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

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

                      For the Quarter Ended June 30, 1997

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

For the transition period from______to_____
Commission File No. 0-16880

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

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

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



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

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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements  for the past 90 days.  Yes __X__ No____ As of March 31, 1997,  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>


                                                June 30
     ASSETS                                       1997       December 31,
                                              (Unaudited)        1996
                                              -----------    ------------
<S>                                         <C>             <C>

Investments:
   Investments available for sale, at
        fair value .......................   $11,939,152     $11,885,909
   Equity securities, common stock .......        32,838          35,438
   Cash and cash investments .............       337,915         702,769
                                             -----------     -----------
        Total Investments                     12,309,906      12,624,116
Accrued investment income ................       235,723         222,101
Furniture and equipment ..................       256,994         266,234
Deferred policy acquisition costs ........       449,826         474,667
Receivable from reinsurer ................        23,301          28,462
Other assets .............................       497,782         485,995
                                             -----------      ----------
       TOTAL ASSETS                          $13,773,532     $14,101,575
                                             ===========      ==========
     LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
   Liability for future policy benefits .     $1,392,921      $1,382,280
   Policy claims payable.................        885,000         816,500
   Premium deposit fund .................        139,366         177,909
   Annuity deposits .....................      3,421,804       3,495,571
   Deferred annuity profits .............        615,737         610,536
   Supplementary contracts without
       life contingencies ...............         63,367          70,515
   Other liabilities ....................        552,623         415,901
                                              ----------      ----------
       Total liabilities                       7,070,819       6,969,212
                                              ----------      ----------
SHAREHOLDERS' EQUITY:
   Common stock .........................        466,239         466,239
   Additional paid-in capital ...........     14,308,230      14,308,230
   Unrealized appreciation (depreciation)
        of securities ...................        (39,522)        (41,679)
   Treasury stock .......................        (64,105)        (64,105)
   Accumulated deficit ..................     (7,968,129)     (7,536,322)
                                              ----------     -----------
     Total shareholders' equity                6,702,713       7,132,363
                                              ----------      ----------
TOTAL LIABILITIES & SHAREHOLDER'S EQUITY     $13,773,532     $14,101,575
                                              ==========      ==========
<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            Six Months Ended
                                                                   June 30,                     June 30,
                                                        ---------------------------    --------------------------
                                                            1997            1996          1997            1996
                                                        -----------     -----------    -----------     -----------
<S>                                                     <C>             <C>            <C>             <C>

REVENUES:
   Premium income ..................................   $  2,555,179    $  1,774,936   $  4,822,269    $  3,390,315
   Investment income ...............................        229,940         218,219        439,507         433,509
   Realized gains on investments ...................         23,147          12,546         41,911          16,459
                                                        -----------     -----------     ----------      ----------
    Total income ...................................      2,808,266       2,005,701      5,303,687       3,840,283
                                                        -----------     -----------     ----------      ----------

EXPENSES:
   Policy benefits and other insurance costs .......      2,268,801       1,547,136      4,147,641       3,002,118
   Increase in liability for future policy benefits         (15,048)          8,232          4,141          (8,062)
   Amortization of deferred policy acquisition costs         15,373          14,976         24,841          22,352
   Operating expenses ..............................        695,132         628,825      1,359,231       1,211,444
   Taxes, other than on income .....................         90,860          66,244        199,640         127,737
                                                        -----------     -----------     ----------      ----------

    Total expenses .................................      3,055,118       2,265,413      5,735,494       4,355,589
                                                        -----------     -----------     ----------      ----------

    OPERATING INCOME (LOSS) ........................       (246,852)       (259,712)      (431,807)       (515,306)

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

    NET INCOME (LOSS) ..............................   ($   246,852)  ($    259,712)  ($   431,807)   ($   515,306)
                                                        ===========     ===========     ==========      ==========

   Net loss per share ..............................   ($      0.01)  ($       0.01)  ($      0.02)   ($      0.02)
                                                        ===========     ===========     ==========      ==========

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


<FN>

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

       

<TABLE>

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

                                                                    Six Months
                                                               Ended          Ended
                                                              06/30/97       06/30/96
                                                              --------       --------
<S>                                                         <C>            <C>
Cash flows from operating activities:
Net loss ...................................................($  431,807)   ($  515,306)
Adjustments to reconcile  net loss to net cash
  provided by (used in) operating activities:
 Realized (gain) loss on investments .......................    (45,990)       (12,689)
 Realized (gain) loss on sale of furniture and equipment....      4,079         (3,770)
 Depreciation ..............................................     46,923         46,669
 Amortization of deferred acquisition
    costs and state licenses acquired ......................     24,841         23,906
 Accretion of bond discount ................................     (1,782)        (2,835)

Change in assets and liabilities:
 Increase in accrued investment income .....................    (13,622)       (39,695)
 Decrease (increase) in receivable from reinsurer...........      5,161              0   
 Decrease in premium deposit fund ..........................    (38,543)        (9,483)
 Increase (decrease)in annuity deposits and deferred profits    (68,566)        86,320
 Increase in liability for future policy
    benefits ...............................................     10,641        (41,797)
 Increase in policy claims payable..........................     68,500        (33,735) 
 Other net .................................................    124,934        (31,237)
                                                              ----------      ---------
     Total adjustments .....................................    116,576        (18,346)
                                                              ----------      ---------
     Total cash provided by (used in)
         operating activities ..............................   (315,231)      (533,652)

Cash flows from investing activities:
  Sales of debt securities .................................  1,496,496      1,561,854
  Sales of equity securities ...............................          0              0 
  Sales of furniture and equipment .........................        201          9,000
  Purchase of equity securities ............................          0              0
  Purchase of furniture and equipment ......................    (41,963)       (45,417)
  Purchase of fixed maturity securities .................... (1,497,209)    (2,547,183)
                                                              ---------      ---------
      Net cash provided by (used in) investing activities       (42,475)    (1,021,746)
                                                              ---------      ---------
Cash flows from financing activities:
  Payments on supplementary contracts ......................     (7,148)        (6,755)
                                                               ---------     ----------
      Net cash provided by (used in) financing activities        (7,148)        (6,755)
                                                              ---------     ----------
Net increase (decrease) in cash and cash equivalents .......   (364,854)    (1,562,153)

Cash and cash equivalents, beginning of year ............       702,769      1,910,596
                                                              ---------      ---------
Cash and cash equivalents, end of period ................   $   337,915    $   348,443
                                                              =========      =========
<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, 1995, previously filed with the Commission,  for
financial  statements  for  the  year  ended  December  31,  1995,  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 June 30,  1997,  the  Company had liquid  assets of  $337,915 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 half of 1997,  BNLAC  collected  $5,040,213 of
premiums and annuity  deposits  (gross before  reinsurance)  and the Company had
consolidated investment income of $439,507.

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

The  Company's  insurance  operations  are  conducted  through its wholly  owned
subsidiary,  Brokers National Life Assurance Company (BNLAC).  At June 30, 1997,
BNLAC had statutory  capital and surplus  exceeding $5.158 million.  In February
1997, the Company and BNL Equity Corporation  contributed  $500,000 to the gross
paid in and contributed surplus of BNLAC.

Results of Operations
Premium  income  for the first six  months of 1997 was  $4,822,269  compared  to
$3,390,315 for the same period in 1996. The increase of $1,431,954,  or 42%, was
due to increase in sales of group dental  insurance in the last half of 1996 and
first half of 1997.

Net  investment  income was $439,507 for the period ended June 30, 1997 compared
to  $433,509  for the same  period in 1996.  The  increase  was due to  interest
received on GIC bonds.

Realized  gains on  investments  were  $41,911  in the first six  months of 1997
compared to $16,456 for the same period in 1996.  The increase in realized gains
was due to bonds sold in the normal course of the Company's investment activity.

In the first six months of 1997,  policy benefits and other insurance costs were
$4,147,641  compared to $3,002,118 for the same period in 1996. The increase was
due to an  increase in claims and  commissions  resulting  from the  increase in
dental business in force.

For the period ended June 30, 1997,  the increase  (decrease)  in liability  for
future policy  benefits was $4,141 compared to $(8,062) in 1996. The increase in
1997 was due to an increase in group dental  unearned  premium  reserves for the
year and an increase in GAAP life reserves.

Amortization of deferred policy  acquisition  costs were $24,841 and $22,352 for
the first half of 1997 and 1996  respectively.  Amortization  of deferred policy
acquisition costs should remain relatively constant as the asset is reduced over
the upcoming years.

Operating  expenses  increased  from  $1,211,444  in the  first  half of 1996 to
$1,359,231 in 1997.  The increase in operating  expenses was primarily due to an
increase  in legal  fees (see legal  proceeding),  printing  expense  and claims
administrative expense - which are attributable to the increase volume of dental
insurance in force.

Taxes,  other than on income,  fees and assessments  were $199,640 for the first
six  months of 1997  compared  to  $127,737  for the same  period  in 1996.  The
increase  was due to an  increase  in premium  taxes on the  increased  premiums
collected and an increase in state filing fees for  advertising  and policy form
approval.

The net loss from operations for the first half of 1997 was $431,807 compared to
$515,306  for the same  period  in 1996.  The  decrease  is  primarily  due to a
reduction in other  insurance  costs and  operating  expenses as a percentage of
premium  income in 1997  versus  1996.  Management  anticipates  this trend will
continue as increased dental business is put in force.


                                     6


<PAGE>




                          PART II -- OTHER INFORMATION


Item 1.  Legal Proceedings.
On April  30,  1996,  Myra Jo  Pearson  and Paul  Pearson  filed a class  action
complaint in the Circuit Court of Pulaski County, Arkansas (3rd Division) naming
the Company,  BNL Equity  Corporation  and several  officers of the Company,  as
defendants. On July 19, 1996, the plaintiffs filed their first amended complaint
and on and after July 24, 1996, the defendants were first served and notified of
the complaint and first amended complaint.  The plaintiffs have alleged that the
defendants   violated  the  Arkansas  Securities  Act  in  several  respects  in
connection  with the public  offerings  of  securities  made by United  Arkansas
Corporation ("UAC") (now known as BNL Equity Corporation) during the period from
January 1989 until May, 1992. The plaintiffs have filed on behalf of themselves,
as well as all other similarly  situated persons who acquired UAC stock in these
offerings.  The crux of the plaintiffs'  allegations is that the defendants made
alleged  misrepresentations  and  omissions  concerning  the  business  plan and
insurance marketing strategy of UAC in connection with the public offerings.


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 and its consolidated subsidiary.

Item 4.  Submission of Matters to a Vote of Security Holders.
The Company's  Annual Meeting of Shareholders was held on May 20, 1997 in Little
Rock, Arkansas. At the annual meeting, the following individuals were elected to
the Company's Board of Directors.

Wayne E. Ahart           Richard Barclay               Eugene A. Cernan
John Greig               Tom Landry                    C. James McCormick
James A. Mullins         Chris Schenkel                Barry Shamas
Kenneth Tobey            Cecil Alexander               C. Donald Byrd
Hayden Fry               Roy Keppy                     Roy Ledbetter
John E. Miller           Robert R. Rigler              L. Stanley Schoelerman
Orville E. Sweet

12,457,328 shares were voted in favor of Messrs.  Barclay and Greig;  12,454,328
voted  in favor  of Mr.  Miller;  12,453,326  shares  voted in favor of  Messrs.
Schoelerman  and Sweet;  12,452,126  shares voted in favor of Messrs.  Ahart and
Byrd;  12,451,226  shares  voted in  favor  of  Messrs.  Alexander,  Cernan  and
Ledbetter;  12,449,726  shares voted in favor of Mr. Rigler;  12,448,226  shares
voted  in  favor  of Mr.  Mullins;  12,448,142  shares  voted  in  favor  of Mr.
McCormick;  12,447,026 shares voted in favor of Mr. Schenkel;  12,446,642 shares
voted in favor of Mr. Landry; 12,445,142 shares voted in favor of Mr. Keppy; and
12,440,060  shares voted in favor of Mr. Fry.  94,516  shares were withheld from
all directors.

The  shareholders  ratified  the  selection  of  Amend,  Smith  &  Co.,  as  the
Corporation's  independent auditors for the fiscal year 1996.  12,147,860 shares
were voted in favor; 47,430 were voted against; and 96,052 shares abstained.

Item 5.  Other Information.
None


                                    7

<PAGE>


<TABLE>
<CAPTION>

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

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

  3.2        Bylaws of BNL Financial Corporation                     Incorporated by reference to Exhibit 3.2 of the
                                                                     Company's Registration Statement No. 33-70318

  4.1        Instruments defining the rights of security             Incorporated by reference to Exhibit 4 of the
             holders, including indentures                           Company's Registration Statement No. 2-94538 and
                                                                     Exhibits 3.5 and 4 of Post-Effective Amendment
                                                                     No. 3 thereto.

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

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

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


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

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

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

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

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


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

  10.9       Stock Bonus Agreement between BNL Financial             Attached as Exhibit 10.9
             Corporation and C. Donald Bryd and Kenneth Tobey

   11        Statement re computation of per share earnings          Not applicable

   12        Statements re computation of ratios                     Not applicable

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


</TABLE>


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





                                   SIGNATURES

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

                                                      BNL FINANCIAL CORPORATION
                                                      (Registrant)



Date: August 11,  1997                    __________________________________
                                      By: Wayne E. Ahart, Chairman of the Board
                                          (Chief Executive Officer)


Date: August 11, 1997                     __________________________________
                                      By: Barry N. Shamas, Executive V.P.
                                          (Chief Financial Officer)


                                    8


<PAGE>





Exhibit 10.9
                                          STOCK BONUS AGREEMENT

This Stock Bonus Agreement (the "Agreement") is made effective as of the 1st day
of January,  1997, between BNL Financial Corporation (the "Company") and Kenneth
Tobey ("Employee").

Whereas, the Employee serves as an executive officer of the Company; and

Whereas,  the Company desires to encourage the Employee to remain as an employee
of the Company and for the Employee to have a growing  personal  interest in the
continued success and progress of the Company; and

Whereas,  the Company desires to offer certain  compensation to the Employee for
the performance of his duties through the purchase of stock as herein  provided;
and

Whereas,  the Company and  Employee  desire to enter into an  agreement  setting
forth  the  rights  and  obligations  of  the  respective   parties  under  said
compensation arrangement;

Now,  therefore,  in consideration of the foregoing and the covenants  contained
herein, the Company and Employee agree as follows:

1.  Establishment  of Committee.  A committee (the  "Committee") of the board of
directors of the Company  shall be  established  to implement  the terms of this
Agreement.  If the board  shall not  establish  a  separate  committee  for that
purpose, the Compensation Committee of the board shall act as the Committee.

2. Allocation of Profits.  Subject to the terms and conditions set forth in this
Agreement,  the  Company  agrees that it will  allocate  and set aside an amount
equal to two and one-half  percent (2 1/2%) of the net profits,  after taxes, of
the Company each year (the "Allocated  Amount").  For purposes of the Agreement,
"net profits,  after taxes" shall be calculated  in  accordance  with  generally
accepted  accounting  principles,  with the  amount  to be  determined  from the
year-end financial statements of the Company.

3. Use of Allocated Amount. The Allocated Amount shall be used by the Company in
the following  manner:  (i) the Company shall withhold any amounts  necessary to
pay all required taxes and similar charges required to be withheld on account of
the payment of  compensation  to the Employee;  and (ii) after deduction for the
withholding of taxes and other charges as provided in the aforesaid  subsection,
the funds remaining of the Allocated  Amount shall be used to purchase shares of
the Company's common stock (the "Shares") for and on behalf of the Employee.

4. Timing of the Allocation. When the annual financial statements of the Company
have been received by the Company, a copy thereof shall be promptly given to the
Committee,  together with a statement from the chief financial officer, or other
person   designated  by  the  Committee  to  make  such   calculation,   of  the
determination of the Allocated Amount  hereunder.  Upon receipt of the financial
information and the calculation as herein  provided,  the Committee shall direct
the appropriate  officers or employees of the Company to set aside the Allocated
Amount for purposes of making the purchases  herein  contemplated and shall make
such arrangements as it deems appropriate to complete such purchases.  It is the
intention of the parties hereto that all such purchases shall take place as soon
as reasonably practicable after the setting aside of the Allocated Amount.

5.  Purchase of Shares.  If possible,  the Shares shall be purchased on the open
market at the  then-current  market  price.  In the event  that an  insufficient
number of shares shall be available  for purchase on the open market so as to be
able to fully  utilize the  Allocated  Amount for the  purchase  of Shares,  the
Allocated  Amount may be used to purchase shares  directly from the Company.  If
the Shares are purchased from the Company, the price shall be established at the
then-current  market  price  or,  if no such  market  exists,  at a price  to be
established  by the board of directors of the Company.  The  Committee  shall be
responsible for determining the timing and source of the purchases and shall use
reasonable  efforts  to  comply  with the  intent  of this  agreement  as herein
expressed.

6. Issuance of Shares. The Shares shall be purchased in the name of the Employee
and shall be issued in his name or, upon the request of the Employee,  be issued
in joint  tenancy with the Employee and any person  designated  by the Employee.
Neither the Company nor the Committee  shall acquire any interest in or title to
any of the Shares.

7. Interpretation and Implementation of the Agreement.  The Committee shall have
the full  authority to interpret and implement this  Agreement.  The Company and
the Employee agree that any determination, if reasonable and made in good faith,
of the Committee shall be binding upon the parties.

8. Limitation on Annual Amount.  The Allocated Amount for any one year shall not
exceed fifty thousand dollars ($50,000).

9.  Limitation on Shares to be  Purchased.  This  Agreement  shall cease and the
Employee shall not be entitled to receive any additional  Shares  hereunder when
the total  number of Shares  purchased  for the  Employee  shall be four hundred
thousand (400,000).

10.  Termination of the Agreement by the Company.  The Company may terminate the
Agreement at any time; provided, however, that the Employee shall be entitled to
receive  any and all  Shares  to which he is  entitled  prior to the date of the
termination.  If the  Agreement  is  terminated  after the end of the  Company's
fiscal year but before the purchase of any Shares under the Agreement on account
of the results of the Company for the prior year, the Employee shall be entitled
to receive the entire  amount which would be due for the prior  fiscal year.  If
the Agreement is terminated  prior to the end of the Company's  fiscal year, the
Committee  shall make such  adjustments to the Allocated  Amount due, if any, to
Employee  for  that  fiscal  year  as  it  deems  appropriate.  In  making  such
determination the Committee shall act in a reasonable manner and shall take into
account such factors as the length of time during the year the  Agreement was in
effect and the  Employee's  contribution  during the year to the  success of the
Company.

11.  Automatic  Termination  upon  Termination of Employee.  The  termination of
Employee's  employment  with  the  Company  shall  act as a  termination  of the
Agreement at the date of Employee's termination,  subject to the following:  (a)
If Employee  voluntarily  terminates  after the end of the Company's fiscal year
but before the Employee has received the  Allocated  Amount,  Employee  shall be
entitled to receive the entire  Allocated  Amount for that previous fiscal year.
(b) If Employee  voluntarily  terminates his employment  with the Company before
the end of the fiscal year, Employee shall not be entitled to receive any of the
Allocated  Amount for that fiscal year unless the Committee  shall,  in its sole
discretion,  determine  that  such  payment,  or a  portion  thereof,  would  be
appropriate.  (c) If Employee's employment with the Company is terminated by the
Company for any reason other than for cause, as hereinafter defined,  during the
fiscal year,  the Employee  shall be entitled to receive that  proportion of the
Allocated  Amount which the amount of time during which he was employed bears to
the  entire  fiscal  year.  (d) If  Employee's  employment  with the  Company is
terminated by the Company for cause,  Employee  shall not be entitled to receive
any amount hereunder for that fiscal year.

For  purposes  of this  section,  "for  cause"  shall  mean  dishonesty,  theft,
conviction  of a  serious  misdemeanor  or  felony,  drunkenness  or  drug  use,
unethical  business  conduct,  breach  of trust  or a  material  breach  of this
Agreement.  "For cause"  shall also  include the failure of the Employee for any
reason,  within ten (10) days after  receipt of Employee of written  notice from
the Company, to correct, cease, or otherwise alter any insubordination,  failure
to comply  with  instructions  or other  action or  omission  to act that in the
opinion of the Company does or may materially and adversely  affect its business
or operations.

12.  Possible  Restriction  on Shares.  Employee  recognizes and agrees that the
Shares may be "restricted  securities" as that term is defined under the federal
securities  laws if the Shares have been purchased  directly from the Company or
in a manner that would  require  the Shares to be  restricted  securities."  The
Company  agrees that it will use  reasonable  efforts to purchase  the Shares in
such a fashion  that they will not be  considered  "restricted  securities"  but
makes no guaranty or other assurance that the Shares will be so acquired.

13. Assignability.  The Employee may not assign his rights hereunder;  provided,
however, that, in the event of the disability of the Employee, his interests may
be exercised by his  representative,  guardian or similar agent and that, in the
event of the  death of the  Employee,  his  estate  and heirs  may  acquire  and
exercise  any and all of his  rights  hereunder  which  exist at the date of his
death.

14. Entire  Agreement.  This Agreement  constitutes the entire  agreement of the
parties with respect to the matters contained herein.

15.  Right  to  Employment.  Nothing  contained  herein  shall be  construed  as
providing Employee with any rights to continued employment with the Company.

The parties  agree that this  agreement  shall  become  effective as of the date
first set forth above.


/S/ Kenneth Tobey_________________
Kenneth Tobey
"Employee"



BNL Financial Corporation
"Company"


BY: /S/ Wayne Ahart________________
A designated Officer

                                          STOCK BONUS AGREEMENT

This Stock Bonus Agreement (the "Agreement") is made effective as of the 1st day
of January,  1997,  between BNL Financial  Corporation  (the  "Company")  and C.
Donald Byrd ("Employee").

Whereas, the Employee serves as an executive officer of the Company; and

Whereas,  the Company desires to encourage the Employee to remain as an employee
of the Company and for the Employee to have a growing  personal  interest in the
continued success and progress of the Company; and

Whereas,  the Company desires to offer certain  compensation to the Employee for
the performance of his duties through the purchase of stock as herein  provided;
and

Whereas,  the Company and  Employee  desire to enter into an  agreement  setting
forth  the  rights  and  obligations  of  the  respective   parties  under  said
compensation arrangement;

Now,  therefore,  in consideration of the foregoing and the covenants  contained
herein, the Company and Employee agree as follows:

1.  Establishment  of Committee.  A committee (the  "Committee") of the board of
directors of the Company  shall be  established  to implement  the terms of this
Agreement.  If the board  shall not  establish  a  separate  committee  for that
purpose, the Compensation Committee of the board shall act as the Committee.

2. Allocation of Profits.  Subject to the terms and conditions set forth in this
Agreement,  the  Company  agrees that it will  allocate  and set aside an amount
equal to two and one-half  percent (2 1/2%) of the net profits,  after taxes, of
the Company each year (the "Allocated  Amount").  For purposes of the Agreement,
"net profits,  after taxes" shall be calculated  in  accordance  with  generally
accepted  accounting  principles,  with the  amount  to be  determined  from the
year-end financial statements of the Company.

3. Use of Allocated Amount. The Allocated Amount shall be used by the Company in
the following  manner:  (i) the Company shall withhold any amounts  necessary to
pay all required taxes and similar charges required to be withheld on account of
the payment of  compensation  to the Employee;  and (ii) after deduction for the
withholding of taxes and other charges as provided in the aforesaid  subsection,
the funds remaining of the Allocated  Amount shall be used to purchase shares of
the Company's common stock (the "Shares") for and on behalf of the Employee.

4. Timing of the Allocation. When the annual financial statements of the Company
have been received by the Company, a copy thereof shall be promptly given to the
Committee,  together with a statement from the chief financial officer, or other
person   designated  by  the  Committee  to  make  such   calculation,   of  the
determination of the Allocated Amount  hereunder.  Upon receipt of the financial
information and the calculation as herein  provided,  the Committee shall direct
the appropriate  officers or employees of the Company to set aside the Allocated
Amount for purposes of making the purchases  herein  contemplated and shall make
such arrangements as it deems appropriate to complete such purchases.  It is the
intention of the parties hereto that all such purchases shall take place as soon
as reasonably practicable after the setting aside of the Allocated Amount.

5.  Purchase of Shares.  If possible,  the Shares shall be purchased on the open
market at the  then-current  market  price.  In the event  that an  insufficient
number of shares shall be available  for purchase on the open market so as to be
able to fully  utilize the  Allocated  Amount for the  purchase  of Shares,  the
Allocated  Amount may be used to purchase shares  directly from the Company.  If
the Shares are purchased from the Company, the price shall be established at the
then-current  market  price  or,  if no such  market  exists,  at a price  to be
established  by the board of directors of the Company.  The  Committee  shall be
responsible for determining the timing and source of the purchases and shall use
reasonable  efforts  to  comply  with the  intent  of this  agreement  as herein
expressed.

6. Issuance of Shares. The Shares shall be purchased in the name of the Employee
and shall be issued in his name or, upon the request of the Employee,  be issued
in joint  tenancy with the Employee and any person  designated  by the Employee.
Neither the Company nor the Committee  shall acquire any interest in or title to
any of the Shares.

7. Interpretation and Implementation of the Agreement.  The Committee shall have
the full  authority to interpret and implement this  Agreement.  The Company and
the Employee agree that any determination, if reasonable and made in good faith,
of the Committee shall be binding upon the parties.

8. Limitation on Annual Amount.  The Allocated Amount for any one year shall not
exceed fifty thousand dollars ($50,000).

9.  Limitation on Shares to be  Purchased.  This  Agreement  shall cease and the
Employee shall not be entitled to receive any additional  Shares  hereunder when
the total  number of Shares  purchased  for the  Employee  shall be four hundred
thousand (400,000).

10.  Termination of the Agreement by the Company.  The Company may terminate the
Agreement at any time; provided, however, that the Employee shall be entitled to
receive  any and all  Shares  to which he is  entitled  prior to the date of the
termination.  If the  Agreement  is  terminated  after the end of the  Company's
fiscal year but before the purchase of any Shares under the Agreement on account
of the results of the Company for the prior year, the Employee shall be entitled
to receive the entire  amount which would be due for the prior  fiscal year.  If
the Agreement is terminated  prior to the end of the Company's  fiscal year, the
Committee  shall make such  adjustments to the Allocated  Amount due, if any, to
Employee  for  that  fiscal  year  as  it  deems  appropriate.  In  making  such
determination the Committee shall act in a reasonable manner and shall take into
account such factors as the length of time during the year the  Agreement was in
effect and the  Employee's  contribution  during the year to the  success of the
Company.

11.  Automatic  Termination  upon  Termination of Employee.  The  termination of
Employee's  employment  with  the  Company  shall  act as a  termination  of the
Agreement at the date of Employee's termination,  subject to the following:  (a)
If Employee  voluntarily  terminates  after the end of the Company's fiscal year
but before the Employee has received the  Allocated  Amount,  Employee  shall be
entitled to receive the entire  Allocated  Amount for that previous fiscal year.
(b) If Employee  voluntarily  terminates his employment  with the Company before
the end of the fiscal year, Employee shall not be entitled to receive any of the
Allocated  Amount for that fiscal year unless the Committee  shall,  in its sole
discretion,  determine  that  such  payment,  or a  portion  thereof,  would  be
appropriate.  (c) If Employee's employment with the Company is terminated by the
Company for any reason other than for cause, as hereinafter defined,  during the
fiscal year,  the Employee  shall be entitled to receive that  proportion of the
Allocated  Amount which the amount of time during which he was employed bears to
the  entire  fiscal  year.  (d) If  Employee's  employment  with the  Company is
terminated by the Company for cause,  Employee  shall not be entitled to receive
any amount hereunder for that fiscal year.

For  purposes  of this  section,  "for  cause"  shall  mean  dishonesty,  theft,
conviction  of a  serious  misdemeanor  or  felony,  drunkenness  or  drug  use,
unethical  business  conduct,  breach  of trust  or a  material  breach  of this
Agreement.  "For cause"  shall also  include the failure of the Employee for any
reason,  within ten (10) days after  receipt of Employee of written  notice from
the Company, to correct, cease, or otherwise alter any insubordination,  failure
to comply  with  instructions  or other  action or  omission  to act that in the
opinion of the Company does or may materially and adversely  affect its business
or operations.

12.  Possible  Restriction  on Shares.  Employee  recognizes and agrees that the
Shares may be "restricted  securities" as that term is defined under the federal
securities  laws if the Shares have been purchased  directly from the Company or
in a manner that would  require  the Shares to be  restricted  securities."  The
Company  agrees that it will use  reasonable  efforts to purchase  the Shares in
such a fashion  that they will not be  considered  "restricted  securities"  but
makes no guaranty or other assurance that the Shares will be so acquired.

13. Assignability.  The Employee may not assign his rights hereunder;  provided,
however, that, in the event of the disability of the Employee, his interests may
be exercised by his  representative,  guardian or similar agent and that, in the
event of the  death of the  Employee,  his  estate  and heirs  may  acquire  and
exercise  any and all of his  rights  hereunder  which  exist at the date of his
death.

14. Entire  Agreement.  This Agreement  constitutes the entire  agreement of the
parties with respect to the matters contained herein.

15.  Right  to  Employment.  Nothing  contained  herein  shall be  construed  as
providing Employee with any rights to continued employment with the Company.

The parties agree that this agreement shall become effective as of the day first
written above.


_/S/ C. Donald Byrd______________
C. Donald Byrd
"Employee"



BNL Financial Corporation
"Company"


BY:_/S/ Wayne E. Ahart_________
A designated Officer



                                       4

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