 171,889 |   |
| Receivable      from reinsurer                                                                                                    |   |                                                                                | 53,383                |                                                                                                       |   | 53,383 |   |
| Premiums      due and unpaid                                                                                                      |   |                                                                                | 1,147,393             |                                                                                                       |   | 1,461,467 |   |
| Income      tax assets                                                                                                            |   |                                                                                |   2,000     |                                                                                                       |   |       - |   |
| Intangible      assets                                                                                                            |   |                                                                                | 135,584               |                                                                                                       |   | 137,038 |   |
| Other      assets                                                                                                                 |   |                                                                                | 170,004               |                                                                                                       |   | 155,150 |   |
| Total      Assets                                                                                                                 |   | $                                                                                   | 30,821,136            |                                                                                                       | $      | 30,301,075 |   |
|                                                                                                                              |   |                                                                                |                  |                                                                                                       |   |   |   |
| LIABILITIES      AND SHAREHOLDERS' EQUITY                                                                                         |   |                                                                                |                  |                                                                                                       |   |   |   |
|                                                                                                                              |   |                                                                                |                  |                                                                                                       |   |   |   |
| Liabilities:                                                                                                                      |   |                                                                                |                  |                                                                                                       |   |   |   |
| Liabilities      for future policy benefits                                                                                       |   | $                                                                                   | 2,285,986             |                                                                                                       | $      | 2,255,045 |   |
| Policy      claims payable                                                                                                        |   |                                                                                | 2,260,021             |                                                                                                       |   | 2,306,288 |   |
| Annuity      deposits                                                                                                             |   |                                                                                | 2,505,555             |                                                                                                       |   | 2,463,546 |   |
| Deferred      annuity profits                                                                                                     |   |                                                                                | 250,002               |                                                                                                       |   | 235,159 |   |
| Premium      deposit funds                                                                                                        |   |                                                                                | 23,869                |                                                                                                       |   | 25,318 |   |
| Supplementary      contracts without life contingencies                                                                           |   |                                                                                |  2,973           |                                                                                                       |   |  5,905 |   |
| Advanced      and unallocated premium                                                                                             |   |                                                                                |   1,760,199 |                                                                                                       |   |   2,219,429 |   |
| Commissions      payable                                                                                                          |   |                                                                                | 594,583               |                                                                                                       |   | 514,014 |   |
| Accrued      taxes and expenses                                                                                                   |   |                                                                                | 609,951               |                                                                                                       |   | 356,393 |   |
| Bonds      payable                                                                                                                |   |                                                                                | 1,578,142             |                                                                                                       |   | 1,607,576 |   |
| Deferred      income tax liability                                                                                                |   |                                                                                | -                     |                                                                                                       |   | 29,601 |   |
| Other      liabilities                                                                                                            |   |                                                                                | 1,031,895             |                                                                                                       |   |   967,929 |   |
| Total      Liabilities                                                                                                            |   |                                                                                | 12,903,176            |                                                                                                       |   | 13,004,203 |   |
|                                                                                                                              |   |                                                                                |                  |                                                                                                       |   |   |   |
| 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                                                                                                   |   |                                                                                |  5,748,840       |                                                                                                       |   |  5,751,240 |   |
| Accumulated      other comprehensive income                                                                                       |   |                                                                                | (10,622)              |                                                                                                       |   | 122,630 |   |
| Accumulated      surplus                                                                                                          |   |                                                                                | 12,178,028            |                                                                                                       |   | 11,426,539 |   |
| Treasury      stock, at cost; 255,452; ,250,252 shares respectively                                                               |   |                                                                                | (307,565              | )                                                                                                          |   | (  312,816 | ) |
| Total      Shareholders' Equity                                                                                                   |   |                                                                                | 17,917,960            |                                                                                                       |   | 17,296,872 |   |
| Total      Liabilities and Shareholders' Equity                                                                                   |   | $                                                                                   | 30,821,136            |                                                                                                       | $      | 30,301,075 |   |

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|                                                                   | Three      Months EndedMarch      31 |
|------------------------------------------------------------------------|--------------------------------------|
|                                                                   |                                 | 2008(Unaudited) |   | 2007(Unaudited) |
| Income:                                                                |                                 |   |   |   |
| Premium      income                                                    | $                                    | 11,142,672 | $ | 11,270,566 |
| Vision      insurance income                                           |                                 | 627,551 |   | 509,505 |
| Net      investment income                                             |                                 | 311,778 |   | 325,047 |
| Marketing      fees                                                    |                                 |      - |   | 33,874 |
| Realized      gains on debt retirement                                 |                                 |   9,812 |   |   5,403 |
| Realized      gains                                                    |                                 | 8,838 |   | 0 |
|                                                                   |                                 |   |   |   |
| Total      Income                                                      |                                 | 12,100,651 |   | 12,144,395 |
|                                                                   |                                 |   |   |   |
| Expenses:                                                              |                                 |   |   |   |
| Liability      for future policy benefits expense                      |                                 |  30,941 |   |  18,992 |
| Policy      benefits and other insurance costs                         |                                 | 8,502,811 |   | 8,444,261 |
| Amortization      of deferred policy acquisition costs                 |                                 | (5,599) |   | 3,867 |
| Operating      expenses                                                |                                 | 2,192,972 |   | 2,185,451 |
| Taxes,      other than income, fees and assessments                    |                                 | 454,717 |   | 426,744 |
|                                                                   |                                 |   |   |   |
| Total      Expenses                                                    |                                 | 11,175,842 |   | 11,079,315 |
|                                                                   |                                 |   |   |   |
| Income      from Operations before Income Taxes                        |                                 |   924,809 |   | 1,065,080 |
|                                                                   |                                 |   |   |   |
| Provision      for income taxes                                        |                                 |  173,320 |   |  189,820 |
|                                                                   |                                 |   |   |   |
| Net      Income                                                        | $                                    | 751,489 | $ | 875,260 |
|                                                                   |                                 |   |   |   |
| Net      income per common share (basic and diluted)                   | $                                    | 0.05 | $ | 0.06 |
|                                                                   |                                 |   |   |   |
| Weighted      average number of fully paid common shares               |                                 | 15,213,712 |   | 15,701,335 |
|                                                                   |                                 |   |   |   |
| Other      comprehensive income (loss), net of tax:                    |                                 |   |   |   |
| Unrealized      gains (losses) on securities:                          |                                 |   |   |   |
| Unrealized      holding gain (loss) arising during period (net of tax) | $                                    | (129,246) | $ | 61,602 |
| Reclassification      adjustment for loss included in net income       |                                 | (4,006) |   | - |
|                                                                   |                                 |   |   |   |
| Other      Comprehensive Income (Loss)                                 |                                 |  (133,252) |   |  61,602 |
|                                                                   |                                 |   |   |   |
| Comprehensive      Income                                              | $                                    | 618,237 | $ | 936,862 |

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|                                                                                                      | Three      Months EndedMarch      31, |                        |
|-----------------------------------------------------------------------------------------------------------|---------------------------------------|-----------------------------|
| Cash flows      from operating activities:                                                           | 2008(Unaudited)                       |                        | 2007(Unaudited) |   |
| Net      income                                                                                           | $                                     |   751,489         |   | $ |   875,260 |   |
| Adjustments      to reconcile net income to net cash provided by operating      activities:               |                                  |                        |   |   |   |   |
| Realized      gain on investments                                                                         |                                  | (8,838                      | ) |   | - |   |
| Realized      gain on debt retirement                                                                     |                                  | (9,812                      | ) |   | (5,403 | ) |
| Decrease      in deferred tax asset                                                                       |                                  | (4,602                      | ) |   | (1,000 | ) |
| Depreciation                                                                                              |                                  |  72,093                |   |   |  69,690 |   |
| Amortization      of deferred acquisition costs, and intangibles                                          |                                  |  (4,146                | )  |   |  5,320 |   |
| Accretion      of bond discount                                                                           |                                  |    161       |   |   |    181 |   |
| Change      in assets and liabilities:                                                                    |                                  |                        |   |   |   |   |
| (Increase)      decrease in accrued investment income                                                     |                                  |    24,823    |   |   |    (22,591 | ) |
| Decrease      in premiums due and unpaid                                                                  |                                  |   314,074         |   |   |   12,318 |   |
| Increase      in liability for future policy benefits                                                     |                                  | 30,941                      |   |   | 18,992 |   |
| Decrease      in policy claims payable                                                                    |                                  | (46,267                     | ) |   | (49,156 | ) |
| Increase      (decrease) in annuity deposits and deferred profits                                         |                                  | 38,852                      |   |   | (107,526 | ) |
| Decrease      in premium deposit funds                                                                    |                                  | (1,449                      | ) |   | (1,406 | ) |
| Increase      (decrease) in advanced and unallocated premium                                              |                                  | (459,231                    | ) |   | 405,053 |   |
| Increase      in commissions payable                                                                      |                                  |  80,569                |   |   |  71,553 |   |
| Other,      increase                                                                                      |                                  | 318,625                     |   |   | 245,587 |   |
| Net      Cash Provided By Operating Activities                                                            |                                  | 1,097,282                   |   |   | 1,516,872 |   |
|                                                                                                      |                                  |                        |   |   |   |   |
| Cash      flows from investing activities:                                                                |                                  |                        |   |   |   |   |
| Proceeds      from maturity or redemption - Held to Maturity Investments                                  |                                  |   7,132,133       |   |   |   65,617 |   |
| Purchase      of equity securities                                                                        |                                  |   (198,222        | ) |   | - |   |
| Purchase      of furniture and equipment                                                                  |                                  | (51,319                     | ) |   | (44,552 | ) |
| Purchase      of fixed maturity securities - Held to MaturityInvestments                                  |                                  | (1,448,772                  | ) |   | (1,138,642 | ) |
|             Other investments – Line of credit payments      received |                                  | 9,922                       |   |   | 8,807 |   |
| Net      Cash Provided By (Used In) Investing Activities                                                  |                                  | 5,443,742                   |   |   | (1,108,770 | ) |
|                                                                                                      |                                  |                        |   |   |   |   |
| Cash      flows from financing activities:                                                                |                                  |                        |   |   |   |   |
| Net      payments on supplementary contracts                                                              |                                  | (2,932                      | ) |   | (2,777 | ) |
| Purchase      of treasury stock                                                                           |                                  | (6,750                      | ) |   | 32,273 |   |
| Bonds      payable purchased                                                                              |                                  | (22,596                     | ) |   | (101,792 | ) |
| Exercised      stock options                                                                              |                                  |  9,600                 |   |   |   - |   |
| Net      Cash Used In Financing Activities                                                                |                                  | (22,678                     | ) |   | (72,296 | ) |
|  Net Increase In Cash and Cash      Equivalents                                                      |                                  |    6,518,346 |    |   |    335,806 |    |
|  Cash      And Cash Equivalents, Beginning Of Period                                                 |                                  |   4,937,983       |   |   |   1,673,058 |   |
|  Cash      And Cash Equivalents, End Of Period                                                       | $                                     | 11,456,329                  |   | $ | 2,008,864 |   |
|                                                                                                      |                                  |                        |   |   |   |   |

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|                                                  |   | Level      1 |   | Level      2 |   | Level      3 |   | Total      |
|-------------------------------------------------------|--------|--------------|--------|--------------|--------|--------------|--------|------------|
| Fixed      Maturities , held to maturity              | $      | -            | $      | 13,296,467   | $      | -            | $      | 13,296,467 |
| Fixed      maturities, available for sale             |   | -            |   | 583,600      |   | -            |   | 583,600    |
| Equity      securities, available for sale            |   | 588,736      |   | -            |   | -            |   | 588,736    |
| Other      long term investments                      |   | -            |   | -            |   | 1,460,132    |   | 1,460,132  |
| Cash      and cash equivalents                        |   | 6,094,449    |   | 5,361,880    |   | -            |   | 11,456,329 |
|                                                  |   |         |   |         |   |         |   |       |
|       Total      assets | $      | 6,683,185    | $      | 19,241,947   | $      | 1,460,132    | $      | 27,385,264 |

|                                             |   | Other      Long-term Investments* |   |   |
|--------------------------------------------------|--------|-----------------------------------|--------|--------|
| Fair      value, beginning of period             | $      | 1,470,054                         |   |   |
| Purchases,      sales, issuances and settlements |   | (9,922)                           |   |   |
|                                             |   |                              |   |   |
|                                             | $      | 1,460,132                         |   |   |
|                                             |   |                              |   |   |

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|       Period |    (a)TotalNumber      ofSharesPurchased |    (b)AveragePrice      Paid      Per      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, 2008     | 1,200                                                   | $1.25                                                           | None                                                                                                                 | None                                                                                                          |
| Month      #1, Feb 1 thru Feb 28, 2008     | 3,000                                                   | $1.25                                                           | None                                                                                                                 | None                                                                                                          |
| Month      #3, Mar 1 thru 31, 2008         | 1,200                                                   | $1.25                                                           | None                                                                                                                 | None                                                                                                          |
| Totals                                     | 5,400                                                   |                                                            |                                                                                                                 |                                                                                                          |

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| 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                                                                           |
| 11        |   | Statement      Re computation of per share earnings.                                                                                                                                                         |   | Reference      is made to the computation of per share earnings as shown page 4 herein      and the explanation in Note 2 to the Notes to Consolidated Financial      Statements (unaudited), page 6 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, 2007, as filed with the      SEC on Schedule 14A on April 30, 2008, is incorporated by reference      herein.                               |

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| 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 |
| 32.1 |   | Certification      of Chief Executive OfficerSection      906                                                                     |   | Filed      herewith - E3 |
| 32.2 |   | Certification      of Chief Financial OfficerSection      906                                                                     |   | Filed      herewith - E3 |

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

|                          |   | BNL      FINANCIAL CORPORATION                 |
|-------------------------------|--------|------------------------------------------------|
|                          |   | (Registrant)                                   |
|                          |   |                                           |
|                          |   | /s/      Wayne E. Ahart                        |
| Date:      May 14, 2008       |   | By:      Wayne E. Ahart, Chairman of the Board |
|                          |   | (Chief      Executive Officer)                 |
|                          |   |                                           |
|                          |   |  /s/      Barry N. Shamas                 |
| Date: May 14,      2008  |   | By:      Barry N. Shamas, Executive V.P.       |
|                          |   | (Chief      Financial Officer)                 |

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