<PAGE>
<PAGE> 1



         United States Securities and Exchange Commission
                     Washington, D.C.  20549

                            FORM 10-K

                            (Mark One)

[X]  Annual Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934 for the Fiscal Year Ended December 31, 1999.
                                or
[ ]  Transition Report Pursuant to Section 13 or 15(d) of the
     Securities Exchange Act of 1934 for the Transition Period From
                  to              .

                Commission file number : 33-67312

                    FIRST ALLIANCE CORPORATION
       (exact name of registrant as specified in its charter)

       Kentucky                                61-1242009
(State or other jurisdiction of           (I.R.S. Employer Identification
 incorporation or organization)                   number)

 2285 Executive Drive, Suite 308
 Lexington, KY   40505                          606-299-7656
(Address of principal executive offices)     (Telephone number)

Securities registered pursuant to Section 12(b) of the Act:
                         Title of Each Class
                                NONE

Securities registered pursuant to section 12(g) of the Act:
                         Title of Each Class

                 Class A Common Stock, No Par Value

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter periods that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes [X] No[ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this form [X]

               Applicable only to Corporate Issuers

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.

Common Stock, No Par Value - 5,673,465 shares as of March 1, 2000

               Documents Incorporated by Reference

Portions of the Proxy Statement for the Annual Meeting of Shareholders
scheduled to be held June 8, 2000 are incorporated  by reference into
Part III.

Certain Exhibits to the Company's prior filing of Form 10-K for 1995 and
the Registration Statement on Form S-1, Amendment Number 4, File Number
33-67312, which was declared effective on March 4, 1994 are incorporated by
reference into Part IV.


<PAGE>
<PAGE>2

PART I


Item 1.   Business

First Alliance Corporation (the "Company") was organized on February 16, 1993
for the purpose of forming, owning and managing life insurance companies.
The Company registered with the Securities and Exchange Commission and the
Kentucky Department of Financial Institutions a $12,500,000 public stock
offering.

On October 28, 1995, the Company completed the public stock offering.  The
company raised total capital of $13,750,000 which includes a 10% over-sale
of $1,250,000 contemplated in the public filing.   Six million dollars of
the proceeds of the stock sale were used to capitalize the life insurance
subsidiary, First Alliance Insurance Company ("FAIC").  Three million dollars
of the proceeds might be used to capitalize the venture capital company based
on a schedule as determined by the Company's Board of Directors.  During 1997
and 1996, $316,000 and during 1999, $127,500 of the proceeds were used in the
capitalization of the Company's wholly-owned venture capital subsidiary,
First Kentucky Capital Corporation ("FKCC").   The remainder of the proceeds
will provide resources for additional capital for the life insurance
subsidiary or capital for the possible acquisition of life insurance or
insurance related company(s).

The Company is currently marketing Common Stock at $2.50 per share through a
$500,000 Indiana intra-state private placement.  The offering relied on
exemptions from registration provided by Section 4(2) of the Securities Act
of 1933 and Rule 506 of Regulation D promulgated thereunder.  The purpose of
this offering was to provide a base in Indiana for marketing of the products
of FAIC.  As of March 1, 2000, the Company had raised total offering proceeds
of $451,888.

First Alliance Corporation

The primary revenue source for the Company is provided by its wholly owned
life insurance subsidiary, First Alliance Insurance Company ("FAIC").  FAIC
has contracted with the Company to provide administrative and data processing
services for insurance operations.  The Company provides underwriting and
accounting services for First American Capital Corporation ("FACC") of Topeka,
Kansas and its subsidiaries.  The Company owns approximately 9.6% of FACC's
outstanding common shares.  Additionally, the Company provides accounting
services for Mid-American Alliance Corporation ("MAAC") of Jefferson City,
Missouri, of which it owns approximately 15.1%.   Investment income provides
additional income to the Company.

First Alliance Insurance Company

On May 17, 1995, FAIC received a Certificate of Authority from the Kentucky
Department of Insurance ("KDI").  On November 1, 1995 insurance operations
commenced.  Under generally accepted accounting principles, FAIC has over
$8,154,804 of capital and surplus and is wholly owned by the Company.  FAIC
is also licensed to transact life and annuity business in Indiana, Ohio and
Kansas.  Currently, FAIC only markets its products in Kentucky and Indiana.
FAIC has contracted with the Company to provide administrative and data
processing services.  As discussed in the following paragraph, the only
expenses to be directly incurred by FAIC are direct agency expenses including
commissions.

Administration

Effective November 1, 1995, the Company entered into a service agreement with
FAIC to provide personnel, facilities, and services to FAIC.  FAIC has no
employees.  The services to be performed pursuant to the service agreement
are underwriting, claim processing, accounting, processing and servicing of
policies, and other services necessary to carry on FAIC's business.  The
agreement is in effect until either party provides ninety days written notice
of termination. Under the agreement, FAIC pays monthly fees based on life and
annuity premiums recorded by FAIC.  The percentages are twenty-five percent
of first year premiums; twenty percent of second year premiums; fifteen
percent of third year premiums; ten percent of fourth year premiums and five
percent of premiums in years five and thereafter.  FAIC will retain direct
agency expenses such as agent training and licensing, agency meeting expenses,
and other directly related expenditures.  Pursuant to the terms of the
agreement, FAIC had incurred expenses totaling $821,562, $595,146 and $432,648
during 1999, 1998 and 1997, respectively.


<PAGE>
<PAGE>3

On behalf of FAIC, the Company has retained the services of Bruce and Bruce
Company, consulting actuaries of Lake Bluff, Illinois.  Bruce and Bruce
assisted in developing the products that the Company is marketing.

Products of FAIC

The primary insurance product being marketed by FAIC is a modified payment
whole life insurance policy with a flexible premium deferred annuity rider.
A modified payment whole life insurance policy requires premium payments to
be made for a certain number of years after which the policyholder is
entitled to full policy benefits.  Typical premium paying periods for modified
payment whole life insurance polices are ten, fifteen and twenty years.
FAIC's product, marketed as the "Alliance 2000", combines both a ten and
twenty payment period based on the issue age of the insured.  Issue ages from
0 to 20 and 66 through 80 are ten pay polices and issue ages from age 21 to 65
are twenty pay policies.  Premium payments are split between the life and
annuity based on percentages established in the product design.  First year
premium payments are allocated 100% to life insurance and renewal payments
are split 50% to life and 50% to annuity. The product is being sold in
premium units with the ability to purchase either fractional or multiple
units.  At the end of the required premium paying period, the policyholder
may continue to make full premium payments into the annuity rider to provide
for greater annuity accumulations.

The initial product was designed to provide predetermined life insurance
benefits based on the age of the insured.  The base coverage decreases each
year until an ultimate benefit amount is attained.  The annuity rider does
not contain any fees or load.  Surrender charges in the annuity are based on
a regressive scale which starts at 10% in the first year and decreases by 1%
each year until after the tenth policy year there are no surrender charges.

This product is the result of a modification of FAIC's initial insurance
product which was introduced in November of 1995.  The initial insurance
product was a twenty pay ordinary life policy with a flexible premium
deferred annuity rider.  For issue ages 0 to 50, there was an annual income
protection benefit rider (decreasing term rider).

FAIC also offers credit life and disability insurance products (see "Credit
Life Agreement" below) as well as a ten year term life insurance policy and a
single premium deferred annuity product.

Product Marketing and Sales

FAIC uses the same face to face marketing techniques for its life insurance
products as the Company did for its public stock offering.  The marketing
plan is designed in its entirety around the Company's stockholder base, which
provides an excellent referral system for product sales.

FAIC also markets credit life and disability insurance products to banks
throughout the state of Kentucky.  Marketing of these products is accomplished
through an agreement with the Kentucky Bankers Association (the "KBA").  A
representative of the KBA promotes FAIC's credit insurance products through
banks who are members of the KBA. Marketing of these products commenced in
December of 1998.

FAIC is licensed to market its products in the states of Indiana, Kansas,
Ohio and Kentucky.  Marketing in Indiana began in late 1998.  Marketing in
Kansas and Ohio may not begin until a substantial policyholder base is
established in Kentucky and Indiana.

Credit Life Agreement

On November 1, 1998, FAIC entered into an credit life agreement with North
Central Life Insurance Company of St. Paul, Minnesota ("North Central").
Under the terms of the agreement, FAIC receives 2 1/2% (two and a half
percent) of all credit life insurance premiums written by banks in the state

<PAGE>
<PAGE>4

of Kentucky who offer FAIC's credit insurance products.  Additionally, FAIC
entered into an administration agreement with North Central through which
North Central provides all policy administration.  During 1999 and 1998, FAIC
received $230,129 and $295, respectively, of ceding commissions pursuant to
the agreement.  All credit insurance products are also 100% reinsured through
North Central. FAIC remains primarily liable if North Central is unable to
meet its obligations under the terms of the reinsurance agreement.  North
Central is rated A- Excellent by A.M. Best Company.


<TABLE>
The following table provides certain information about FAIC's life insurance
operations for the year ended December 31, 1999.

<CAPTION>

                                  Ordinary Life              Credit Life
                               Number      Amount of   Number of    Amount of
                             of Polices    Insurance  Policies or   Insurance
                                          (thousands)
                            ------------  ----------- ------------  ----------
<S>                         <C>           <C>         <C>           <C>
Beginning of year                2,334    $  119,576         83     $     287

Issued during year               1,412        77,533      1,354        10,310

Revived during year                 11         1,933          -             -

Deaths                              (5)         (212)       (12)          (14)

Lapse, surrender and
 decreased                        (117)      (26,640)      (290)       (4,205)
                            ------------  ----------- ------------  ----------
In-force end of year             3,635    $  172,190      1,135     $   6,378


</TABLE>

Reinsurance

Consistent with the general practice of the life insurance industry, FAIC
reinsures a portion of the coverage provided by the life insurance products
they offer.  The maximum amount of risk that FAIC retains on its ordinary
life products is $50,000 on any one insured.  The remaining coverage is
reinsured with Business Men's Assurance Company of America of Kansas City,
Missouri.  Additional reinsurance is provided for the 10-year term product
through Optimum RE of Dallas, Texas.  The retention limit on the 10-year
term is $50,000.  FAIC reinsures all of the credit life and disability it
writes through North Central Life Insurance Company of St. Paul, Minnesota.
At December 31, 1999, FAIC has reinsured $107,024,000 of life insurance
coverage, including $45,690,000 in accidental death benefits and $6,378,000
of credit life insurance.

Investments

Investment activities are an integral part of the operations of FAIC.  The
Kentucky Insurance Code restricts the investments of insurance companies by
the type of investment, the amount that an insurance company may invest in
any one type of investment, and the amount that an insurance company may
invest in the securities of any one issuer.  The restrictions of the Kentucky
Insurance Code are not expected to have a material effect on the investment
return of FAIC. The Company is not subject to the same investment restrictions
as FAIC.  Credit risk is limited by emphasizing investment grade securities
and by diversifying the investment portfolio among government and corporate
bonds.

The Company has an agreement with Fifth Third Bank of Lexington, Kentucky, a
registered investment advisor, to assist FAIC in managing its investment
portfolio.  Fifth Third Bank also provides investment services for the
Company.  Fees are based on a percentage of invested assets.

The Company has taken a very conservative investment approach in which the
investments consist of government and high grade corporate issues.  In doing
so, investment yields are lower than could be obtained with investments which
have a higher degree of risk.

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<PAGE>5

Competition

The life insurance industry is extremely competitive.  There are a large
number of insurance companies which are substantially larger, have greater
financial resources,  offer more diversified product lines and have larger
selling organizations than FAIC.  Competition also is encountered from the
expanding number of banks and other financial intermediaries that offer
competing products.  FAIC must also compete with other insurers to attract
and retain qualified agents to market FAIC's products.

Governmental Regulation

FAIC is subject to regulation and supervision by the KDI.  The insurance laws
of Kentucky give the KDI broad regulatory authority, including powers to: (I)
grant and revoke licenses to transact business; (ii) regulate and supervise
trade practices and market conduct; (iii) establish guaranty associations;
(iv) license agents; (v) approve policy forms; (vi) approve premium rates for
some lines of business; (vii) establish reserve requirements; (viii)
prescribe the form and content of required financial statements and reports;
(ix) determine the reasonableness and adequacy of statutory capital and
surplus; and (x) regulate the type and amount of permitted investments.

Kentucky has enacted legislation which regulates insurance holding company
systems, including acquisitions, extraordinary dividends, the terms of
affiliate transactions, and other related matters.  Currently, the Company
and FAIC have registered as a holding company system pursuant to the laws of
the state of Kentucky.

Benefit Capital Life Insurance Company

On December 30, 1999, FAIC acquired all of the outstanding capital stock of
Benefit Capital Life Insurance Company ("BCLIC") of New Orleans, Louisiana.
The purchase price for the shares was approximately $519,000 in cash and
25,000 shares of First Alliance Corporation common stock valued at $62,500.
Benefit Capital is licensed only in the state of Louisiana.

First Kentucky Capital Corporation

The Company funded its wholly owned venture capital subsidiary with $316,000
during 1996 and 1997.  During 1999, FAC provided additional capital of
$127,500. FKCC provides capital for Kentucky based business for both start-up
companies and expansion of existing business.  During 1996 and 1997, FKCC
made three venture capital investments and one investment was made during
1999.

On April 12, 1996, FKCC purchased a 51% interest in Medical Acceptance
Corporation ("MAC") for $50,000.  MAC purchases receivables from medical
providers at a discount.  On December 31, 1997, FKCC entered into an
agreement to sell its interest in MAC for $8,000 in cash and notes receivable
totaling $147,049.  The notes receivable included draws of $105,049 on a
$250,000 line of credit FKCC provided to MAC as well as capital provided for
operations since its purchase in 1996.  Due to the uncertainty of
collectibility of the notes, FKCC established a $74,698 valuation allowance
during 1997.  During 1999 and 1998 MAC paid $27,394 and $38,341, respectively
of the principal balance of the notes receivable.  FKCC included $55,241 and
$6,182 of operating losses of MAC in its operations during 1997 and 1996,
respectively.

Other investments made during 1996 in LGP, Inc. and Cybertyme, Inc were
written-off during 1997 due to unfavorable operating results.  These write-offs
totaled $97,184 at December 31, 1997 and will not affect future operating
results. In addition, during 1997 a $31,000 line of credit agreement from
LGP, Inc. was determined to be uncollectible and was written off.

On June 16, 1999, FKCC executed a commitment to purchase three units of the
Prosperitas Investment Partners, LP ("Prosperitas") for $450,000.
Prosperitas is a venture capital fund based in Louisville, Kentucky.  An
initial payment of $22,500, which represents 5% of the total investment, was
paid upon the execution of the subscription agreement. Upon receipt of the
Small Business Investment Company ("SBIC") license from the U.S. Small
Business Association by Prosperitas, an additional $127,500 was invested.

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<PAGE>6

The investment at December 31, 1999 was $150,000 with the remaining amount of
the commitment due in equal installments on the second and fourth
anniversaries of the investment.

Financial Information Relating to Industry Segments

<TABLE>

Financial information related to specific segments of the Company's business
are presented below.  All sales of life insurance by FAIC are to unaffiliated
customers.

<CAPTION>

                                        Years ended December 31,
                                 1999            1998              1997
                              ----------      ----------        ----------
<S>                         <C>             <C>              <C>
Premiums earned, net
of reinsurance:
 Life and annuity
 insurance operations       $  3,329,812    $  2,294,440      $  1,221,400
                              ==========      ==========        ==========

Revenues:
 Life and annuity
 insurance operations       $  4,103,369    $  2,814,106      $  1,652,201

 Venture capital
 operations                       30,923           4,101          (152,919)

 Corporate operations            199,834         167,002           155,769
                              ----------      ----------        ----------
Total                       $  4,334,126    $  2,985,209      $  1,655,051
                              ==========      ==========        ==========

Income (loss) before
 income taxes:
 Life and annuity
 insurance operations       $  1,045,750    $    935,549      $    455,550

 Venture capital
 operations                       30,923           4,085          (154,015)

 Corporate operations           (681,655)       (540,135)         (858,309)
                              ----------      ----------        ----------
Total                       $    395,018    $    399,499      $   (556,774)
                              ==========      ==========        ==========

Assets:
 Life and annuity
 insurance operations       $ 16,359,833    $ 11,850,273      $  9,259,930

 Venture capital
 operations                      208,766          50,343            46,258

 Corporate operations          2,125,589       3,332,409         3,992,176
                              ----------      ----------        ----------
Total                       $ 18,694,188    $ 15,233,025      $ 13,298,364
                              ==========      ==========        ==========

</TABLE>

Employees

As of December 31, 1999, the Company had thirteen full time employees.

Item 2.   Properties

The Company leases approximately 6,100 square feet located at 2285 Executive
Drive, Lexington, Kentucky.  At December 31, 1999, the Company leased
approximately 5,400 square feet pursuant to a lease agreement which would
expire on March 31, 1999.  In February of 1999, the Company extended the
5,400 square foot lease agreement until January 31, 2001.  Additionally, in
February of 1999 the Company entered into a lease agreement for an additional
700 square feet at the same location.  The lease on this additional space
expires on January 31, 2001.  Annual rent expense for the year ended December
31, 1999 totaled $87,386.

Item 3.  Legal Proceedings

The Company received a civil summons on October 6, 1997 related to an

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<PAGE>7

automobile accident in October 1996 which involved an officer of the Company,
who was driving the automobile.  The summons was served by the Circuit Court
in Fayette County, Kentucky and lists Katherine Stockton, Individually, and
as Administratrix of the Estate of Frank Novak, and as next friend of Bradley
Novak and Angela Novak, as the Plaintiffs.  The legal action alleges that the
officer was acting in the course and scope of employment with the Company at
the time of the accident.  The lawsuit was settled within the policy limits.

Item 4.  Submission of Matters to a Vote of Security Holders

Not Applicable

Item 5.  Market for Registrant's Common Stock and Related Stockholder Matters

(a.) Market Information

Trading of the Company's common stock is limited and sporadic and an
established public market does not exist.

(b.) Holders

As of March 1, 2000, there are approximately 5,300 shareholders of the
Company's outstanding common stock.

(c.) Dividends

The Company has not paid any cash dividends since inception (February 16,
1993).  Additionally, dividends are not anticipated in the foreseeable future.


<PAGE>
<PAGE>8



Item 6.   Selected Financial Data

<TABLE>
The following table provides selected consolidated operating results for the
Company for the years ended December 31, 1999, 1998 and 1997 and selected
balance sheet information at December 31, 1999, 1998 and 1997.

<CAPTION>

                                     1999            1998           1997
                               ---------------------------------------------
<S>                             <C>             <C>            <C>
Operating Data:

Premium income, net             $  3,329,812    $  2,294,440   $  1,221,400

Net investment income                659,309         595,612        504,831

Benefits and expenses              3,939,108       2,585,710      2,211,825

Federal income taxes                 254,540         265,102        123,995

Net income/(loss)                    140,478         134,397       (680,769)

Net income/(loss) per
 common share-basic and
 diluted                                0.02            0.02          (0.12)

<CAPTION>

Balance Sheet Data:
<S>                             <C>             <C>            <C>
Total assets                      18,694,188      15,233,025     13,298,364

Life policy reserves               3,273,564       1,493,766        761,808

Annuity contract liabilities       3,004,186       1,763,029      1,112,551

Total liabilities                  7,757,755       4,406,299      2,732,006

</TABLE>

Item 7.  Management's Discussion and Analysis of Financial Conditions and
         Results of Operations

The Company makes forward-looking statements from time to time and desires to
take advantage of the "safe harbor" which is afforded such statements under
the Private Securities Litigation Reform Act of 1995 when they are accompanied
by meaningful cautionary statements identifying important factors that could
cause actual results to differ materially from those in the forward-looking
statements.

The statements contained in the following "Management's Discussion and
Analysis of Financial Condition and Results of Operations," statements
contained in future filings with the Securities and Exchange Commission and
publicly disseminated press releases, and statements which may be made from
time to time in the future by management of the Company in presentations to
shareholders, prospective investors, and others interested in the business
and financial affairs of the Company, which are not historical facts, are
forward-looking statements that involve risks and uncertainties that could
cause actual results to differ materially from those set forth in the
forward-looking statements.  Any projections of financial performances or
statements concerning expectations as to future developments should not be
construed in any manner as a guarantee that such results or developments will,
in fact, occur.  There can be no assurance that any forward-looking statement
will be realized or that actual results will not be significantly different
from that set forth in such forward-looking statement.  In addition to the
risks and uncertainties of ordinary business operations, the forward-looking
statements of the Company referred to above are also subject to risks and
uncertainties.

The Company operates in a highly competitive business environment, and its
operations could be negatively affected by matters discussed under the
caption, "Competition," on page 5 of this Form 10-K.

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<PAGE>9

The following discussion should be read in conjunction with the consolidated
financial statements and the notes thereto beginning on page F-1.

Results of Operations

Comparisons between periods related to the results of operations are for the
years ended December 31 of the year specified.  Net income during 1999
increased $6,081 over 1998 results based on the following income and expense
transactions.

The primary source of revenue for the Company is life insurance premium
income.  First Alliance Insurance Company ("FAIC") began writing life
insurance and annuities in November of 1995.  Typical with most life
insurance policies, a premium payment is required each year in order for the
policyholder to receive the benefits set forth in the policy. Premium
payments are classified as first year and renewal.  Renewal premiums are any
premium payment that is made after the first year the policy is in force.
During 1999, premium income totaled $3,798,814.  In 1998, premium income
totaled $2,383,680.  This increase of $1,415,134 can be attributed to the
growth in the renewal premium base plus an increase in first year premium
sales.  Of the $3,798,814 of premium income in 1999, $1,886,288 represents
first year premium, $1,543,799 represents renewal premiums and $368,727
represents single premiums on credit insurance. Premium income in 1998 was
comprised of $1,375,270 of first year premium and $1,008,410.  Total premium
income for 1998 increased $1,104,001 over 1997 primarily due to a larger
renewal premium base and first year premium sales.

Life insurance companies typically reinsure a portion of the death benefit on
individual lives.  Reinsurance is a method of transferring risk to another
life insurance company to guard against an adverse effect on capital.  In
return for assuming this risk, a premium is charged by the reinsurance
company.  FAIC has a reinsurance agreement for its primary product with
Businessmen's Assurance Company of Kansas City, Missouri.  Under the terms
of the agreement, FAIC is not required to make first year premium payments.
However, Generally Accepted Accounting Principles require the amount of
premium not paid in the first year to be recorded as a liability and
amortized over the duration of the associated policies.  Reinsurance premiums
totaled $469,002, $89,240 and $58,279 for 1999, 1998 and 1997, respectively.
These reinsurance premiums are a direct reduction of premium income.  Credit
insurance is 100% reinsured.  The reinsurance premiums related to credit
insurance were $368,727 in 1999.

During 1999, net investment income increased $63,697 over 1998 results.  This
increase is primarily due to a larger investment base from FAIC's operations.
Net investment income in 1998 and 1997 was $595,612 and $504,831, respectively.

Realized investment gains during 1999 totaled $205.  During 1998, realized
investment gains totaled $6,529 from investment gains on the sale of bonds.
During 1997, realized investment losses included a write-off of a $31,000
credit line balance of LGP, Inc., a valuation allowance of $75,000 on notes
receivable offset by a $8,000 gain on the sale of Medical Acceptance
Corporation.

Other income totaled $114,671 in 1999 which represents a $26,043 increase
over 1998 results of $88,628.  The Company provides accounting support to
Mid-American Alliance Corporation and its subsidiary Mid American Century Life
Insurance company and First American Capital Corporation and its subsidiary
First Life America Corporation.  Fees related to these accounting services
were $95,531, $48,816 and $35,000 in 1999, 1998, and 1997 respectively.

The increase in life insurance policy reserves was $870,582 in 1999 and
$731,958 in 1998.  Life insurance reserves are established to provide for the
payment of policyholder benefits.  Factors such as premiums, interest,
mortality and life expectancy are considered in the calculation of reserve
factors developed by an actuary.  Typically, these factors increase as a
policy reaches another anniversary creating a larger reserve.  During 1999,
reserves were recorded on new insurance sales and reserves on existing
policies increased.  This accounted for the increase of $138,624 in 1999 as
compared to 1998.  During 1997, life insurance policy reserves increased
$381,888.

Commissions paid to life insurance agents totaled $1,524,961, $933,100 and
$473,231 1999, 1998 and 1997, respectively.  Commissions are paid to agents
on both first year and renewal premium payments.  First year commission

<PAGE>
<PAGE>10

percentages are significantly greater than renewal commission percentages.
When new premiums written increase from year to year and existing policies
renew, commission expense increases.  In December 1998 FAIC began the selling
credit insurance.  During 1999, commission on the sale of credit insurance
was $220,838. During 1999 first year premium sales increased which, combined
with the sale of credit insurance, accounts for the $591,861 increase in
commission expense in 1999 over 1998.

During 1999 and 1997, death claims, net of reinsurance ceded, were $122,135
and $24,848 respectively.   FAIC did not incur any death claims in 1998.
Annuity premiums received are recorded as liabilities rather than income
pursuant to Statement of Financial Accounting Standard 97 "Accounting and
Reporting by Insurance enterprises for Certain Long-Duration Contracts and
for Realized Gains and Losses from the Sale of Investments".  Interest is
paid on these annuity premium accumulations.  As policies renew, the annuity
fund balance increases which also increases the base on which interest is
earned by the policyholder.  Interest is credited to the fund balance.  The
growth in the annuity fund balance accounts for the increase in interest
expense between years.  Interest expense was $200,107, $111,171 and $58,642
for 1999, 1998 and 1997, respectively.

Certain costs related to the acquisition of life insurance policies are
capitalized and amortized over the premium paying period of the policies.
These costs, which are referred to as deferred policy acquisition costs,
include first year commissions and first year management fees based on new
premiums written.  During 1999, $1,655,160 of these expenses were capitalized
and will be amortized over the life of the associated policies.  In 1998 and
1997, $1,200,412 and $708,185 of these costs were capitalized.  Amortization
of deferred policy acquisition costs totaled $760,468, $426,476 and $339,562
for 1999, 1998 and 1997, respectively.

Selling, administrative and general insurance expenses increased $29,416 in a
comparison of 1999 to 1998.  These expenses relate to the administration and
issuance of life insurance policies.  This increase can be attributed to a
larger sales volume and increased processing costs.  Selling , administrative
and general insurance expenses totaled $363,166, $333,750, and $225,511 in
1999, 1998 and 1997, respectively.  Salaries, wages and employee benefits
totaled $1,102,195 in 1999 and increased $300,863 over 1998 results.  This
increase is due to additional personnel, increased costs of employee benefits
and incentive payments to officers.

During 1997, the Company granted stock options.  Compensation expense was
recorded based on the difference between the exercise price of the options
and the fair market value of the stock on the date of grant.  This
compensation expense totaled $159,743 in 1997.  There were no options granted
during 1999 and 1998 and accordingly, no compensation cost related to stock
options is recorded.

Professional fees increased $20,778 during 1999 compared to 1998.
Professional fees include accounting fees, actuarial fees, consulting fees
and legal fees.  Professional fees totaled $107,708, $86,930 and $235,749 for
1999, 1998 and 1997, respectively.

Income tax expense for 1999 totaled $254,540.  Federal income taxes are
calculated based on the earnings of FAIC.  Certain items included in income
reported for financial statements are not included in taxable income for the
current year and recorded as deferred income taxes.  Of the $254,540 deferred
income taxes totaled $230,783 and taxes currently payable totaled $23,757.
In 1998 total income tax expense was $265,102 of which $210,430 was deferred.
In 1997 total income tax expense was $123,995 of which $109,102 was deferred.

Consolidated Financial Condition

Changes in the consolidated balance sheet of 1999 compared to 1998 reflect
the operations of the Company and capital transactions discussed below.

Total assets in 1999 increased $3,461,163 from $15,233,025 in 1998 to
$18,694,188.  At December 31, 1999  and 1998, invested assets totaled
$9,667,847 and $6,362,765, respectively.  This increase of $3,305,082 is
primarily the result of investing cash in available-for-sale securities and
$905,098 of invested assets acquired in the purchase of BCLIC.  Cash and cash

<PAGE>
<PAGE>11

equivalents totaled $5,540,571 at December 31, 1999 which consisted of cash
and money market mutual funds.

Deferred policy acquisition costs increased $894,692 net of amortization of
$760,468 during 1999.  Policy acquisition expenses related to new insurance
sales totaled $1,655,160 and were capitalized during 1999.  Goodwill and
value of insurance acquired increased $216,567 due to the acquisition of
BCLIC.  Advances to agents decreased $14,678 during 1999 due to repayments of
prior advances on new business submitted.

Liabilities increased $3,351,456 during 1999 to $7,757,755.  Annuity premiums
received by insurance companies are classified as liabilities.  At December
31, 1999 these annuity premiums, along with interest credited to policyholder
balances, totaled $3,004,186.  Renewal annuity premiums plus interest less
surrenders accounted for the $1,241,157 increase over 1998.  Life policy
reserves increased $1,779,798 during 1999 to $3,273,564.  Life policy
reserves were established on new business and additional reserves were
recorded on existing policies which renewed.  Deposits on pending policy
applications increased from $216,565 in 1998 to $233,158 in 1999.  These
deposits are monies submitted with life insurance applications which are in
the process of being underwritten.  In the event these policies are issued,
this money becomes premium income, otherwise it is refunded to the
policyholder.  The increase of $16,593 in 1999 represents increased sales
volume.  Policyholder dividend deposits in the amount of $43, 188 for 1999,
are funds placed on deposit with the Company to accumulate interest and they
are related to BCLIC policies that were acquired on December 30, 1999.
Policyholder premium deposits are funds placed on deposit with the Company to
accumulate interest to pay future policy premiums.  Interest credited to the
fund along with additional deposits and withdrawals accounted for the $9,886
increase during 1999.

Deferred federal income taxes are based on timing differences between FAIC's
financial statement taxable income and taxable income computed based on
Internal Revenue Service requirements.  Due to increased earnings of FAIC,
the deferred federal income taxes liability increased $143,735 to $602,667
for 1999.

Liquidity

FAIC's insurance operations generally receive adequate cash flows from
premium collections and investment income to meet their obligations.
Insurance policy liabilities are primarily long term and generally are paid
from future cash flows.  Most of the Company's invested assets are in bonds
which are readily marketable.  Although there is no present need or intent to
dispose of such investments, the Company could liquidate portions of their
investments if such a need arose.

Item 8.  Financial Statements and Supplementary Data

The financial statements listed in Item 14(a) (1) and (2) are included in
this report beginning on page 19.

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

NONE

<PAGE>
<PAGE>12

PART III

Item 10. Directors and Executive Officers

<TABLE>

<CAPTION>

Name                        Age     Position                       Term
----                        ---     --------                       ----
<S>                         <C>     <C>                            <C>
Scott J. Engebritson        42      Vice Chairman of the Board     1 Year
                                    Director

Michael N. Fink             44      President/Director             1 Year

Jimmy Dan Conner            46      Director                       1 Year

Denzel E. ("Denny") Crum    62      Director                       1 Year

James M. Everett            54      Director                       1 Year

Charles Hamilton            73      Director                       1 Year

Ronda S. Paul               56      Director                       1 Year

</TABLE>

The executive officers serve at the direction of the Board of Directors and
are appointed at the annual meeting of the Board.  Directors are elected
annually by the shareholders.  On October 15, 1999, Daniel D. Briscoe
resigned from the  Company and its subsidiaries' Boards of Directors.  He
resigned for personal reasons.  On March 28, 2000, Chris J. Haas was removed
as a director and oficer of the Company due to management differences. The
following is a brief description of the previous business background of each
of the executive officers and directors.

SCOTT J. ENGEBRITSON: Mr. Engebritson serves as Vice-Chairman of the Board of
Directors.  Mr. Engebritson is also Chairman of Mid-American Alliance
Corporation and Mid American Century Life Insurance Company, both of
Jefferson City, Missouri.  Mr. Engebritson has twenty two years of experience
in the insurance industry.  From 1978 to 1984, he was associated with Liberty
American Corporation and Liberty American Assurance Corporation as Regional
Director of Sales and Director of Customer Services.  In December of 1984,
Mr. Engebritson became affiliated with United Trust, Inc., an Illinois
insurance holding company, where he served as Regional Director of Sales,
Agency Director and Assistant to the President.  In December of 1987, Mr.
Engebritson assisted in the organization of United Income, Inc., an Ohio
insurance holding company, where he served as President and a Director of
United Income, Inc. and United Security Assurance Company, United Income's
insurance subsidiary, through February of 1993.  He has been listed in Who's
Who in Life Insurance since 1988.

MICHAEL N. FINK: Mr. Fink serves as President of the Company and a Director.
Mr. Fink also serves as Chairman of First American Capital Corporation and
First Life America Corporation, both of Topeka, Kansas.  Mr. Fink has
nineteen years of experience in the insurance industry, primarily in sales
management.  From 1981 to 1984, Mr. Fink was an agent, District Director,
and Regional Director with Liberty American Assurance Company in Lincoln,
Nebraska. In 1984, Mr. Fink transferred to an affiliated company, Future
Security Life, in Austin, Texas, where he served as Regional Director and
Agency Director until 1988.  In March of 1988, Mr. Fink became affiliated
with United Income, Inc. and United Security Assurance Company as Agency
Director and Assistant to the President.  He ended his affiliation with these
companies in June of 1993.

JIMMY DAN CONNER:  Director.  President of Old Colony Insurance Service, Inc.,
an independent insurance agency. Involved in Crusade for Children and Boy
Scouts of America.  Sales Manager of Allied Foods, Atlanta, Georgia
1982-1983 and Torbitt & Castleman Co. in Buckner, Kentucky 1977-1982.
Professional basketball player with the Kentucky Colonels of the American
Basketball Association 1976-1977.  Captain of the University of Kentucky
basketball team, All American Honorable Mention and Academic All American in
1975.  Kentucky Mr. Basketball 1971.  Business Administration major at the
University of Kentucky.

<PAGE>
<PAGE>13

DENZEL E. ("DENNY") CRUM:  Director.  Head basketball coach at the University
of Louisville since 1971.  On the board of Directors of the National
Association of Basketball Coaches (NABC).  The Sporting News 1986 "Coach of
the Year."  The Lexington Herald Leader's 1990 "Sportsman of the Decade."
1994 Naismith Basketball Hall of Fame Inductee.  Numerous other Kentucky and
national coaching awards.  BA in Physical Education from UCLA where he played
basketball for John Wooden.

JAMES M. EVERETT:  Director.  Director, Kentucky Council Area Development
Districts.   Member of Governor's Earthquake Hazards and Safety Technical
Advisory Panel (GEHSTAP) since 1983.  On the Board of Directors of Kentuckians
for Better Transportation (KBT).  Member of the Governor's Local Issues
Conference Planning Committee.  Fulton County Judge-Executive 1982-1992.
B.S. in Vocational Agriculture and M.S. in Horticulture from Murray State
University.

CHARLES HAMILTON:  Director.  Owns and operates numerous interests in real
estate, agri-business and agriculture.  Director of Bullitt County Farm
Bureau for last 25 years.  Vice President and Director of Bullitt County
Bank.  Former Kentucky Commissioner of Agriculture and past Chairman of the
Governor's Task Force on Agriculture.  Past member of the Kentucky State Fair
Board.  Recipient of the 1992 Distinguished Services Award from the Kentucky
Association of Conservation Districts.  1980 and 1991 recipient of the
Kentucky Pork Producers Association Outstanding Service Award.  B.S. in
Agriculture from the University of Kentucky.

RONDA S. PAUL:  Ms. Paul serves as General Counsel and Director for the
Company.  Attorney.  Director of the Kentucky Division of Securities from
1982 through 1991.  Attorney for the Kentucky Department of Banking and
Securities 1980-1981.  On the faculty of the College of Business and
Economics at the University of Kentucky 1971-1978.  PhD in finance and
accounting from Purdue University and JD from the University of Kentucky.

Item 11.  Executive Compensation

The information required by this Item is incorporated by reference from the
Company's proxy statement for the annual meeting of shareholders to be filed
with the Securities and Exchange Commission by the Company within 120 days
after the end of its 1999 fiscal year.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

The information required by this Item is incorporated by reference from the
Company's proxy statement for the annual meeting of shareholders to be filed
with the Securities and Exchange Commission by the Company within 120 days
after the end of its 1999 fiscal year.

Item 13.  Certain Relationships and Related Transactions

The information required by this Item is incorporated by reference from the
Company's proxy statement for the annual meeting of shareholders to be filed
with the Securities and Exchange Commission by the Company within 120 days
after the end of its 1999 fiscal year.


<PAGE>
<PAGE>14



                            PART IV


Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)       1 and 2        Financial Statements and Schedules

          The consolidated financial statements and financial statement
          schedules of First Alliance Corporation presented in this report
          are listed in the index on Page F-1.

          3     Exhibits

          3(I)  Articles of Incorporation, as amended (1)

          3(ii) By-laws, as amended (1)

          4     Instruments defining the rights of security holders,
                including indentures (1)

          10    Material Contracts

                (a)  Lease (1)
                (b)  Sub-lease (2)
                (c)  Advisory Board Contract (1)
                (d)  Service agreement between First Alliance Insurance
                     Company and First Alliance Corporation. (2)
                (e)  Management Employment Agreements (2)
                (f)  Lease agreement dated February 26, 1999 (3)
                (g)  Management agreement between First Alliance Corporation
                     and First American Capital Corporation (3)

          11    Statement re computation of per share earnings (4)

          21    Subsidiaries

          27    Financial Data Schedule

(b)       Reports on Form 8-K

          No filing on form 8-K was made in 1999.


(1)       Filed as an Exhibit to the Registrant's Registration Statement
          on Form S-1, Amendment Number 4, File Number 33-67312, which was
          declared effective on March 4, 1994, and incorporated herein by
          reference.

(2)       Filed as an Exhibit to the Registrant's 1995 Form 10-K, File Number
          33-67312, and incorporated herein by reference.

(3)       Filed as an Exhibit to the Registrant's 1998 Form 10-K, File Number
          33-67312, and incorporated herein by reference.

(4)       Note 2 in Notes to Consolidated Financial Statements included in
          this Report beginning on Page F-13


<PAGE>
<PAGE>15

                           SIGNATURES

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


By   /s/Michael N. Fink                                Date   3/28/2000
     Michael N. Fink, President/Director


By   /s/Thomas I. Evans                                Date   3/28/2000
     Thomas I. Evans, Vice-President/
     Assistant Secretary


<PAGE>
<PAGE>16


                           SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


By  /s/Scott J. Engebritson                            Date   3/28/2000
    Scott J. Engebritson, Vice-Chairman/Director


By  /s/Michael N. Fink                                 Date    3/28/2000
    Michael N. Fink, President/Director


By  /s/Jimmy Dan Conner                                Date   3/28/2000
    Jimmy Dan Conner, Director


By  /s/Denzel E. Crum                                  Date   3/28/2000
    Denzel E. Crum, Director


By  /s/James M. Everett                               Date   3/28/2000
    James M. Everett, Director


By  /s/Charles Hamilton                               Date   3/28/2000
     Charles Hamilton, Director


By  /s/Ronda S. Paul                                  Date   3/28/2000
    Ronda S. Paul, Director


<PAGE>
<PAGE>F-1


                    FIRST ALLIANCE CORPORATION

            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                AND FINANCIAL STATEMENT SCHEDULES





                                                                       Page
Consolidated Financial Statements                                    Numbers


Report of Independent Auditors. . . . . . . . . . . . . . .             F-2

Report of Independent Auditors. . . . . . . . . . . . . . .             F-3

Consolidated Balance Sheets as of December 31, 1999 and 1998 . . . .    F-4

Consolidated Statements of Operations for the years ended
   December 31, 1999, 1998 and 1997  . . . . . . . . . . . . . . . .    F-6

Consolidated Statement of Changes in Shareholders' Equity for the years
   ended December 31, 1999, 1998 and 1997  . . . . . . . . . . . . .    F-7

Consolidated Statements of Cash Flows for the years ended
   December 31, 1999, 1998 and 1997  . . . . . . . . . . . . . . . .    F-8

Notes to Consolidated Financial Statements . . . . . . . . . . . . .    F-10

Consolidated Financial Statement Schedules

   Schedule I    Summary of Investments  . . . . . . . . . . . . . .    F-26

   Schedule II   Condensed Financial Information of Registrant . . .    F-27

   Schedule III Supplementary Insurance Information  . . . . . . . .    F-30

   Schedule IV  Reinsurance  . . . . . . . . . . . . . . . . . . . .    F-32


All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable and, therefor, have been omitted.

<PAGE>
<PAGE>F-2

                   Independent Auditors' Report



Board of Directors and Shareholders
First Alliance Corporation


 We have audited the accompanying consolidated balance sheets of First
Alliance Corporation (a Kentucky corporation) and subsidiaries as of December
31, 1999 and 1998, and the related consolidated statements of operations,
changes in shareholders' equity, and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audit.

 We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audit provides a
reasonable basis for our opinion.

 In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of First
Alliance Corporation and subsidiaries as of December 31, 1999 and 1998, and
the consolidated results of their operations and their consolidated cash flows
for the years then ended in conformity with generally accepted accounting
principles.

 We have also audited Schedules I, II, III and IV as of December 31, 1999 and
1998, of First Alliance Corporation and subsidiaries and Schedules II, III
and IV for the years then ended.  In our opinion, these schedules present
fairly, in all material respects, the information required to be set forth
therein.

                                  /s/KERBER, ECK & BRAECKEL LLP


Springfield, Illinois
March 10, 2000

<PAGE>
<PAGE>F-3

                  Report of Independent Auditors





The Shareholders and Board of Directors
First Alliance Corporation

We have audited the accompanying consolidated statements of operations,
changes in shareholders' equity and cash flows of First Alliance Corporation
and subsidiaries for the year ended December 31, 1997.  Our audit also
included the financial statement schedules as of and for the year ended
December 31, 1997.  These financial statements and schedules are the
responsibility of the Company's management.  Our responsibility is to express
an opinion on these financial statements and schedules based on our audit.

We conducted our audit in accordance with auditing standards generally
accepted in the United States.  Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the 1997 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of
operations and cash flows of First Alliance Corporation and subsidiaries for
the year ended December 31, 1997, in conformity with accounting principles
generally accepted in the United States.  Also, in our opinion, the
1997 financial statement schedules referred to above, when considered
in relation to the basic financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.

                                         /s/ ERNST & YOUNG LLP


Louisville, Kentucky
March 24, 1998

<PAGE>
<PAGE>F-4


<TABLE>
FIRST ALLIANCE CORPORATION

CONSOLIDATED BALANCE SHEETS
<CAPTION>

                                                      December 31,
                                               1999                 1998
<S>                                          --------------       --------------
Assets                                    <C>                  <C>
Investments:
 Securities available for sale,
 at fair value:
  Fixed maturities (amortized cost,
  $8,897,097 and $5,973,453 in 1999
  and 1998, respectively)                 $   8,774,608        $   6,121,129

  Equity securities (cost of
  $382,588 and $20,000 in 1999
  and 1998, respectively)                       407,881               20,000

 Policy loans                                    32,194                    -
 Notes receivable (net of $149,698
  valuation allowance in 1999 and 1998)         103,164              221,636
 Other invested assets                          150,000                    -
 Short-term investments                         200,000                    -
                                          --------------       --------------
Total investments                             9,667,847            6,362,765

Cash and cash equivalents                     5,540,571            6,587,264
Investments in related parties                  125,000              125,000
Reinsurance recoverable                           1,418                    -
Receivables from related parties                 14,203               20,496
Federal income tax recoverable                    7,985                    -
Accrued investment income                       135,482              107,416
Deferred policy acquisition costs             2,743,111            1,848,419
Value of insurance acquired                      61,311                    -
Goodwill                                        155,256                    -
Prepaid expenses                                 48,473               23,427
Office furniture and equipment                   42,499               43,684
Advances to agents                               42,998               57,676
Premiums due                                     81,690               47,130
Other assets                                     26,344                9,748
                                          --------------       --------------
Total assets                              $  18,694,188        $  15,233,025
                                          ==============       ==============

See notes to consolidated financial statements.

</TABLE>
<PAGE>
<PAGE>F-5

<TABLE>
FIRST ALLIANCE CORPORATION

CONSOLIDATED BALANCE SHEETS (continued)
<CAPTION>

                                                      December 31,
                                               1999                 1998
                                          --------------       --------------
<S>                                       <C>                  <C>
Liabilities and Shareholders' Equity

Policy and contract liabilities:
  Annuity contract liabilities            $   3,004,186        $   1,763,029
  Life policy reserves (net of
   reinsurance ceded reserves of
   $203,776 and $88,534 in 1999 and
   1998, respectively)                        3,273,564            1,493,766
  Policy and contract claims                     42,099                    -
  Policyholder dividend deposits                 43,188                    -
  Policyholder premium deposits                 187,414              177,528
  Deposits on pending policy applications       233,158              216,565
  Unearned revenue                               86,878              102,993
  Reinsurance premiums payable                   61,450               65,183
                                          --------------       --------------
Total policy and contract liabilities         6,931,937            3,819,064

Federal income taxes payable:
  Current                                             -               32,258
  Deferred                                      602,667              458,932
Other taxes payable                               8,207                    -
Commissions, salaries, wages and
  benefits payable                              133,382               64,740
Accounts payable and accrued expenses            81,562               31,305
                                          --------------       --------------
Total liabilities                             7,757,755            4,406,299


Claims and contingencies (Note 16)

Shareholders' equity:
Common stock, no par value, 8,000,000
  shares authorized; 5,643,185 and
  5,620,690 shares issued and
  outstanding at December 31, 1999
  and 1998                                      564,318              562,069
Additional paid in capital                   12,466,943           12,180,353
Retained earnings - deficit                  (2,030,679)          (2,013,165)
Accumulated other comprehensive income          (64,149)              97,469
                                          --------------       --------------
Total shareholders' equity                   10,936,433           10,826,726
                                          --------------       --------------
Total liabilities and shareholders'
  equity                                  $  18,694,188        $  15,233,025
                                          ==============       ==============

See notes to consolidated financial statements.

</TABLE>
<PAGE>
<PAGE>F-6

<TABLE>
FIRST ALLIANCE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>


                                            Years ended December 31,
                                      1999           1998            1997
                                  ------------   ------------    ------------
<S>                               <C>            <C>             <C>
Revenues
 Gross premium income             $ 3,798,814    $ 2,383,680     $ 1,279,679
 Reinsurance premiums ceded          (469,002)       (89,240)        (58,279)
                                  ------------   ------------    ------------
Net premium income                  3,329,812      2,294,440       1,221,400

Investment activity:
 Net investment income                659,309        595,612         504,831
 Net realized investment
  gain (loss)                             205          6,529        (110,935)

Commissions and expense
 allowances received
 on reinsurance ceded                 230,129              -               -

Other income                          114,671         88,628          39,755
                                  ------------   ------------    ------------
Total revenue                       4,334,126      2,985,209       1,655,051

Benefits and expenses
 Increase in policy reserves          870,582        731,958         381,888
 Death claims (net of
  reinsurance of $208,135
  in 1999)                            122,135              -          24,848
 Policyholder surrender values         49,408         27,374               -
 Interest credited on annuities
  and premium deposits                200,107        111,171          58,642
 Commissions                        1,524,961        933,100         473,231
 Policy acquisition costs
  deferred                         (1,655,160)    (1,200,412)       (708,185)
 Amortization of deferred policy
  acquisition costs                   760,468        426,476         339,562
 Selling, administrative and
  general insurance expenses          363,166        333,750         225,511
 Salaries, wages and employee
  benefits                          1,102,195        801,332         680,193
 Compensation expense related
  to stock options                          -              -         159,743
 Professional fees                    107,708         86,930         235,749
 Miscellaneous taxes                   42,837         23,689          38,168
 Advisory board and directors
  fees                                 87,430         65,986          48,361
 Rent expense                          87,386         77,633          75,226
 Depreciation expense                  15,708         16,436          16,292
 Other operating costs and
  expenses                            260,177        150,287         162,596
                                  ------------   ------------    ------------
Total benefits and expenses         3,939,108      2,585,710       2,211,825
                                  ------------   ------------    ------------
Income (loss) before income
 tax expense                          395,018        399,499        (556,774)
                                  ------------   ------------    ------------
Income tax expense                    254,540        265,102         123,995
                                  ------------   ------------    ------------
Net income (loss)                 $   140,478    $   134,397     $  (680,769)
                                  ============   ============    ============

Net income (loss) per common
 share-basic and diluted          $      0.02    $      0.02     $     (0.12)
                                  ============   ============    ============

See notes to consolidated financial statements.

</TABLE>
<PAGE>
<PAGE>F-7

<TABLE>
FIRST ALLIANCE CORPORATION

CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY
<CAPTION>


                                             Years ended December 31,
                                      1999           1998            1997
                                  ------------   ------------    ------------
<S>                               <C>            <C>             <C>
Common stock:
  Balance, beginning of year      $   562,069    $   557,984     $   557,984
   Sale of shares in private
    placement (150,475 shares)         15,047              -               -
   Exercise of stock options
    (40,850 shares)                         -          4,085               -
   Company stock acquired
    (127,980 shares)                  (12,798)             -               -
                                  ------------   ------------    ------------
  Balance, end of year                564,318        562,069         557,984

Additional paid-in capital:
  Balance, beginning of year       12,180,353     12,141,546      11,981,803
   Stock options granted                    -              -         159,743
   Exercise of stock options
    (40,850 shares)                         -         38,807               -
   Sale of shares in private
    placement (150,475 shares)        361,140              -               -
   Cost of public offering            (54,558)             -               -
   Company stock acquired
    (127,980 shares)                  (19,992)             -               -
                                  ------------   ------------    ------------
  Balance, end of year             12,466,943     12,180,353      12,141,546

Retained earnings-deficit:
  Balance, beginning of year       (2,013,165)    (2,147,562)     (1,466,793)
   Net income (loss)                  140,478        134,397        (680,769)
   Company stock acquired
    (127,980 shares)                 (157,992)             -               -
                                  ------------   ------------    ------------
  Balance, end of year             (2,030,679)    (2,013,165)     (2,147,562)

Accumulated other comprehensive
 income:
  Balance, beginning of year           97,469         14,390         (98,558)
   Net unrealized gain (loss)
    on available-for-sale
    securities net of
    reclassification adjustment
    (see below)                      (161,618)        83,079         112,948
                                  ------------   ------------    ------------
  Balance, end of year                (64,149)        97,469          14,390
                                  ------------   ------------    ------------
Total shareholders' equity        $10,936,433    $10,826,726     $10,566,358
                                  ============   ============    ============

Disclosure of reclassification
 amount:
 Unrealized holding gains (loss)
  arising during period           $  (161,823)   $    87,586     $   104,411
 Less: reclassification
  adjustment for (gains) loss
  in net income                           205         (4,507)          8,537
                                  ------------   ------------    ------------
Net unrealized gains (loss)
 on securities                    $  (161,618)   $    83,079     $   112,948
                                  ============   ============    ============

See notes to consolidated financial statements.

</TABLE>
<PAGE>
<PAGE>F-8

<TABLE>
FIRST ALLIANCE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
                                             Years ended December 31,
                                      1999           1998            1997
                                  ------------   ------------    ------------
<S>                               <C>            <C>             <C>
Operating activities:
Net income (loss)                 $   140,478    $   134,397     $  (680,769)
Adjustments to reconcile net
 income (loss) to net cash
 provided by operating
 activities:
  Interest credited on annuities
   and premium deposits               183,734        111,171          58,642
  Provision for depreciation           15,708         16,436          16,292
  Compensation expense related
   to stock options                         -              -         159,743
  Amortization of premium and
   accretion of discount on
   fixed maturity investments          23,883         20,899          25,955
  Realized investment (loss)gain         (205)        (6,529)         87,935
  Provision for deferred federal
   income taxes                       230,786        210,429         109,102
  Loss on investments in
   unconsolidated affiliates                -              -          97,184
  Increase in policy loans             (5,587)             -               -
  Increase (decrease) in accrued
   investment income                  (21,207)        44,397          19,603
  Decrease in receivables from
   related parties                      6,293            790          24,993
  Increase (decrease) in
   reinsurance recoverable             (1,418)             -          40,000
  Increase in federal income
   tax recoverable                     (7,985)             -               -
  Increase in deferred policy
   acquisition costs, net            (894,692)      (773,935)       (324,875)
  Decrease in unearned revenue        (17,221)       (33,306)              -
  Decrease (increase) in premiums
   due                                (31,915)       (19,179)         14,571
  Decrease (increase) in other
   assets                             (24,780)        45,883          (2,534)
  Increase in policy reserves         870,582        731,958         381,888
  Increase (decrease) in deposits
   on pending policy applications      16,593        124,350         (30,514)
  Increase (decrease) in claims
   payable                             22,000              -         (93,794)
  Increase (decrease) in reinsurance
   premiums payable                    (3,733)        25,626           7,285
  Decrease (increase) in federal
   income taxes payable               (32,258)        32,258          (2,154)
  Increase (decrease) in
   commissions, salaries, wages
   and benefits                        68,641        (56,017)         71,046
  Increase (decrease) in accounts
   payable, accrued expenses and
   other liabilities                   57,607       (114,671)         46,362
                                  ------------   ------------    ------------
Net cash provided by operating
 activities                           595,304        494,957          25,961

Investing activities:
  Purchase of available-for-sale
   fixed maturities                (4,031,911)      (782,760)     (1,250,000)
  Sale of available-for-sale
   fixed maturities                 1,789,689      3,112,129       1,539,680
  Maturity of available-for-sale
   fixed maturities                         -        700,000         750,000
  Purchase of preferred stock               -              -      (1,000,000)
  Sale of preferred stock                   -        999,700               -
  Purchase of common stock           (362,588)             -         (20,000)
  Purchase of other invested
   assets                            (150,000)             -               -
  Purchase price paid for
   Benefit Capital Life Insurance
   Company in excess of cash
   acquired                          (200,092)             -               -
  Decrease (increase) in notes
   receivable                         118,472        113,287        (188,827)
  Purchase of furniture and
   equipment (net)                     (3,723)       (28,094)           (594)
                                  ------------   ------------    ------------
Net cash provided by (used in)
 investing activities              (2,840,153)     4,114,262        (169,741)

<PAGE>
<PAGE>F-9

Financing activities:
  Deposits on annuity contracts,
   net                              1,057,423        549,013         574,717
  Policyholder premium deposits,
   net                                  9,886         50,685          (3,758)
  Proceeds from exercise of stock
   options                                  -         42,892               -
  Proceeds from sale of company
   stock                              376,187              -               -
  Cost of stock offering              (54,558)             -               -
  Purchase of company stock          (190,782)             -               -
                                  ------------   ------------    ------------
Net cash provided by financing
 activities                         1,198,156        642,590         570,959
                                  ------------   ------------    ------------
Increase (decrease) in cash and
 cash equivalents                  (1,046,693)     5,251,809         427,179
Cash and cash equivalents,
 beginning of year                  6,587,264      1,335,455         908,276
                                  ------------   ------------    ------------
Cash and cash equivalents,
 end of year                      $ 5,540,571    $ 6,587,264     $ 1,335,455
                                  ============   ============    ============

See notes to consolidated financial statements.

</TABLE>

<PAGE>
<PAGE>F-10


1.   Nature of Operations

First Alliance Corporation (the "Company") was incorporated on February 16,
1993 for the primary purpose of forming, owning and managing life insurance
companies.  On March 4, 1994, the Company's registration statement filed with
the Securities and Exchange Commission and the Kentucky Department of
Financial Institutions for a $12,500,000 public stock offering, which
included a 10% "over-sale" provision (additional sales of $1,250,000), was
declared effective.  The  Company completed its public stock offering on
October 28, 1995, raising total capital of $13,750,000.

The Company has two wholly-owned insurance subsidiaries, First Alliance
Insurance Company ("FAIC"), domiciled in Kentucky and Benefit Capital Life
Insurance Company ("BCLIC"domiciled in Louisiana.  FAIC was incorporated
on December 29, 1994 and initially capitalized with $3,000,000 on January 10,
1995.  The Company made an additional $3,000,000 capital contribution on May
15, 1995 and the Kentucky Department of Insurance ("KDI") granted FAIC a
Certificate of Authority on May 17, 1995.  Insurance operations commenced on
November 1, 1995.  BCLIC was purchased December 30, 1999 and has capital and
surplus of $480,501.  Operating results of BCLIC are not included in these
financial statements.

FAIC's initial product was a twenty pay ordinary life insurance policy with a
flexible premium deferred annuity rider and a decreasing term rider for issue
ages 0 to 50.  During 1997, the Company modified the insurance product being
marketed.  The revised product offers a life insurance policy with an annuity
rider similar to the initial product, however the annual income protection
benefit rider was eliminated and death benefits on the base policy modified.
Additionally, the split between life and annuity premiums and the premium
paying period were changed.  In the first year, the full premium is allocated
to life insurance with all renewal premium payments being split half to life
and half to annuity. Depending on the issue age, the premium paying period is
either ten or twenty years.

The product is being sold in premium units with the ability to purchase
either fractional or multiple units.  If a  greater accumulated annuity value
is desired,  the policyholder may continue to make the premium payments,
after the completion of the premium paying period, with the entire payment
funding the annuity.  Other products currently being marketed by FAIC are a
single premium deferred annuity, a ten year term policy and credit life and
credit accident and health.  FAIC is licensed and sells its product in the
states of Kentucky, Indiana, Ohio and Kansas.  Currently, the products are
only marketed in Kentucky and Indiana.

The Company also has a wholly-owned venture capital subsidiary, First Kentucky
Capital Corporation ("FKCC"), which was capitalized with $224,000 during 1996
and commenced operations on April 12, 1996.  Additional  capital contributions
of $127,500 and $92,000 were made during 1999 and 1997, respectively.  FKCC
provides capital for Kentucky based businesses for both start-up companies
and for expansion of existing businesses.  Investments may take the form of
loans, guarantees, commitments, equity, or joint venture agreements, or any
combination thereof.  FKCC invested in three Kentucky businesses during 1996.
As of December 31, 1997, all of these investments had been written-off.
During 1999 FKCC executed a commitment to purchase three units of the
Prosperitas Partners, LP ("Prosperitas") for $450,000.  Prosperitas is a
venture capital fund based in Louisville, Kentucky.  An initial payment of
$22,500, which represents 5% of the total investment, was paid upon the
execution of the subscription agreement. Upon receipt of the Small Business
Investment Company ("SBIC") license from the U.S. Small Business Association
by Prosperitas, an additional $127,500 was invested.  The investment at
December 31, 1999 was $150,000 with the remaining amount of the commitment
due in equal installments on the second and fourth anniversaries of the
investment.

<PAGE>
<PAGE>F-11

2.   Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") which
differ from statutory accounting practices prescribed or permitted by the
KDI and the Louisiana Department of Insurance ("LDI").

Principles of Consolidation

The accompanying consolidated financial statements include the accounts and
operations of the Company, FAIC, FKCC, BCLIC and Medical Acceptance
Corporation ("MAC", prior to its disposition on December 31, 1997).  All
intercompany accounts and transactions are eliminated in consolidation.

Management's Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect amounts reported in the financial statements and accompanying
notes.  Actual results could differ from those estimates.

Investments

The Company classifies all of its fixed maturity and equity securities,
except equity securities of related parties as available-for-sale.
Available-for-sale securities are carried at fair value with unrealized gains
and losses, net of applicable deferred taxes, reported in other comprehensive
income.  Policy loans are carried at unpaid balances.  Cash equivalents
consist of highly liquid investments with maturities of three months or less
at the date of purchase and are carried at cost which approximates fair value.
Notes receivable are reported at unpaid principal balance, net of allowance
for uncollectible amounts.  Other invested assets are reported at cost.
Short term investments are carried at cost which approximates fair value.
Realized gains and losses on sales of investments are recognized in
operations on the specific identification basis.  Interest and dividends
earned on investments are included in net investment income.

Common stock is reported at cost as these shares represent organizer shares
purchased in the initial private placement and are restricted from sale or
transfer under Rule 144 of the Act (see Note 4).

Investments in related parties are reported at cost (see Note 6).

Investments in unconsolidated affiliates consist of common stock investments
and are recorded using the equity method of accounting, with gains and losses
reported in net investment income.

Office Furniture and Equipment

Office furniture and equipment is recorded at cost less accumulated
depreciation using principally the 200% declining balance method over the
estimated useful life of the respective assets.  Accumulated depreciation was
$96,427 and $69,808 at December 31, 1999 and 1998, respectively.

Office Lease

The Company leases approximately 6,100 square feet located at 2285 Executive
Drive, Lexington, Kentucky.  At December 31, 1998, the Company leased
approximately 5,400 square feet pursuant to a lease agreement which would
expire on March 31, 1999.  In February of 1999, the Company extended the
5,400 square foot lease agreement until January 31, 2001.  Additionally, in
February of 1999 the Company entered into a lease agreement for an additional
700

<PAGE>
<PAGE>F-12

2.   Significant Accounting Policies (continued)

square feet at the same location.  The lease on this additional space expires
on January 31, 2001.  Annual rent expense for the years ended December 31,
1999, 1998 and 1997 totaled $87,386, $77,633 and $75,226, respectively.

Deferred Policy Acquisition Costs

Commissions and other costs of acquiring life insurance, which vary with, and
are primarily related to, the production of new insurance contracts have been
deferred to the extent recoverable from future policy revenues and gross
profits. The acquisition costs are amortized over the life of the related
policies using assumptions consistent with those used in computing policy
reserves.

Goodwill and Value of Insurance Acquired

Goodwill represents the excess of the purchase price of purchased subsidiaries,
over amounts assigned (based on estimated fair values at the date of
acquisition) to the identifiable net assets acquired.  Goodwill is amortized
over 20 years.  At December 31, 1999 no amortization had been recorded.

Value of insurance acquired is recorded for the estimated value assigned to
the insurance in force of the purchased subsidiary at the date of acquisition.
The assigned value is amortized over the expected remaining life of the
insurance in force using methods consistent with that used for amortization
of policy acquisition costs.  The acquisition of BCLIC occurred at December
31, 1999 and accordingly, no amortization has been recorded.

Life Policy Reserves

The liabilities for future policy benefits on the Company's life insurance
products are computed using the net level premium method and assumptions as
to investment yields, mortality, withdrawals and other assumptions, modified
as necessary to reflect anticipated trends and to include provisions for
possible unfavorable deviations.  The assumptions utilized were 7.25% for
investment yields, 1975-1980 select and ultimate tables for mortality, and
Linton BA tables for withdrawal rates.

Annuity Contract Liabilities

Annuity contract liabilities are computed using the retrospective deposit
method and consist of policy account balances, before deducting surrender
charges, which accrue to the benefit of policyholders.  Premiums received on
annuity contracts are recognized as an increase in a liability rather than
premium income.  Interest credited on annuity contracts is recognized as an
expense.

Liability for Policy Claims

Policy claim liabilities are based on known liabilities plus estimated
future liabilities developed from trends of historical data applied to
current exposures.

Policyholder Deposits

Policyholder deposits consist primarily of premium and dividend deposits.
Policyholder premium deposits represent premiums received for the payment of
future premiums on existing policyholder contracts.  Interest is credited on
these deposits at the rate of 6%.  The premium deposits are recognized as an
increase in a liability rather than premium income.  Policyholder dividend
deposits represent dividends paid to policyholders of BCLIC that have been
left with the company to earn interest.  Interest is credited on these
deposits at the rate of 4%.  Interest credited on premium and dividend
deposits is recognized as an expense.

<PAGE>
<PAGE>F-13


2. Significant Accounting Policies (continued)

Premiums

Life insurance premiums for limited payment contract are recorded according
to Statement of Financial Accounting Standard ("SFAS") No. 97. "Accounting
and Reporting by Insurance Enterprises for Certain Long-Duration Contracts
and for Realized Gains and Losses from the Sale of Investments".  Any gross
premium in excess of net premium is deferred and recognized in income in a
constant relationship with insurance in force.

Federal Income Taxes

The Company uses the liability method of accounting for income taxes.
Deferred income taxes are provided for cumulative temporary differences
between balances of assets and liabilities determined under generally accepted
accounting principles and balances determined for tax reporting purposes.

Reinsurance

Estimated reinsurance receivables are reported as assets and are recognized
in a manner consistent with the liabilities related to the underlying
reinsured contracts, in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 113, "Accounting and Reporting for Reinsurance of
Short-Duration and Long-Duration Contracts".

Common Stock

Common stock has no par value and a stated value of $.10 per share and is
fully-paid and non-assessable.

Earnings Per Share

Net income (loss) per common share for basic and diluted earnings per share
is based upon the weighted average number of common shares outstanding during
the year.  During 1998, option shares exercised are assumed to be outstanding
based on the day exercised.   The weighted average outstanding common shares
was 5,645,035 in 1999 and 5,583,016 in 1998 and 5,579,840 in 1997.

Comprehensive Income

As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income".  SFAS No. 130
establishes new rules for the reporting and display of comprehensive income
and its components; however, the adoption of this statement had no impact on
the Company's net income or total shareholder's equity.  SFAS No. 130
requires unrealized gains and losses on the Company's available-for-sale
securities to be included in other comprehensive income.

3. Acquisition of Benefit Capital Life Insurance Company

On December 30, 1999, FAIC, a subsidiary of the Company,  acquired 100% of
the common stock of Benefit Capital Life Insurance Company from an
unaffiliated insurance holding company (the "BCLIC Acquisition").  The BCLIC
acquisition was accounted for as a purchase.  There were no results of
operations to be included in the consolidated statements since the date of
acquisition.

The aggregate purchase price for the BCLIC acquisition was approximately
$636,000 (including net cost associated with the acquisition of approximately
$54,000).  The BCLIC acquisition was financed with the working capital of
FAIC and 25,000 shares of Company stock valued at $62,500.

<PAGE>
<PAGE>F-14

4. Investments
<TABLE>

The amortized cost and fair value of investments in fixed maturities and
equity securities at December 31, 1999 and 1998 are summarized as follows:
<CAPTION>
                                          Gross         Gross
                          Amortized     Unrealized    Unrealized      Fair
                             Cost         Gains         Losses        Value
                         -----------    ----------    ----------   -----------
<S>                      <C>            <C>           <C>          <C>
December 31, 1999:
Fixed maturities
 U.S. government bonds   $ 5,290,951    $    1,119    $   70,633   $ 5,221,437
 Municipal bonds             779,662         1,365        16,345       764,682
 Corporate bonds           2,826,484           277        38,272     2,788,489
                         -----------    ----------    ----------   -----------
Total                    $ 8,897,097    $    2,761    $  125,250   $ 8,774,608
                         -----------    ----------    ----------   -----------
Equity securities        $   382,588    $   46,899    $   21,606   $   407,881
                         -----------    ----------    ----------   -----------
<CAPTION>

December 31, 1998:
<S>                      <C>            <C>           <C>          <C>
Fixed maturities:
 U.S. government bonds   $ 2,549,148    $   64,175    $        -   $ 2,613,323
 Municipal bonds           1,129,553        34,378             -     1,163,931
 Corporate bonds           2,294,752        49,648           525     2,343,8750
                         -----------    ----------    ----------   -----------
Total                    $ 5,973,453    $  148,201    $      525   $ 6,121,129
                         -----------    ----------    ----------   -----------

</TABLE>
<TABLE>

The amortized cost and fair value of fixed maturities at December 31, 1999,
by contractual maturity, are shown below. Actual maturities may differ from
contractual maturities because certain borrowers may have the right to call
or prepay obligations.

<CAPTION>
                                            Amortized         Fair
                                              Cost            Value
                                          -------------   ------------
<S>                                       <C>             <C>
Due in one year or less                   $    880,443    $   876,302
Due after one year through five years        3,910,151      3,854,077
Due after five years through ten years       3,693,217      3,630,943
Due after ten years                            413,286        413,286
                                          -------------   ------------
                                          $  8,897,097    $ 8,774,608

</TABLE>

The fair values for investments in fixed maturities are based on quoted
market prices.

Included in investments are securities which have a fair  value of $4,390,848
and $187,312 at December 31, 1999, which are on deposit with the KDI and the
LDI.

The Company limits credit risk by emphasizing investment grade securities and
by diversifying its investment portfolio among government, states, municipals,
political subdivisions and corporate bonds.  As a result, management believes
that significant concentrations of credit risk do not exist.

On March 31, 1997, the Company purchased 500,000 shares of the $2.00 par
value Secured Non-Cumulative Redeemable Convertible Preferred Stock of U.S.
Star Financial Corporation ("U.S. Star") for $1,000,000.  The Preferred shares
were collateralized with securities, which were in the possession of the
Company, that equal the total investment.  All interest earned on the
collateral was retained by U.S. Star.  The Preferred shares were convertible
into common shares at a rate of one share of Preferred for one share of
common.  U.S. Star could have required the conversion if it met conditions
set forth in the security agreement.  If the Preferred shares were not
converted within eighteen months of the date of purchase, the Preferred
shares could be redeemed at the original purchase price.  On September 30,
1998,

<PAGE>
<PAGE>F-15

4. Investments (continued)

the Preferred shares were redeemed for approximately the original purchase
price.  The Preferred shares contained a provision under which the Company
received dividends in the form of common stock.  During 1998, the Company
received 45,000 shares of U.S. Star common stock.  The common stock received
is restricted from sale or transfer under Rule 144 of the Act.  Accordingly,
the value of the common stock dividend could not be determined and therefore
the Company did not recognize any dividend income or record the common stock
at any value.

On March 31, 1997, the Company purchased 200,000 shares of Paradise Plus USA,
Inc. and 200,000 shares of Paradise Plus Holding Company, Inc. for a total
investment of $20,000 or $.05 per share.  Each company is offering a total of
700,000 shares of its no par value common stock through a private placement
stock offering.  As these shares represent organizer shares and are restricted
under Rule 144 of the Act, the common stock investments have been recorded at
cost.  In addition, the Company executed a $100,000 promissory note bearing
interest at an annual rate of 8.5% with Paradise Plus Holding Company, Inc.
on March 5, 1997.   At December 31, 1999 and 1998, the unpaid principal
balance on this note was $144,334.

During 1996, the Company entered into a $175,000 line of credit agreement,
bearing interest at an annual rate of 10.25%, with Mr. Rick Meyer, President
of First American Capital Corporation (see Note 6).  During 1997, the line of
credit agreement was converted to a thirty-six month promissory note bearing
interest at an annual rate of 10.25%. The Company had a perfected security
interest in amounts due Mr. Meyer from United Security Assurance Company
which would provide for payment of the note.  The note was retired during
1999.  At December 31, 1998 the  unpaid balance of the note was $64,068.

During 1996, the Company entered into a $100,000 line of credit agreement,
which bears interest at an annual rate of 20%, with Mr. James Hayslip of
Successful Solutions, Inc.  During 1997, the line of credit agreement was
extended from July 31, 1997 to July 31, 1998.  The unpaid balance at December
31, 1997 was $22,042.  During 1998, Mr. Hayslip paid the outstanding balance
of the note.

During 1999 and 1998, the Company had gross realized investment gains of $205
and $6,988, respectively.  There were no realized investment gains during 1997.
Realized investment losses totaled $459 and $12,935 in 1998 and 1997,
respectively. There were no realized investment losses during 1999. These
realized gains and losses during 1999, 1998 and 1997 were the result of the
sale of available for sale fixed maturity investments.  In addition, during
1997 the Company incurred a net realized gain of $8,000 related to its
disposition of MAC (see Note 7) and a gross realized loss of $31,000 related
to its line of credit agreement with LGP, Inc. ("LGP", see Note 7).

As of December 31, 1999 and 1998, the Company had recorded an allowance for
uncollectible accounts on notes receivable of $149,698  (including the
allowance recorded in connection with the sale of MAC - see Note 6).

<TABLE>

The following are the components of net investment income:
<CAPTION>
                                             Years ended December 31,
                                      1999           1998            1997
                                  ------------   ------------    ------------
<S>                               <C>            <C>             <C>
Fixed maturities                  $   339,448    $   439,310     $   560,866
Equity securities                         286              -               -
Notes receivable                       18,801         28,149          37,447
Short-term and other investments      319,624        147,996          26,421
Investments in unconsolidated
 affiliates                                 -              -         (97,184)
                                  ------------   ------------    ------------
Gross investment income               678,159        615,455         527,550
Investment expenses                   (18,850)       (19,843)        (22,719)
                                  ------------   ------------    ------------
Net investment income             $   659,309    $   595,612     $   504,831
                                  ============   ============    ============
</TABLE>

<PAGE>
<PAGE>F-16

5. Concentrations of Credit Risk

Credit risk is limited by emphasizing investment grade securities and by
diversifying the investment portfolio among government, special revenue and
corporate bonds.  The Company has not experienced any significant losses in
such investments and believes it is not exposed to any significant credit
risk.   The Company and its subsidiaries maintain cash balances at several
financial institutions.  Accounts at each institution are insured by the
Federal Deposit Insurance Corporation up to $100,000.  Uninsured balances
aggregate $570,000 at December 31, 1999.  The Company has not experienced any
losses in such accounts and believes it is not exposed to any significant
credit risk on cash and cash equivalents.

6. Investments in and Receivables from Related Parties

The Company has investments in related parties of $125,000 at December 31,
1999 and 1998, which are reported at cost as these investments represent
organizer shares purchased in the initial private placement of the related
entities (discussed below) and are restricted from sale or transfer under
Rule 144 of the Act.  The Company also had receivables from these entities
of $14,203 and $20,496 at December 31, 1999 and 1998, respectively.

First American Capital Corporation

On August 8, 1996, the Company purchased 525,000 shares of the common stock
of First American Capital Corporation ("FACC") of Topeka, Kansas, for $52,500.
At December 31, 1998, FACC had raised total capital of $14,349,649 from the
sale of private placement shares and through a $12,500,000 Kansas intrastate
public stock offering which commenced on March 11, 1997.  On January 15, 1999,
FACC completed its public stock offering raising total public offering
proceeds of $13,750,000 which includes a $1,250,000 over-sale.  The proceeds
of the public offering were used to form a Kansas domiciled life insurance
company, First Life America Corporation.  The Company owns 9.6% of the
outstanding common stock of FACC at December 31, 1999.  At December 31, 1999
and 1998, the Company had accounts receivable from FACC of $9,160 and
$14,134, respectively.

 Mid-American Alliance Corporation

On August 8, 1996, the Company purchased 725,000 shares of the common stock
of Mid-American Alliance Corporation ("MAAC") of Jefferson City, Missouri,
for $72,500.   At December 31, 1999, MAAC had raised total capital of
$9,906,015 from the sale of private placement shares and through a
$16,000,000 Missouri intrastate public stock offering.  On December 31, 1997,
MAAC acquired Mid American Century Life Insurance Company ("MACLIC"), a
Missouri domiciled life insurance company.  The proceeds of the public
offering will be used to further capitalize MACLIC.  The public offering will
end on April 14, 1999 and the Company will own approximately 12% of the
outstanding common stock.  At December 31, 1999 and 1998, the Company had
accounts receivable from MAAC of $4,529 and $6,362, respectively.

7.  Venture Capital Subsidiary Investments

FKCC purchased newly issued common stock of MAC, Lexington, Kentucky,
representing a 51% interest, for $50,000 on April 12, 1996.  MAC purchases
receivables from medical providers at a discount.   The acquisition was
accounted for as a purchase and resulted in intangible assets of $26,623
($20,623 goodwill and $6,000 non-compete agreement) at the date of acquisition.
MAC has incurred operating losses since inception.  As such, the Company has
included 100% of MAC's operating losses of $6,182 and $55,241 for the years
ended December 31, 1997 and 1996, respectively, in the consolidated financial
statements.  Further, at December 31, 1996, the Company recorded a valuation
allowance of $26,623 relating to the intangible assets recorded in conjunction
with the acquisition.  During 1996, FKCC entered into a $250,000 line of
credit agreement with MAC.  The unpaid balance on this agreement was $6,616
and $66,708 at December 31, 1999 and 1998, respectively.

<PAGE>
<PAGE>F-17


7.  Venture Capital Subsidiary Investments (continued)

On December 31, 1997, FKCC entered into an agreement  to sell its interest in
MAC for $8,000 in cash and notes receivable of $147,049, which includes the
unpaid balance on the line of credit agreement of $105,049 at December 31,
1997.  Included in the notes receivable balance is a $72,351 contract funding
note, which bears interest at an annual rate of 7%, which will be repaid
based on the underlying patient contract payments, with the remaining balance
due June 30, 1998.  Due to the uncertainty of collectibility of the notes,
the Company recorded a valuation allowance of $74,698. At the date of sale,
the investment in MAC had no carrying value.  The net realized gain on this
disposition was $8,000.

FKCC also purchased a 49% interest in LGP, for $49,000 on October 18, 1996,
which is accounted for on the equity method of accounting.  LGP is a dating
service using interactive-video matchmaking, which combines a television
dating show and an on-line profile library on the Internet.  During 1996,
FKCC entered into a $31,000 line of credit agreement with LGP of which the
entire balance was drawn upon during 1997.  At December 31, 1997, the $31,000
line of credit agreement was determined to be uncollectible and was written-
off.  Due to operating losses of $17,184 in 1996 and $31,816 in 1997, the
investment in LGP has no carrying value at December 31, 1999 or 1998.

Lastly, FKCC purchased a 40% interest in Cybertyme, Inc. ("Cybertyme"),
Glasgow, Kentucky, for $80,000 on November 12, 1996, which is also accounted
for on the equity method of accounting.  Cybertyme provides individuals who
do not have access to a personal computer the ability to access the Internet
for an hourly fee.  In addition, Cybertyme will provide educational classes
regarding Internet use and other personal computer applications.  During 1997,
operating losses of $29,678 were recorded relative to this investment.
Management believes that Cybertyme will continue to incur operating losses
and has elected to record a valuation allowance of $50,322 which approximates
the remaining investment balance at December 31, 1999 and 1998.

On June 16, 1999, First Kentucky Capital Corporation executed a commitment to
purchase three units of the Prosperitas Investment Partners, LP ("Prosperitas")
for $450,000.  Prosperitas is a venture capital fund based in Louisville,
Kentucky.  An initial payment of $22,500, which represents five percent of
the total investment, was paid upon the execution of the subscription
agreement.  On November 29, 1999 a payment of $127,500 was made and the
remaining amount of the commitment is due in equal installments on the second
and fourth anniversaries of the initial capital contribution.


8.  Federal Income Taxes

<TABLE>

The Company files a consolidated federal income tax return with FACC but does
not file a consolidated return with FAIC.  FAIC is taxed as a life insurance
company under the provisions of the Internal Revenue Code and must file a
separate tax return for its initial six years of existence.  Federal income
tax expense for the years ended December  31, 1999, 1998 and 1997 consisted
of the following:

<CAPTION>
                                             Years ended December 31,
                                      1999           1998            1997
                                  ------------   ------------    ------------
<S>                               <C>            <C>             <C>
Current                           $    23,757    $    54,671     $    14,893
Deferred                              230,783        210,431         109,102
                                  ------------   ------------    ------------
Federal income tax expense        $   254,540    $   265,102     $   123,995
                                  ============   ============    ============

</TABLE>
<PAGE>
<PAGE>F-18

8.  Federal Income Taxes (continued)

<TABLE>

Federal income tax expense differs from the amount computed by applying the
statutory federal income tax rate of 34% as follows:
<CAPTION>
                                             Years ended December 31,
                                      1999           1998            1997
                                  ------------   ------------    ------------
<S>                               <C>            <C>             <C>
Federal income tax expense
 (benefit) at statutory rate      $   134,306    $   135,829     $  (189,303)

Small life insurance company
 deduction                            (60,672)       (74,692)        (27,470)
Increase in valuation allowance       180,759        176,967         341,714
Surtax exemptions                     (10,802)        (9,427)         (9,847)
Other                                  10,949         36,425           8,901
                                  ------------   ------------    ------------
Federal income tax expense        $   254,540    $   265,102     $   123,995
                                  ============   ============    ============
</TABLE>

<TABLE>

Deferred federal income taxes reflect the impact of "temporary differences"
between the amount of assets and liabilities for financial reporting purposes
and such amounts as measured by tax laws and regulations.

Significant components of the Company's net deferred tax liability are as
follows:
<CAPTION>
                                                December 31,
                                       1999                    1998
                                  --------------           -------------
<S>                               <C>                      <C>
Deferred tax liability:
  Deferred policy acquisition      $    734,002             $   527,078
  Due and deferred premiums              26,875                  14,324
  Net unrealized investment gains             -                  50,210
                                  --------------           -------------
Total deferred tax liability            760,877                 591,612

Deferred tax asset:
  Policy reserves and contract
   liabilities                           73,805                  76,548
  Unearned revenue                       29,162                  35,018
  Reinsurance premiums                   18,402                  21,114
  Net unrealized investment
   losses                                36,841                       -
  Net operating loss carry
   forward                            1,337,796               1,157,037
  Alternative minimum tax credit
   carry forward                         44,846                  44,846
                                  --------------           -------------
Total deferred tax asset              1,540,852               1,334,563
Valuation allowance                  (1,382,642)             (1,201,883)
                                  --------------           -------------
Net deferred tax asset                  158,210                 132,680
                                  --------------           -------------
Net deferred tax liability         $    602,667             $   458,932
                                  ==============           =============
</TABLE>


The Company has net operating loss carry forwards of approximately $3,934,694,
expiring in 2009 through 2019.  These net operating loss carry forwards are
not available to offset FAIC income.  FAIC has alternative minimum tax credit
carry forwards of $44,846, which have no expiration date.  Federal income
taxes paid during 1999, 1998 and 1997 were $26,000, $15,000 and $22,000
respectively.

<PAGE>
<PAGE>F-19

9. Shareholders' Equity and Statutory Accounting Practices

The insurance subsidiaries are domiciled in Kentucky and Louisiana and
prepare their statutory-basis financial statements in accordance with
statutory accounting practices ("SAP") prescribed or permitted by the
Kentucky and Louisiana Department of Insurance.  Currently, "prescribed"
statutory accounting practices include state insurance laws, regulations, and
general administrative rules, as well as the National Association of Insurance
Commissioners ("NAIC") Accounting Practices and Procedures Manual and a
variety of other NAIC publications.  "Permitted" statutory accounting
practices encompass all accounting practices that are not prescribed; such
practices may differ from state to state, may differ from company to company
within a state, and may change in the future.  During 1998, the NAIC adopted
codified statutory accounting principles  ("Codification").  Codification
will change, to some extent, prescribed statutory accounting principals that
the insurance subsidiaries use to prepare their statutory-basis financial
statements.  At this time it is  anticipated  that Codification will replace
the NAIC Accounting Practices and Procedures Manual and will be effective
January 1, 2001.  However, management believes that the impact of Codification
will not be material to the insurance subsidiaries' statutory-basis financial
statements.

<TABLE>

Net income for 1999, 1998 and 1997 and capital and surplus at December 31,
1999, 1998 and 1997 for the Company's insurance operations as reported in
these financial statements prepared in accordance with GAAP as compared to
amounts reported in accordance with SAP prescribed or permitted by the KDI
and LDI are as follows:

<CAPTION>

                                     GAAP                       SAP
                            -----------------------   ----------------------
                                Net     Capital and       Net    Capital and
                              Income      Surplus       Income     Surplus
<S>                         <C>         <C>           <C>        <C>
1999                        $ 791,210   $ 8,154,804   $ 100,989  $ 6,460,894

1998                          670,447     7,458,286     107,579    6,306,783

1997                          331,555     6,708,844     194,977    6,227,997

</TABLE>

FAIC carries its investment in BCLIC at cost after deduction for amortization
of goodwill and other intangibles, and adjustments for subsequent operating
results.  The admitted value of FAIC's investment in BCLIC equals BCLIC's
statutory capital and surplus of $413,365 plus goodwill of $222,392 at
December 31, 1999.

Principal differences between GAAP and SAP include: a) costs of acquiring
new policies are deferred and amortized for GAAP; b) value of insurance
inforce acquired is established as an asset for GAAP;  c) benefit reserves
are calculated using more current investments, mortality and withdrawals
assumptions for GAAP; d) deferred income taxes are provided for GAAP; e)
assets and liabilities of acquired companies are adjusted to their fair
values at acquisition, with the amount of the purchase price in excess of the
fair value recorded as goodwill under GAAP; f) statutory asset valuation
reserves and interest maintenance reserves are not required for GAAP;  and g)
available-for-sale fixed maturity investments are reported at fair value with
unrealized gains and losses reported as a separate component of shareholders'
equity for GAAP.

Statutory restrictions limit the amount of dividends which may be paid by
FAIC to the Company.  Generally, dividends during any year may not be paid
without prior regulatory approval, in excess of the lesser of (a) 10% of
statutory shareholder's surplus as of the preceding December 31, or (b)
statutory net operating income for the preceding year. In addition, FAIC must
maintain the minimum statutory capital and surplus, $1,250,000, required for
life insurance companies domiciled in Kentucky and BCLIC must maintain
minimum capital and surplus of $450,000.

The KDI and LDI imposes minimum risk-based capital ("RBC") requirements on
insurance enterprises that were developed by the NAIC.  The formulas for
determining the amount of RBC specify various weighing factors that are

<PAGE>
<PAGE>F-20

9. Shareholders' Equity and Statutory Accounting Practices (continued)

applied to financial balances or various levels of activity based on the
perceived degree of risk.  Regulatory compliance is determined by ratio
(the "Ratio") of the enterprises regulatory total adjusted capital, as
defined by the NAIC, to its authorized control level RBC, as defined by the
NAIC.  Enterprises below specific trigger points or ratios are classified
within certain levels, each of which requires specified corrective action.
FAIC and BCLIC have a Ratio that is in excess of the minimum RBC requirements;
accordingly, FAIC and BCLIC meet the RBC requirements.

10. Reinsurance

To minimize the risk of claim exposure, FAIC reinsures all amounts of risk on
any one life in excess of $50,000 for individual life insurance.  Credit life
and accident and health benefits and accidental death benefits are 100%
reinsured.  All amounts of risk in excess of FAIC's retention on individual
life insurance, except for term insurance is ceded to Business Men's
Assurance Company ("BMA").   At December 31, 1999 and 1998, FAIC ceded
$61,333,753 and $66,850,411 of insurance in-force and received reserve
credits of $203,776 and $97,417 respectively.  Pursuant to the terms of the
agreement with BMA, FAIC pays no reinsurance premiums on first year
individual business.  However, SFAS No. 113 requires the unpaid premium to be
recognized as a first year expense and amortized over the estimated life of
the reinsured policies.  FAIC records this unpaid premium as "Reinsurance
premiums payable" in the accompanying  balance sheet and recognized  as
"Reinsurance premiums ceded" in the accompanying income statement.  At
December 31, 1999, and 1998, the unpaid reinsurance premiums net of
amortization totaled $61,450 and $65,183, respectively.  During 1999, 1998
and 1997, FAIC paid $472,735, $79,375 and $50,994 of reinsurance premiums,
respectively.

BCLIC reinsures 50% of the risk to $10,000 and 100% of the risk over $10,000
on any one life.  At December 31, 1999 BCLIC ceded $8,612,671 of reinsurance
in force and received reserve credits of $13,158.  To the extent that the
reinsurance companies are unable to meet their obligations under the
reinsurance agreements, the Company remains primarily liable for the entire
amount at risk.

11. Related Party Transactions

Effective November 1, 1995, the Company entered into a service agreement with
FAIC to provide personnel, facilities, and services to FAIC.  The services to
be performed pursuant to the service agreement are underwriting, claim
processing, accounting, processing and servicing of policies, and other
services necessary to facilitate FAIC's business. The agreement is in effect
until either party provides ninety days written notice of termination.  Under
the agreement, FAIC pays monthly fees based on life and annuity premiums
delivered by FAIC.  The percentages are 25% of first year premiums; 20% of
second year premiums; 10% of third year premiums; and 5% of premiums in years
four and thereafter.  FAIC will retain general insurance expenses related to
its sales agency, such as agent training and licensing, agency meeting
expenses, and agent's health insurance.  Pursuant to the terms of the
agreement, FAIC had incurred expenses of $821,562, $595,146 and $432,648 for
the years ended December 31, 1999, 1998 and 1997, respectively.

The Company entered into service agreements with FACC and MAAC effective
September 1, 1996.  Pursuant to the terms of the agreements, the Company
provides investment management, data processing, accounting and reporting
services in return for a $1,000 per month service fee from each company. Upon
commencement of their public stock offerings (April 1, 1997 for FACC and
November 1, 1997 for MAAC), these fees increased to $2,000 per month.

In December of 1998, the Company contracted with FACC to provide underwriting
and accounting services for FAC. and FACC.  The agreement dated September 1,
1996 between the Company and FACC was terminated with the execution of the
new agreement. Under the terms of the management agreement, the FACC pays
fees based on a percentage of delivered premiums of FLAC.  The percentages
are five and one half percent (5.5%) for first year premiums; four percent
(4%) of second year premiums; three percent (3%) of third year premiums; two
percent (2%) of fourth year premiums and one percent (1%) for year five and
one percent (1%) for years six through ten for ten year policies and one-half
percent (.5%) in years six through twenty for twenty year policies.

<PAGE>
<PAGE>F-21

11. Related Party Transactions (continued)

Under the terms of the agreements, FACC incurred expenses of $60,531, $24,816
and $21,000 during 1999, 1998 and 1997, respectively and MAAC incurred expenses
of $35,000, $24,000 and $14,000 during 1999, 1998 and 1997, respectively.
Further, the Company has accounts receivable of $9,160 and $4,529 from FACC
and MAAC, respectively, at December 31, 1999 and $13,318 and $6,362 from FACC
and MAAC, respectively, at December 31, 1998 (see Note 4).  Various officers
and directors of the Company hold similar positions with FACC and MAAC.

12.  Fair Values of Financial Instruments

The fair values of financial instruments, and the methods and assumptions
used in estimating their fair values, are as follows:

Fixed Maturities

Fixed maturities are carried at fair value in the accompanying consolidated
balance sheets.  The fair value of fixed maturities are based on quoted market
prices.  At December 31, 1999 and 1998, the fair value of fixed maturities
was $8,774,608 and $6,121,129, respectively.

Equity Securities

The fair values of equity securities are based on market prices where
available.  Equity  securities are carried at fair value in the accompanying
financial statements.  At December 31, 1999 the fair value of equity
securities was  $407,881 and $20,000, respectively.

Investments in Related Parties

The Company holds investments in related parties of $125,000 at December 31,
1999 and 1998.  These investments represent organizer shares purchased in the
initial private placement of the respective entities and are restricted under
Rule 144 of the Act.  Accordingly, there are no quoted market prices for
these investments..  These investments are carried at cost in the accompanying
consolidated balance sheets.

Short-Term Investments

The carrying value of short-term investments approximates their fair value.
At December 31, 1999 the fair value of short-term investments was $200,000.
No short-term investments were held at December 31, 1998.

Cash and Cash Equivalents

The carrying values of cash and cash equivalents approximate their fair
values.  At December 31, 1999 and 1998, the fair value of cash and cash
equivalents was $5,540,571 and $6,587,264, respectively.

Policy Loans

The carrying value of policy loans approximates their fair value.  At
December 31, 1999 the fair value of policy loans was $32,194.  No policy
loans were held at December 31, 1998.

Other Invested Assets

The carrying value of other invested assets approximates fair value.  At
December 31, 1999 the fair value of other invested assets was $150,000. No
other invested assets were held in 1998.

<PAGE>
<PAGE>F-22

12.  Fair Values of Financial Instruments (continued)

Notes Receivable and Investments in Unconsolidated Affiliates

The carrying values of notes receivable and investments in unconsolidated
affiliates approximate their fair values.  At December 31, 1999 and 1998, the
fair values of notes receivable was $103,164 and $221,636 respectively.
Investments in unconsolidated affiliates did not have any carrying value at
December 31, 1999 and 1998.

Investment Contracts

The carrying value of investment-type fixed annuity contracts approximates
their fair value.  At December 31, 1999 and 1998, the fair value of
investment-type fixed annuity contracts were $3,004,186 and $1,763,029,
respectively.

13.  Stock Options

The Company has adopted a stock option plan for 200,000 common stock shares.
The option exercise price pursuant to the plan is $1.05.  Grantees have not
more than one year in which to exercise their options.  The stock acquired
pursuant to exercise of options granted is non-transferable for a period of
two years from the date of acquisition.  The Company's three founding
officers are not eligible to participate in the plan.  The  stock options
became available for granting on March 4, 1997.

Stock options are accounted for in accordance with Accounting Principals
Board Opinion No. 25, "Accounting for Stock Issued to Employees."  The
Company has recognized compensation expense equal to the difference between
the option exercise price of $1.05 and the estimated fair value of the stock
at the date of grant.   Compensation cost reflected in these financial
statements as the result of these 54,650 options being granted is $159,743,
representing the difference between the estimated fair value of the
underlying stock at grant date (approximately $4.00 per share) and the
option exercise price.

<TABLE>

A summary of the Company's stock option activity and related information for
the years ended December 31, 1999 and 1998 follows.
<CAPTION>

                                     1999                  1998
                             Options      Price    Options      Price
                           -----------  --------  ---------    --------
<S>                        <C>          <C>       <C>          <C>
Outstanding, beginning of
     year                           -   $      -    54,650     $   1.05
Granted                             -          -         -            -
Exercised                           -          -   (40,850)        1.05
Forfeited                           -          -    13,800            -
                           -----------  --------  ---------    --------
Outstanding, end of
     year                           -                    -
                           ===========            =========

Fair value of options
 granted during year      $         -             $218,600
                          ============            =========

</TABLE>
<PAGE>
<PAGE>F-23


14.       Comprehensive income

In 1999, the Financial Accounting and Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 130, "Reporting Comprehensive
Income".  SFAS 130 requires the detail of comprehensive income for the
reporting period be disclosed in the financial statements.  Comprehensive
income consists of net income or loss for the current period adjusted for
income, expenses gains and losses that are reported as a separate component
of shareholders' equity rather than in the statement of operations.  The
financial statements have been prepared in accordance with SFAS 130.

<TABLE>

The components of comprehensive income along with the related tax effects
are presented for 1999, 1998 and 1997 as follows:

<CAPTION>
                                      1999           1998            1997
                                  ------------   ------------    ------------
<S>                               <C>            <C>             <C>
Unrealized gain on
 available-for-sale securities:
  Unrealized holding gains/
   (losses) during the period     $  (244,669)   $   132,706     $   158,199
  Tax benefit/(expense)                83,186        (45,120)        (53,788)
                                  ------------   ------------    ------------
                                     (161,483)        87,586         104,411
Less:
 Adjustment for gains realized
  in net income                           205          6,829               -
 Tax benefit/(expense)                    (70)        (2,322)              -
                                  ------------   ------------    ------------
                                          135          4,507               -
Plus:
 Adjustment for losses realized
  in net income                             -              -          12,935
 Tax benefit/(expense)                      -              -           4,398
                                  ------------   ------------    ------------
                                            -              -           8,537
                                  ------------   ------------    ------------
Other comprehensive income        $  (161,618)   $    83,079     $   112,948
                                  ============   ============    ============

Net income/(loss)                 $   140,478    $   134,397     $  (680,769)
 Other comprehensive income
 /(loss) net of tax effect:
   Unrealized investment gains
   (losses)                          (161,618)        83,079         112,948
                                  ------------   ------------    ------------
Comprehensive income/(loss)       $   (21,140)   $   217,476     $  (567,821)
                                  ============   ============    ============

Net income/(loss) per common
 share - basic and diluted        $      0.02    $      0.02     $     (0.12)
                                  ============   ============    ============

</TABLE>
<PAGE>
<PAGE>F-24


15.  Segment Information

Prior to 1998 segment data was required to be  presented on an "industry
approach" in accordance with SFAS No. 14. SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information", became effective for 1998
and superseded SFAS No. 14.  SFAS No. 131 requires a "management approach"
(how management internally evaluates the operating performance of its
business units) in the presentation of business segments.  The segment data
that follows has been prepared in accordance with SFAS No. 131 which is
consistent with prior year presentation.  The operations of the Company and
its subsidiaries have been classified into three operating segments as
follows: life and annuity insurance operations, venture capital operations,
and corporate operations.  Segment information as of December 31, 1999, 1998
and 1997 and for the years then ended is as follows:

<TABLE>
<CAPTION>
                                      1999           1998            1997
                                  ------------   ------------    ------------
<S>                               <C>            <C>             <C>
Revenues:
 Life and annuity insurance
  operations                      $  4,103,369   $  2,814,106    $  1,652,201
 Venture capital operations             30,923          4,101        (152,919)
 Corporate operations                  199,834        167,002         155,769
                                  ------------   ------------    ------------
 Total                            $  4,334,126   $  2,985,209    $  1,655,051
                                  ============   ============    ============

Income (loss) before income
 taxes:
 Life and annuity insurance
  operations                      $  1,045,750   $    935,549    $    455,550
 Venture capital operations             30,923          4,085        (154,015)
 Corporate operations                 (681,655)      (540,135)       (858,309)
                                  ------------   ------------    ------------
Total                             $    395,018   $    399,499    $   (556,774)
                                  ============   ============    ============

Assets:
 Life and annuity insurance
  operations                      $ 16,359,833   $ 11,850,273    $  9,259,930
 Venture capital operations            208,766         50,343          46,258
 Corporate operations                2,125,589      3,332,409       3,992,176
                                  ------------   ------------    ------------
Total                             $ 18,694,188   $ 15,233,025    $ 13,298,364
                                  ============   ============    ============

Depreciation and amortization
 expense:
 Life and annuity insurance
  operations                      $    760,468   $    426,476    $    339,562
 Venture capital operations                  -              -               -
 Corporate operations                   15,708         16,436          16,292
                                  ------------   ------------    ------------
Total                             $    776,176   $    442,912    $    355,854
                                  ============   ============    ============
</TABLE>

16.  Claims and Contingencies

The Company received a civil summons on October 6, 1997 related to an
automobile accident in October 1996 which involved an officer of the Company,
who was driving the automobile.  The summons was served by the Circuit Court
in Fayette County, Kentucky and lists Katherine Stockton, Individually, and
as Administratrix of the Estate of Frank Novak, and as next friend of Bradley
Novak, as the Plaintiff.  The legal action alleged that the officer was
acting in the course and scope of employment with the Company at the time of
the accident.  The lawsuit was settled within the insurance policy limits.

<PAGE>
<PAGE>F-25

17. Commitments

On June 16, 1999, First Kentucky Capital Corporation executed a commitment to
purchase three units of the Prosperitas Investment Partners, LP ("Prosperitas")
for $450,000.  Prosperitas is a venture capital fund based in Louisville,
Kentucky.  An initial payment of $22,500, which represents five percent of
the total investment, was paid upon the execution of the subscription
agreement.  On November 29, 1999 a payment of $127,500 was made and the
remaining amount of the commitment is due in equal installments on the second
and fourth anniversaries of the initial capital contribution.

<PAGE>
<PAGE>F-26


<TABLE>

           FIRST ALLIANCE CORPORATION AND SUBSIDIARY

               SCHEDULE I - SUMMARY OF INVESTMENTS
            OTHER THAN INVESTMENTS IN RELATED PARTIES

                        DECEMBER 31, 1999
<CAPTION>

                                                              Amount at
                                                            Which Shown in
                                                             the Balance
Type of Investment                Cost(1)       Value(2)      Sheet (3)
                               -------------  -----------   --------------
<S>                            <C>            <C>           <C>
Fixed Maturities:
 Bonds:
  United States Government
   and government agencies
   and authorities             $  5,290,951   $ 5,221,437   $  5,221,437
  States, municipalities and
   political subdivisions           779,662       764,682        764,682
  All other corporate bonds       2,826,484     2,788,489      2,788,489
                               -------------  -----------   --------------
Total fixed maturities            8,897,097     8,774,608      8,774,608

 Equity securities                  382,588       407,881        407,881
 Policy loans                        32,194        32,194         32,194
 Notes receivable                   103,164       103,164        103,164
 Short-term investments             200,000       200,000        200,000
 Other Invested Assets              150,000       150,000        150,000
                               -------------  -----------   --------------
                                    867,946       893,239        893,239
                               -------------  -----------   --------------
Total investments              $  9,765,043   $ 9,667,847   $  9,667,847
                               =============  ===========   ==============

<FN>
<F1>
(1) Original cost of fixed maturities adjusted for amortization of premiums
    and discounts.

<F2>
(2) Represents fair market value of fixed maturities at the balance sheet
    date determined on the basis of year end market prices.

<F3>
(3) Excludes investments in related parties of $125,000.
</FN>

</TABLE>

<PAGE>
<PAGE>F-27

<TABLE>

                    FIRST ALLIANCE CORPORATION

   SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                     CONDENSED BALANCE SHEET
<CAPTION>

                                                      December 31,
                                               1999                 1998
                                          --------------       --------------
<S>                                        <C>                  <C>
Assets
Available-for-sale fixed maturities,
 at fair value (amortized cost, $884,232
 and $505,365 in 1999 and 1998,
 respectively)                             $     877,414        $     505,848

Equity securities (cost of $156,925 and
 $20,000 in 1999 and 1998, respectively)         157,522               20,000
Investment in subsidiaries*                    8,363,570            7,508,630
Cash and cash equivalents                      1,231,732            2,355,214
Notes receivable                                  93,925              218,688
Investments in related parties                   125,000              125,000
Receivables from related parties                  14,203               20,496
Accrued investment income                         18,684               13,262
Prepaid expenses                                  48,473               23,427
Office furniture and equipment, less
 accumulated depreciation of $81,390
 and $69,808 in 1999 and 1998,
 respectively                                     31,699               43,684
Receivable from subsidiary*                      115,119               70,829
Deferred federal income taxes                      2,115                    -
Other assets                                      12,611                8,358
                                          --------------       --------------
Total assets                               $  11,092,067        $  10,913,436
                                          ==============       ==============

Liabilities and Shareholders' Equity

Accounts payable and accrued expenses      $      14,721        $      64,270
Salaries, wages, and benefits payable            128,741               20,708
Payable to subsidiary*                             5,172                1,569
Deferred federal income taxes                          -                  164
Other taxes payable                                7,000                    -
                                          --------------       --------------
Total liabilities                                155,634               86,711


Shareholders' equity:

Common stock, no par value, 8,000,000
 shares authorized; 5,643,185 and
 5,620,690 shares issued and outstanding
 at December 31, 1999 and 1998,
 respectively; $.10 stated value                 564,318              562,069
Additional paid-in capital                    12,466,943           12,180,352
Retained earnings-deficit                     (2,030,679)          (2,013,165)
Accumulated other comprehensive income           (64,149)              97,469
                                          --------------       --------------
Total shareholders' equity                    10,936,433           10,826,725
                                          --------------       --------------
Total liabilities and shareholders'
 equity                                    $  11,092,067        $  10,913,436
                                          ==============       ==============
<FN>
<F1>
* Eliminated in consolidation
</FN>

</TABLE>

<PAGE>
<PAGE>F-28

<TABLE>

                    FIRST ALLIANCE CORPORATION

   SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

   CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

<CAPTION>

                                             Years ended December 31,
                                      1999           1998            1997
                                  ------------   ------------    ------------
<S>                                <C>            <C>             <C>
Revenues
 Service fee revenue from
  subsidiary*                      $   821,562    $   595,962     $   432,648
 Net investment income                 132,218        118,644         171,204
 Realized investment gains
  (losses)                                  14           (459)        (50,435)
 Equity in earnings of
  subsidiaries*                        822,133        674,533         177,540
 Other income                           97,602         48,000          35,000
                                  ------------   ------------    ------------
Total revenue                        1,873,529      1,436,680         765,957

Benefits and expenses
 Salaries, wages and employee
  benefits                           1,102,195        801,332         680,193
 Compensation cost related to
  stock options                              -              -         159,743
 Professional fees                     107,708         86,930         235,749
 Insurance administration
  expenses                              96,063         85,734          69,466
 Rent expense                           14,734         77,633          75,226
 Depreciation expense                   15,708         16,436          16,292
 Other operating costs and
  expenses                             396,643        234,218         210,057
                                  ------------   ------------    ------------
Total benefits and expenses          1,733,051      1,302,283       1,446,726
                                  ------------   ------------    ------------
Net income/(loss)                      140,478        134,397        (680,769)

Other comprehensive income (loss),
 net of income tax:
 Unrealized investment gain (loss)    (161,618)         4,085          21,993
                                  ------------   ------------    ------------
Comprehensive income (loss)        $   (21,140)   $   138,482     $  (658,776)
                                  ============   ============    ============

<FN>
<F1>
* Eliminated in consolidation
</FN>

</TABLE>

<PAGE>
<PAGE>F-29

<TABLE>
                    FIRST ALLIANCE CORPORATION

   SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                CONDENSED STATEMENTS OF CASH FLOWS

<CAPTION>


                                             Years ended December 31,
                                      1999           1998            1997
                                  ------------   ------------    ------------
<S>                                <C>            <C>             <C>
Net cash used in operating
 activities                        $  (663,978)   $  (585,317)    $  (634,713)

Investing activities:
 Purchase of available-for-sale
  fixed maturities                    (910,480)             -               -
 Sale of available-for-sale
  fixed maturities                     526,014      1,249,863       1,539,680
 Maturity of available-for-sale
  fixed maturities                           -        700,000               -
 Purchase of preferred stock                 -              -        (800,000)
 Sale of preferred stock                     -        799,700               -
 Purchase of common stock             (136,925)             -         (20,000)
 Investment in subsidiaries           (190,000)             -         (92,000)
 Decrease (Increase) in notes
   receivable                          124,763         68,848               -
 Purchase of furniture and
  equipment                             (3,723)       (28,094)         (3,939)
                                  ------------   ------------    ------------
Net cash provided by (used in)
 investing activities                 (590,351)     2,790,317         623,741


Financing activities:
 Proceeds from stock options                 -         42,893               -
 Proceeds from sale of stock           376,187              -               -
 Cost of stock offering                (54,558)             -               -
 Purchase of company stock            (190,782)             -               -
                                  ------------   ------------    ------------
Net cash provided by financing
 activities                            130,847         42,893               -
                                  ------------   ------------    ------------

Increase (decrease) in cash and
 cash equivalents                   (1,123,482)     2,247,893         (10,972)

Cash and cash equivalents,
 beginning of year                   2,355,214        107,321         118,293
                                  ------------   ------------    ------------
Cash and cash equivalents,
 end of year                      $  1,231,732   $  2,355,214    $    107,321
                                  ============   ============    ============
</TABLE>

<PAGE>
<PAGE>F-30

<TABLE>

                     FIRST ALLIANCE CORPORATION

        SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION

<CAPTION>

                        Future policy
                          benefits              Other
            Deferred       losses               policy                Net
            policy       claims and             claims &              invest
            acquisition     loss      Unearned  benefits   Premium    & other
Segment     costs        expenses(a)  premiums  payable(b) revenue    income
            ----------- ------------- --------- ---------- ---------- --------
<S>         <C>         <C>           <C>       <C>        <C>        <C>
December
 31, 1999
 Life
 insurance
 and annuity
 operations $ 2,743,111 $  6,319,849  $ 86,878  $ 230,602  $3,329,812 $526,168

 Venture
 capital
 operations           -            -         -          -           -        -

 Corporate
 operations           -            -         -          -           -  132,218
            ----------- ------------- --------- ---------- ---------- --------
 Total      $ 2,743,111 $  6,319,849  $ 86,878  $ 230,602  $3,329,812 $658,386
            =========== ============= ========= ========== ========== ========
December
 31, 1998
 Life
 insurance
 and annuity
 operations $ 1,848,419 $  3,256,795  $102,993  $ 177,528  $2,294,441 $476,968

 Venture
 capital
 operations           -            -         -          -           -        -

 Corporate
 operations           -            -         -          -           -  118,644
            ----------- ------------- --------- ---------- ---------- --------
Total       $ 1,848,419 $   3,256,795 $102,993  $ 177,528  $2,294,441 $595,612
            =========== ============= ========= ========== ========== ========


December
 31, 1997
 Life
 insurance
 and annuity
 operations $ 1,074,485  $  1,874,359 $136,299  $ 117,137  $1,221,400 $430,811

 Venture
 capital
 operations           -             -         -         -           -  (97,184)

 Corporate
  operations          -             -         -         -           -  210,959
            ----------- ------------- --------- ---------- ---------- --------
Total       $ 1,074,485 $   1,874,359  $136,299 $ 117,137  $1,221,400 $544,586
            =========== ============= ========= ========== ========== ========
</TABLE>

<PAGE>
<PAGE>F-31

<TABLE>

                    FIRST ALLIANCE CORPORATION

  SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION (continued)

<CAPTION>

                              Benefits        Amortization
                               claims,         of deferred
                             losses and          policy           Other
                             settlement        acquisition      operating
Segment                      expenses(c)          costs          expenses
<S>                          <C>              <C>               <C>
December 31, 1999

Life insurance and annuity
  operations                 $  371,650       $  760,468        $   363,556

Venture capital operations            -                -                  -

Corporate operations                  -                -          1,703,051
                             ----------       ----------        -----------
Total                        $  371,650       $  760,468        $ 2,066,607
                             ==========       ==========        ===========

December 31, 1998

Life insurance and annuity
  operations                 $  138,545       $  426,476        $   580,579

Venture capital operations            -                -                  -

Corporate operations                  -                -          1,302,283
                             ----------       ----------        -----------
Total                        $  138,545       $  426,476        $ 1,882,862
                             ==========       ==========        ===========

December 31, 1997

Life insurance and annuity
  operations                 $  465,378       $  339,562        $   390,259

Venture capital operations            -                -              2,548

Corporate operations                  -                -          1,014,078
                             ----------       ----------        -----------
Total                        $  465,378       $  339,562        $ 1,406,885
                             ==========       ==========        ===========
<FN>
<F1>
(a) Includes annuity contract liabilities.
<F2>
(b) Includes policyholder premium and dividend deposits.
<F3>
(c) Includes interest credited on annuity contract liabilities and
     policyholder premium deposits.
</FN>

</TABLE>
<PAGE>
<PAGE>F-32

<TABLE>

                    FIRST ALLIANCE CORPORATION

                    SCHEDULE IV - REINSURANCE

<CAPTION>

                                                                   Percentage
                                                                    of Amount
                               Ceded to    Assumed                   Assumed
                      Gross     Other     from Other                  to Net
                      Amount   Companies  Companies   Net Amount     Amounts
<S>                 <C>        <C>         <C>        <C>          <C>
Life insurance
 in force
 (in thousands):
December 31, 1999   $  195,895 $  69,947   $       -  $  125,948           -
December 31, 1998      119,576    36,310           -      83,266           -
December 31, 1997       98,685    47,248           -      51,437           -

Premiums:
December 31, 1999   $3,803,251 $ 473,439   $       -  $3,329,812           -
December 31, 1998    2,383,680    89,240           -   2,294,440           -
December 31, 1997    1,279,679    58,279           -   1,221,400           -

</TABLE>