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



                       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, 1999

    [ ] 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

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



                            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, 1999, 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                                       1999       December 31,
                                              (Unaudited)        1998
                                              -----------    ------------
<S>                                         <C>             <C>

Investments:
   Investments available for sale, at
        fair value .......................   $10,914,452     $10,006,208
   Equity securities, common stock .......         1,844           2,573
   Cash and cash investments .............     1,451,881       2,426,963
                                             -----------     -----------
        Total Investments                     12,368,177      12,435,744
Accrued investment income ................       195,003         195,652
Furniture and equipment ..................       427,464         325,717
Deferred policy acquisition costs ........       370,940         379,917
Receivable from reinsurer ................        33,531          33,531
Premiums due and unpaid...................       797,789         611,786
Other assets .............................       391,026         345,428
                                             -----------      ----------
       TOTAL ASSETS                          $14,583,930     $14,327,775
                                             ===========      ==========
     LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
   Liability for future policy benefits .     $1,381,800      $1,398,633
   Policy claims payable.................      2,653,175       2,508,175
   Premium deposit fund .................        123,728         114,841
   Annuity deposits .....................      3,243,534       3,259,195
   Deferred annuity profits .............        500,000         521,212
   Supplementary contracts without
       life contingencies ...............        122,853         129,944
   Advanced and unallocated premium......        692,000         352,999 
   Commissions payable...................        431,524         310,303
   Other liabilities ....................        361,171         528,507
                                              ----------      ----------
       Total liabilities                       9,509,785       9,123,809
                                              ----------      ----------
SHAREHOLDERS' EQUITY:
   Common stock .........................        466,239         466,239
   Additional paid-in capital ...........     14,308,230      14,308,230
   Unrealized appreciation (depreciation)
        of securities ...................        115,218         208,289
   Treasury stock .......................        (64,105)        (64,105)
   Accumulated deficit ..................     (9,751,437)     (9,714,687)
                                              ----------     -----------
     Total shareholders' equity                5,074,145       5,203,966
                                              ----------      ----------
TOTAL LIABILITIES & SHAREHOLDER'S EQUITY     $14,583,930     $14,327,775
                                              ==========      ==========
<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,        
                                                        ---------------------------  
                                                            1999            1998     
                                                        -----------     -----------  
<S>                                                     <C>             <C>          

REVENUES:
   Premium income ..................................   $  6,738,162    $  4,350,247  
   Investment income ...............................        175,053         218,904  
   Realized gains on investments ...................             79          52,175  
                                                        -----------     -----------  
    Total income ...................................      6,913,294       4,621,326  
                                                        -----------     -----------  

EXPENSES:
   Policy benefits and other insurance costs .......      5,817,957       3,737,908  
   Increase in liability for future policy benefits         (16,834)         41,993  
   Amortization of deferred policy acquisition costs          8,977           6,486  
   Operating expenses ..............................        925,923         843,327  
   Taxes, other than on income .....................        214,021         153,034  
                                                        -----------     -----------  

    Total expenses .................................      6,950,044       4,782,748  
                                                        -----------     -----------  

    OPERATING INCOME (LOSS) ........................        (36,750)       (161,422) 

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

    NET INCOME (LOSS) ..............................   ($    36,750)  ($    161,422) 
                                                        ===========     ===========  

  Net loss per share ..............................         ($0.00)        ($0.01)             
                                                        =============   ============        
    Weighted average number
    of shares ......................................      23,311,944     23,311,944         
                                                        =============   ============       


Other comprehensive income, net of tax:
   Unrealized gains on securities:
      Unrealized holding gains arising during 
         period.....................................        ($92,991)       (24,833)          
      Reclassification adjustment for    
         (gains) losses included in net income......             (79)       (52,175)            
                                                        -------------   ------------        
                                                            

     OTHER COMPREHENSIVE LOSS ......................        ($93,070)      ($77,008)     
                                                        -------------   ------------        

     COMPREHENSIVE LOSS ...........................        ($129,820)     ($238,430)     
                                                       ==============   ============        
 

<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
                                                              03/31/99       03/31/98
                                                              --------       --------
<S>                                                         <C>            <C>
Cash flows from operating activities:
Net loss ...................................................($   36,750)   ($  161,422)
Adjustments to reconcile  net loss to net cash
  provided by (used in) operating activities:
 Realized (gain) on investments ............................       (733)       (52,175)
 Realized loss on sale of furniture and equipment...........        654             -
 Depreciation ..............................................     34,772         24,148
 Amortization of deferred acquisition
    costs and state licenses acquired ......................      9,754          7,263
 Accretion of bond discount ................................       (402)          (895)

Change in assets and liabilities:
 Decrease in accrued investment income .....................        649         28,307
 Increase in premiums due and unpaid........................   (186,003)       (50,994)  
 Decrease (increase) in premium deposit fund ................     8,887         (5,459)
 Decrease in annuity deposits and deferred profits..........    (36,873)        (8,205)
 Decrease (increase) in liability for future policy
    benefits ...............................................    (16,834)        41,993
 Increase in policy claims payable..........................    145,000        654,370
 Increase in advanced and unallocated premium...............    339,001         27,999
 Increase in commissions payable............................    121,221         17,724
 Other net .................................................   (213,715)       (35,924)                                           
                                                              ----------      ---------
     Total Adjustments .....................................    205,378        648,152 
                                                              ----------      ---------
     Total cash provided by (used in)
         operating activities ..............................    168,628        486,730 

Cash flows from investing activities:
  Sales of debt securities .................................  1,500,556      3,350,156
  Sales of equity securities ...............................          0              0 
  Sales of furniture and equipment .........................      4,000              0
  Purchase of equity securities ............................          0              0
  Purchase of furniture and equipment ......................   (141,174)       (13,363)
  Purchase of fixed maturity securities .................... (2,500,000)    (2,903,811)
                                                              ---------      ---------
      Net cash provided by (used in) investing activities    (1,136,618)       432,982 
                                                              ---------      ---------
Cash flows from financing activities:
  Payments on supplementary contracts ......................     (7,092)        (3,757)
                                                               ---------     ----------
      Net cash provided by (used in) financing activities        (7,092)        (3,757)
                                                              ---------     ----------
Net increase (decrease) in cash and cash equivalents .......   (975,082)       915,955

Cash and cash equivalents, beginning of year ............     2,426,963        714,539
                                                              ---------      ---------
Cash and cash equivalents, end of period ................   $ 1,451,881    $ 1,630,494
                                                              =========      =========
<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, 1999,  the Company had liquid assets of  $1,451,881 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 quarter of 1999, BNLAC collected  $6,636,038 of
premiums and annuity  deposits  (gross before  reinsurance)  and the Company had
consolidated investment income of $175,053.

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  does not hedge its  investment
income through the use of derivatives.

The  Company's  insurance  operations  are  conducted  through its wholly  owned
subsidiary,  Brokers National Life Assurance Company (BNLAC). At March 31, 1999,
BNLAC had statutory  capital and surplus of  $3,838,243.  In 1997, BNL Financial
Corporation  contributed $500,000 to the paid in surplus of BNLAC and BNL Equity
Corporation  contributed $250,000.  BNLAC is required to maintain minimum levels
of  statutory  capital  and  surplus,  which  differ  from state to state,  as a
condition to  conducting  business in those states in which it is licensed.  The
State of Arkansas,  which is the legal domicile of BNLAC,  requires a minimum of
$2,300,000 in capital and surplus. The highest requirement in any state in which
BNLAC is licensed  is  $3,000,000.  Some states in which BNLAC is licensed  have
increased these  requirements to as much as $5,000,000,  but, in general,  BNLAC
may continue to operate under the lower minimum  requirements  in effect when it
first became licensed in the applicable state.  BNLAC  voluntarily  withdrew its
license  in  the  state  of  Washington  due  to an  increased  minimum  capital
requirement in that state of $2,400,000.  Management monitors these developments
to maintain compliance with the requirements of each state.

Results of Operations
Premium  income  for the  first  quarter  of 1999  was  $6,738,162  compared  to
$4,350,247 for the same period in 1998. The increase of $2,387,915,  or 55%, was
due to an increase in insurance premiums written during 1998.

Net investment  income was $175,053 for the period ended March 31, 1999 compared
to $218,904 for the same period in 1998. The decrease was primarily due to lower
interest  rates and the  reinvestment  of bonds called for  redemption  in lower
yielding short-term investments.

Realized  gains  on  investments  were $79 in the  first  three  months  of 1999
compared to $52,175 for the same period in 1998.  The decrease in realized gains
was due to a  decrease  in bonds  sold in the  normal  course  of the  Company's
investment activity.

In the first quarter of 1999,  policy  benefits and other  insurance  costs were
$5,817,957  compared to $3,737,908 for the same period in 1998. The increase was
due to an  increase in claims and  commissions  resulting  from the  increase in
insurance  business  in force.  The dental  claims  loss ratio was 74.4% for the
first quarter of 1999 compared to 74.2% for the same period in 1998.

For the period ended March 31, 1999, the increase in liability for future policy
benefits was ($16,834) compared to $41,993 in 1998. The decrease in 1999 was due
to a decrease in life reserves from surrendered policies.

Amortization of deferred policy acquisition costs were $8,977 and $6,486 for the
first quarter of 1999 and 1998  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 $925,923 in the first quarter of 1999 compared
to $843,327 for the same period in 1998. The increase in operating  expenses was
primarily  due to an  increase in payroll  and claims  administrative  expense -
which are all attributable to the increased volume of insurance in force.

                                      -6-
<PAGE>

Taxes,  other than on income,  fees and assessments  were $214,021 for the first
quarter of 1999  compared to $153,034 for the same period in 1998.  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 1999 was $36,750  compared
to $161,422 for the same period in 1998. The reduction in the 1999 first quarter
loss compared to 1998 was  primarily due to an increase in premium  income and a
lower cost per unit to administer the business.


The "Year 2000" Issue


The "Year 2000" (or "Y2K") Issue is the  inability of  computers  and  computing
technology to recognize  correctly the Year 2000 date change.  The problem arose
because many software  programs were written using two digits for the year (e.g.
98) rather than four digits (e.g. 1998). These systems automatically assume that
the first two  digits  are "1" and "9",  which  will  cause  these  programs  to
misinterpret dates occurring after December 31, 1999.

The Company has 3 primary sources of computer data. They are:
1.   VIP  Systems,  Inc.  (VIP) -  Independent  provider of  mainframe  computer
     support  for all of the  Company's  data  except  dental  insurance  claims
     payments.
2.   Employer Plan Services,  Inc. (EPSI) - Third Party  Administrator (TPA) for
     the Company's dental insurance claims payments and claims records.
3.   In-house  programs  which  provide a majority of the  Company's  management
     reports.

The Y2K compliance status of each of these three systems is as follows:

      VIP

      All VIP  application  software  programs were  originally  written with an
      8-digit  date  field,  including 4 digits for the year  designation.  As a
      result,  VIP has represented to the Company that its application  software
      is Y2K compliant.

      VIP is in the process of converting its existing  application  software to
      PC  based  hardware  using  Windows  NT  operating  system  (which  is Y2K
      compliant). The conversion process includes testing for Y2K compliance and
      is  scheduled  for  completion  by mid-1999.  On August 1, 1999,  VIP will
      decide which system (the  current  mainframe  system or the new PC system)
      will be in use at year end 1999.  BNL will  perform  final Y2K  compliance
      verification tests at that time.

      VIP's  mainframe  computer  used  an  operating  system  that  was not Y2K
      compliant.  VIP recently  acquired and implemented  all necessary  program
      "patches"  required to make its mainframe  operating system Y2K compliant.
      On  January  12,  1999,  VIP  informed  the  Company  that tests have been
      performed without problems and that the mainframe and operating system are
      Y2K compliant.


      EPSI

      In April 1999, the company  changed its TPA to EPSI.  EPSI is currently in
      the  process  of  replacing   equipment  or  making   corrections  to  the
      programming  of  existing   equipment  where  it  is  feasible,   so  that
      date-related  activities  and the functions  they provide do not adversely
      interfere with the processing of data.  Equipment which has been purchased
      has been  guaranteed  as Year  2000  compliant.  They have  purchased  new
      software  that is  Year  2000  compliant  for the  processing  of  claims.
      Contingency  plans are also being  developed to reduce the likelihood that
      year 2000  events  outside  of their  control  will not  adversely  impact
      customer service. BNL will perform Y2K compliance  verification after EPSI
      has  completed  their  software  and  hardware  updates.  In the event the
      verification  tests fail,  the Company's  backup  alternative  would be to
      retain a new TPA that is Y2K compliant.

                                      -7-
<PAGE>

      In-House Programs

      The Company's Internal Systems  Management (ISM) department  implemented a
      year 2000  strategy in January  1998 to evaluate all hardware and in-house
      program  software to determine  their Y2K  readiness.  The ISM  department
      identified the following hardware and software problems:

1.   Computer  system board BIOS's would not  understand  year 2000 date.
2.   Some  computers  were  still  using  operating  systems  that  were not Y2K
     compliant.
3.   Internal network software was not Y2K compliant.
4.   Internal databases had some Y2K issues.

The ISM  department  evaluated  these problems and by January 1999 had taken the
following actions to correct the problems  identified: 

1.   Replaced  all computer  system  boards with boards Y2K approved by National
     Software Testing Laboratories.
2.   Upgraded all computers to a Y2K compliant operating system.
3.   Converted the internal network to new network software with all appropriate
     upgrades. 
4.   Upgraded the internal database with millennium edition software.

Full  scale  testing  has been  performed  in a year  2000  environment  with no
problems  being  found.  As of  February  1,1999 the  Company's  ISM  department
believes that in-house programs are Y2K compliant.

The cost incurred to date by the Company to correct the Y2K problem has not been
material.  The Company does not expect to incur any additional material costs to
become  compliant  nor does it  foresee  a need for any  substantial  amount  of
in-house staff training.

                                      -8-





<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. On August 27, 1998, the Court entered a ruling certifying the lawsuit as a
class action, with the class of plaintiffs including all Arkansas purchasers who
participated in the public offerings of securities by UAC during the stated time
frame.  The Company  believes that serious  errors were made in  certifying  the
class,  and  the  Company  is  in  the  process  of  filing  an  appeal  of  the
certification order.

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 items were submitted to a vote of security holders during the current period.

Item 5.  Other Information.
Effective  April 15, 1999,  the Company  terminated  its TPA agreement  with ASO
North  America  and entered  into a  three-year  agreement  with  Employer  Plan
Services,  Inc.  (EPSI) to administer  the Company's  group dental  claims.  The
agreement will increase the Company's  claims  administration  expense by 50% at
the current level of claims  processing.  Management  feels the terms of the new
agreement are competitive  and necessary to get the quality of service  required
to administer the Company's claims.


                                      -9-

<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 4.2 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, 1998.
              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                  1996. 
              Registrant 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-
<PAGE>


  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 30,
              Corporation and C. Donald Bryd and Kenneth Tobey        1997
                                                                      
  10.10       Office lease assumption and assignment agreement        Filed with 10KSB for the period ended December 31,
              dated September 1, 1998, between Brokers National       1998
              Life Assurance Company and Walgreen Co. and
              Charles H. Morrison for premises in Austin, TX
                                                                      
  10.11       Sublease dated January 20, 1999 between  Brokers 31,     Filed with 10-KSB for the period ended December1998 
              National Life Assurance Company and PRG, Inc.            1998

  10.12       Agreement between Employer Plan Services Inc. and       Filed herewith as Exhibit I
              Brokers National Life Assurance Company to
              administer dental claims processing for the Company

   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
No reports were filed 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: May 11, 1999                      /s/ Wayne E. Ahart
                                      ____________________________
                                      By: Wayne E. Ahart, Chairman of the Board
                                          (Chief Executive Officer)


Date: May 11, 1999                      /s/ Barry N. Shamas
                                      ____________________________
                                      By: Barry N. Shamas, Executive V.P.
                                          (Chief Financial Officer)




                                      -11-
<PAGE>



                                                                  




                                    EXHIBIT I



                            CLAIM SERVICES AGREEMENT







                   THIS AGREEMENT is made as of the First day of
                               June 1, 1999 between:


                     Brokers National Life Assurance Company
                            (an Arkansas Corporation)

                   (hereinafter referred to as "Brokers") and

                          Employer Plan Services, Inc.
                              (a Texas corporation)

                       (hereinafter referred to as "EPSI")



















This Agreement,  together with any Schedules and Exhibits attached or referenced
within this Agreement and any amendments to the Agreement, constitute the entire
Agreement between Brokers and EPSI.

<PAGE>


                                TABLE OF CONTENTS

I.       Purpose

II.      Consideration
III.     Duties of EPSI

A.       Payment of Claims
B.       Claim Determination
C.       Customer Service
D.       Watts Service
E.       Eligibility Maintenance
F.       Reports
G.       Disputed Claims
H.       Overpayment and Underpayment
I.       Fidelity Bond and Errors and Omissions Coverage
J.       Maintenance of Records
K.       Notices and Complaints

IV.      Restrictions on Performance

A.       Trademarks and Tradenames
B.       Subcontracting

V.       Rights of Brokers

A.       Periodic Audits
B.       Ownership of and Access to Records

VI.      Duties of Brokers

VII.     Compensation

VIII.    Printing Costs

IX.      Liability of EPSI and Brokers

A.       Liability of EPSI
B.       Liability of Brokers

X.       Termination

A.       Duration
B.       Termination by EPSI
C.       Termination by Brokers

XI.      General Provisions

A.       Performance of Service
B.       Amendments
C.       Notice


<PAGE>


         Purpose

         This  Agreement  provides  for the terms under which EPSI will  provide
         dental  claim  services  for the current or future  contracted  Brokers
         dental  insurance  Policyholders.   EPSI  will  provide  such  services
         regarding  claims  for the  Policyholders'  covered  persons  ("Covered
         Persons"),  in accordance with the terms of the Policyholders' policies
         ("Policy(ies)").



Consideration

         The consideration for this Agreement will be the mutual promises of the
parties contained herein.



Duties of EPSI

EPSI will perform the following services with respect to Brokers' Policyholders:

A.   Payment of Claims - EPSI will receive, review, evaluate,  refer, adjust and
     promptly  pay or deny all claims that are  submitted  to EPSI  according to
     EPSI then current  claims  administration  practices and  procedures and as
     directed by Brokers. All claims will be paid in strict conformance with the
     Policy language,  unless directed  otherwise by Brokers.  Specific services
     will include:

1.   Preparation of checks for the payment of the amount of benefits  determined
     to be payable  under the Policy to the  Beneficiary  or to the  assignee of
     benefits as the interests appear to EPSI.
2.   Release  benefit checks to the payee by regular mail. The frequency of such
     check  releases  shall be in accordance  with the written  instructions  of
     Brokers.  EPSI shall be entitled to rely upon such  approval as a guarantee
     of funding.
3.   In the event that a Claim is denied, in whole or in part, written notice to
     the Beneficiary of the reason(s) for the denial.
4.   Preparation  and release of Explanation of Benefit forms to the Beneficiary
     in conjunction with the payment or denial of each Claim.

EPSI will reduce claim turnaround time, within a reasonable period of time after
the effective date of this agreement,  in order to comply with the  requirements
of any applicable  State Unfair Claims  Practices Act or the requirements of any
State   Insurance   Department  law  or  regulation.   Brokers  will  have  sole
responsibility to notify EPSI of any such State Insurance Department requirement
or law.

B. Claim  Determination  - With  respect to any  specific  claim,  if EPSI deems
appropriate, EPSI may:

1.   Correspond directly with the Covered Person,  Policyholder and/or providers
     of health-care services in the event that additional information appears to
     be necessary to properly process the Claim;
2.   Consult with professional  medical or dental consultants (at the expense of
     Brokers);
3.   Use its standard  procedures to determine  whether there is other  coverage
     against which benefits provided under Brokers' Policy may be coordinated;

4.   Determine  whether  the  procedure,  treatment  or  supplies  appears to be
     medically necessary in the opinion of EPSI;

5.   Determine  the amount of  benefits  which  appear to be  payable  under the
     Policy with respect to the  indicated  procedure,  based upon the lesser of
     the amount due under any applicable PPO Fee Schedule,  the amount  actually
     charged or the 75th  percentile  of the amount  considered  reasonable  and
     customary  in  accordance  with the data  base  then  loaded  into the EPSI
     system.  It is  understood  and  agreed  that such  percentile  shall be as
     determined by Brokers.  The  reasonable and customary data base loaded into
     the EPSI system will, unless otherwise disclosed to Brokers, be as provided
     to EPSI by Medical Data Research;  updated not less frequently than every 6
     months.

C.            Customer  Service - EPSI will  maintain  a Customer  Service  Unit
              trained to respond to telephone and written inquiries from Covered
              Persons and providers relating to the Policy and Claim matters.

D.            Watts Service - EPSI will provide a toll-free  telephone number so
              that  Covered  Persons or  providers  may contact  EPSI  regarding
              Claims matters during the regular business hours of EPSI.

E.            Eligibility  Maintenance - EPSI will maintain an eligibility  file
              of Covered Persons entitled to receive benefits under the Policies
              based upon information provided to EPSI by Brokers as provided for
              in Section VI.D of this Agreement.

F. Reports - EPSI will:

1.   maintain a system for the tracking of payments, refunds, stop payments, and
     voids, and report the transactions in the Monthly Claim Report; and
2.   maintain a system for and assume  all  reporting  responsibilities  for the
     preparation  and  distribution  of IRS Form  1099 for  providers  of dental
     service.
3.   provide  reports as needed by Brokers for the timely  completion of Brokers
     financial  statement  and as  requested  by Brokers for analysis of Brokers
     claim experience.

         G.    Disputed  Claims - EPSI will refer all disputed claims to Brokers
               for determination.  A claim which is pending further  information
               is not a disputed claim.

              "Disputed Claim" is a claim:

1. which has been denied in whole or in part by EPSI; and

2. for which EPSI's determination has been disputed or appealed in writing.

In referring a Disputed  Claim to Brokers,  EPSI will  provide  Brokers with the
following information:

1.   a copy of all  documents  in the  claimant's  file,  including  the  claim,
     correspondence  between  EPSI and the  claimant,  and any  other  pertinent
     documents relating to the Disputed Claim; and

2.   an analysis of the  Disputed  Claim and the basis for the claim denial with
     appropriate  references to the  applicable  provisions of the  Policy(ies).
     Brokers  will notify EPSI in writing of its  determination  with respect to
     the Disputed Claim.  Brokers retains final decision making  authority as to
     how the Disputed Claim will be handled.

H.              Rescissions   -  EPSI  will  refer  all  claims  which   contain
                information  which  would be grounds  for  rescinding  a Covered
                Person's   coverage  to  Brokers  along  with  the   appropriate
                documentation.  Brokers  will have the sole  authority to decide
                whether or not  coverage  should be  rescinded.  Brokers has the
                sole  authority  to issue all notices of  rescission  to Covered
                Persons. EPSI will be notified of all rescissions.

I.              Overpayment and Underpayment - If EPSI pays any person less than
                the amount to which he or she is entitled under the Policy(ies),
                EPSI will promptly,  upon learning of the  underpayment,  adjust
                the underpayment to the correct amount.

              If EPSI or Brokers  discovers that an overpayment has been made on
              behalf of any person's  claim,  EPSI is hereby  authorized to seek
              recovery  from the  dentist or insured and or to offset the amount
              of any excess  payment  form any unpaid claim of such person or of
              any other person who is a member of such person's family unit.

J.       Fidelity Bond and Errors and Omissions Coverage

1.   EPSI is required to purchase a Blanket  Fidelity Bond in its own name in an
     amount of at least $1,000,000
The Bond will state that:
a.   loss, if any,  involving money or other property  belonging to Brokers will
     be payable to Brokers as its interest may appear; and
b.   if the Bond is  canceled,  Brokers  will be  notified 30 days prior to such
     cancellation.

EPSI,  upon  request,  will  provide  a copy  of the  Bond  to Brokers.

2.   EPSI is required to purchase  and to maintain  Liability  Insurance  in any
     amount not less than $1,000,000 per individual  claim and $1,000,000 in the
     aggregate to provide insurance coverage for liability related to or arising
     out of EPSI's  errors or omissions in the  performance  of its duties under
     this  Agreement.  EPSI will provide Brokers with evidence of such coverage,
     upon  request,   and  will  notify  brokers  of  any  material   change  or
     cancellation of such coverage 30 days prior to such change or cancellation.

K.  Maintenance of Records - All records will be maintained at EPSI's  principal
administrative offices:

1.   the duration of this Agreement; or

2.   a longer  period of time as may be required  under the Employee  Retirement
     Income  Security  Act of 1974,  or any  applicable  state  or  commonwealth
     statute.

EPSI may copy all claim forms and accompanying documentation on a record-keeping
system.  All records will be maintained in accordance with prudent  standards of
record keeping.  Notwithstanding the above, it is hereby agreed that all records
pertaining  to the  business  administered  hereunder  are the sole  property of
Brokers, and EPSI shall provide Brokers any and all such documents on request by
Brokers. Brokers agrees to pay the cost of retrieval of such records.

L. Notices and Complaints - If EPSI receives:

1.   notice of the  commencement of any legal  proceeding  involving any Covered
     Persons; or
2.   communication from:

a.   any Insurance Department or other administrative agency; or

b.   any other person identifying a complaint by any Covered Person or calling a
     hearing involving any Brokers practice,

EPSI will immediately  notify Brokers.  EPSI will immediately send copies of any
necessary documentation to Brokers, for exclusive handling by Brokers. EPSI will
maintain a file  containing  any  written  letters of  complaint  received  from
Covered  Persons,  Policyholders  or service  providers  for a period of six (6)
years from receipt of the complaint letter, or a longer period of time as may be
required  under  the  employee  retirement  Income  Security  Act of 1974 or any
applicable state statute.
Restrictions on Performance

                  A.  Trademarks  and  Tradenames  - EPSI will not use the claim
                  files or Brokers'  name,  trademarks,  logo or the name of any
                  other  affiliated  Brokers'  company  in any way or manner not
                  specifically  authorized  in writing by Brokers.  EPSI may use
                  only advertising which:

1.       pertains to the business underwritten by Brokers; and
2.       has been approved in writing by Brokers in advance of its use.

                  B.  Subcontracting  - EPSI  will  not  subcontract  any of its
                  administrative functions,  duties, or responsibilities without
                  the prior approval of Brokers. Brokers has the right to refuse
                  approval for any reason whatsoever at its sole discretion.


Rights of Brokers

A.   Periodic  Audits - Brokers may audit the  records of EPSI which  pertain to
     the  performance  of the duties of EPSI with respect to the Policies.  EPSI
     will fully cooperate with Brokers, or its designee,  during any such audit.
     Brokers will provide 15 calendar days prior  written  notice to EPSI of its
     intent to perform  an audit and to  include in such  notice the name of the
     persons  authorized to perform the audit.  All such audits shall take place
     at the office of EPSI during its normal business hours.
B.   Ownership of and Access of Records - All source  documentation  relating to
     the  Policies  which comes into the  possession  of EPSI is the property of
     Brokers.  Accordingly,  EPSI will  retain  all  records  pertaining  to the
     Policies  for the  period  required  by law and  will  furnish  information
     relating  to  claims  for  benefits  under  the  policies  which  is in the
     possession  of EPSI as  requested  by Brokers.  EPSI  reserves the right to
     charge its then current fee for the production of such information. Records
     will not be used for any purpose not authorized in writing by Brokers.

<PAGE>



Duties of Brokers

                  Brokers will provide EPSI with the following items:

A.   Brokers'   general    administrative    instructions   as   applicable   to
     Policyholders;
B.   A copy of the master  Policy(ies),  booklet(s),  rider(s),  and Certificate
     forms;
C.   Any additional  standard Brokers forms necessary for the  administration of
     the Policy(ies);
D.   A monthly,  or more  frequently  if  desired,  eligibility  file of persons
     entitled to receive benefits from Policies based upon information  provided
     to Brokers by  Policyholders  on EPSI's standard  electronic or other media
     acceptable to EPSI.  Brokers,  and not EPSI,  shall be responsible  for the
     accuracy  of such  eligibility  information;  and EPSI shall be entitled to
     accept such information as accurate without inspection or investigation;
E.   A claims  clearing  Account  which  shall be  established,  maintained  and
     adequately funded solely by Brokers ("Account"). Such Account shall be used
     exclusively  for the payment of claims as provided in Section  III.A.1.  of
     this Agreement.  Brokers shall at all times be responsible for funding this
     account for the payment of benefits  under the Policies by and through this
     Account.  Brokers shall also be responsible  for  reconciling  the Account.
     EPSI shall not be  required  to use any of its funds for the payment of any
     such benefits,  and it is expressly understood and agreed that Brokers, and
     not EPSI,  shall be liable  in the event any such  check or checks  are not
     honored when presented for payment.



Compensation

EPSI shall be reimbursed by Brokers according to the attached Schedule A for all
services  enumerated  in this  Agreement.  Brokers  understands  and agrees that
additional  services  that it may request  EPSI to perform or an increase in the
complexity if the services will generate  additional  fees that are not included
on Schedule A. EPSI will outline such additional fees and secure Brokers written
agreement to such fees prior to undertaking  any action with respect to any such
requested service.


Printing Costs

If EPSI requests any forms in addition to or in replacement  of forms  available
and in stock at Brokers,  Brokers  will  review and  prepare the form  language,
prepare the form language, prepare a mechanical proof(s) and cause such forms to
be printed. Brokers will bear the cost of printing such forms.


Liability of EPSI and Brokers

A.                Liability of EPSI - EPSI agrees to indemnify  and hold Brokers
                  harmless  from any and all  liability,  loss,  damage,  fines,
                  penalties  and  costs,   including   expenses  and  reasonable
                  attorneys' fees, which Brokers may sustain by reason of EPSI's
                  actions or failure to act in carrying out its responsibilities
                  as set forth in this Agreement.  EPSI also agrees to indemnify
                  and hold Brokers harmless from any liability or loss resulting
                  from the dishonest acts of EPSI employees or officers.

B.                Liability of Brokers - Brokers  agrees to  indemnify  and hold
                  EPSI harmless from any and all liability, loss, damage, fines,
                  penalties  and  costs,   including   expenses  and  reasonable
                  attorneys'  fees, which EPSI may sustain by reason of Brokers'
                  actions or failure to act in carrying out its responsibilities
                  as set forth in this  Agreement.  Brokers  agrees to indemnity
                  and hold EPSI harmless  from any  liability or loss  resulting
                  from the dishonest acts of Brokers employees or officers.



Termination

A.                Duration - Unless  terminated  as  provided in  paragraph  X.B
                  below,  the term of this  Agreement  shall be three (3) years,
                  commencing on the Effective Date ("Initial Term") and shall be
                  automatically  renewed  for  successive  one  (1)  year  terms
                  ("renewal Terms"). As used in this Agreement, "Term" means the
                  period during which the  Agreement is in force,  commencing on
                  the  Effective  Date  and  ending  on the  effective  date  of
                  termination.

B.  Termination  by EPSI - EPSI may terminate  this Agreement upon 15 days prior
written notice in the event that:
----------------------------

1.   any check issued for payment of benefits  under the Policies is  dishonored
     for any  reason  and  Brokers  fails to  deposit  funds to cover such check
     within 10 days of being notified of the dishonored check, or

2.   any fee due and owing to EPSI remains  unpaid for a period of 15 days after
     payment is due, or

3.   Brokers refuses or neglects to provide information  reasonably requested by
     EPSI for the performance of its duties under the Agreement, or

4.   a petition in  voluntary  or  involuntary  Bankruptcy  is filed by, or with
     respect to, Brokers.

EPSI shall specify the "effective date of termination" in any such notice.

C.  Termination  by Brokers - This  Agreement may be terminated  immediately  by
Brokers when and if:

1.   EPSI commits  fraud or gross  negligence in the  performance  of any of its
     duties under this Agreement, or
2.   wrongfully  withholds  or  misappropriates,  for EPSI's  own use,  funds of
     Brokers or any of its Policyholders, or
3.   EPSI  refuses or neglects to provide  information  reasonably  requested by
     Brokers for the performance of its duties under the Agreement, or
4.   a petition in voluntary or involuntary Bankruptcy is filed by, or with
     respect to EPSI, or
5.   More than 50% of EPSI outstanding  stock is transferred to individuals
     other than the current shareholders.
     D.   Either Brokers or EPSI may terminate this Agreement at any time during
          any Renewal Term,  without cause, upon 90 days prior written notice to
          the other party.
     E.   Effect of  Termination  - EPSI shall not be  obligated  to perform any
          services  whatever  under this Agreement to or on behalf of Brokers on
          or after the effective date of termination of this Agreement, unless a
          written  agreement  providing  otherwise has been executed by EPSI and
          Brokers prior to such effective date.

General Provisions


A.                Performance  of  Service  - In the event  that  EPSI  fails to
                  perform  services  under this  Agreement,  Brokers  may assume
                  those  services and will be entitled to the fees or allowances
                  otherwise payable to EPSI.



B.                Amendments  -  This  Agreement,  any  Schedules  and  Exhibits
                  attached  hereto can be  changed  at any time by an  amendment
                  signed by both parties.



                  Brokers   may   change   the    Policyholders,    Policy(ies),
                  Administrative policies or guidelines at any time by providing
                  EPSI at least sixty (60) days advance  written  notice of such
                  change. All such changes will become prospectively  binding on
                  EPSI.  IF any such change  shall  affect the scope of services
                  performed by EPSI or require extraordinary  measures, the fees
                  payable shall be adjusted as mutually agreed to by the parties
                  in writing.



EPSI will not change  any Policy  language  or any of Brokers  practices  unless
authorized in writing by Brokers.


C.                EPSI shall  perform  only  ministerial  duties to Brokers  and
                  shall be neither the fiduciary nor  co-fiduciary as defined by
                  the Employee  Retirement  Income Security Act of 1974 (ERISA).
                  All reports or  disclosures  required  by law or  governmental
                  authorities shall be the  responsibility of Brokers.  EPSI may
                  provide information,  assistance and advice to Brokers to meet
                  these requirements.



D.                EPSI shall make no  representation  to Brokers  concerning any
                  federal,  state or local  tax  status  of the  Plan.  All such
                  questions  should  be  referred  to  Brokers'  counsel  or tax
                  consultant.  If, during the operation of the Plan, the federal
                  government,  the  government  of any  state  of any  political
                  subdivision or  instrumentality of either shall assess any tax
                  against the Plan and EPSI is  required  to pay such tax,  EPSI
                  shall report  payment to Brokers and make a charge against the
                  Plan for such tax.



Notice - Any notification referenced under this Agreement will be effective:



1.   only if it is in writing, unless otherwise indicated; and



2.   when  hand-delivered  or two (2) days after it is mailed by registered
     mail, return receipt requested and addressed as follows:

                                    If addressed to Brokers, to:

                                    Brokers National Life Assurance Company

                                    2100 W. William Cannon, Ste. L

                                    Austin, Texas 78745



                                    If addressed to EPSI, to:

                                    EPSI Benefits, Inc.

                                    Employer Plan Services

                                    2180 North Loop West, Suite 400

                                    Houston, Texas 770189

<PAGE>






         This Agreement is made binding by the signatures of Brokers' and EPSI's
         representatives who are duly authorized to enter into such agreements.





         FOR EPSI:    Lyndon A. Smith                President

                      (Name)                         (Title)





of  EMPLOYER  PLAN  SERVICES,  INC.  agrees  on its  behalf to the terms of this
Agreement. I am authorized to enter into such agreements.




         __/s/ Lyndon A. Smith_________________            __4/15/99_____

         (Signature)                                          (Date)









         FOR Brokers: Barry Shamas          Executive Vice President

                      (Name)                         (Title)





of Brokers,  agree on its behalf to the terms of this Agreement. I am authorized
to enter into such agreements.






         ___/s/ Barry N. Shamas________________            __4/15/99______

         (Signature)                                          (Date)



<PAGE>




                                   SCHEDULE A
SCHEDULE OF FEES


(waived)  ANNUAL  MAINTENANCE  FEE:  This fee shall be  collected in the twelfth
month of each  contract year for:  revisions to -------- the Plans,  Plan review
meetings,  computer  updates,  claims  reporting and preparation of the IRS form
1099 for the Plan Providers.

ADMINISTRATION  FEE:  The fees in this  section  are charged to  administer  the
services as indicated. The fee listed below shall be multiplied by the number of
eligible  employees  in the  corresponding  plan of benefits on the 15th of each
month.
                                                                DENTAL BENEFIT 

$   1.68          1st 60,000 EE Lives
 ----------          

$   1.55          60,001 - 75,000 EE Lives
 ----------

$   1.45          75,001 - 125,000 EE Lives
 ----------

$   1.30          *125,000+ EE Lives
 ----------


The Company  designates  Barry  Shamas as its  administrative  contact  with the
Claims Administrator.

The  effective  date of this  schedule is June 1, 1999,  and it shall  remain in
effect  until  this  Agreement  is  terminated  or this  schedule  is amended by
agreement of both  parties.  After 12 months and at the 125,000 EE Life level we
will review the fee between Brokers and EPSI to discuss possible increases.



By their signatures below, the undersigned:

     a.   certify  that they have  authority  granted  to them  respectively  by
          Company and by Claims  Administrator,  Inc., to execute this agreement
          on its behalf and

     b.   hereby execute this agreement in their respective names.

BROKERS NATIONAL                                    EMPLOYER PLAN SERVICES, INC.
LIFE ASSURANCE COMPANY


BY:   /s/  Barry N Shamas                   BY:      /s/ Lyndon A Smith________