**Annual      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of      1934**

**FORM      10-K**

**ANNUAL      REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF      1934**

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

**BNL      FINANCIAL CORPORATION**

|                                                                                             |                                             |
|--------------------------------------------------------------------------------------------------|--------------------------------------------------|
| IOWA                                                                                             | 42-1239454                                       |
| (State                of incorporation)                                                          | (IRS                Employer Identification No.) |
|                                                                                             |                                             |
| 7010                Hwy 71 W., Suite 100                                                         |                                             |
| Austin,                TX                                                                        | 78735                                            |
| (Address                of principal executive offices)                                          | (Zip                Code)                        |
|                                                                                             |                                             |
| Registrant's                telephone number, including area code: (512)                383-0220 |

----

**PART      1**

**ITEM      1. Business**

**General**

|   |   |  BNL                Financial Corporation               |  <--------------------> |  Consumer's                Protective Association(Inactive                Association) |
|--------|--------|--------------------------------------------------------------|------------------------------------|---------------------------------------------------------------------------------------------|
|   |   | |                                                            |                               |                                                                                        |
|   |   |  Brokers                National Life Assurance Company |                               |                                                                                        |
|   |   | |                                                            |                               |                                                                                        |
|   |   |  BNL                Brokerage Corporation               |                               |                                                                                        |

**Industry      Segments**

**Sales      and Marketing**

----

|                                                                 |   | **2006**                     |   | 2005                     |
|----------------------------------------------------------------------|--------|------------------------------|--------|--------------------------|
| I.                Annualized Premiums and Annuity Deposits In Force: |   |                         |   |                     |
| Ordinary                Life Insurance                               |   | **$                263,000** |   | $                301,000 |
| Individual                Annuities(1)                               |   | **83,000**                   |   | 100,000                  |
| Group                Dental Insurance                                |   | **43,084,000**               |   | 41,465,000               |
| Miscellaneous                A&H insurance                       |   | **2,219,000**                |   | 2,351,000                |
|                                                                 |   |                         |   |                     |
| Total                                                                |   | **$45,649,000**              |   | $44,217,000              |

| II.                Collected Premiums and Annuity Deposits:                                                     |   |                         |   |                     |
|-----------------------------------------------------------------------------------------------------------------|--------|------------------------------|--------|--------------------------|
| Ordinary                Life Insurance                                                                          |   | **$                303,000** |   | $                295,000 |
| Individual                Annuities(1)                                                                          |   | **73,000**                   |   | 84,000                   |
| Group                Dental Insurance                                                                           |   | **42,132,000**               |   | 41,629,000               |
| Miscellaneous                A&H insurance                                                                  |   | **2,242,000**                |   | 2,370,000                |
|                                                                                                            |   |                         |   |                     |
| Total                                                                                                           |   | **$44,750,000**              |   | $44,378,000              |
|  III.                Face Value of Insurance:                                                              |   |                         |   |                     |
| Ordinary                Life Insurance                                                                          |   | **$43,645,000**              |   | $39,992,000              |
| Accidental                Death Insurance                                                                       |   | **79,643,000**               |   | 79,643,000               |
|                                                                                                            |   |                         |   |                     |
| Total                                                                                                           |   | **$157,064,000**             |   | $119,634,000             |
| (1)                Classified                as a deposit liability on the financial                statements. |

|   State               |   |   Life                Premiums |   |   Annuity     |   |  Accident                and Health |   |   Total |
|---------------------------------|--------|------------------------------------------|--------|-------------------------|--------|------------------------------------------|--------|-------------------|
| Georgia                         |   | $                22,000                  |   | $-                      |   | $3,957,000                               |   | $3,979,000        |
| Louisiana                       |   | 20,000                                   |   | -                       |   | 3,505,000                                |   | 3,525,000         |
| Oregon                          |   | 1,000                                    |   | -                       |   | 2,996,000                                |   | 2,997,000         |
| Minnesota                       |   | 8,000                                    |   | -                       |   | 2,755,000                                |   | 2,763,000         |
| Michigan                        |   | 10,000                                   |   | -                       |   | 2,618,000                                |   | 2,628,000         |
| Indiana                         |   | 11,000                                   |   | -                       |   | 2,591,000                                |   | 2,602,000         |
| Arkansas                        |   | 26,000                                   |   | -                       |   | 2,561,000                                |   | 2,587,000         |
| Mississippi                     |   | 1,000                                    |   | -                       |   | 2,225,000                                |   | 2,226,000         |
| Idaho                           |   | 1,000                                    |   | -                       |   | 2,222,000                                |   | 2,223,000         |
| All                Other States |   | 203,000                                  |   | 73,000                  |   | 18,944,000                               |   | 19,220,000        |
| Total                           |   | $303,000                                 |   | $                73,000 |   | $44,374,000                              |   | $44,750,000       |

|     |   | Group                Dental |   | Individual                  |
|----------|--------|-----------------------------|--------|-----------------------------|
|     |   | Gross                       |   | Dental                Gross |
|     |   | Premiums                    |   | Premiums                    |
|     |   | Collected                   |   | Collected                   |
| **2006** |   | **$42,132,000**             |   | **$1,988,000**              |
| 2005     |   | 41,629,000                  |   | 2,033,000                   |
| 2004     |   | 40,681,000                  |   | 1,594,104                   |
| 2003     |   | 38,813,000                  |   | 872,000                     |
| 2002     |   | 39,734,000                  |   | 326,000                     |

----

|                                  |   |                       |   | Incurred  |
|---------------------------------------|--------|----------------------------|--------|-----------|
|                                  |   | Gross                      |   | Claims    |
| Group                Dental Insurance |   | Claims                Paid |   | Ratio     |
| **2006**                              |   | **$27,127,000**            |   | **64.1%** |
| 2005                                  |   | 26,046,000                 |   | 63.1%     |
| 2004                                  |   | 25,044,000                 |   | 62.3%     |
| 2003                                  |   | 24,279,000                 |   | 62.7%     |
| 2002                                  |   | 25,772,000                 |   | 64.9%     |

**Agents'      Commissions**

**Reinsurance**

----

|                                      |   | Gross                   |   |             |   |                   |   | Net                     |
|-------------------------------------------|--------|-------------------------|--------|------------------|--------|------------------------|--------|-------------------------|
|                                      |   | Insurance               |   | Reinsurance      |   | Reinsurance            |   | Insurance               |
|                                      |   | In                Force |   | Ceded            |   | Assumed                |   | In                Force |
| Life                Insurance             |   |                    |   |             |   |                   |   |                    |
| **2006**                                  |   | **$43,645,000**         |   | **$15,333,000**  |   | **$                0** |   | **$28,312,000**         |
| 2005                                      |   | 39,992,000              |   | 14,531,000       |   | 0                      |   | 25,461,000              |
| 2004                                      |   | 37,207,000              |   | 11,752,000       |   | 0                      |   | 25,455,000              |
| 2003                                      |   | 37,832,000              |   | 12,782,000       |   | 0                      |   | 25,050,000              |
| 2002                                      |   | 37,045,000              |   | 11,443,000       |   | 0                      |   | 25,602,000              |
|                                      |   |                    |   |             |   |                   |   |                    |
|                                      |   |                    |   |             |   |                   |   |                    |
| Accidental                Death Insurance |   |                    |   |             |   |                   |   |                    |
| **2006**                                  |   | **$112,085,000**        |   | **$100,877,000** |   | **$                0** |   | **$11,208,000**         |
| 2005                                      |   | 79,643,000              |   | 71,834,000       |   | 0                      |   | 7,809,000               |
| 2004                                      |   | 65,629,000              |   | 59,238,500       |   | 0                      |   | 6,391,000               |
| 2003                                      |   | 52,095,000              |   | 46,885,000       |   | 0                      |   | 5,209,500               |
| 2002                                      |   | 44,000,000              |   | 39,600,000       |   | 0                      |   | 4,400,000               |
|                                      |   |                    |   |             |   |                   |   |                    |

**Investments**

|   Year |   |  BNLAC                Statutory Net Investment Income |   |   Net                Return on Mean Invested Assets |
|------------------|--------|------------------------------------------------------------|--------|---------------------------------------------------------------|
| **2006**         |   | **$1,005,774**                                             |   | **4.6%**                                                      |
| 2005             |   | 853,563                                                    |   | 4.0%                                                          |
| 2004             |   | 879,351                                                    |   | 4.4%                                                          |
| 2003             |   | 854,548                                                    |   | 4.2%                                                          |
| 2002             |   | 1,041,679                                                  |   | 5.6%                                                          |

**Special      Factors Relating to Accounting and Regulatory Reporting of Insurance      Companies**

----

**Insurance      Regulations**

----

**Competition**

----

**Personnel**

**ITEM      1A. Risk Factors**

**ITEM      1B. Unresolved Staff Comments**

**ITEM      2. Properties**

**ITEM      3. Legal Proceedings**

----

**ITEM      4. Submission of Matters to a Vote of Security Holders**

----

**PART      II**

**ITEM      5. Market for Registrant’s Common Equity and Related Stockholder      Matters**

**Market      for Stock**

**Purchases        of Common Stock During Last Quarter**

|    **Period**              | **(a)****Total                  number of shares purchased****Note                  1** | **(b)**  **Average                  price paid per share** | **(c)****Total                  number of shares purchased as part of publicly announced plans                  or                  programs** | **(d)****Maximum                  number of shares that may yet be purchased under the plans or                  programs** |
|-------------------------------------------|-----------------------------------------------------------------------------------------|----------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------|
| Month                  #1 (October 1-31)  | 4,668                                                                                   | $1.00                                                                | NA                                                                                                                                             | NA                                                                                                                          |
| Month                  #2 (November 1-30) | -                                                                                       | -                                                                    | NA                                                                                                                                             | NA                                                                                                                          |
| Month                  #3 (December 1-31) | 52,762                                                                                  | $1.00                                                                | NA                                                                                                                                             | NA                                                                                                                          |
| Total                                     | 56,762                                                                                  | $1.00                                                                | NA                                                                                                                                             | NA                                                                                                                          |

**Holders**

**Dividends**

**Equity      Compensation Plan Information**

*2002      Non-Director, Non-Executive Stock Option Plan, *

----

|     Plan                Category |   | A  Number                of Securities to be issued upon exercise of outstanding                options |   | B  Weighted                Average exercise price of outstanding options |   | CNumber                of securities remaining available for future issuance under equity                compensation plans (excluding securities reflected in column                (a) |
|------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                 |   |                                                                                                              |   |                                                                               |   |                                                                                                                                                                                     |
| Approved                by security holders          |   |                                                                                                              |   |                                                                               |   |                                                                                                                                                                                     |
|                                                 |   |                                                                                                              |   |                                                                               |   |                                                                                                                                                                                     |
|  Brokers                and Agents Plan         |   |  245,575                                                                                                     |   |  $.88                                                                         |   |  -                                                                                                                                                                                  |
|                                                 |   |                                                                                                              |   |                                                                               |   |                                                                                                                                                                                     |
| Not                approved by security holders      |   |                                                                                                              |   |                                                                               |   |                                                                                                                                                                                     |
|                                                 |   |                                                                                                              |   |                                                                               |   |                                                                                                                                                                                     |
| Employee                Plan                         |   | 108,000                                                                                                           |   | $.63                                                                               |   | 134,000                                                                                                                                                                                  |

**Transfer      Agent and Registrar**

**ITEM      6. Selected Financial Data**

|                                                                                                     |  **2006**                                                                                                     |   |  2005                                                                               |   |  2004                                                                                         |   |  2003                                                                                         |   |  2002                                                                                         |
|----------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------|
| Total                Income......................................................                        | **$                47,646,337**                                                                                    |   | $                46,614,276                                                              |   | $                44,906,665                                                                        |   | $                42,505,179                                                                        |   | $                42,367,834                                                                        |
| Net                Income                ............................................................... | **$                  2,564,243**                                                                         |   | $                  2,303,089                                                   |   | $                  2,652,503                                                             |   | $                  2,736,355                                                             |   | $                  2,500,727                                                             |
| Net                Income Per Common                Share....................................            | **$                               .16** |   | $              .13 |   | $                             .14 |   | $                             .14 |   | $                             .12 |
| Total                Assets................................................................              | **$                27,009,634**                                                                                    |   | $                26,621,477                                                              |   | $                26,058,520                                                                        |   | $                24,555,254                                                                        |   | $                22,133,342                                                                        |
| Total                Liabilities..................................................                       | **$                12,497,130**                                                                                    |   | $                13,498,115                                                              |   | $                12,798,984                                                                        |   | $                13,204,072                                                                        |   | $                13,822,575                                                                        |
| Average                Shares Outstanding..............................                                  | **16,481,342**                                                                                                     |   | 17,495,881                                                                               |   | 19,184,245                                                                                         |   | 20,082,075                                                                                         |   | 20,469,480                                                                                         |

**ITEM      7. Management’s Discussion and Analysis of Financial Condition and Results of      Operations**

**Forward-Looking      Statements**

----

----

** **

----

----

**Deferred      Tax Asset**

|                                      | **2006**                     |   | 2005                     |   | 2004                     |   |
|-------------------------------------------|------------------------------|--------|--------------------------|--------|--------------------------|--------|
|                                      |                         |   |                     |   |                     |   |
| Current                tax provisions     | **$                514,377** |   | $                448,040 |   | $                355,183 |   |
| Deferred                tax provision     | **4,025**                    |   | 79,001                   |   | 113,000                  |   |
|                                      |                         |   |                     |   |                     |   |
| Total                income tax provision | **$                518,402** |   | $                527,041 |   | $                468,183 |   |
|                                      |                         |   |                     |   |                     |   |

|                                                       |   | **2006**                       |   | 2005                     |   | 2004                       |
|------------------------------------------------------------|--------|--------------------------------|--------|--------------------------|--------|----------------------------|
|                                                       |   |                           |   |                     |   |                       |
| Book                income before tax                      |   | **$                3,082,645** |   | $2,830,130               |   | $                3,120,686 |
|                                                       |   |                           |   |                     |   |                       |
| Income                tax computed at statutory rate (34%) |   | **$                1,048,099** |   | $                962,244 |   | $                1,061,033 |
| Valuation                allowance for AMT credit          |   | **110,461**                    |   | 106,891                  |   | 126,317                    |
| Revision                of valuation allowance             |   | **(116,108)**                  |   | 51,499                   |   | (102,323)                  |
| Rate                differential                           |   | **(524,050)**                  |   | (593,593)                |   | (616,844)                  |
|                                                       |   |                           |   |                     |   |                       |
| Total                income tax provision (benefit)        |   | **$                518,402**   |   | $                527,041 |   | $                468,183   |
|                                                       |   |                           |   |                     |   |                       |

----

| Expiring |   |  NOL                Amount |
|----------|--------|---------------------------------|
|     |   |                            |
| 2007     |   | $286,000                        |
| 2008     |   | 203,000                         |
| 2009     |   | 162,000                         |
| 2010     |   | 186,000                         |
| 2011     |   | 66,000                          |
| 2012     |   | 193,000                         |
| 2018     |   | 112,000                         |
| 2019     |   | 131,000                         |
| 2020     |   | 65,000                          |
|     |   |                            |
|     |   | $1,404,000                      |

**Financial      Condition**

|                                                                 |   | **2006** |           | 2005   |   | 2004       |   |
|----------------------------------------------------------------------|--------|----------|----------------|--------|--------|------------|--------|
| Income                from Operations before Income Taxes            |   | **$**    | **3,082,645**  |   | $      | 2,830,130  |   | $ | 3,120,686 |   |
| Book                Value Per Share                                  |   | **$**    | **0.92**       |   | $      | 0.78       |   | $ | 0.70 |   |
| Stockholders'                Equity                                  |   | **$**    | **14,512,504** |   | $      | 13,123,361 |   | $ | 13,259,536 |   |
| Statutory                Capital and Surplus of Insurance Subsidiary |   | **$**    | **13,223,044** |   | $      | 12,114,024 |   | $ | 13,438,168 |   |
| A.M.                Best Financial Rating                            |   |     | **B+**         |   |   | B+         |   |   | B+ |   |
|                                                                 |   |     |           |   |   |       |   |   |   |   |

**Liquidity      and Capital Resources**

----

| **Portfolio                Designated “Held to Maturity”** December                31, 2006                           |   |   Amortized                Cost |           |  Gross                Unrealized Gains |   |  Gross                Unrealized Losses |   |  Estimated                Market Value |        |
|----------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|----------------|---------------------------------------------|--------|----------------------------------------------|--------|---------------------------------------------|-------------|
| US                Treasury securities and obligations of  US                government corporations and   agencies |   | **$**                                     | **14,325,106** |                                        | **$**  | **-**                                        |   | **$**                                       | **262,543** |   | **$** | **14,062,563** |   |
| Corporate                securities                                                                                                    |   |                                      | **3,308,649**  |                                        |   | **48,947**                                   |   |                                        | **50,856**  |   |   | **3,306,740** |   |
| Mortgage-backed                securities GNMA                & FNMA CMO                                                           |   |                                      | **1,494,882**  |                                        |   | **765**                                      |   |                                        | **66,148**  |   |   | **1,429,499** |   |
|                                                                                                                                   |   |                                      |           |                                        |   |                                         |   |                                        |        |   |   |   |   |
| Totals                                                                                                                                 |   | **$**                                     | **19,128,637** |                                        | **$**  | **49,712**                                   |   | **$**                                       | **379,547** |   | **$** | **18,798,802** |   |

| **Less                Than Investment Grade Bonds** December                31, 2006 |   |  S&PRating |   |   Amortized                Cost |   |  Gross                Unrealized Gains |   |  Gross                Unrealized Losses |       |  Estimated                Market Value |   |
|-------------------------------------------------------------------------------------------|--------|---------------------|--------|-------------------------------------------|--------|---------------------------------------------|--------|----------------------------------------------|------------|---------------------------------------------|--------|
| Ford                Motor Company                                                         |   |                | CCC+   |                                      | **$**  | **187,339**                                 |   | **$**                                        | **-**      |                                        | **$**  | **49,139** |   | **$** | **138,200** |   |
| General                Motors Acceptance Corporation                                      |   |                | BB+    |                                      |   | **100,000**                                 |   |                                         | **-**      |                                        |   | **5,000** |   |   | **95,000** |   |
| Provident                Companies Inc.                                                   |   |                | BB+    |                                      |   | **135,004**                                 |   |                                         | **18,184** |                                        |   | **-** |   |   | **153,188** |   |
|                                                                                      |   |                |   |                                      |   |                                        |   |                                         |       |                                        |   |   |   |   |   |   |
| Totals                                                                                    |   |                |   |                                      | **$**  | **422,343**                                 |   | **$**                                        | **18,184** |                                        | **$**  | **54,139** |   | **$** | **386,388** |   |

----

|  **Long-Term                Contractual Obligations ***                |  **Total**                                       |  **<                1 Year**                  |  **1-3                Years**                                                                                           |  **3-5                Years**                                                                                     |  **>                5 Years**                                                                        |
|-----------------------------------------------------------------------------|-------------------------------------------------------|-------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------|
| Bonds                and Related Future Interest Payable**                  | $                2,313,000                            | $                     98,000 | $                    198,000                                                                             | $                   198,000                                                                             | $                1,819,000                                                                                   |
| Operating                Lease Obligations                                  | $                2,075,000                            | $                   342,000            | $                    646,000                                                                             | $                   633,000                                                                             | $                   454,000                                                                   |
| Liability                for Future Policy Benefits(Note                A.) |  $10,679,039                                     |  $                1,451,264                      |  $                 2,351,881                                                                                       |  $                1,633,351                                                                                       |  $                5,242,543                                                                             |
| Policy                Claims Payable (Note B.)                              | $                2,508,125                            | $                2,508,125                            | $                                               - | $                                              - | $                               - |
| Liability                for Annuity Deposits (Note C.)                     | $                5,792,954                            | $                     87,560 | $                    185,645                                                                             | $                   199,026                                                                             | $                5,320,723                                                                                   |
| Supplementary                Contracts (Note D.)                            | $                     33,000 | $                     17,000 | $                      16,000                                                                  | $                               -           | -                                                                                                            |

**Notes      to Long-Term Contractual Obligations Table:**

**Special      Note**
**      Relating to Notes A, B, C and D and the information and presentation for      liabilities for future policy benefits, policy claims payable, annuity deposits      and supplementary contracts.**

**NOTE      A, Liabilities for Future Policy Benefits.**

**NOTE      B, Policy Claims Payable.**

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**NOTE      C, Annuity Deposits.**

**NOTE      D, Supplementary Contracts.**

**Results      of Operations**

----

----

**Future      Marketing Plans**

**ITEM      7A. Quantitative and Qualitative Disclosures About Market      Risk.**

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**ITEM      8. Financial Statements and Supplementary Data**

**ITEM      9. Changes in and Disagreements with Accountants on Accounting and Financial      Disclosure**

**ITEM      9A. Internal Controls and Procedures**

**ITEM      9B. Other Information**

----

**PART      III**

**ITEM      10. Directors, Executive Officers and Corporate Governance of the      Registrant**

|    **Name**         |   |    **Age** |   |   **First                Became Director or Executive Officer** |   |    **Position**                                                                                                   |
|------------------------------------|--------|---------------------------|--------|---------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------|
| Wayne                E. Ahart      |   | 66                        |   | 1984                                                                      |   | Chairman                of the Board and Director                                                                                |
| C.                Donald Byrd      |   | 65                        |   | 1984                                                                      |   | Vice                Chairman of the Board and Director                                                                           |
| Kenneth                Tobey       |   | 48                        |   | 1994                                                                      |   | President                and Director                                                                                            |
| Barry                N. Shamas     |   | 59                        |   | 1984                                                                      |   | Executive                Vice President, Treasurer, Chief Operating Officer, Chief Financial                Officer and Director |
| Cecil                Alexander     |   | 70                        |   | 1994                                                                      |   | Director                                                                                                                         |
| Richard                Barclay     |   | 69                        |   | 1994                                                                      |   | Director                                                                                                                         |
| Eugene                A. Cernan    |   | 72                        |   | 1994                                                                      |   | Director                                                                                                                         |
| Hayden                Fry          |   | 77                        |   | 1984                                                                      |   | Director                                                                                                                         |
| John                Greig          |   | 71                        |   | 1984                                                                      |   | Director                                                                                                                         |
| Roy                Ledbetter       |   | 76                        |   | 1994                                                                      |   | Director                                                                                                                         |
| John                E. Miller      |   | 77                        |   | 1994                                                                      |   | Director                                                                                                                         |
| James                A. Mullins    |   | 72                        |   | 1984                                                                      |   | Director                                                                                                                         |
| C.                James McCormick  |   | 81                        |   | 1984                                                                      |   | Director                                                                                                                         |
| Robert                R. Rigler    |   | 83                        |   | 1989                                                                      |   | Director                                                                                                                         |
| L.                Stan Schoelerman |   | 81                        |   | 1984                                                                      |   | Director                                                                                                                         |
| Orville                Sweet       |   | 82                        |   | 1984                                                                      |   | Director                                                                                                                         |

**Identification      of Certain Significant Employees**

**Family      Relationships**

**Business      Experience**

**Wayne      E. Ahart**

**C.      Don Byrd**

**Kenneth      Tobey**

----

**Barry      N. Shamas**

**Cecil      L. Alexander**

**Richard      L. Barclay**

**Eugene      A. Cernan**

**Hayden      Fry**

**John      Greig**

**Roy      E. Ledbetter**

**C.      James McCormick**

**John      E. Miller**

----

**James      A. Mullins**

**Robert      R. Rigler**

**L.      Stanley Schoelerman**

**Orville      Sweet**

**Audit      Committee**

**Compensation      Committee**

**Code      of Ethics**

----

**ITEM      11. Executive Compensation**

**ITEM      12. Security Ownership of Certain Beneficial Owners and      Management**

**Security      Ownership of Certain Beneficial Owners**

|    **Title                of Class** |   |    **Name                and Address of Beneficial Owner** |   |   **Amount                and Nature of Beneficial Ownership****(1)** |   |   **Percent                of Class as of****December                31, 2006** |
|-----------------------------------------------------|--------|---------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------|
|                                                |   |                                                                      |   |                                                                            |   |                                                                                      |
| Common                Stock                         |   | Wayne                E. Ahart                                             |   | 4,712,216(2)                                                                    |   | 29.99%                                                                                    |
|                                                |   | 8017                Cobblestone                                           |   |                                                                            |   |                                                                                      |
|                                                |   | Austin,                TX 78735                                           |   |                                                                            |   |                                                                                      |
|                                                |   |                                                                      |   |                                                                            |   |                                                                                      |
| Common                Stock                         |   | Barry                N. Shamas                                            |   | 2,801,816(3)                                                                    |   | 17.83%                                                                                    |
|                                                |   | 1095                Hidden Hills Dr                                       |   |                                                                            |   |                                                                                      |
|                                                |   | Dripping                Springs, TX 78620                                 |   |                                                                            |   |                                                                                      |
|                                                |   |                                                                      |   |                                                                            |   |                                                                                      |
| Common                Stock                         |   | C.                Don Byrd                                                |   | 1,744,843                (4)                                                    |   | 11.11%                                                                                    |
|                                                |   | 1725                S. 50th Unit 144                                      |   |                                                                            |   |                                                                                      |
|                                                |   | W.                Des Moines, IA 50265                                    |   |                                                                            |   |                                                                                      |
|                                                |   |                                                                      |   |                                                                            |   |                                                                                      |
| Common                Stock                         |   | Kenneth                Tobey                                              |   | 1,043,886                                                                       |   | 6.64%                                                                                     |
|                                                |   | 23                Tennyson                                                |   |                                                                            |   |                                                                                      |
|                                                |   | N.                Little Rock, AR 72116                                   |   |                                                                            |   |                                                                                      |

----

**Security      Ownership of Management**

|    **Title                of Class** |    **Name                of Beneficial Owner**         |   **Amount                and Nature of Beneficial Ownership****1** |   **Percent                of Class as of December 31, 2006** |
|-----------------------------------------------------|-----------------------------------------------------------------------|-------------------------------------------------------------------------------|-------------------------------------------------------------------------|
| Common                                              | Wayne                E. Ahart                                         | 4,712,2162                                                                    | 29.99%                                                                  |
| Common                                              | Cecil                L. Alexander                                     | 37,088                                                                        | 0.24%                                                                   |
| Common                                              | Richard                L Barclay                                      | 46,088                                                                        | 0.29%                                                                   |
| Common                                              | Tammy                Barr                                             | 600                                                                           | 0.00%                                                                   |
| Common                                              | C.                Donald Byrd                                         | 1,744,8433                                                                    | 11.11%                                                                  |
| Common                                              | Eugene                A. Cernan                                       | 37,088                                                                        | 0.24%                                                                   |
| Common                                              | Jeffrey                A. Drees                                       | 18,843                                                                        | 0.12%                                                                   |
| Common                                              | Hayden                Fry                                             | 69,047                                                                        | 0.44%                                                                   |
| Common                                              | John                Greig                                             | 50,102                                                                        | 0.32%                                                                   |
| Common                                              | Roy                E. Ledbetter                                       | 37,088                                                                        | 0.24%                                                                   |
| Common                                              | C.                James McCormick                                     | 137,0844                                                                      | 0.87%                                                                   |
| Common                                              | John                E. Miller                                         | 47,111                                                                        | 0.30%                                                                   |
| Common                                              | James                A Mullins                                        | 50,000                                                                        | 0.32%                                                                   |
| Common                                              | Jerry                Ouzts                                            | 300                                                                           | 0.00%                                                                   |
| Common                                              | Pamela                C. Randolph                                     | 2,905                                                                         | 0.02%                                                                   |
| Common                                              | Robert                R Rigler                                        | 3,295                                                                         | 0.02%                                                                   |
| Common                                              | L.                Stanley Schoelerman                                 | 50,000                                                                        | 0.30%                                                                   |
| Common                                              | Barry                N. Shamas                                        | 2,801,8165                                                                    | 17.83%                                                                  |
| Common                                              | Orville                Sweet                                          | 50,000                                                                        | 0.32%                                                                   |
| Common                                              | Kenneth                Tobey                                          | 1,043,886                                                                     | 6.64%                                                                   |
| **Common**                                          | **All                Officers and Directors as a group (22 persons)** |  **10,939,400**                                                          |  **69.63%**                                                        |

----

**ITEM      13. Certain Relationships and Related Transactions and Directors      Independence**

**ITEM      14. Principal Accountant Fees and Services**

**PART      IV**

**ITEM      15. Exhibits, Financial Statement Schedules**

**(a)   1.      Financial Statements**

**2.**

**3.      Exhibits**

| **No.**   |   | **Description**                                                                                                                                                                                                                                                   |   | **Page                or Method of Filing**                                                                                                                                                                              |
|-----------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  3.1 |   |  Articles                of Incorporation of BNL Financial Corporation, dated January 27,                1984 and                Amendment to Articles of Incorporation of BNL Financial Corporation,                dated                November 13, 1987. |   |  Incorporated                by reference to Exhibit 3.1 of the Company's Annual Report on Form                10-K                for the period ending December 31, 1993.                                         |
| 3.2       |   | By-laws                of BNL Financial Corporation.                                                                                                                                                                                                              |   | Incorporated                by reference to Exhibit 3.2 of the Company’s Registration Statement No.                33-70318                                                                                        |
| 4.1       |   | Instruments                defining the rights of security holders, including                indentures.                                                                                                                                                          |   | Incorporated                by reference to Exhibit 4 of the Company's Registration Statement                No.                2-94538 and Exhibits 3.5 and 4 of Post-Effective Amendment No. 3                thereto. |
| 4.2       |   | Articles                of Incorporation of BNL Financial Corporation, dated January 27,                1984 and                Amendment to Articles of Incorporation on BNL Financial Corporation,                dated                November 13, 1987.       |   | Incorporated                by reference to Exhibits 4.2 of the Company's Annual Report on Form                10-KSB                for the period ending December 31, 1998.                                            |
| 10.1      |   | Form                of Agreement between Commonwealth Industries Corporation, American                Investors Corporation and Wayne E. Ahart regarding rights to purchase                shares of the Company.                                                 |   | Incorporated                by reference to Exhibit I of the Company's Quarterly Report on 10-QSB                for                the period ended September 30, 1994.                                            |

----

| 10.2 |   | Agreement                dated December 21, 1990 between Registrant and C. Donald Byrd granting                Registrant right of first refusal as to future transfers of Mr. Byrd's                shares of the Company's common stock. |   | Incorporated                by reference to Exhibit I of the Company's Quarterly Report on 10-QSB                for                the period ended March 31, 1996.                                                                                                                                               |
|------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.3 |   | Convertible                Debenture Agreement dated July 25, 2001 between BNL Equity Corporation                and                EPSI Benefits Inc.                                                                                     |   | Incorporated                by reference to Exhibit 10.9 of the Company's Annual Report on 10-K                for                the period ended December 31, 2005.                                                                                                                                                   |
| 10.4 |   | Claims                Service Agreement dated June 1, 1999 between Brokers National Life                Assurance Company and Employer Plan Services Inc.                                                                                  |   | Incorporated                by reference to Exhibit 10.5 of the Company's Annual Report on 10-K                for                the period ended December 31, 2005.                                                                                                                                                   |
| 10.5 |   | Office                lease agreement dated January 21, 2005, between Brokers National                Life                Assurance Company and KIMCO for premises in Austin.                                                              |   | Incorporated                by reference to Exhibit 10.6 of the Company's Annual Report on 10-K                for                the period ended December 31, 2005.                                                                                                                                                   |
| 10.6 |   | Line                of Credit Agreement dated October 15, 2004 between Brokers National                Life                Assurance Company and Employer Plan Services Inc.                                                               |   | Incorporated                by reference to Exhibit 10.7 of the Company's Annual Report on 10-K                for                the period ended December 31, 2005.                                                                                                                                                   |
| 10.7 |   | Marketing                Agreement dated July 25, 2001 between BNL Equity Corporation and                Employer                Plan Services Inc. and EPSI Benefits Inc.                                                                 |   | Incorporated                by reference to Exhibit 10.8 of the Company's Annual Report on 10-K                for                the period ended December 31, 2005.                                                                                                                                                   |
| 10.8 |   | Outsourcing                Agreement dated May 1, 2006 between Brokers National Life Assurance                Company and Virtual Item Processing Systems, Inc.                                                                            |   | Filed                herewith - Exhibit E4                                                                                                                                                                                                                                                                              |
| 11   |   | Statement                Re computation of per share earnings.                                                                                                                                                                             |   | Reference                is made to the explanation of the computation of per share earnings                as                shown in Note 1 to the Notes to Consolidated Financial Statements                filed                herewith under Item 14(a)(1) above which clearly describes the                same. |
| 12   |   | Statements                re computation of ratios.                                                                                                                                                                                        |   | Not                applicable.                                                                                                                                                                                                                                                                                          |
| 16   |   | Letter                Re Change in Certifying Accountant.                                                                                                                                                                                  |   | Incorporated                by reference to Exhibit I of the Company's periodic Report on Form                8-K                dated September 14, 1995.                                                                                                                                                              |
| 21   |   | Subsidiaries                of Registrant.                                                                                                                                                                                                 |   | Filed                herewith.                                                                                                                                                                                                                                                                                          |
| 31.1 |   | Certification                of Chief Executive OfficerSection                302                                                                                                                                                          |   | Filed                herewith - E1                                                                                                                                                                                                                                                                                      |
| 31.2 |   | Certification                of Chief Financial Officer Section                302                                                                                                                                                         |   | Filed                herewith - E2                                                                                                                                                                                                                                                                                      |
| 32.1 |   | Certification                of Chief Executive OfficerSection                906                                                                                                                                                          |   | Filed                herewith - E3                                                                                                                                                                                                                                                                                      |
| 32.2 |   | Certification                of Chief Financial OfficerSection                906                                                                                                                                                          |   | Filed                herewith - E3                                                                                                                                                                                                                                                                                      |

----

**SIGNATURES**

|                                           |   |                                                                                                                                                                                         |   |                   |
|------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|
| **SIGNATURE**                                  |   | **TITLE**                                                                                                                                                                                    |   | **DATE**               |
|   /S/                Wayne E. Ahart  |   |                                                                                                                                                                                         |   |   03/30/2006 |
| Wayne                E. Ahart                  |   | Chairman                of the Board, Director (Principal Executive Officer)                                                                                                                 |   |                   |
|   /S/                C. Donald Byrd  |   |                                                                                                                                                                                         |   |   03/27/2007 |
| C.                Donald Byrd                  |   | Vice                Chairman of the Board and Director                                                                                                                                       |   |                   |
|   /S/                Kenneth Tobey   |   |                                                                                                                                                                                         |   |   03/27/2007 |
| Kenneth                Tobey                   |   | President                and Director                                                                                                                                                        |   |                   |
|   /S/                Barry N. Shamas |   |                                                                                                                                                                                         |   |   03/30/2007 |
| Barry                N. Shamas                 |   | Executive                Vice President, Treasurer, Chief Operating Officer, Chief Financial                Officer and Director (Principal Financial and Accounting                Officer) |   |                   |
|                                           |   |                                                                                                                                                                                         |   |                   |
| Hayden                Fry                      |   | Director                                                                                                                                                                                     |   |                   |

----

|   /S/                John Greig          |   |     |   |   03/27/2007 |
|----------------------------------------------------|--------|----------|--------|------------------------|
| John                Greig                          |   | Director |   |                   |
|   /S/                C. James McCormick  |   |     |   |   03/27/2007 |
| C.                James McCormick                  |   | Director |   |                   |
|   /S/                James A. Mullins    |   |     |   |   03/27/2007 |
| James                A. Mullins                    |   | Director |   |                   |
|   /S/                Robert R. Rigler    |   |     |   |   03/23/2007 |
| Robert                R. Rigler                    |   | Director |   |                   |
|   /S/                Stanley Schoelerman |   |     |   |   03/27/2007 |
| Stanley                Schoelerman                 |   | Director |   |                   |
|   /S/                Orville Sweet       |   |     |   |   03/27/2007 |
| Orville                Sweet                       |   | Director |   |                   |
|   /S/                Cecil Alexander     |   |     |   |   03/27/2007 |
| Cecil                Alexander                     |   | Director |   |                   |
|   /S/                Richard Barclay     |   |     |   |   03/27/2007 |
| Richard                Barclay                     |   | Director |   |                   |
|   /S/                Eugene A. Cernan    |   |     |   |   03/27/2007 |
| Eugene                A. Cernan                    |   | Director |   |                   |
|   /S/                Roy Ledbetter       |   |     |   |   03/27/2007 |
| Roy                Ledbetter                       |   | Director |   |                   |
|   /S/                John E. Miller      |   |     |   |   03/27/2007 |
| John                E. Miller                      |   | Director |   |                   |

----

**Table      of Contents**

|                                                                                                                                                        |   | Page                Number of 2006Form                10-K |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------|
| Item                15(a) Financial Statements                                                                                                              |   |                                                       |
|                                                                                                                                                        |   |                                                       |
| Report                of Independent Accountants on Financial Statements                                                                                    |   | F-2                                                        |
|                                                                                                                                                        |   |                                                       |
| Consolidated                Balance Sheet, December 31, 2006 and 2005                                                                                       |   | F-3                                                        |
|                                                                                                                                                        |   |                                                       |
| Consolidated                Statement of Operations and Comprehensive Income for the years ended                December 31, 2006, 2005 and 2004            |   |  F-4                                                  |
|                                                                                                                                                        |   |                                                       |
| Consolidated                Statement of Changes in Shareholders' Equity for the years ended                December                31, 2006, 2005 and 2004 |   |  F-5                                                  |
|                                                                                                                                                        |   |                                                       |
| Consolidated                Statement of Cash Flows for the years ended December 31, 2006, 2005                and                2004                      |   |  F-6                                                  |
|                                                                                                                                                        |   |                                                       |
| Notes                to Consolidated Financial Statements                                                                                                   |   | F-7                                                        |
|                                                                                                                                                        |   |                                                       |
| Item                15(d) - Schedule II, Condensed Financial Information of                Registrant                                                       |   | F-21                                                       |
|                                                                                                                                                        |   |                                                       |

----

**BNL      Financial Corporation and Subsidiaries**

**Report      of Independent Registered Public Accounting Firm**

----

**BNL      Financial Corporation and Subsidiaries**

**Consolidated      Balance Sheets**

|   |   | **December                31,** |   |
|--------|--------|---------------------------------|--------|

| **ASSETS**                                                                                                                                                                               |   | **2006** |           | 2005   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|----------------|--------|--------|
|                   Cash and cash equivalents                                                                                                                                    |   | $        | **1,673,058**  |   | $      | 946,272 |   |
|                   Investments in fixed maturities at fair value, Available for Sale                (amortized cost $ 590,133; $598,816; respectively)                          |   |     | **596,800**    |   |   | 600,756 |   |
|                   Investments in fixed maturities at amortized cost, Held to Maturity                (fair                value $18,798,802; $18,334,704; respectively)        |   |     | **19,128,637** |   |   | 18,717,461 |   |
|    Other                long-term investments - (Note 4)                                                                                                                  |   |     | **1,507,809**  |   |   | 1,543,441 |   |
|                   Investment in equity securities, at fair value (cost                $442,574, $356,056, respectively)                                                        |   |     | **509,381**    |   |   | 357,792 |   |
|      Total                Investments, Including Cash and Cash Equivalents                                                                                      |   |     | **23,415,685** |   |   | 22,165,722 |   |
|                                                                                                                                                                                     |   |     |           |   |   |   |   |
|                   Accrued investment income                                                                                                                                    |   |     | **223,295**    |   |   | 185,286 |   |
|                   Funds receivable on matured fixed security                                                                                                                   |   |     | **-**          |   |   | 807,500 |   |
|                   Leasehold improvements, furniture and equipment, net                                                                                                         |   |     | **1,322,369**  |   |   | 1,368,975 |   |
|                   Deferred policy acquisition costs                                                                                                                            |   |     | **359,491**    |   |   | 389,110 |   |
|                   Policy loans                                                                                                                                                 |   |     | **153,798**    |   |   | 126,303 |   |
|                   Receivable from reinsurer                                                                                                                                    |   |     | **52,820**     |   |   | 48,385 |   |
|                   Premiums due and unpaid                                                                                                                                      |   |     | **1,086,103**  |   |   | 1,027,683 |   |
|                   Income tax assets                                                                                                                                            |   |     | **21,000**     |   |   | 37,000 |   |
|                   Intangible assets                                                                                                                                            |   |     | **142,853**    |   |   | 146,540 |   |
|                   Other assets                                                                                                                                                 |   |     | **232,220**    |   |   | 318,973 |   |
|                                                                                                                                                                                     |   |     |           |   |   |   |   |
|     Total                Assets                                                                                                                                      |   | $        | **27,009,634** |   | $      | 26,621,477 |   |
|                                                                                                                                                                                     |   |     |           |   |   |   |   |
| **LIABILITIES**                                                                                                                                                                          |   |     |           |   |   |   |   |
|                   Liabilities for future policy benefits                                                                                                                       |   | $        | **2,472,849**  |   | $      | 2,591,479 |   |
|                   Policy claims payable                                                                                                                                        |   |     | **2,508,125**  |   |   | 2,558,565 |   |
|                   Annuity deposits                                                                                                                                             |   |     | **2,536,225**  |   |   | 2,835,552 |   |
|                   Deferred annuity profits                                                                                                                                     |   |     | **288,389**    |   |   | 339,429 |   |
|                   Premium deposit funds                                                                                                                                        |   |     | **28,458**     |   |   | 31,807 |   |
|                   Supplementary contracts without life contingencies                                                                                                           |   |     | **17,241**     |   |   | 36,981 |   |
|                   Advanced and unallocated premium                                                                                                                             |   |     | **875,089**    |   |   | 803,290 |   |
|                   Commissions payable                                                                                                                                          |   |     | **555,159**    |   |   | 501,821 |   |
|                   Accrued taxes and expenses                                                                                                                                   |   |     | **615,700**    |   |   | 752,376 |   |
|                   Bonds payable                                                                                                                                                |   |     | **1,639,984**  |   |   | 1,747,178 |   |
|                   Other liabilities                                                                                                                                            |   |     | **959,911**    |   |   | 1,299,637 |   |
|     Total                Liabilities                                                                                                                                 |   |     | **12,497,130** |   |   | 13,498,115 |   |
|                                                                                                                                                                                     |   |     |           |   |   |   |   |
|                                                                                                                                                                                     |   |     |           |   |   |   |   |
| **SHAREHOLDERS’                EQUITY**                                                                                                                                            |   |     |           |   |   |   |   |
|                   Common stock, $.02 stated value, 45,000,000 shares                authorized;    17,213,170                shares issued and outstanding |   |     | **344,264**    |   |   | 344,264 |   |
|                   Additional paid-in capital                                                                                                                                   |   |     | **7,582,733**  |   |   | 7,608,519 |   |
|                   Accumulated other comprehensive income                                                                                                                       |   |     | **68,356**     |   |   | 10,622 |   |
|                   Accumulated surplus                                                                                                                                          |   |     | **7,977,171**  |   |   | 5,412,928 |   |
|                   Treasury stock, at cost, 1,502,270; 383,879; shares, respectively                                                                                            |   |     | **(1,460,020** | **)**  |   | (252,971 | ) |
|     Total                Shareholders' Equity                                                                                                                        |   |     | **14,512,504** |   |   | 13,123,362 |   |
|                                                                                                                                                                                     |   |     |           |   |   |   |   |
|     Total                Liabilities and Shareholders' Equity                                                                                                        |   | $        | **27,009,634** |   | $      | 26,621,477 |   |

----

**BNL      Financial Corporation and Subsidiaries**

**Consolidated      Statements of Operations and Comprehensive Income**

|                                                                                                                                                                                                    |   | **Year                Ended December 31,** |           |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|----------------|
|                                                                                                                                                                                                    |   | **2006**                                   |           | **2005** |   | **2004** |   |
| **Income**                                                                                                                                                                                              |   |                                       |           |   |   |   |   |
|                   Premium income                                                                                                                                                              |   | $                                          | **44,646,393** |   | $ | 44,303,827 |   | $ | 42,451,319 |   |
|                   Net investment income                                                                                                                                                       |   |                                       | **1,191,583**  |   |   | 1,003,613 |   |   | 975,485 |   |
|                   Marketing fees (Note 4)                                                                                                                                                     |   |                                       | **143,315**    |   |   | 115,233 |   |   | 165,275 |   |
|                   Vision insurance income                                                                                                                                                     |   |                                       | **1,603,767**  |   |   | 1,051,720 |   |   | 695,046 |   |
|                   Realized gain on debt retirements                                                                                                                                           |   |                                       | **35,732**     |   |   | 102,067 |   |   | 495,462 |   |
|                   Realized gains                                                                                                                                                              |   |                                       | **25,547**     |   |   | 37,816 |   |   | 124,078 |   |
|                                                                                                                                                                                                    |   |                                       |           |   |   |   |   |   |   |   |
|     Total                Income                                                                                                                                                     |   |                                       | **47,646,337** |   |   | 46,614,276 |   |   | 44,906,665 |   |
|                                                                                                                                                                                                    |   |                                       |           |   |   |   |   |   |   |   |
| **Expenses**                                                                                                                                                                                            |   |                                       |           |   |   |   |   |   |   |   |
|   Increase                (decrease) in liability for future policy benefits                                                                                                                  |   |                                       | **(123,066**   | **)** |   | 308,563 |   |   | 687,619 |   |
|                   Policy benefits and other insurance costs                                                                                                                                   |   |                                       | **34,374,507** |   |   | 33,317,136 |   |   | 31,766,217 |   |
|                   Amortization of deferred policy acquisition costs                                                                                                                           |   |                                       | **26,219**     |   |   | 22,467 |   |   | 29,973 |   |
|                   Operating expenses                                                                                                                                                          |   |                                       | **8,759,605**  |   |   | 8,558,205 |   |   | 7,957,447 |   |
|                   Taxes, other than on income                                                                                                                                                 |   |                                       | **1,526,427**  |   |   | 1,577,775 |   |   | 1,344,723 |   |
|                                                                                                                                                                                                    |   |                                       |           |   |   |   |   |   |   |   |
|     Total                Expenses                                                                                                                                                   |   |                                       | **44,563,692** |   |   | 43,784,146 |   |   | 41,785,979 |   |
|                                                                                                                                                                                                    |   |                                       |           |   |   |   |   |   |   |   |
|     Income                from Operations before Income                Taxes                                                                                                        |   |                                       | **3,082,645**  |   |   | 2,830,130 |   |   | 3,120,686 |   |
|                                                                                                                                                                                                    |   |                                       |           |   |   |   |   |   |   |   |
|   Provision                for                income taxes                                                                                                                                    |   |                                       | **518,402**    |   |   | 527,041 |   |   | 468,183 |   |
|                                                                                                                                                                                                    |   |                                       |           |   |   |   |   |   |   |   |
|     Net                Income                                                                                                                                                       |   | $                                          | **2,564,243**  |   | $ | 2,303,089 |   | $ | 2,652,503 |   |
|                                                                                                                                                                                                    |   |                                       |           |   |   |   |   |   |   |   |
| Net                income per common share (basic and diluted)                                                                                                                                          |   | $                                          | **0.16**       |   | $ | 0.13 |   | $ | 0.14 |   |
|                                                                                                                                                                                                    |   |                                       |           |   |   |   |   |   |   |   |
| Weighted                average number of fully paid                common shares                                                                                                                       |   |                                       | **16,481,342** |   |   | 17,495,881 |   |   | 19,184,245 |   |
|                                                                                                                                                                                                    |   |                                       |           |   |   |   |   |   |   |   |
|     Net                Income (as above)                                                                                                                                            |   | $                                          | **2,564,243**  |   | $ | 2,303,089 |   | $ | 2,652,503 |   |
|                                                                                                                                                                                                    |   |                                       |           |   |   |   |   |   |   |   |
| Other                comprehensive income (loss), net of tax:                                                                                                                                           |   |                                       |           |   |   |   |   |   |   |   |
|                   Unrealized gains on securities:                                                                                                                                             |   |                                       |           |   |   |   |   |   |   |   |
|                     Unrealized holding gain (loss) arising during period (net of $11,532                and                $9,000 of deferred taxes in 2006 and 2005; respectively) |   |                                       | **73,496**     |   |   | (51,490 | ) |   | 38,761 |   |
| Reclassification                adjustment for gain included in net income                                                                                                                              |   |                                       | **(15,761**    | **)** |   | (28,052 | ) |   | (126,364 | ) |
|                                                                                                                                                                                                    |   |                                       |           |   |   |   |   |   |   |   |
|     Other                Comprehensive Income (Loss)                                                                                                                                |   |                                       | **57,735**     |   |   | (79,542 | ) |   | (87,603 | ) |
|                                                                                                                                                                                                    |   |                                       |           |   |   |   |   |   |   |   |
|     Comprehensive                Income                                                                                                                                             |   | $                                          | **2,621,978**  |   | $ | 2,223,547 |   | $ | 2,564,900 |   |

----

**BNL      Financial Corporation and Subsidiaries**

**Consolidated      Statements of Changes in Shareholders’ Equity**

|                                                      |   | Shares                of Common Stock |           | Amount                of Common Stock |   | Additional                Paid-In Capital |   | Accumulated                Surplus |          | Accumlated                Other Comprehensive Income |   | Treasury                Stock |       |
|-----------------------------------------------------------|--------|---------------------------------------|----------------|---------------------------------------|--------|-------------------------------------------|--------|------------------------------------|---------------|------------------------------------------------------|--------|-------------------------------|------------|
| Balance,                December 31, 2003                 |   | 20,980,760                            |           | $419,616                              |   | $10,787,911                               |   | $457,336                           |          | $177,768                                             |   | $(1,151,896)                  |       |
|                                                      |   |                                  |           |                                  |   |                                      |   |                               |          |                                                 |   |                          |       |
| Accumulated                other comprehensive income     |   |                                  | -              |                                  |   | -                                         |   |                               | -             |                                                 |   | -                             |       |   | (87,603 | ) |   | - |   |
| Sale                of treasury stock                     |   |                                  | -              |                                  |   | -                                         |   |                               | 23,239        |                                                 |   | -                             |       |   | - |   |   | 41,312 |   |
| Purchase                of treasury stock                 |   |                                  | -              |                                  |   | -                                         |   |                               | -             |                                                 |   | -                             |       |   | - |   |   | (619,262 | ) |
| Stock                options exercised                    |   |                                  | -              |                                  |   | -                                         |   |                               | 3,650         |                                                 |   | -                             |       |   | - |   |   | 20,761 |   |
| Stock                options granted                      |   |                                  | -              |                                  |   | -                                         |   |                               | 15,000        |                                                 |   | -                             |       |   | - |   |   | - |   |
| Contingent                Treasury Stock                  |   |                                  | -              |                                  |   | -                                         |   |                               | -             |                                                 |   | -                             |       |   | - |   |   | 519,201 |   |
| See                Note 6                                 |   |                                  |           |                                  |   |                                      |   |                               |          |                                                 |   |                          |       |   |   |   |   |   |   |
| Net                income                                 |   |                                  | -              |                                  |   | -                                         |   |                               | -             |                                                 |   | 2,652,503                     |       |   | - |   |   | - |   |
| Balance,                December 31, 2004                 |   |                                  | 20,980,760     |                                  | $      | 419,616                                   |   | $                                  | 10,829,800    |                                                 | $      | 3,109,839                     |       | $ | 90,165 |   | $ | (1,189,884 | ) |
|                                                      |   |                                  |           |                                  |   |                                      |   |                               |          |                                                 |   |                          |       |   |   |   |   |   |   |
| Accumulated                other comprehensive income     |   |                                  | -              |                                  |   | -                                         |   |                               | -             |                                                 |   | -                             |       |   | (79,543 | ) |   | - |   |
| Sale                of treasury stock                     |   |                                  | -              |                                  |   | -                                         |   |                               | (29,693       | )                                                    |   | -                             |       |   | - |   |   | 94,243 |   |
| Purchase                of treasury stock                 |   |                                  | -              |                                  |   | -                                         |   |                               | -             |                                                 |   | -                             |       |   | - |   |   | (2,435,698 | ) |
| Stock                options exercised                    |   |                                  | -              |                                  |   | -                                         |   |                               | 4,634         |                                                 |   | -                             |       |   | - |   |   | 6,796 |   |
| Retirement                of treasury stock               |   |                                  | (3,767,590     | )                                     |   | (75,352                                   | )      |                               | (3,196,222    | )                                                    |   | -                             |       |   | - |   |   | 3,271,574 |   |
| Net                income                                 |   |                                  | -              |                                  |   | -                                         |   |                               | -             |                                                 |   | 2,303,089                     |       |   | - |   |   | - |   |
| Balance,                December 31, 2005                 |   |                                  | 17,213,170     |                                  | $      | 344,264                                   |   | $                                  | 7,608,519     |                                                 | $      | 5,412,928                     |       | $ | 10,622 |   | $ | (252,969 | ) |
|                                                      |   |                                  |           |                                  |   |                                      |   |                               |          |                                                 |   |                          |       |   |   |   |   |   |   |
| **Accumulated                other comprehensive income** |   |                                  | **-**          |                                  |   | **-**                                     |   |                               | **-**         |                                                 |   | **-**                         |       |   | **57,734** |   |   | **-** |   |
| **Sale                of treasury stock**                 |   |                                  | **-**          |                                  |   | **-**                                     |   |                               | **(25,936**   | **)**                                                |   | **-**                         |       |   | **-** |   |   | **90,370** |   |
| **Purchase                of treasury stock**             |   |                                  | **-**          |                                  |   | **-**                                     |   |                               | **-**         |                                                 |   | **-**                         |       |   | **-** |   |   | **(1,297,871** | **)** |
| **Stock                options exercised**                |   |                                  | **-**          |                                  |   | **-**                                     |   |                               | **150**       |                                                 |   | **-**                         |       |   | **-** |   |   | **450** |   |
| **Net                income**                             |   |                                  | **-**          |                                  |   | **-**                                     |   |                               | **-**         |                                                 |   | **2,564,243**                 |       |   | **-** |   |   | **-** |   |
| **Balance,                December 31, 2006**             |   |                                  | **17,213,170** |                                  | $      | **344,264**                               |   | $                                  | **7,582,733** |                                                 | $      | **7,977,171**                 | ** ** | $ | **68,356** |   | $ | **(1,460,020** | **)** |

----

**BNL      Financial Corporation and Subsidiaries**

**Consolidated      Statements of Cash Flows**

|   |   | **Year                Ended December 31,** |   |
|--------|--------|--------------------------------------------|--------|

|                                                                                                                                                    |   |  **2006** |   | 2005   |                    | 2004   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|--------|--------|-------------------------|--------|--------|
| **Cash                Flows from Operating Activities**                                                                                                 |   |      |   |   |                    |   |   |
|                  Net income                                                                                                                        | **$**  | **2,564,243**  |   | $      | 2,303,089               |   | $      | 2,652,503 |   |
|                  Adjustments to reconcile net income to net cash provided                by operating activities:                                  |   |           |   |   |                    |   |   |   |   |
|     Realized                gain                on investments                                                                      |   | **(17,367**    | **)**  |   | (                41,060 | )      |   | (131,796 | ) |
|     Realized                (gain)                loss on sale of furniture and equipment                                           |   | **(8,180**     | **)**  |   | 3,244                   |   |   | 7,719 |   |
|     Realized                gain                on debt extinguishments                                                             |   | **(35,732**    | **)**  |   | (102,067                | )      |   | (495,462 | ) |
|     Depreciation                                                                                                                    |   | **311,489**    |   |   | 234,632                 |   |   | 209,851 |   |
|     Decrease                in                deferred tax asset                                                                    |   | **4,000**      |   |   | 79,000                  |   |   | 113,000 |   |
|     Increase                in and                amortization of deferred acquisition costs, and bond issuance                cost |   | **(24,932**    | **)**  |   | 28,282                  |   |   | 66,078 |   |
|     Accretion                of                bond premium (discount)                                                              |   | **(5,623**     | **)**  |   | (1,031                  | )      |   | 3,749 |   |
|     Common                stock and stock options granted                                                                           |   | **-**          |   |   | -                       |   |   | 15,000 |   |
|                  Change in assets and liabilities:                                                                                                 |   |           |   |   |                    |   |   |   |   |
|     (Increase)                decrease in accrued investment income                                                                 |   | **(38,009**    | **)**  |   | (2,089                  | )      |   | 517 |   |
|     Increase                in                receivable from reinsurer                                                             |   | **(4,435**     | **)**  |   | (14,264                 | )      |   | (3,056 | ) |
|     (Increase)                decrease in premiums due and unpaid                                                                   |   | **(58,420**    | **)**  |   | (171,724                | )      |   | 203,991 |   |
|     Increase                (decrease) in liability for future policy benefits                                                      |   | **(118,631**   | **)**  |   | 322,827                 |   |   | 690,674 |   |
|     Increase                (decrease) in policy claims payable                                                                     |   | **(50,440**    | **)**  |   | 322,636                 |   |   | (343,063 | ) |
|     Increase                (decrease) in annuity deposits and deferred profits                                                     |   | **(350,367**   | **)**  |   | 17,158                  |   |   | (45,822 | ) |
|     Decrease                in                premium deposit funds                                                                 |   | **(3,349**     | **)**  |   | (4,217                  | )      |   | (5,236 | ) |
|     Increase                (decrease) in advanced and unallocated premium                                                          |   | **71,799**     |   |   | 143,792                 |   |   | (467,650 | ) |
|     Increase                in                commissions payable                                                                   |   | **53,338**     |   |   | 18,166                  |   |   | 50,398 |   |
|     Other,                (decrease)                                                                                                |   | **(138,876**   | **)**  |   | (92,908                 | )      |   | (3,157 | ) |
|                         Net Cash Provided by Operating Activities                                               |   | **2,150,508**  |   |   | 3,043,466               |   |   | 2,518,238 |   |
|                                                                                                                                                    |   |           |   |   |                    |   |   |   |   |
| **Cash                Flows from Investing Activities**                                                                                                 |   |           |   |   |                    |   |   |   |   |
|                    Proceeds from sales of investments                                                                                    |   | **150,452**    |   |   | 64,129                  |   |   | 1,150,475 |   |
|                    Proceeds from maturity or redemption - Available for Sale                Investments                                  |   | **-**          |   |   | 206,460                 |   |   | 793,634 |   |
|                    Proceeds from maturity or redemption - Held to Maturity                Investments                                    |   | **4,244,735**  |   |   | 3,158,405               |   |   | 7,293,903 |   |
|                    Proceeds from sale of furniture and equipment                                                                         |   | **12,786**     |   |   | -                       |   |   | 58,388 |   |
|                    Purchase of equity securities                                                                                         |   | **(223,281**   | **)**  |   | -                       |   |   | (360,453 | ) |
|                    Purchase of furniture, equipment and leasehold                improvements                                            |   | **(466,286**   | **)**  |   | (618,235                | )      |   | (224,757 | ) |
|                    Purchase of fixed maturity securities, Held to Maturity                                                               |   | **(3,853,309** | **)**  |   | (6,193,619              | )      |   | (9,580,134 | ) |
|                    Other Investments - Line of credit - receipt (advanced)                                                               |   | **35,632**     |   |   | 13,966                  |   |   | (30,000 | ) |
|     Net                Cash Used in Investing Activities                                                                       |   | **(99,271**    | **)**  |   | (3,368,894              | )      |   | (898,944 | ) |
|                                                                                                                                                    |   |           |   |   |                    |   |   |   |   |
| **Cash                Flows from Financing Activities**                                                                                                 |   |           |   |   |                    |   |   |   |   |
|                    Sale of treasury stock                                                                                                |   | **64,550**     |   |   | 62,563                  |   |   | 64,550 |   |
|                    Purchase of treasury stock                                                                                            |   | **(1,297,948** | **)**  |   | (2,435,698              | )      |   | (619,262 | ) |
|                    Net change in supplementary contracts                                                                                 |   | **(19,740**    | **)**  |   | (18,818                 | )      |   | (13,797 | ) |
|                    Stock options exercised                                                                                               |   | **150**        |   |   | 11,430                  |   |   | 24,411 |   |
|                    Debt extinguishments                                                                                                  |   | **(71,463**    | **)**  |   | (157,690                | )      |   | (663,944 | ) |
|        Net                Cash Used                in Financing Activities                                           |   | **(1,324,451** | **)**  |   | (2,538,213              | )      |   | (1,208,042 | ) |
|      Net                Increase (Decrease) in Cash and Cash Equivalents                                                       |   | **726,786**    |   |   | (2,863,641              | )      |   | 411,252 |   |
|      Cash                and Cash Equivalents, Beginning of Period                                                             |   | **946,272**    |   |   | 3,809,913               |   |   | 3,398,661 |   |
|                                                                                                                                                    |   |           |   |   |                    |   |   |   |   |
|     Cash                and Cash Equivalents, End of Period                                                                         | **$**  | **1,673,058**  |   | $      | 946,272                 |   | $      | 3,809,913 |   |

----

**1.      **
**Summary      of Significant Accounting Policies**

----

**1.      **
**Summary      of Significant Accounting Policies (continued)**

**2.      **
**Shareholders'      Equity**

** **

----

**2.**
**      Shareholders' Equity (continued)**

|                               |   | **December                31,****2006** |           | December                31, 2005 |   |  December                31, 2004 |   |
|------------------------------------|--------|-----------------------------------------|----------------|----------------------------------|--------|----------------------------------------|--------|
|                               |   |                               |           |                             |   |                                   |   |
| Capital                and Surplus |   | **$**                                   | **13,223,044** |                             | $      | 12,114,024                             |   | $ | 13,438,168 |   |
|                               |   |                                    |           |                             |   |                                   |   |   |   |   |
| Net                Income          |   | **$**                                   | **2,490,537**  |                             | $      | 2,263,342                              |   | $ | 2,216,168 |   |
|                               |   |                                    |           |                             |   |                                   |   |   |   |   |

----

**2.      **
**Shareholders'      Equity (continued)**

|                                                                 |   | **December                31, 2006** |          | December                31, 2005          |   | December                31, 2004 |   |
|----------------------------------------------------------------------|--------|--------------------------------------|---------------|-------------------------------------------|--------|----------------------------------|--------|
|                                                                 |   |  **Income**                     |          | **Capital                and****Surplus** |   |  Income                     |   | Capital                andSurplus |   |  Income |   | Capital                andSurplus |   |
| Consolidated                reporting under                          |   |                                 |          |                                      |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                   generally accepted accounting principles |   | **$**                                | **2,564,243** |                                      | **$**  | **14,512,504**                   |   | $ | 2,303,089 |   | $ | 13,123,361 |   | $ | 2,652,503 |   | $ | 13,259,536 |   |
| Attributable                to Parent Company and BNL Equity         |   |                                 | **63,937**    |                                      |   | **(276,877**                     | **)**  |   | 74,933 |   |   | (559,877 | ) |   | 411,805 |   |   | (1,218,884 | ) |
|                                                                 |   |                                 |          |                                      |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Brokers                National Life Assurance Company               |   |                                 | **2,500,306** |                                      |   | **14,789,381**                   |   |   | 2,228,156 |   |   | 13,683,239 |   |   | 2,240,698 |   |   | 14,478,420 |   |
|                                                                 |   |                                 |          |                                      |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deferred                acquisition costs                            |   |                                 | **29,620**    |                                      |   | **(359,491**                     | **)**  |   | (42,734 | ) |   | (389,110 | ) |   | 125,437 |   |   | (346,373 | ) |
| Reserve                and premium adjustments                       |   |                                 | **20,207**    |                                      |   | **28,009**                       |   |   | 125,718 |   |   | 200,520 |   |   | (14,650 | ) |   | 232,610 |   |
| Interest                maintenance reserve/AVR                      |   |                                 | **20,204**    |                                      |   | **(623,563**                     | **)**  |   | 22,467 |   |   | (602,271 | ) |   | (91,609 | ) |   | (627,679 | ) |
| Unrealized                appreciation of securities                 |   |                                 | **-**         |                                      |   | **66,807**                       |   |   | - |   |   | 145,714 |   |   | - |   |   | 64,656 |   |
| Annuity                deposits and related adjustments              |   |                                 | **(51,040**   | **)**                                     |   | **560,430**                      |   |   | (97,569 | ) |   | 295,996 |   |   | (120,137 | ) |   | 373,985 |   |
| Income                tax credit                                     |   |                                 | **(1,000**    | **)**                                     |   | **86,000**                       |   |   | 45,000 |   |   | 61,000 |   |   | 79,000 |   |   | 33,000 |   |
| Other                                                                |   |                                 | **(27,760**   | **)**                                     |   | **(1,324,529**                   | **)**  |   | (17,696 | ) |   | (1,281,064 | ) |   | (2,571 | ) |   | (770,451 | ) |
|                                                                 |   |                                 |          |                                      |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BNLAC                Statutory Basis                                 |   | **$**                                | **2,490,537** |                                      | **$**  | **13,223,044**                   |   | $ | 2,263,342 |   | $ | 12,114,024 |   | $ | 2,216,168 |   | $ | 13,438,168 |   |

**3.      **
**Income      Taxes**

|                                      | **2006**                     |   | 2005                     |   | 2004                     |   |
|-------------------------------------------|------------------------------|--------|--------------------------|--------|--------------------------|--------|
|                                      |                         |   |                     |   |                     |   |
| Current                tax provisions     | **$                514,377** |   | $                448,040 |   | $                335,183 |   |
| Deferred                tax provision     | **4,025**                    |   | 79,001                   |   | 113,000                  |   |
|                                      |                         |   |                     |   |                     |   |
| Total                income tax provision | **$518,402**                 |   | $527,041                 |   | $468,183                 |   |
|                                      |                         |   |                     |   |                     |   |

----

**3.      **
**Income      Taxes (continued)**

|                                                       |   | **2006** |          | 2005   |   | 2004      |   |
|------------------------------------------------------------|--------|----------|---------------|--------|--------|-----------|--------|
|                                                       |   |     |          |   |   |      |   |
| Book                income before tax                      |   | **$**    | **3,082,645** |   | $      | 2,830,130 |   | $ | 3,120,686 |   |
|                                                       |   |     |          |   |   |      |   |   |   |   |
| Income                tax computed at statutory rate (34%) |   | **$**    | **1,048,099** |   | $      | 962,244   |   | $ | 1,061,033 |   |
| Valuation                allowance for AMT credit          |   |     | **110,461**   |   |   | 106,891   |   |   | 126,317 |   |
| Revision                of valuation allowance             |   |     | **(116,108**  | **)**  |   | 51,499    |   |   | (102,323 | ) |
| Rate                differential                           |   |     | **(524,050**  | **)**  |   | (593,593  | )      |   | (616,844 | ) |
|                                                       |   |     |          |   |   |      |   |   |   |   |
| Total                income tax provision                  |   | **$**    | **518,402**   |   | $      | 527,041   |   | $ | 468,183 |   |
|                                                       |   |     |          |   |   |      |   |   |   |   |

| Expiring |   |       |
|----------|--------|------------|
|     |   |       |
| 2007     |   | $286,000   |
| 2008     |   | 203,000    |
| 2009     |   | 162,000    |
| 2010     |   | 186,000    |
| 2011     |   | 66,000     |
| 2012     |   | 193,000    |
| 2018     |   | 112,000    |
| 2019     |   | 131,000    |
| 2020     |   | 65,000     |
|     |   |       |
|     |   | $1,404,000 |

**4.      **
**Investments**

| **Portfolio                Designated “Held to Maturity”****(Note                1)** December                31, 2006                      |   |    Amortized                Cost |           |   Gross                Unrealized Gains |   |   Gross                Unrealized Losses |   |    Estimated                Market Value |        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|----------------|---------------------------------------------------|--------|----------------------------------------------------|--------|---------------------------------------------------------|-------------|
| US                Treasury securities and obligations of  US                government corporations and                    agencies |   | **$**                                           | **14,325,106** |                                              | **$**  | **-**                                              |   | **$**                                                   | **262,543** |   | **$** | **14,062,563** |   |
| Corporate                securities                                                                                                                          |   |                                            | **3,308,649**  |                                              |   | **48,947**                                         |   |                                                    | **50,856**  |   |   | **3,306,740** |   |
| Mortgage-backed                securities GNMA                and FNMA CMO                                                                                   |   |                                            | **1,494,882**  |                                              |   | **765**                                            |   |                                                    | **66,148**  |   |   | **1,429,499** |   |
|                                                                                                                                                         |   |                                            |           |                                              |   |                                               |   |                                                    |        |   |   |   |   |
| Totals                                                                                                                                                       |   | **$**                                           | **19,128,637** |                                              | **$**  | **49,712**                                         |   | **$**                                                   | **379,547** |   | **$** | **18,798,802** |   |
|  **Portfolio                Designated “Available for Sale”****(Note                1)** December                31, 2006              |   |                                            |           |                                              |   |                                               |   |                                                    |        |   |   |   |   |
| US                Treasury securities and obligations of US                government corporations and agencies                                              |   | **$**                                           | **402,794**    |                                              | **$**  | **63,706**                                         |   | **$**                                                   | **7,900**   |   | **$** | **458,600** |   |
| Corporate                securities                                                                                                                          |   |                                            | **187,339**    |                                              |   | **-**                                              |   |                                                    | **49,139**  |   |   | **138,200** |   |
|                                                                                                                                                         |   |                                            |           |                                              |   |                                               |   |                                                    |        |   |   |   |   |
| Totals                                                                                                                                                       |   | **$**                                           | **590,133**    |                                              | **$**  | **63,706**                                         |   | **$**                                                   | **63,353**  |   | **$** | **596,800** |   |

----

**4.      **
**Investments      (continued)**

| **Portfolio                Designated “Held to Maturity”****(Note                1)** December                31, 2005         |   |    Amortized                Cost |       |   Gross                Unrealized Gains |   |   Gross                Unrealized Losses |   |   Estimated                Market Value |    |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|------------|---------------------------------------------------|--------|----------------------------------------------------|--------|---------------------------------------------------|---------|
| US                Treasury securities and obligations of  US                government corporations and agencies                           |   | $                                               | 14,693,046 |                                              | $      | 2,000                                              |   | $                                                 | 331,792 |   | $ | 14,363,254 |   |
| Corporate                securities                                                                                                             |   |                                            | 2,481,106  |                                              |   | 61,835                                             |   |                                              | 56,535  |   |   | 2,486,406 |   |
| Mortgage-backed                securities GNMA                                                                                                  |   |                                            | 1,543,310  |                                              |   | 811                                                |   |                                              | 59,077  |   |   | 1,485,044 |   |
|                                                                                                                                            |   |                                            |       |                                              |   |                                               |   |                                              |    |   |   |   |   |
| Totals                                                                                                                                          |   | $                                               | 18,717,462 |                                              | $      | 64,646                                             |   | $                                                 | 447,404 |   | $ | 18,334,704 |   |
|  **Portfolio                Designated “Available for Sale”****(Note                1)** December                31, 2005 |   |                                            |       |                                              |   |                                               |   |                                              |    |   |   |   |   |
| US                Treasury securities and obligations of  US                government corporations and agencies                           |   | $                                               | 402,712    |                                              | $      | 74,294                                             |   | $                                                 | 8,250   |   | $ | 468,756 |   |
| Corporate                securities                                                                                                             |   |                                            | 187,103    |                                              |   | -                                                  |   |                                              | 55,103  |   |   | 132,000 |   |
|                                                                                                                                            |   |                                            |       |                                              |   |                                               |   |                                              |    |   |   |   |   |
| Totals                                                                                                                                          |   | $                                               | 589,815    |                                              | $      | 74,294                                             |   | $                                                 | 63,353  |   | $ | 600,756 |   |

|        |   |  **Held                to Maturity** |   |   |                **Available                for Sale** |   |   |   |   |
|--------|--------|-------------------------------------------|--------|--------|-----------------------------------------------------------|--------|--------|--------|--------|
|   |   | December                31, 2006          |   |   |  December                31, 2006                    |   |   |   |   |

|                                                      |   | Amortized                    Cost |            | EstimatedMarket                    Value |   |  Amortized                    Cost |   | EstimatedMarket                    Value |    |
|-----------------------------------------------------------|--------|-----------------------------------|-----------------|------------------------------------------|--------|-----------------------------------------|--------|------------------------------------------|---------|
| Due                    in one year or less                |   | $                                 | 3,999,697  |                                     | $      | 3,920,938                               |   | $                                        | -       |   | $ | - |   |
| Due                    after one year through five years  |   |                              | 6,050,807       |                                     |   | 6,006,517                               |   |                                     | -       |   |   | - |   |
| Due                    after five years through ten years |   |                              | 4,550,000       |                                     |   | 4,463,288                               |   |                                     | -       |   |   | - |   |
| Due                    after ten years                    |   |                              | 3,033,250       |                                     |   | 2,978,560                               |   |                                     | 596,800 |   |   | 590,133 |   |
|                                                      |   |                              | 17,633,754      |                                     |   | 17,369,303                              |   |                                     | 596,800 |   |   | 590,133 |   |
|                                                      |   |                              |            |                                     |   |                                    |   |                                     |    |   |   |   |   |
| Mortgage-backed                    securities             |   |                              | 1,494,883       |                                     |   | 1,429,499                               |   |                                     | -       |   |   | - |   |
|                                                      |   |                              |            |                                     |   |                                    |   |                                     |    |   |   |   |   |
|                                                      |   | $                                 | 19,128,637      |                                     | $      | 18,798,802                              |   | $                                        | 596,800 |   | $ | 590,133 |   |

----

**4.      **
**Investments      (continued)**

|                                                                        | 2006                        |   | 2005                        |   |
|-----------------------------------------------------------------------------|-----------------------------|--------|-----------------------------|--------|
|                                                                        |  **Cost**              |   | **Market****Value**         |   |  Cost |   | MarketValue |   |
|                                                                        |                        |   |                        |   |   |   |   |   |
| Banks,                trusts and insurance                companies         | **$                81,183** |   | **$                92,300** |   | $                81,183 |   | $                81,660 |   |
|  Industrial,                savings and                loans and other |  **361,391**           |   |  **417,081**           |   |  274,873 |   |  276,132 |   |
|                                                                        |                        |   |                        |   |   |   |   |   |
|                                                                        | **$442,574**                |   | **$509,381**                |   | $356,056 |   | $357,792 |   |

|                                                                           |   | **2006**                       |   | 2005                       |   | 2004                     |
|--------------------------------------------------------------------------------|--------|--------------------------------|--------|----------------------------|--------|--------------------------|
|                                                                           |   |                           |   |                       |   |                     |
| Interest                on debt securities and cash                investments |   | **$                1,196,221** |   | $                1,005,399 |   | $                984,799 |
| Dividends                on equity securities                                  |   | **7,680**                      |   | 11,484                     |   | 5,589                    |
|                                                                           |   |                           |   |                       |   |                     |
|                                                                           |   | **1,203,901**                  |   | 1,016,883                  |   | 990,388                  |
| Investment                expenses                                             |   | **(12,318)**                   |   | (13,270)                   |   | (14,903)                 |
|                                                                           |   |                           |   |                       |   |                     |
| Net                Investment Income                                           |   | **$1,191,583**                 |   | $1,003,613                 |   | $975,485                 |

|                             |   | **2006**                    |   | 2005                    |   | 2004                     |
|----------------------------------|--------|-----------------------------|--------|-------------------------|--------|--------------------------|
|                             |   |                        |   |                    |   |                     |
| Debt                securities   |   | **$                3,678**  |   | $                3,273  |   | $                123,075 |
| Equity                securities |   | **13,689**                  |   | 31,299                  |   | 10,521                   |
| Fixed                assets      |   | **8,180**                   |   | 3,244                   |   | (9,519)                  |
|                             |   |                        |   |                    |   |                     |
|                             |   | **$                25,547** |   | $                37,816 |   | $                124,077 |

** **

----

**4.      Investments (continued)**

**5.      **
**Fair      Value of Financial Instruments**

|                                                                                                                  | **2006**                                                                          |                                                                  | 2005      |
|-----------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------|-----------------------------------------------------------------------|-----------|
|                                                                                                                  | **Carrying**                                                                      | **Fair**                                                              |      | Carrying | Fair |   |
| Assets                                                                                                                | **Amount**                                                                        | **Value**                                                             |      | Amount | Value |   |
|                                                                                                                  |                                                                              |                                                                  |      |   |   |   |
| Cash                and Cash Equivalents                                                                              |                                                                              |                                                                  |      |   |   |   |
|                    (Note 1)                                                                            | **$                   1,673,058**                                  | **$                 1,673,058**                                  | (a)       | $                          946,272 | $                        946,272 | (a) |
| Funds                receivable on matured fixed security                                                             | **-**                                                                             | **-**                                                                 | (a)       | 807,500 | 807,500 |   |
| Investments-fixed                maturity, available for sale                    (Note 4 & Note 1) |  **596,800**                                                                 |  **596,800**                                                     |  (b) |  600,756 |  600,756 |  (b) |
| Investments-fixed                maturity, held to maturity                    (Note 4 & Note 1)   |  **19,128,637**                                                              |  **18,798,802**                                                  |  (b) |  18,717,461 |  18,334,704 |  (b) |
| Investments                -equity securities                                                                         |                                                                              |                                                                  |      |   |   |   |
|                    (Note 4 & Note 1)                                                               | **509,381**                                                                       | **509,381**                                                           | (b)       | 357,792 | 357,792 | (b) |
| Other                long term investments (Note 4)                                                                   | **1,507,809**                                                                     | **1,507,809**                                                         | (a)       | 1,543,441 | 1,543,441 | (a) |
| Other                financial instruments-Assets                                                                     | **434,146**                                                                       | **434,146**                                                           | (a)       | 356,309 | 356,309 | (a) |
|                                                                                                                  |                                                                              |                                                                  |      |   |   |   |
| Total                financial instruments-Assets                                                                     | **$                 23,849,831**                                             | **$                23,519,996**                                       |      | $                     23,329,531 | $       2,946,774 |   |
|                                                                                                                  |                                                                              |                                                                  |      |   |   |
| Liabilities                                                                                                           |                                                                              |                                                                  |      |   |   |   |
|                                                                                                                  |                                                                              |                                                                  |      |   |   |   |
| Premium                deposit funds                                                                                  | **$                         28,458** | **$                       28,458** | (a)       | $                31,807 | $                            31,807 | (a) |
| Bonds                payable                                                                                          | **1,639,984**                                                                     | **1,639,984**                                                         | (a)       | 1,747,178 | 1,747,178 | (a) |
| Supplementary                contracts without life contingencies                                                     |                                                                              |                                                                  |      |   |   |   |
|                    (Note 1)                                                                            | **17,241**                                                                        | **17,241**                                                            | (a)       | 36,981 | 36,981 | (a) |
| Annuity                deposits                                                                                       |                                                                              |                                                                  |      |   |   |   |
|                    (Note 1)                                                                            | **2,536,225**                                                                     | **2,536,225**                                                         | (a)       | 2,835,552 | 2,835,552 | (a) |
|                                                                                                                  |                                                                              |                                                                  |      |   |   |   |
| Total                financial instruments-Liabilities                                                                | **$    4,221,908**                                            | **$                 4,221,908**                                  |      | $                      4,651,518 | $                      4,651,518 |   |
|                                                                                                                  |                                                                              |                                                                  |      |   |   |   |

----

**6.      **
**Commitments      and Contingencies**

| 2007   | $                342,000   |
|--------|----------------------------|
| 2008   | 336,000                    |
| 2009   | 310,000                    |
| 2010   | 311,000                    |
| 2011   | 322,000                    |
| 2012   | 315,000                    |
| 2013   | 139,000                    |
|   |                       |
| Total  | $                2,075,000 |
|   |                       |

----

**6.      **
**Commitments      and Contingencies (continued)**

**7.      **
**Liability      for Unpaid Claims **

|                                                     |   |     |           |   |   |       |   |
|----------------------------------------------------------|--------|----------|----------------|--------|--------|------------|--------|
|                                                     |   | **2006** |           | 2005   |   | 2004       |   |
| Balance                at January 1                      |   | **$**    | **2,558,565**  |   | $      | 2,235,929  |   | $ | 2,588,992 |   |
|                   less reinsurance recoverable |   |     | **-**          |   |   | -          |   |   | 10,000 |   |
| Net                Balance at January 1                  |   |     | **2,558,565**  |   |   | 2,235,929  |   |   | 2,578,992 |   |
|                                                     |   |     |           |   |   |       |   |   |   |   |
| Incurred                related to:                      |   |     |           |   |   |       |   |   |   |   |
| Current                year                              |   |     | **28,361,878** |   |   | 27,633,450 |   |   | 26,649,186 |   |
| Prior                years                               |   |     | **(34,030**    | **)**  |   | (28,226    | )      |   | (252,342 | ) |
| Total                Incurred                            |   |     | **28,327,848** |   |   | 27,605,224 |   |   | 26,396,844 |   |
|                                                     |   |     |           |   |   |       |   |   |   |   |
| Paid                related to:                          |   |     |           |   |   |       |   |   |   |   |
| Current                year                              |   |     | **25,844,512** |   |   | 25,074,885 |   |   | 24,412,258 |   |
| Prior                years                               |   |     | **2,524,535**  |   |   | 2,207,703  |   |   | 2,327,649 |   |
| Total                Paid                                |   |     | **28,369,047** |   |   | 27,282,588 |   |   | 26,739,907 |   |
|                                                     |   |     |           |   |   |       |   |   |   |   |
| Net                Balance at December 31                |   |     | **2,508,125**  |   |   | 2,558,565  |   |   | 2,235,929 |   |
|                   Plus reinsurance recoverable |   |     | **9,241**      |   |   | -          |   |   | - |   |
| Balance                at December 31                    |   | **$**    | **2,517,366**  |   | $      | 2,558,565  |   | $ | 2,235,929 |   |

**8.      **
**Reinsurance      **

----

**8.      **
**Reinsurance      (continued) **

|     **December                31, 2006** |   |    Gross                Amount |           |   Ceded                To Other Companies |   |   Assumed                From Other Companies |   |    Net                Amounts |   |  Percentage                Of Amount Assumed To Net |   |
|--------------------------------------------------------------|--------|-----------------------------------------------|----------------|-----------------------------------------------------|--------|---------------------------------------------------------|--------|----------------------------------------------|--------|----------------------------------------------------------|--------|
| Life                insurance in force (in thousands)        |   | **$**                                         | **43,645**     |                                                | **$**  | **15,333**                                              |   | **$**                                        | **-**  |                                                     | **$**  | **28,312** |   |   | **0.0** | **%** |
|                                                         |   |                                          |           |                                                |   |                                                    |   |                                         |   |                                                     |   |   |   |   |   |   |
| Premiums-life                insurance                       |   | **$**                                         | **378,533**    |                                                | **$**  | **71,370**                                              |   | **$**                                        | **-**  |                                                     | **$**  | **307,163** |   |   | **0.0** | **%** |
| Premiums-accident                and health                  |   |                                          | **44,435,776** |                                                |   | **74,521**                                              |   |                                         | **-**  |                                                     |   | **44,361,255** |   |   | **0.0** | **%** |
| Total                insurance premiums                      |   | **$**                                         | **44,814,309** |                                                | **$**  | **145,891**                                             |   | **$**                                        | **-**  |                                                     | **$**  | **44,668,418** |   |   | **0.0** | **%** |

----

**8.      **
**Reinsurance      (continued) **

|                                                  |   |    Gross                Amount |       |   Ceded                To Other Companies |   |   Assumed                From Other Companies |   |    Net                Amounts |   |  Percentage                Of Amount Assumed To Net |   |
|-------------------------------------------------------|--------|-----------------------------------------------|------------|-----------------------------------------------------|--------|---------------------------------------------------------|--------|----------------------------------------------|--------|----------------------------------------------------------|--------|
| December                31, 2005                      |   |                                          |       |                                                |   |                                                    |   |                                         |   |                                                     |   |
| Life                insurance in force (in thousands) |   | $                                             | 39,992     |                                                | $      | 14,531                                                  |   | $                                            | -      |                                                     | $      | 25,461 |   |   | 0.0 | % |
|                                                  |   |                                          |       |                                                |   |                                                    |   |                                         |   |                                                     |   |   |   |   |   |   |
| Premiums-life                insurance                |   | $                                             | 294,370    |                                                | $      | 62,430                                                  |   | $                                            | -      |                                                     | $      | 231,940 |   |   | 0.0 | % |
| Premiums-accident                and health           |   |                                          | 44,090,958 |                                                |   | 55,051                                                  |   |                                         | -      |                                                     |   | 44,035,907 |   |   | 0.0 | % |
| Total                insurance premiums               |   | $                                             | 44,385,328 |                                                | $      | 117,481                                                 |   | $                                            | -      |                                                     | $      | 44,267,847 |   |   | 0.0 | % |
|                                                  |   |                                          |       |                                                |   |                                                    |   |                                         |   |                                                     |   |   |   |   |   |   |
| December                31, 2004                      |   |                                          |       |                                                |   |                                                    |   |                                         |   |                                                     |   |   |   |   |   |   |
| Life                insurance in force (in thousands) |   | $                                             | 37,207     |                                                | $      | 11,752                                                  |   | $                                            | -      |                                                     | $      | 25,455 |   |   | 0.0 | % |
|                                                  |   |                                          |       |                                                |   |                                                    |   |                                         |   |                                                     |   |   |   |   |   |   |
| Premiums-life                insurance                |   | $                                             | 241,724    |                                                | $      | 61,668                                                  |   | $                                            | -      |                                                     | $      | 180,056 |   |   | 0.0 | % |
| Premiums-accident                and health           |   |                                          | 42,199,595 |                                                |   | 35,937                                                  |   |                                         | -      |                                                     |   | 42,163,658 |   |   | 0.0 | % |
| Total                insurance premiums               |   | $                                             | 42,441,319 |                                                | $      | 97,605                                                  |   | $                                            | -      |                                                     | $      | 42,343,714 |   |   | 0.0 | % |

**9.      **
**Benefit      Plans for Certain Brokers/Agents and Employees**

*2002      Non-Director, Non-Executive Stock Option Plan, *

----

**10.      **
**Concentrations**

**11.      **
**Change      in Accounting Estimate**

**12.**
**Subsequent      Events**

**13.      **
**Unaudited      Quarterly Results of Operations**

|                                                      |   | Quarter                Ended |            |
|-----------------------------------------------------------|--------|------------------------------|-----------------|
|                                                      |   | March                31      |            | June                30 |   | September                30 |   | December                31 |   |
| **2006**                                                  |   |                         |            |   |   |   |   |   |   |
| **Premium                Income**                         |   | **$**                        | **11,316,687**  |   | **$** | **11,032,159** |   | **$** | **11,081,025** |   | **$** | **11,216,523** |   |
| **Net                Investment Income**                  |   |                         | **272,364**     |   |   | **321,674** |   |   | **312,502** |   |   | **285,043** |   |
| **Marketing                Fees**                         |   |                         | **33,960**      |   |   | **33,726** |   |   | **39,027** |   |   | **36,602** |   |
| **Vision                Insurance Income**                |   |                         | **392,024**     |   |   | **332,830** |   |   | **445,745** |   |   | **433,168** |   |
| **Realized                Gains (Losses)**                |   |                         | **26,285**      |   |   | **5,263** |   |   | **3,654** |   |   | **26,075** |   |
| **Expenses**                                              |   |                         | **(11,522,217** | **)** |   | **(11,227,573** | **)** |   | **(11,011,115** | **)** |   | **(11,321,188** | **)** |
|                                                      |   |                         |            |   |   |   |   |   |   |   |   |   |   |
| **Net                Income**                             |   | **$**                        | **519,103**     |   | **$** | **498,079** |   | **$** | **870,838** |   | **$** | **676,223** |   |
|                                                      |   |                         |            |   |   |   |   |   |   |   |   |   |   |
| **Earnings                Per Share (Basic and Diluted)** |   | **$**                        | **0.03**        |   | **$** | **0.03** |   | **$** | **0.05** |   | **$** | **0.05** |   |
|                                                      |   |                         |            |   |   |   |   |   |   |   |   |   |   |
| **Comprehensive                Income**                   |   | **$**                        | **505,645**     |   | **$** | **486,941** |   | **$** | **926,155** |   | **$** | **703,237** |   |

----

**13.      **
**Unaudited      Quarterly Results of Operations (continued)**

|                                                  |   | Quarter                Ended |        |
|-------------------------------------------------------|--------|------------------------------|-------------|
|                                                  |   | March                31      |        |  June                30 |   | September                30 |   | December                31 |   |
| 2005                                                  |   |                         |        |   |   |   |   |   |   |   |   |   |   |
| Premium                Income                         |   | $                            | 10,898,491  |   | $ | 11,239,144 |   | $ | 11,139,337 |   | $ | 11,026,855 |   |
| Net                Investment Income                  |   |                         | 249,206     |   |   | 245,295 |   |   | 241,661 |   |   | 267,451 |   |
| Marketing                Fees                         |   |                         | 29,016      |   |   | 33,459 |   |   | 23,205 |   |   | 29,553 |   |
| Vision                Insurance Income                |   |                         | 231,161     |   |   | 244,042 |   |   | 263,591 |   |   | 312,926 |   |
| Realized                Gains (Losses)                |   |                         | 51,769      |   |   | 7,368 |   |   | 53,616 |   |   | 27,130 |   |
| Expenses                                              |   |                         | (10,884,681 | ) |   | (11,330,984 | ) |   | (11,230,729 | ) |   | (10,864,792 | ) |
|                                                  |   |                         |        |   |   |   |   |   |   |   |   |   |   |
| Net                Income                             |   | $                            | 574,962     |   | $ | 438,324 |   | $ | 490,682 |   | $ | 799,123 |   |
|                                                  |   |                         |        |   |   |   |   |   |   |   |   |   |   |
| Earnings                Per Share (Basic and Diluted) |   | $                            | 0.03        |   | $ | 0.02 |   | $ | 0.03 |   | $ | 0.05 |   |
|                                                  |   |                         |        |   |   |   |   |   |   |   |   |   |   |
| Comprehensive                Income                   |   | $                            | 525,424     |   | $ | 444,364 |   | $ | 462,048 |   | $ | 791,713 |   |

----

**Item      15(d) - Schedule II, Condensed Financial Information of      Registrant**

**BNL      Financial Corporation (Parent Company)**

**Balance      Sheets**

|                                                                                                                                           |
|-------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                      |   | **2006** |   | 2005 |   |
| **Assets**                                                                                                                                |   |   |   |   |   |
| Cash                and cash equivalents                                                                                                  |   | **$** | **74,502** |   | $ | 69,788 |   |
| Investments,                at fair value                                                                                                 |   |   | **192,100** |   |   | 191,750 |   |
| Investment                in equity securities, at fair value                                                                             |   |   | **-** |   |   | 870 |   |
|     Total                Investments, Including Cash and Cash Equivalents                                             |   |   | **266,602** |   |   | 262,408 |   |
|                                                                                                                                      |   |   |   |   |   |   |   |
| Accrued                investment income                                                                                                  |   |   | **10,630** |   |   | 10,630 |   |
| Loan                to EPSI                                                                                                               |   |   | **1,357,407** |   |   | 1,357,407 |   |
| Investment                in Unconsolidated Subsidiaries and Affiliates,                at equity (eliminated in consolidated statements) |   |   | **14,789,381** |   |   | 13,683,238 |   |
| Income                tax asset                                                                                                           |   |   | **37,000** |   |   | 42,000 |   |
| Other                assets                                                                                                               |   |   | **154,126** |   |   | 187,382 |   |
|                                                                                                                                      |   |   |   |   |   |   |   |
|     Total                Assets                                                                                       |   | **$** | **16,615,146** |   | $ | 15,543,065 |   |

| **Liabilities**                                                                                                                                       |   |   |           |   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------------|--------|--------|
| Bonds                payable                                                                                                                          |   | **$**  | **1,639,984**  |   | $      | 1,747,178 |   |
| Loan                from Brokers National Life Assurance Co.                                                                                          |   |   | **320,782**    |   |   | 569,788 |   |
| Other                liabilities                                                                                                                      |   |   | **141,877**    |   |   | 102,739 |   |
|     Total                Liabilities                                                                                              |   |   | **2,102,643**  |   |   | 2,419,704 |   |
|                                                                                                                                                  |   |   |           |   |   |   |   |
| **Shareholders'                Equity**                                                                                                               |   |   |           |   |   |   |   |
|                                                                                                                                                  |   |   |           |   |   |   |   |
| Common                stock, $.02 stated value, 45,000,000 shares authorized; 17,213,170,                shares                issued and outstanding |   |   | **344,264**    |   |   | 344,264 |   |
| Additional                paid-in capital                                                                                                             |   |   | **7,582,732**  |   |   | 7,608,519 |   |
| Retained                earnings                                                                                                                      |   |   | **7,977,171**  |   |   | 5,412,928 |   |
| Treasury                stock, at cost, 1,502,720; 383,879 shares, respectively                                                                       |   |   | **(1,460,020** | **)**  |   | (252,971 | ) |
| Unrealized                appreciation of securities                                                                                                  |   |   | **68,356**     |   |   | 10,622 |   |
| Total                Shareholders' Equity                                                                                                             |   |   | **14,512,503** |   |   | 13,123,362 |   |
|                                                                                                                                                  |   |   |           |   |   |   |   |
| Total                Liabilities and Shareholders’ Equity                                                                                       |   | **$**  | **16,615,146** |   | $      | 15,543,065 |   |

----

**Item      15(d) - Schedule II, Condensed Financial Information of      Registrant**

**BNL      Financial Corporation (Parent Company)**

**Statement      of Operations**

|                                                                                           |   |     |   |   |          |   |   |   |   |      |   |   |
|------------------------------------------------------------------------------------------------|--------|----------|--------|--------|---------------|--------|--------|--------|--------|-----------|--------|--------|
|                                                                                           |   | **2006** |   |   |          | 2005   |   |   | 2004   |      |
| **Income**                                                                                     |   |     |   |   |          |   |   |   |   |      |   |   |
|                   Net investment income                                              |   |     |   | **$**  | **223,021**   |   |   |   | $      | 202,003   |   |   |   | $ | 199,917 |   |
|                   Marketing fees                                                     |   |     |   |   | **143,315**   |   |   |   |   | 115,232   |   |   |   |   | 165,275 |   |
|                   Realized gain on debt extinguishment                               |   |     |   |   | **35,730**    |   |   |   |   | 102,067   |   |   |   |   | 495,462 |   |
|                   Realized gains (losses)                                            |   |     |   |   | **(1,621**    | **)**  |   |   |   | -         |   |   |   |   | 1,800 |   |
|     Total                Income                                            |   |     |   |   | **400,445**   |   |   |   |   | 419,302   |   |   |   |   | 862,454 |   |
|                                                                                           |   |     |   |   |          |   |   |   |   |      |   |   |   |   |   |   |
| **Expenses**                                                                                   |   |     |   |   |          |   |   |   |   |      |   |   |   |   |   |   |
|                   General and administrative                                         |   |     |   |   | **211,236**   |   |   |   |   | 141,873   |   |   |   |   | 224,820 |   |
|                   Interest expense                                                   |   |     |   |   | **120,246**   |   |   |   |   | 168,496   |   |   |   |   | 184,408 |   |
|       Total                Expenses                              |   |     |   |   | **331,482**   |   |   |   |   | 310,369   |   |   |   |   | 409,228 |   |
|                                                                                           |   |     |   |   |          |   |   |   |   |      |   |   |   |   |   |   |
| Income                from operations before income taxes                                      |   |     |   |   | **68,963**    |   |   |   |   | 108,933   |   |   |   |   | 453,226 |   |
| Provision                for income taxes                                                      |   |     |   |   | **5,025**     |   |   |   |   | 34,000    |   |   |   |   | 41,421 |   |
|                                                                                           |   |     |   |   |          |   |   |   |   |      |   |   |   |   |   |   |
| Net                income before equity in undistributed income                of subsidiaries |   |     |   |   | **63,938**    |   |   |   |   | 74,933    |   |   |   |   | 411,805 |   |
| Equity                in undistributed income of subsidiaries                                  |   |     |   |   | **2,500,306** |   |   |   |   | 2,228,156 |   |   |   |   | 2,240,698 |   |
|                                                                                           |   |     |   |   |          |   |   |   |   |      |   |   |   |   |   |   |
|     Net                Income                                              |   |     |   | **$**  | **2,564,244** |   |   |   | $      | 2,303,089 |   |   |   | $ | 2,652,503 |   |
|                                                                                           |   |     |   |   |          |   |   |   |   |      |   |   |   |   |   |   |
| Net                Income Per Common Share (Basic and Diluted)                                 |   |     |   | **$**  | **.16**       |   |   |   | $      | .13       |   |   |   | $ | .14 |   |

----

**Item      15(d) - Schedule II, Condensed Financial Information of      Registrant**

**BNL      Financial Corporation (Parent Company)**

**Statements      of Cash Flows**

|                                                                                       |   |     |            |   |   |       |   |
|--------------------------------------------------------------------------------------------|--------|----------|-----------------|--------|--------|------------|--------|
|                                                                                       |   | **2006** |            | 2005   |   | 2004       |   |
| **Cash                Flows from Operating Activities**                                    |   |     |            |   |   |       |   |
| Net                income                                                                  |   | **$**    | **2,564,244**   |   | $      | 2,303,089  |   | $ | 2,652,503 |   |
| Adjustments                to compute cash provided by operating                activities |   |     | **(2,420,083**  | **)**  |   | (2,468,796 | )      |   | (2,640,980 | ) |
| Net                Cash Provided (Used) by Operating Activities                            |   |     | **144,161**     |   |   | (165,707   | )      |   | 11,523 |   |
|                                                                                       |   |     |            |   |   |       |   |   |   |   |
| **Cash                Flows from Investing Activities**                                    |   |     |            |   |   |       |   |   |   |   |
| Dividend                from subsidiary                                                    |   |     | **1,450,000**   |   |   | 2,950,000  |   |   | 1,150,000 |   |
| Proceeds                from sale of furniture and equipment                               |   |     | **-**           |   |   | -          |   |   | 1,800 |   |
| Net                Cash Provided by Investing Activities                                   |   |     | **1,450,000**   |   |   | 2,950,000  |   |   | 1,151,800 |   |
|                                                                                       |   |     |            |   |   |       |   |   |   |   |
| **Cash                Flows from Financing Activities**                                    |   |     |            |   |   |       |   |   |   |   |
| Purchase                of treasury stock                                                  |   |     | **(1,297,948**  | **)**  |   | (2,432,056 | )      |   | (619,262 | ) |
| Sale                of treasury stock                                                      |   |     | **64,550**      |   |   | 64,550     |   |   | 64,550 |   |
| Stock                options exercised                                                     |   |     | **150**         |   |   | 11,430     |   |   | 24,411 |   |
| Payments                on long term debt                                                  |   |     | **(249,005**    | **)**  |   | (231,014   | )      |   | - |   |
| Debt                extinguishments                                                        |   |     | **(107,194**    | **)**  |   | (157,690   | )      |   | (666,643 | ) |
| Net                Cash Provided (Used) by Financing Activities                            |   |     | **($1,589,447** | **)**  |   | (2,744,780 | )      |   | (1,196,944 | ) |
| Net                Increase (Decrease) in Cash and Cash Equivalents                        |   |     | **4,714**       |   |   | 39,513     |   |   | (33,621 | ) |
|                                                                                       |   |     |            |   |   |       |   |   |   |   |
| Cash                and Cash Equivalents, Beginning of Period                              |   |     | **69,788**      |   |   | 30,275     |   |   | 63,896 |   |
|                                                                                       |   |     |            |   |   |       |   |   |   |   |
| Cash                and Cash Equivalents, End of Period                                    |   | **$**    | **74,502**      |   | $      | 69,788     |   | $ | 30,275 |   |