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

                                   FORM 10-KSB
(Mark  one)

[X]  ANNUAL  REPORT  UNDER  SECTION  13  OR  15(D) OF THE SECURITIES EXCHANGE
     ACT  OF  1934 For  the  Fiscal  Year  Ended  December  31,  2000.

[ ]  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
                           --------------------------
                 (Name of small business issuer in its charter)
         Kentucky                                       61-1242009
 (State  of  incorporation)                       (I.R.S.  Employer
                                                  Identification  number)

2285  Executive  Drive,  Suite  308 Lexington,  KY        40505
(Address  of  principal  executive  offices)           (Zip  Code)

     Issuer's  telephone  number              859-299-7656

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

      Securities registered pursuant to section 12(g) of the Exchange Act:
                               Title of Each Class
                               -------------------
                       Class A Common Stock, No Par Value


Check  whether  the issuer (1) filed all reports required to be filed by Section
13  or  15(d) of the Exchange Act of 1934 during the past 12 months, and (2) has
been  subject to such filing requirements for the past 90 days.  Yes [X]  No[  ]

Check  if there is no disclosure of delinquent filers in response to Item 405 of
Regulation  S-B  is  not  contained  in  this  form,  and  no disclosure will 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-KSB
or  any  amendment  to  this  form  10-KSB  [X]

State  issuer's  revenues  for  its  most  recent  fiscal  year:  $4,980,839

State  the  aggregate  market value of the voting equity held by non affiliates:
Of  the  5,527,360  shares  of  common  stock  of  the  registrant  issued  and
outstanding  as  of  March 1, 2001, 4,331,860 shares are held by non-affiliates.
Because  of  the  absence of an established trading market for the common stock,
the  registrant  is unable to calculate the aggregate market value of the voting
stock  held  by  non-affiliates  as of a specified date within the past 60 days.

State 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:  5,527,360  shares  as  of  March  1,  2001

     Documents  Incorporated  by  Reference

Portions of the Proxy Statement for the Annual Meeting of Shareholders scheduled
to  be  held  June  6,  2001  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  III.

Transitional  Small  Business  Disclosure Format (check one) : Yes [  ]  No [X ]

<PAGE>


                                   FORM 10-KSB
                   For the Fiscal Year Ended December 31, 2000

                                TABLE OF CONTENTS

Part  I.

Item  1.     Description  of  Business                                       3
Item  2.     Description  of  Property                                       8
Item  3.     Legal  Proceedings                                              9
Item  4.     Submission  of  Matters  to  a  Vote  of  Security  Holders     9

Part  II.

Item  5.     Market  for  Common  Equity  and  Related Stockholder Matters   9
Item  6.     Management's  Discussion  and  Analysis or Plan of Operation    9
Item  7.     Financial  Statements                                           15
Item  8.     Changes  In  and  Disagreements  With Accountants on Accounting
              And Financial  Disclosure                                      15

Part  III.

Item  9.    Directors,  Executive  Officers,  Promoters  and  Control
             Persons; Compliance With Section 16(a) of the Exchange Act      15
Item  10.   Executive  Compensation                                          15
Item  11.   Security Ownership of Certain Beneficial Owners and Management   15
Item  12.   Certain  Relationships  and  Related  Transactions               16
Item  13.   Exhibits  and  Reports  on  Form  8-K                            16
            Signatures                                                       17


                                     Page 2
<PAGE>
                                     PART I

Item  1.     Description  of  Business
             -------------------------

General
-------

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 could 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").

In  February 1999 the Company commenced an offering of 200,000 shares of class A
common  stock  no  par  value  for  $2.50  per  share.  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 and related exemptions
at the state level.  Additionally, these securities are restricted from transfer
for  thirty  months  from the date of purchase.  The shares of common stock were
offered  directly  to  potential  subscribers on a direct participation basis by
agents  of  the  Company.  During 2000 the Company completed the sale of 200,000
shares  that  raised  total  proceeds  of  $500,000  and incurred offering cost,
including  commissions,  of  $55,608.

First  Alliance  Corporation
----------------------------

The Company is a holding company that engages in the business of life insurance,
annuities,  and  accident  and health insurance through First Alliance Insurance
Company  ("FAIC")  and  Benefit  Capital Life Insurance Company (BCLIC), (herein
collectively,  the "Life Insurance Subsidiaries".)  FAIC has contracted with the
Company  to  provide  administrative  and data processing services for insurance
operations.  The Company provides accounting services for First American Capital
Corporation  ("FACC")  of Topeka, Kansas and its subsidiaries.  The Company owns
approximately  9.7%  of  FACC's  outstanding  common  shares.  Additionally, the
Company  provides underwriting and accounting services for Mid-American Alliance
Corporation ("MAAC") of Jefferson City, Missouri and its insurance subsidiaries,
of  which  it  owns  approximately 11.9%.  Investment income provides additional
income  to  the  Company.

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.

FKCC  purchased  newly  issued  common  stock  of  MAC,  Lexington,  Kentucky,
representing  a  51%  interest,  for  $50,000  on April 12, 1996.  MAC purchased
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  of $147,049.  Due to the uncertainty of collectibility of the
notes,  the  Company  has  a valuation allowance of $6,616 at December 31, 2000.
The  unpaid  balance on this agreement was $6,616 at December 31, 2000 and 1999.
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 by Prosperitas of the
Small  Business Investment Company ("SBIC") license from the U.S. Small Business
Association,  an  additional  $127,500 was invested.  The investment at December
31,  2000  was $150,000 with the remaining amount of the commitment due in equal
installments  on  the  second  and  fourth  anniversaries  of  the  investment.

                                     Page 3
<PAGE>
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 more than
$8,275,892  of  capital and surplus and is wholly owned by the Company.  FAIC is
also licensed to transact life and annuity business in Indiana, Kansas, Ohio and
Tennessee.  Currently,  FAIC  markets its products only 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  was in effect through January 1, 2001, at which time a new management
and  administration  agreement  became effective.  Under the agreement in effect
for  2000, FAIC paid monthly fees based on life and annuity premiums received by
FAIC.  The  percentages  were  25  percent of first-year premiums; 20 percent of
second-year  premiums;  10  percent  of  third-year  premiums;  and 5 percent of
premiums  in  years  four  and thereafter.  FAIC retained 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
incurred expenses totaling $847,530, $821,562 and $595,146 during 2000, 1999 and
1998,  respectively.

Products  of  FAIC
------------------

The  primary  insurance product currently 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 "Alliance 2000," combines both a ten and twenty payment period based
on  the  issue age of the insured.  Issue ages from zero 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  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  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  loads.  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 whereupon there are no surrender charges.

This product is the result of a modification of FAIC's initial insurance product
that  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 zero to 50, there was an annual income protection benefit rider
(decreasing  term  rider).

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

Product  Marketing  and  Sales
------------------------------

FAIC  markets  products  through captive agents; approximately 52 captive agents
are  licensed  to  sell  its  non-credit insurance products.  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.


                                     Page 4
<PAGE>
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  ("KBA").  A
representative  of  the  KBA  promotes  FAIC's credit insurance products through
banks  that  are  members  of the KBA.  Marketing of these products commenced in
December  of  1998.  There  are approximately 275 agents licensed to sell credit
insurance.

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

Credit  Insurance  Agreement
----------------------------

On  November  1, 1998, FAIC entered into a credit insurance agreement with North
Central  Life Insurance Company of St. Paul, Minnesota ("North Central").  Under
the  terms of the agreement, FAIC reinsures 100% of all credit life and accident
and  health  insurance it writes in Kentucky.  FAIC receives a ceding commission
equal  to  2 1/2% (two and a half percent) of credit insurance premiums written,
plus  100%  of commissions paid to agents.  Additionally, North Central provides
all  policy  administration.  During  2000  and 1999, FAIC received $520,018 and
$230,129,  respectively,  of ceding commissions pursuant to the agreement.  FAIC
remains  primarily  liable  in  the  event  North  Central is unable to meet its
obligations  under  the  terms  of  the reinsurance agreement.  North Central is
rated  A+  (Superior)  by  A.M.  Best  Company.

Insurance  In  Force
--------------------

The  following  table  provides  information  concerning  the  Life  Insurance
Subsidiaries'  volume  of  life insurance coverage in force for each of the last
three  years.

<TABLE>
<CAPTION>

Year Ended December 31
(Dollars in Thousands)                     2000      1999      1998
<S>                                      <C>       <C>       <C>
Beginning of period                      $195,895  $119,863  $ 98,685
Acquired business of Benefit Capital            -    17,327         -
New business issued during the period:
     Individual                            58,027    79,466    58,900
     Credit Life                           36,091    10,310       309
                                         --------  --------  --------
Total                                    $290,013  $226,966  $157,894
                                         --------  --------  --------
Terminations during period
     Individual                            36,663    26,852    38,009
     Credit Life                           24,071     4,219        22
                                         --------  --------  --------
In-force end of period                   $229,279  $195,895  $119,863
                                         ========  ========  ========

Reinsurance ceded at end of period       $ 86,207  $ 69,947  $ 36,310
                                         --------  --------  --------
</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,  located in Kansas City,
Missouri.  Additional  reinsurance  is  provided  for  the  10-year term product
through  Optimum  Re Insurance Company of Dallas, Texas.  The retention limit on
the  10-year  term  product is $50,000.  All credit life and accident and health
insurance  written  by  FAIC is 100% reinsured with North Central Life Insurance
Company  of  St.  Paul,  Minnesota.  At  December  31,  2000, FAIC has reinsured
$132,368,000  of  life  insurance  coverage, including $54,060,000 in accidental
death benefits and $18,398,000 of credit life insurance.  BCLIC reinsures 50% of
the  risk  to  $10,000  and  100%  of the risk over $10,000 on any one life.  At
December 31, 2000 and 1999, BCLIC ceded $7,898,481 and $8,612,671 of reinsurance
in  force  and  received  reserve credits of $11,477 and $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.

                                     Page 5
<PAGE>

Underwriting
------------

The  Life  Insurance  Subsidiaries  follow  underwriting  procedures designed to
assess  and  quantify  insurance  risks  before issuing life insurance policies.
Such  procedures  require  medical  examinations  (including  blood tests, where
permitted)  of  applicants  for  policies of life insurance in excess of certain
policy limits. These requirements are graduated according to the applicant's age
and  vary by policy type. The Life Insurance Subsidiaries also rely upon medical
records  and  upon  each applicant's written application for insurance, which is
generally  prepared  under  the  supervision  of  a  trained  agent.

Evaluating  the  impact  of  future Acquired Immune Deficiency Syndrome ("AIDS")
claims  under life insurance policies issued is extremely difficult, in part due
to  the  insufficiency  and conflicting data regarding the number of persons now
infected  with  the  AIDS  virus,  uncertainty as to the speed at which the AIDS
virus has and may spread through the general population, advancements in medical
treatment  options.  The  Life  Insurance  Subsidiaries  have implemented, where
legally  permitted,  underwriting procedures designed to assist in the detection
of  the  AIDS  virus  in  applicants.

Investments
-----------

The  Company  derives a substantial portion of its revenue from investments. The
Life  Insurance Subsidiaries maintain diversified investment portfolios that are
held  primarily  to  fund future policyholder obligations.  State insurance laws
impose certain restrictions on the nature and extent of investments by insurance
companies.  FAIC  made substantial investments in equity securities during 2000.
Neither  the  Company  nor  its  subsidiaries  owned  any  collateralized
mortgage-backed securities as of December 31, 1999 that would be included in the
high-risk  classification.

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.

Competition
-----------

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

Governmental  Regulation
------------------------

The  Life  Insurance Subsidiaries are subject to comprehensive regulation in the
states  in  which  they  are  authorized  to conduct business.  The laws of such
states  establish  supervisory agencies with broad administrative 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.  The  Kentucky and
Louisiana  Department  of  Insurance also periodically examines the business and
accounts  of  the  Life  Insurance  Subsidiaries.

The  Life  Insurance  Subsidiaries  also  can be required, under the solvency or
guaranty  laws  of most states in which they do business, to pay assessments (up
to  prescribed  limits)  to  fund  policyholder  losses  or liabilities of other
insurance  companies that become insolvent. These assessments may be deferred or
foregone  under most guaranty laws if they would threaten an insurer's financial
strength  and,  in  certain  instances,  may be offset against future premium or
intangible  property  taxes.

Kentucky  has  enacted  legislation  which  regulates  insurance holding company
systems,  including  acquisitions,  extraordinary  dividends, terms of affiliate
transactions,  and  other  related  matters.  Under  the  Kentucky statutes, the
Insurance  Subsidiaries  may  not  during any year pay dividends on their common
stock  to  their  parent  company  in  excess of the lesser of the net gain from

                                     Page 6
<PAGE>

operations for the preceding year or 10% of their capital and surplus at the end
of  the  preceding  year,  without  the  consent of the Kentucky Commissioner of
Insurance.  For  2000,  the  maximum amount of dividends that First Alliance and
Benefit  Capital  could pay, without the Commissioner's approval, is $61,514 and
$21,965  respectively.

The  National  Association  of  Insurance Commissioners (NAIC) has taken several
steps  to  address  public  concerns  regarding  insurer  solvency.  These steps
included  implementing  a  state  certification  program  designed  to  promote
uniformity among the insurance laws of the various states and developing insurer
reporting  requirements  that  focus  on  asset  quality,  capital  adequacy,
profitability,  asset/liability  matching,  and  liquidity.  These  requirements
include  establishment  of  asset  valuation  reserves  ("AVR")  and  interest
maintenance  reserves  ("IMR"),  risk-based  capital ("RBC") rules to assess the
capital  adequacy  of  an  insurer, and a revision to the Standard Valuation Law
("SVL")  that specifies minimum reserve levels and requires cash flow testing in
which projected cash inflows from assets are compared to projected cash outflows
for  liabilities  to  determine  reserve  adequacy.

First  Alliance  Insurance Company's AVR, as of December 31, 2000, 1999 and 1998
is  shown  in  Item  6.  "Management's  Discussion  and  Analysis  or  Plan  of
Operations."

RBC  provides  a  means  of  establishing  the  capital  standards for insurance
companies to support their overall business operations with regard to their size
and risk profile.  The four categories of major risk involved in the formula are
[i]  asset  risk - the risk with respect to the insurer's assets; [ii] insurance
risk  -  the  risk of adverse insurance experience with respect to the insurer's
liabilities  and  obligations; [iii] interest rate risk - the interest risk with
respect  to  the insurer's business; and [iv] business risk - all other business
risk.  A  company's  RBC  is  calculated  by  applying factors to various asset,
premium  and  reserve  items,  with  higher factors for those items with greater
underlying  risk  and  lower  for  less  risky items.  RBC standards are used by
regulators  to set in motion appropriate regulatory actions relating to insurers
that  show  signs  of  weak  or  deteriorating conditions.  They also provide an
additional  standard for minimum capital, below which companies would, be placed
in conservatorship.  Based on RBC computations as of December 31, 2000, the Life
Insurance  Subsidiaries  each have capital levels which are at least 400% of the
minimum  requirements.

Action  taken by the NAIC in these and other areas may have a significant impact
on  the  regulation  of insurance companies during the next several years. Given
their  comparatively  small  size,  it  may  be expected that the Life Insurance
Subsidiaries  would  be affected by more stringent regulatory policy, both under
existing  laws  and  any  new regulatory initiatives. Such effects could include
curtailment  or  discontinuance of insurance underwriting in one or more states,
mandated  increases  in  capital  and  surplus,  and/or  other  effects.

Federal  Income  Taxation
-------------------------

The  Life  Insurance  Subsidiaries  are  taxed  under the life insurance company
provisions of the Internal Revenue Code of 1986, as amended (the "Code").  Under
the  Code,  a  life  insurance company's taxable income incorporates all income,
including  life and health premiums, investment income, and certain decreases in
reserves.  The  Code  currently establishes a maximum corporate tax rate of 35%.
The  Code  currently requires capitalization and amortization over a five to ten
year  period of certain policy acquisition costs incurred in connection with the
sale of certain insurance products.  These provisions apply to life, health, and
annuity  business.  Certain  proposals to make additional changes in the federal
income  tax  laws,  including  increasing  marginal  tax  rates, and regulations
affecting  insurance  companies or insurance products, continue to be considered
at  various  times  in  the  United  States Congress and by the Internal Revenue
Service.  The  Company  currently  cannot predict whether any additional changes
will  be adopted in the foreseeable future or, if adopted, whether such measures
will  have  a  material  effect  on  its  operations.

Reserves
--------

In  accordance  with  applicable insurance laws, the Life Insurance Subsidiaries
have  established  and  carry  as  liabilities  actuarial reserves to meet their
policy  obligations.  Life insurance reserves, when added to interest thereon at
certain  assumed  rates and premiums to be received on outstanding policies, are
required to be sufficient to meet policy obligations. The actuarial factors used
in  determining  reserves  in the statutory basis financial statements are based
upon  statutorily-prescribed  mortality  and interest rates. Reserves maintained
for  health  insurance include the unearned premiums under each policy, reserves
for  claims  that  have  been reported but not yet paid, and reserves for claims
that  have  been  incurred  but  have  not  been  reported.

                                     Page 7
<PAGE>

The reserves carried in the financial statements included elsewhere in this Form
10-KSB  are  calculated on the basis of accounting principles generally accepted
in  the  United States and differ from the reserves specified by the laws of the
various  states  and  carried  in the financial statements of the Life Insurance
Subsidiaries  prepared  on  the  basis of statutory accounting principles. These
differences  arise  from the use of different mortality and morbidity tables and
interest  assumptions,  the  introduction  of lapse assumptions into the reserve
calculation,  and  the  use of the level premium reserve method on all insurance
business.  See  Note  2  of  the  Notes to Consolidated Financial Statements for
certain  additional  information  regarding reserve assumptions under accounting
principles  generally  accepted  in  the  United  States.

Financial  Information  Relating  to  Industry  Segments
--------------------------------------------------------

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

<TABLE>
<CAPTION>
                                             Years  ended  December  31,

                                           2000          1999          1998
<S>                                    <C>           <C>           <C>
Premiums earned, net of reinsurance:
Life and annuity insurance operations  $ 3,711,547   $ 3,329,812   $ 2,294,440
                                       ============  ============  ============

Revenues:
Life and annuity insurance operations  $ 4,235,693   $ 3,882,532   $ 2,814,106
Venture capital operations                       0        30,923         4,101
Corporate operations                       245,280       199,834       167,002
                                       ------------  ------------  ------------
Total                                  $ 4,480,973   $ 4,113,289   $ 2,985,209
                                       ============  ============  ============

Income/(loss) before income taxes:
Life and annuity insurance operations  $   873,928   $ 1,045,750   $   935,549
Venture capital operations                       0        30,923         4,085
Corporate operations                      (672,810)     (681,655)     (540,135)
                                       ------------  ------------  ------------

Total                                  $   201,118   $   395,018   $   399,499
                                       ============  ============  ============

Assets:
Life and annuity insurance operations  $19,163,645   $16,729,347   $11,850,273
Venture capital operations                 208,766       208,766        50,343
Corporate operations                     1,712,838     2,125,589     3,332,409
                                       ------------  ------------  ------------
Total                                  $21,085,249   $19,063,702   $15,233,025
                                       ============  ============  ============
</TABLE>

Employees
---------

As  of  March  1,  2000  there  were  16  full  time  employees.

Item  2.     Description  of  Property
--------     -------------------------

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 1999, the Company extended the 5,400 square foot
lease  agreement  until  January  31,  2001.  Additionally, in February 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, 2000 totaled $91,268.
Currently,  the  Company's policy is not to invest in real estate or real estate
mortgages, although a change in such policy would not require a vote of security
holders

                                     Page 8
<PAGE>

Item  3.     Legal  Proceedings
--------     ------------------

There  are  no legal proceedings pending against the Company or its subsidiaries
or  of  which  any of their property is the subject. There are no proceedings in
which  any director, officer, affiliate or shareholder of the Company, or any of
their  associates,  is a party adverse to the Company or any of its subsidiaries
or  has  a  material interest adverse to the Company or any of its subsidiaries.

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

No  matter was submitted during the fourth quarter of the fiscal year covered by
this  Form  10-KSB  to  a  vote  of  the Company's security holders, through the
solicitation  of  proxies  or  otherwise.

                                     PART II

Item  5.     Market  for  Common  Equity  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, 2001, there are approximately 5,500 shareholders of the Company's
outstanding  common  stock.

(c.)   Dividends
       ---------

The Company has not paid any cash dividends since inception (February 16, 1993).
The Board of Directors of the Company has not adopted a dividend payment policy;
however,  dividends  must  necessarily  depend  upon  the Company's earnings and
financial  condition,  applicable legal restrictions, and other factors relevant
at  the time the Board of Directors considers a dividend policy.  Cash available
for dividends to shareholders of the Company must initially come from income and
capital  gains  earned  on its investment portfolio, management service fees and
dividends  paid  by  the Insurance Subsidiaries.  Provisions of the Kentucky and
Louisiana  Insurance  Code  relating  to  insurance  holding  companies  subject
transactions  between  the  Company  and  the  Insurance Subsidiaries, including
dividends  paid  to  the  Company,  to  certain  standards generally intended to
prevent  such  transactions  from  adversely  affecting the adequacy of the Life
Insurance  Subsidiaries'  capital  and surplus available to support policyholder
obligations.  See  Item  1. "Description of Business - Governmental Regulation."
In  addition,  under  the Kentucky Business Corporation Act, the Company may not
pay dividends if, after giving effect to a dividend, it would not be able to pay
its  debts  as  they  become due in the usual course of business or if its total
liabilities  would  exceed  its  total  assets.

Item  6.     Management's  Discussion  and  Analysis  or  Plan  of  Operation
--------     ----------------------------------------------------------------

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
or  Plan  of  Operation,"  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.

                                     Page 9
<PAGE>

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  6  of  this  Form  10-KSB.

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

During  2000 net income decreased $200,359 compared to 1999 results and earnings
per  share decreased 143% to a loss per share of $.01 compared to the prior year
while  equity  per  share  decreased 5% to $1.84. A significant portion of these
results is attributable to the timing of the Company's decision to substantially
increase its investment in equity securities. As detailed below, during 1999 and
1998  the Company maintained an equity portfolio averaging approximately $86,504
and  $20,000,  respectively  (cost basis).  During 2000 the investment in equity
securities was increased to average $3,089,864 (cost basis).  If the Company had
invested its equities in fixed maturities yielding 7%, 2000 pre-tax income would
have  been  approximately  $201,790 higher, and realized investment losses would
have  declined.

Acquisitions
------------

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").  Benefit  Capital  is
licensed in the state of Louisiana only and had statutory capital and surplus of
approximately  $413,000.  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. The BCLIC
Acquisition was accounted for as a purchase.  Results of operations are included
in  the  consolidated  statements  since  the  date  of  acquisition.  A capital
contribution  of  $37,000  was  made  during  2000.

Dispositions
------------

Purchase  of  FAC  Stock  and  Sale  of  Benefit  Capital Life Insurance Company

On  June 27, 2000, the Company purchased 132,000 shares of FAC common stock from
Chris  Haas ("Haas"), former Chairman of the Board of the Company, for $2.49 per
share for an aggregate purchase price of  $328,680 and entered into an agreement
with  HAAS  to  exchange  all  the outstanding common capital stock of BCLIC for
268,000  shares of FAC common stock.  Under the terms of the agreement, FAC will
purchase  BCLIC from FAIC for $670,000 cash and FAC will exchange BCLIC for HAAS
FAC shares.  The agreement is subject to regulatory approval by the Kentucky and
Louisiana Departments of Insurance.  On March  5, 2001 the sale of BCLIC to Haas
was  completed.

Consolidated  Financial  Condition
----------------------------------

Significant  changes  in the consolidated balance sheet of 2000 compared to 1999
reflect  the operations of the Company and capital transactions discussed below.

At  December  31,  2000, the Company's available-for-sale fixed maturities had a
fair  value  of  $8,734,400  and  amortized  cost  of  $8,548,507.  The
available-for-sale portfolio consists of fixed maturities and equity securities.
This  portfolio  is reported at fair value with unrealized gains and losses, net
of applicable deferred taxes, reflected as a separate component in shareholders'
equity.  The  Company's  fixed  maturities  portfolio decreased approximately 4%
during 2000 and increased approximately 49% in 1999, on an amortized cost basis.
The  2000 decrease resulted primarily from repositioning funds into the equities
markets,  while  the 1999 increase resulted from the Benefit Capital acquisition
and  repositing  cash  from  short-term investments.  All of the Company's fixed
maturities  portfolio  was  rated  Aaa  to  A3  by  Moodys  rating  service.

                                    Page 10
<PAGE>

The  Company's  investment  in  equity  securities  increased  $2,785,730  and
$1,724,214  during  2000  on  a  cost  and fair value basis, respectively, after
increasing  $362,588  and $387,881 on a cost and fair value basis, respectively,
in  1999. As of December 31, 2000 there were $1,036,223 of net unrealized losses
in  equity securities, as compared to a  $25,293 unrealized gain at December 31,
1999.  There  were  no  unrealized  gains  or  losses on equity securities in at
December 31, 1998. One security accounted for $190,639 of such unrealized losses
at  December  31,  2000.

As  more  extensively  discussed  under  Consolidated Results of Operations, the
Company  realized  net capital losses from its marketable investments during the
three-year period ended December 31, 2000.  Management believes these pretax net
gains and losses which total $139,684 of losses, ($146,418 loss, 205 gain, 6,529
gain  for  2000,  1999  and  1998,  respectively), are more than would have been
obtained  from a more conservative investment strategy involving only investment
grade bonds.  Net capital gains or losses for a given period are not necessarily
indicative  of  those  for  future  periods.

At December 31, 2000 and 1999 the Company holds notes receivable of $569,788 and
$103,164,  net  of a valuation allowance of $149,698.  At December 31, 2000, the
Company  had $173,722 of notes receivable that had been non-income producing for
the  twelve  months  prior  to  December  31,  2000.

The  increase of $360,000 in other invested assets during 2000 resulted from the
Company's  investment  in  a  limited  liability company that specializes in the
placement  of  rated  and  hard  to  place  life  insurance  products.

The  Company  has  maintained  significant cash and short-term balances over the
past  several  years,  principally  to  hedge  against the uncertainty of future
interest  rates.

Deferred  policy  acquisition  costs  increased  $620,977 net of amortization of
$660,311  during  2000.  Policy  acquisition  expenses  related to new insurance
sales  totaled  $1,281,288  and  were  capitalized  during  2000.

Total policy liabilities as of December 31, 2000, 1999 and 1998 were $9,406,470,
$6,931,937  and  $3,819,064,  respectively.  Approximately 45% of the 2000 total
consist of future policy benefit reserves while policyholder deposit liabilities
represent  55%  of  the  total.

Policyholder  deposits  liabilities  as of December 31, 2000, 1999 and 1998 were
$5,136,141,  $3,467,946  and  $2,157,122,  respectively

Shown  below is a progression of the Company's policyholder deposit activity for
the  year  ended  December  31,  2000.

<TABLE>
<CAPTION>

Year Ended December 31, 2000     Total       Annuity      Other
<S>                           <C>          <C>          <C>
Beginning Balance             $3,234,788   $3,004,186   $230,602
Deposits                       1,536,974    1,494,484     42,490
Withdrawals                     (252,580)    (197,148)   (55,432)
Interest credited                340,672      327,808     12,864
                              -----------  -----------  ---------
Ending Balance                $4,859,854   $4,629,330   $230,524
                              ===========  ===========  =========
</TABLE>

The  growth  in  policyholder  deposit liabilities has resulted from the annuity
rider  deposits  that  begin  in  the  second  policy  year.

The  Company  has  a relatively low effective federal income tax rate, which can
fluctuate  significantly  due  to  the  application  of  Statement  of Financial
Accounting  Standards  ("SFAS")  No.109, "Accounting for Income Taxes." The most
significant  provision  under  SFAS  No.109  affecting  the  Company  is  the
disallowance  of  the  small  life  insurance  company  deduction when computing
deferred  taxes.  The  small  life insurance deduction allows the Life Insurance
Subsidiaries  to  reduce  their  taxable  income  by  60% before computing their
current  provision for tax. By disallowing this, deduction in the computation of
deferred  taxes,  SFAS  No.109 significantly increases the deferred taxes on the
Life  Insurance  Subsidiaries'  temporary  differences. Thus, when a significant
increase  or  decrease  occurs  in  the Company's net temporary differences, the
related  deferred  tax  is  computed using the 34% federal tax rate, whereas tax
will  actually be paid on these net liabilities (when realized) at a lower rate.
The  Company's gross deferred federal income tax liabilities and assets are more
fully  discussed  in  Note  8  to  the  Consolidated  Financial  Statements. All
operating  deferred  tax  assets of the Company are realizable by offset against
existing  deferred  tax liabilities.  Capital deferred tax assets must be offset
against  future  capital gains. The Company believes such gains will materialize

                                    Page 11
<PAGE>

and  the  deferred  tax  assets  will  be  realized. The deferred tax assets are
offset,  to  some  extent, by valuation allowances related to the Company and to
the  Life Insurance Subsidiaries.  The Company's valuation allowance is designed
to  reduce  deferred  tax  assets  to their estimated ultimate realizable value.

Consolidated  Results  of  Operations
-------------------------------------

The  primary source of revenue for the Company is life insurance premium income.
Premium  payments  are  classified  as  first-year  renewal and single.  Renewal
premiums  are  any  premium  payments made after the first year the policy is in
force.

Shown  below  is the Company's premium income for the three years ended December
31,  2000,  1999  and  1998,  respectively.

<TABLE>
<CAPTION>

Premium Income                2000         1999         1998
<S>                        <C>          <C>          <C>
First Year                 $1,432,658   $1,886,288   $1,375,270
Renewal                     2,440,347    1,543,799    1,008,410
Single - Credit Insurance     806,064      368,727            -
                           -----------  -----------  -----------
     Gross premium Income  $4,679,069   $3,798,814   $2,383,680
Reinsurance premium ceded  $ (967,522)  $ (469,002)  $  (89,240)
                           -----------  -----------  -----------
     Net premium income    $3,711,547   $3,329,812   $2,294,440
                           ===========  ===========  ===========
</TABLE>

During 2000, first year premium income declined $453,630 from 1999 levels due to
a  reduction  in the sales force during the first half of the year, however 2001
sales  are expected to increase.  Reinsurance premiums are a direct reduction of
premium  income.  Credit  insurance is 100% reinsured.  The reinsurance premiums
related  to  credit  insurance  were  $806,064  and  $368,727  in 2000 and 1999,
respectively.  All  single  premiums  result  from the sale of credit insurance.

Net  investment  income  for 2000 was $708,375, an increase of $49,066 over 1999
results.  This increase is primarily due to a larger investment base from FAIC's
operations.  Net  investment  income in 1999 and 1998 was $659,309 and $595,612,
respectively.  Investment  income  yields  have declined due to increased equity
security  balances.

Net  realized  investment losses, which total $146,418 during 2000 from the sale
of  bonds  and  common stock, are more than would have been obtained from a more
conservative  investment strategy involving only investment grade bonds.  During
1999 and 1998 realized investment gains were $205 and $6,529, respectively, from
the  sale  of  bonds.

Service fee revenue and other income totaled $207,469 in 2000 which represents a
$83,506 increase over 1999 results of $123,963.  The Company provides accounting
support  to  Mid-American Alliance Corporation and its subsidiaries Mid American
Century  Life  Insurance  Company  and  Security Alliance Insurance Company, and
First  American  Capital  Corporation  and  its  subsidiary  First  Life America
Corporation.  Fees  related  to these accounting services were $173,825, $95,531
and  $48,816  in  2000,  1999  and  1998,  respectively.

The  increase  in  life  insurance  policy  reserves was $754,517, $870,582  and
731,958  in  2000,  1999  and  1998,  respectively.  Life insurance reserves are
established  to  provide  for  the  payment of policyholder benefits.  Actuaries
consider  factors such as premiums, interest, mortality and life expectancy when
calculating  reserve  factors.  Typically,  these  reserve factors increase as a
policy reaches another anniversary, creating a larger reserve.  During 2000, the
reserve  increase  decreased,  when  compared  to  1999, due to a decline in the
volume  of  new  insurance  sales.

Commissions paid to insurance agents totaled $1,632,489, $1,524,961 and $933,100
in  2000,  1999 and 1998, respectively.  Commissions are paid to agents on first
year,  renewal  and  single premium payments.  First-year commission 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 selling credit
insurance.  During 2000 and 1999, commission on the sale of credit insurance was
$499,867 and $220,838. During 2000, the increase in the sale of credit insurance
and  a  decrease  in  first  year ordinary life premium income, accounts for the
$107,528  increase  in  commission  expense  in  2000  over  1999.

                                    Page 12
<PAGE>

Death  claims  during 2000 and 1999, net of reinsurance ceded, were $187,484 and
$122,135  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 No. 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 incurred
and  credited to the annuity fund balances.  As policies renew, the annuity fund
balance  increases  which also increases the base on which interest is earned by
the  policyholder.  The  growth  in  the  annuity  fund balance accounts for the
increase  in  interest  expense  between  years.  Interest expense was $327,808,
$200,107  and  $111,171  for  2000,  1999  and  1998,  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 2000, $1,281,288 of these expenses were capitalized and will be
amortized  over  the  life  of  the  associated  policies.  In  1999  and  1998,
$1,655,160  and  $1,200,412  of  these  costs were capitalized.  Amortization of
deferred  policy  acquisition  costs totaled $660,311, $760,468 and $426,476 for
2000,  1999  and  1998,  respectively.

Selling,  administrative  and general insurance expenses increased $183,722 in a
comparison  of  2000  to  1999.  These expenses relate to the administration and
issuance  of  life  insurance  policies.  This  increase can be attributed to an
increase  in  sales  and  processing costs.  Selling, administrative and general
insurance  expenses  totaled  $546,888,  $363,166 and $333,750 in 2000, 1999 and
1998, respectively.  Salaries, wages and employee benefits totaled $1,059,711 in
2000,  a decrease of $42,484 from 1999 results.  This decrease is due in part to
smaller  incentive  payments  to  officers.

Professional  fees increased $88,329 during 2000 compared to 1999.  Professional
fees  include  accounting,  actuarial, consulting, and legal fees.  Professional
fees  totaled  $196,037,  $107,708  and  $86,930  for  2000,  1999  and  1998,
respectively.

Income  tax  expense  for  2000  totaled  $260,999.  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, resulting in deferred income taxes.  Of the $260,999 amount above,
deferred income taxes totaled $225,431 and taxes currently payable were $35,568.
In  1999  total income tax expense was $254,540, of which $230,783 was deferred.
In  1998  total income tax expense was $265,102, of which $210,431 was deferred.

Statutory  Insurance  Information
---------------------------------

For  insurance  regulatory  and rating purposes, the Life Insurance Subsidiaries
report  on  the  basis  of  statutory  accounting principles ("SAP").  A.M. Best
Company  ("Best")  has  given  First Alliance Insurance Company a rating of NR-5
(not  formally  followed) and Benefit Capital was rated NR-1 (insufficient data)
by  Best.  First Alliance reports its investment in Benefit Capital on the basis
of  the sale price for statutory accounting purposes.  Accordingly, the admitted
value  of  First  Alliance investment in Benefit Capital is $670,000 at December
31,  2000.  First  Alliance  does  not include the $21,965 net income of Benefit
Capital  in  its  statutory  net  income.

To  provide  a  more  detailed understanding of First Alliance operations, shown
below  are  SAP  basis  assets,  asset valuation reserves, statutory capital and
surplus,  net  income  and  net  operating  income  for First Alliance Insurance
Company  for  the  five  years  ended  December  31,  2000.

<TABLE>
<CAPTION>

Year Ended                        Asset               Statutory          Net            Net                 Asset
December 31    Assets     Valuation Reserves 1   Capital and Surplus    Income   Operating Income   Valuation Reserves 1
<S>          <C>          <C>                    <C>                   <C>       <C>                <C>
2000         $14,003,366  $               9,971  $          5,564,827  $ 61,514  $         181,789  $               9,971
1999         $12,312,179  $              43,635  $          6,460,894  $100,989  $         100,989  $              43,635
1998         $ 9,865,490  $              10,115  $          6,306,783  $107,578  $         107,578  $              10,115
1997         $ 8,185,820  $               9,649  $          6,227,997  $194,977  $         194,977  $               9,649
1996         $ 7,000,223  $               7,642  $          6,002,781  $ 78,456  $         104,569  $               7,642
</TABLE>

                                    Page 13
<PAGE>

1  Asset  Valuation  Reserves  are statutory liabilities that act as contingency
reserves in the event of extraordinary losses on invested assets and as a buffer
for  policyholders'  surplus  to  reduce  the  impact of realized and unrealized
investment  losses.


During  2000,  statutory  capital  and  surplus  and  asset  valuation  reserves
decreased  by  approximately  $929,731.  This  decrease  resulted primarily from
$891,779  of  net  unrealized  gains  and  losses, $100,989 shareholder dividend
offset  by  $61,514 of statutory net income.  During 1999, statutory capital and
surplus  and asset valuation reserves increased by approximately $187,631.  This
increase  resulted  primarily  from $100,989 of statutory net income, $24,696 of
unrealized  investment  gains,  $62,500  of  additional surplus paid-in.  During
1998,  statutory  capital  and surplus and asset valuation reserves increased by
approximately  $79,252.  This  increase  resulted  primarily  from  $107,578  of
statutory  net income offset by $28,326 of unrealized investment losses.  During
1997,  capital  and  surplus  and  asset  reserves  increased  by  approximately
$227,223.  This  increase  resulted  from  statutory  net  income of 194,977 and
unrealized  investment  gains  of  $32,246.

Statutory  capital  and  surplus,  specifically the component called surplus, is
used  to fund the expansion of an insurance company's first year individual life
and  accident  and  health  sales.  The  first  year commission and underwriting
expenses  on  such sales will normally consume a very high percentage of, if not
exceed,  first  year premiums.  Accordingly, a statutory loss may occur on these
sales  the first year of the policy. The Life Insurance Subsidiaries' first year
sales  of  these  types  of  products  have  not  been  of a magnitude to have a
significant  impact  on  statutory  surplus.

During 2000, Benefit Capital generated approximately $21,965 of net income.   At
December  31,  2000, Benefit Capital's capital and surplus totaled approximately
$489,275.

Cash  Flow  And  Liquidity
--------------------------

During  2000,  the  Company  generated  $819,857  of  positive  cash  flow  from
operations  compared to $595,304 in 1999 and $494,957 in 1998. The increases for
the three years can be attributed primarily to increased life insurance premiums
received  and  annuity  deposits.

Cash  used by investment activities during 2000 of $3,370,739 resulted primarily
from  a  decision  to  increase  the  investments  in  equity  securities, notes
receivable  and other invested assets.  Cash used in investing activities during
1999  includes  payment  of  approximately  $200,000  for  the  Benefit  Capital
Acquisition  in  excess  of the cash acquired on the effective acquisition date.
Cash  provided  by  financing  activities  in  2000  includes an increase in net
policyholder  deposits  of $1,284,394 and a net use of cash of $229,168 from the
purchase  and  sale  of common stock of the Company.  Cash provided by financing
activities  in  1999  includes  an  increase  in  net  policyholder  deposits of
$1,067,309  and  $130,847  from  the  sale  and  purchase of common stock of the
Company.  Cash  provided by financing activities in 1998 includes an increase in
net  policyholder  deposits  of  $599,698 and $42,892 from the exercise of stock
options.

The  Company  is  subject to various market risks. However, the most significant
such  risks  relate  to  fluctuations  in interest rates and in prices of equity
securities.  Regarding interest rates, the value of the Company's fixed-maturity
investment  portfolio  will increase or decrease in an inverse relationship with
fluctuations  In  interest  rates  while  net  investment  income  earned  on
newly-acquired  fixed-maturities  increases  or decreases in direct relationship
with  interest  rate changes. From an income perspective, the Company is exposed
to  rising  interest  rates  which  could  be  a  significant  risk, as the Life
Insurance  Subsidiaries  annuity business is subject to variable interest rates.
The Life insurance companies life insurance policy liabilities bear fixed rates.
The  Company's has not done cash flow testing at December 31, 2000, however cash
flow  testing will be done in 2001.  From a liquidity perspective, the Company's
fixed  rate policy liabilities have been relatively insensitive to interest rate
fluctuations.  Accordingly,  the  Company believes gradual increases in interest
rates  do  not  present  a significant liquidity exposure for the life insurance
policies.  Historically,  the  Company  has maintained conservative durations in
its  fixed-maturity  portfolio.  At  December  31,  2000 cash and fixed-maturity
investments  with  maturities  of  less  than  five  years equaled more than one
hundred  percent  of total policy liabilities. Notwithstanding the foregoing, if
interest  rates  rise  significantly  in  a  short  time  frame, there can be no
assurance  that  the  life  insurance industry, including the Company, would not
experience  increased  levels  of  surrenders  and reduced sales, and thereby be
materially  adversely  affected.

                                    Page 14
<PAGE>

The  Company  has  not  successfully  managed  the risk of equity security price
fluctuations during the last year.  In addition to the measures described above,
the  Life  Insurance  Subsidiaries  comply  with  the  NAIC promulgated Standard
Valuation  Law  ("SVL")  which  specifies  minimum reserve levels and prescribes
methods  for  determining  them,  with  the  intent  of enhancing solvency. Upon
meeting  certain  test,  which  FAIC  met during 2000, the SVL also requires the
Company  to  perform annual cash flow testing for FAIC not later than July 2001.
This  testing  is designed to ensure that statutory reserve levels will maintain
adequate  protection  in  a  variety  of  potential interest rate scenarios. The
Actuarial  Standards  Board  of  the American Academy of Actuaries also requires
cash  flow  testing  as a basis for the actuarial opinion on the adequacy of the
reserves  which  is  a  required part of the annual statutory reporting process.

Cash  flow  testing  projects  cash  inflows  from  assets and cash outflows for
liabilities  in  various  assumed  economic and yield curve scenarios. This is a
dynamic  process,  whereby  the  performance  of  the  assets and liabilities is
directly  related  to  the  scenario  assumptions. (An example would involve the
credited  interest  rate  on  annuity products and how such rates vary depending
upon  projected  earnings  rates, which are based upon asset performance under a
particular  economic  scenario.)

The  Company's  marketing  plan  could  be modified to emphasize certain product
types  and  reduce  others. New business levels could be varied in order to find
the  optimum  level.  Management  believes that the Company's current liquidity,
current  bond  portfolio  maturity  distribution  and  positive  cash  flow from
operations give it substantial resources to administer its existing business and
fund  growth  generated by direct sales. The Company will service other expenses
and  commitments  by:  (1)  Management  fees  charged  to  the  Life  Insurance
Subsidiaries,  (2)  Service  fee income from affiliated companies, (3) Dividends
from  the Life Insurance Subsidiaries, which are limited by law to the lesser of
prior  year  net  operating  income or 10% of prior year-end capital and surplus
unless  specifically  approved  by the controlling insurance departments and (4)
corporate  borrowings,  if  necessary.

Item  7.     Financial  Statements
-------      ---------------------

The  consolidated  financial statements are included in this report beginning on
page  F-1.

Item  8.     Changes  in  and  Disagreements  with Accountants on Accounting and
--------     -------------------------------------------------------------------
Financial  Disclosure
---------------------

     None

                                    PART III

Item  9.     Directors,  Executive  Officers,  Promoters  and  Control  Persons;
--------     -------------------------------------------------------------------
     Compliance  With  Section  16(a)  of  the  Exchange  Act
     --------------------------------------------------------

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  2000  fiscal  year.

Item  10.     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  2000  fiscal  year.

Item  11.     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  2000  fiscal  year.

                                    Page 15
<PAGE>

Item  12.     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  2000  fiscal  year.

Item  13.     Exhibits,  and  Reports  on  Form  8-K
---------     --------------------------------------

  (a)  The  following  documents  are  filed  as part of this form 10-KSB:
 .
     (1)  The  consolidated  financial  statements of First Alliance Corporation
          are  included  herein  on  Page  F-1  through  F-24

     (2)  The  exhibits  set forth on the following Exhibit Index are filed with
          this  report  or  are  incorporated  by  reference  as  set  forth
          herein.

Exhibit  Index
--------------

Exhibit
Number            Name  of  Exhibit
------            -----------------
  3.1     Articles  of  Incorporation,  as  amended  (1)

  3.2     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
                   (filed  herewith)

  11     Statement  regarding  computation  of  per  share  earnings  (4)

  21.1   List  of  subsidiaries

  (b)     Reports  on  Form  8-K
        ----------------------

          None


(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-10

                                    Page 16
<PAGE>
                                   SIGNATURES

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

FIRST  ALLIANCE  CORPORATION


By   /s/Michael  N.  Fink                         Date   3/27/2001
    ---------------------                                ----------
       Michael  N.  Fink,  Chairman/President/Director


By   /s/Thomas  I.  Evans                         Date   3/27/2001
    ---------------------                                ----------
       Thomas  I.  Evans,  Sr.  VP/Secretary/Treasurer/Director

                                    Page 17
<PAGE>
     SIGNATURES

In  accordance  with  the Exchange Act, 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/  Michael  N.  Fink                Date   3/27/2001
    -----------------------                       ----------
       Michael  N.  Fink,  Chairman/President/Director


By   /s/  Scott  J.  Engebritson           Date   3/27/2001
    ----------------------------                  ----------
     Scott  J.  Engebritson,  Vice-Chairman/Director


By   /s/  Thomas  I.  Evans                Date   3/27/2001
    -----------------------                       ----------
     Thomas  I.  Evans,  Sr.  VP/Secretary/Treasurer/Director


By   /s/  Jimmy  Dan  Conner               Date   3/27/2001
    ------------------------                      ----------
     Jimmy  Dan  Conner,  Director


By   /s/  Denzel  E.  Crum                 Date   3/27/2001
    ----------------------                        ----------
     Denzel  E.  Crum,  Director


By   /s/  James  M.  Everett               Date   3/27/2001
    ------------------------                      ----------
     James  M.  Everett,  Director


By   /s/  Charles  L.  Hamilton            Date   3/27/2001
    ---------------------------                   ----------
     Charles  L.  Hamilton,  Director


By   /s/  Ronda  S.  Paul                  Date   3/27/2001
    ---------------------                         ----------
     Ronda  S.  Paul,  Director

                                    Page 18
<PAGE>


                           FIRST ALLIANCE CORPORATION

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                        AND FINANCIAL STATEMENT SCHEDULES

                                                                         Page
Consolidated  Financial  Statements                                    Numbers
-----------------------------------                                   --------


Report  of  Independent  Auditors                                         F-2

Consolidated  Balance  Sheets  as  of  December  31,  2000  and  1999     F-3

Consolidated  Statements  of  Operations  for  the  years  ended
December  31,  2000,  1999  and  1998                                     F-5

Consolidated  Statement  of  Changes  in  Shareholders'  Equity  for  the
 Years ended  December  31,  2000,  1999  and  1998                       F-6

Consolidated  Statements  of  Cash  Flows  for  the  years  ended
December  31,  2000,  1999  and  1998                                     F-7

Notes  to  Consolidated  Financial  Statements                            F-9

                                      F-1
<PAGE>


                          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, 2000
and  1999,  and  the  related  consolidated statements of operations, changes in
shareholders'  equity,  and cash flows for each of the three years in the period
ended  December  31, 2000.  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  audits.

     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  31,2000  and  1999,  and  the
consolidated  results  of their operations and their consolidated cash flows for
each  of  the  three  years in the period ended December 31, 2000, in conformity
with  generally  accepted  accounting  principles.


                                                   /s/KERBER, ECK & BRAECKEL LLP


Springfield,  Illinois
March  21,  2001

                                      F-2
<PAGE>

<TABLE>
<CAPTION>

                               FIRST ALLIANCE CORPORATION

                              CONSOLIDATED BALANCE SHEETS

                                                                    December  31,

                                                                  2000         1999
<S>                                                            <C>          <C>
ASSETS
Investments:
     Securities available for sale, at fair value:
      Fixed maturities (amortized cost, $8,548,507and
      $8,897,097 in 2000 and 1999, respectively)               $ 8,734,400  $ 8,774,608
      Equity securities (cost of $3,168,318 and $382,588
       in 2000 and 1999, respectively)                           2,132,095      407,881
     Policy loans                                                  100,687       32,194
Notes receivable (net of $149,698 valuation
 allowance in 2000 and 1999)                                       569,788      103,164
     Other invested assets                                         510,000      150,000
     Short-term investments                                              -      200,000
                                                               -----------  -----------
Total investments                                               12,046,970    9,667,847

Cash and cash equivalents                                        4,044,915    5,540,571
Investments in related parties                                     237,500      125,000
Receivables from related parties                                    35,675       14,203
Accrued investment income                                          144,074      135,482
Premiums receivable                                                136,069       81,690
Advances to agents                                                  36,382       42,998
Reinsurance recoverable                                            714,561      370,932
Deferred policy acquisition costs                                3,364,088    2,743,111
Value of insurance acquired                                         57,224       61,311
Goodwill                                                           151,027      155,256
Office furniture and equipment                                      45,580       42,499
Federal income tax recoverable                                           -        7,985
Other assets                                                        71,184       74,817
                                                               -----------  -----------
Total assets                                                   $21,085,249  $19,063,702
                                                               ===========  ===========


</TABLE>

                                      F-3
<PAGE>

<TABLE>
<CAPTION>

                          FIRST  ALLIANCE  CORPORATION

                    CONSOLIDATED  BALANCE  SHEETS  (continued)

                                                                  December  31,

                                                                2000          1999
<S>                                                         <C>           <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Policy and contract liabilities:
 Annuity contract liabilities                               $ 4,629,330   $ 3,004,186
 Life policy reserves                                         4,379,730     3,490,498
 Unearned premium reserves                                      358,981       152,580
 Policy and contract claims                                     108,889        42,099
 Policyholder dividend deposits                                  42,726        43,188
 Policyholder premium deposits                                  187,798       187,414
 Deposits on pending policy applications                        276,287       233,158
 Unearned revenue                                                77,010        86,878
 Reinsurance premiums payable                                    56,349        61,450
                                                            ------------  ------------
Total policy and contract liabilities                        10,117,100     7,301,451

Commissions, salaries, wages and benefits payable               175,191       133,382
Accrued expenses and other liabilities                           55,232        89,769
Federal income taxes payable:
Current                                                          11,583             -
Deferred                                                        575,826       602,667
                                                            ------------  ------------
Total liabilities                                            10,934,932     8,127,269

Shareholders' equity:
Common stock, no par value, 8,000,000 shares
  authorized; 5,527,360 and 5,643,185 shares issued and
  outstanding at December 31, 2000 and 1999                     552,736       564,318
Additional paid in capital                                   12,628,272    12,466,943
Accumulated other comprehensive income                         (561,217)      (64,149)
Retained earnings - deficit                                  (2,469,474)   (2,030,679)
Total shareholders' equity                                   10,150,317    10,936,433
                                                            ------------  ------------
Total liabilities and shareholders' equity                  $21,085,249   $19,063,702
                                                            ============  ============


See notes to consolidated financial statements.
</TABLE>

                                      F-4
<PAGE>

<TABLE>
<CAPTION>

                                      FIRST ALLIANCE CORPORATION

                                 CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                      Years ended December 31,

                                                                  2000          1999          1998
<S>                                                           <C>           <C>           <C>
REVENUES
Gross premium income                                          $ 4,679,069   $ 3,798,814   $ 2,383,680
Reinsurance premiums ceded                                       (967,522)     (469,002)      (89,240)
                                                              ------------  ------------  ------------
  Net premium income                                            3,711,547     3,329,812     2,294,440
Investment activity:
  Net investment income                                           708,375       659,309       595,612
  Net realized investment gain (loss)                            (146,418)          205         6,529
Service fee revenue                                               173,825             -             -
Other income                                                       33,644       123,963        88,628
                                                              ------------  ------------  ------------
Total revenue                                                   4,480,973     4,113,289     2,985,209

BENEFITS AND EXPENSES
Increase in policy reserves                                       754,517       870,582       731,958
Death claims (net of reinsurance of $32,735 and                                                     -
  $208,135 in 2000 and 1999, respectively)                        187,484       122,135
Policyholder surrender values                                     201,006        49,408        27,374
Interest credited on policyholder deposits                        340,672       200,107       111,171
Commissions                                                     1,132,622     1,304,124       933,100
Policy acquisition costs deferred                              (1,281,288)   (1,655,160)   (1,200,412)
Amortization expense:
  Deferred policy acquisition cost                                660,311       760,468       426,476
  Value of insurance acquired                                       4,087             -             -
  Goodwill                                                          7,949             -             -
Selling, administrative and general insurance expenses            546,888       363,166       333,750
Salaries, wages and employee benefits                           1,059,711     1,102,195       801,332
Professional fees                                                 196,037       107,708        86,930
Advisory board and directors fees                                  69,876        87,430        65,986
Rent expense                                                       91,268        87,386        77,633
Depreciation expense                                               20,547        15,708        16,436
Other operating costs and expenses                                288,168       303,014       173,976
                                                              ------------  ------------  ------------
          Total benefits and expenses                           4,279,855     3,718,271     2,585,710
                                                              ------------  ------------  ------------
INCOME BEFORE INCOME TAX EXPENSE                                  201,118       395,018       399,499
                                                              ------------  ------------  ------------
Income tax expense                                                260,999       254,540       265,102
                                                              ------------  ------------  ------------
NET INCOME (LOSS)                                             $   (59,881)  $   140,478   $   134,397
                                                              ============  ============  ============
NET INCOME (LOSS) PER COMMON SHARE-BASIC AND
DILUTED                                                       $     (0.01)  $      0.02   $      0.02
                                                              ============  ============  ============
See notes to consolidated financial statements.
</TABLE>

                                      F-5
<PAGE>

<TABLE>
<CAPTION>
                                     FIRST ALLIANCE CORPORATION

                                     CONSOLIDATED STATEMENTS OF
                                   CHANGES IN SHAREHOLDERS' EQUITY


                                                                   Years  ended  December  31,

                                                                2000          1999          1998
<S>                                                         <C>           <C>           <C>
COMMON STOCK:
Balance, beginning of year                                      564,318       562,069       557,984
  Sale of shares in private placement (74,525 and
   150,475 shares in 2000 and 1999, respectively)                 7,453        15,047             -
  Exercise of stock options (40,850 shares)                           -             -         4,085
   Company stock acquired (190,350  and 127,980
   shares in 2000 and 1999, respectively)                       (19,035)      (12,798)            -
                                                            ------------  ------------  ------------
Balance, end of year                                            552,736       564,318       562,069

ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of year                                   12,466,943    12,180,353    12,141,546
Exercise of stock options (40,850 shares)                             -             -        38,807
  Sale of shares in private placement (74,525 and
   150,475 shares in 2000 and 1999, respectively)               178,859       361,140             -
Cost of public offering                                          (1,050)      (54,558)            -
  Company stock acquired (190,350 and 127,980
   shares in 2000 and 1999, respectively)                       (16,480)      (19,992)            -
                                                            ------------  ------------  ------------
 Balance, end of year                                        12,628,272    12,466,943    12,180,353

ACCUMULATED OTHER COMPREHENSIVE INCOME:
Balance, beginning of year                                      (64,149)       97,469        14,390
Net unrealized gain (loss)
  on available-for-sale securities
  net of reclassification adjustment (see below)               (497,068)     (161,618)       83,079
                                                            ------------  ------------  ------------
Balance, end of year                                           (561,217)      (64,149)       97,469

RETAINED EARNINGS-DEFICIT:
Balance, beginning of year                                   (2,030,679)   (2,013,165)   (2,147,562)
Net income (loss)                                               (59,881)      140,478       134,397
  Company stock acquired (190,350 and 127,980
   shares in 2000 and 1999, respectively)                      (378,914)     (157,992)            -
Balance, end of year                                         (2,469,474)   (2,030,679)   (2,013,165)
                                                            ------------  ------------  ------------
TOTAL SHAREHOLDERS' EQUITY                                  $10,150,317   $10,936,433   $10,826,726
                                                            ============  ============  ============

DISCLOSURE OF RECLASSIFICATION AMOUNT:

Unrealized holding gains (loss) arising during period       $  (522,210)  $  (161,823)  $    87,586
Less: reclassification adjustment for (gains) loss
 in net income                                                   25,142           205        (4,507)
                                                            ------------  ------------  ------------
Net unrealized gains (loss) on securities                   $  (497,068)  $  (161,618)  $    83,079
                                                            ============  ============  ============


See notes to consolidated financial statements.
</TABLE>

                                      F-6
<PAGE>

<TABLE>
<CAPTION>

                                     FIRST ALLIANCE CORPORATION

                               CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                    Years ended December 31,

                                                                2000          1999         1998
<S>                                                         <C>           <C>           <C>
OPERATING ACTIVITIES:
Net income (loss)                                           $   (59,881)  $   140,478   $  134,397
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Increase in policy reserves                                     413,401     1,240,096      731,958
Increase in claim liabilities                                    66,790        22,000            -
Increase in reinsurance recoverable                             338,603      (370,932)           -
Interest credited on policyholder deposits                      340,672       183,734      111,171
Provision for depreciation                                       20,547        15,708       16,436
Amortization of goodwill                                          7,949             -            -
Increase in deferred policy acquisition costs, net             (620,977)     (894,692)    (773,935)
Amortization of value of insurance acquired                       4,087             -            -
Amortization of premium and accretion of
 discount on fixed maturity investments                          20,708        23,883       20,899
Net realized investment(gains)loss                              146,418          (205)      (6,529)
Increase in policy loans                                        (68,493)       (5,587)           -
(Increase) decrease in receivables from related
   parties                                                      (21,472)        6,293          790
(Increase) decrease in accrued investment income                 (8,592)      (21,207)      44,397
(Increase) decrease in federal income tax
   recoverable                                                    7,985        (7,985)           -
Increase in premiums receivable                                 (54,379)      (31,915)     (19,179)
(Increase) decrease in advances to agents                         6,616        14,678      (34,425)
(Increase) decrease in other assets                               3,634       (39,458)      80,308
Increase in deposits on pending policy applications              43,129        16,593      124,350
Decrease in unearned revenue                                     (9,868)      (17,221)     (33,306)
Increase (decrease) in reinsurance premium
  payable                                                        (5,101)       (3,733)      25,626
Increase (decrease)  in commissions, salaries,
  wages and benefits                                             41,809        68,641      (56,017)
Increase (decrease) in accrued expenses and other
  liabilities                                                   (34,537)       57,607     (114,671)
Increase (decrease) in federal income taxes payable              11,583       (32,258)      32,258
Increase in deferred federal income tax liability               229,226       230,786      210,429
                                                            ------------  ------------  -----------
Net cash provided by operating activities                       819,857       595,304      494,957

INVESTING ACTIVITIES:
Purchase of available-for-sale fixed maturities              (2,790,071)   (4,031,911)    (782,760)
Sale of available-for-sale fixed maturities                   3,084,201     1,789,689    3,112,129
Maturity of available-for-sale fixed maturities                       -             -      700,000
Sale of preferred stock                                               -             -      999,700
Purchase of common stock                                     (5,136,342)     (362,588)
Sale of common stock                                          2,237,945             -            -
Purchase of other invested assets                              (360,000)     (150,000)           -
Purchase price paid for Benefit Capital Life
 Insurance Company in excess of cash acquired                    (3,720)     (200,092)           -
Decrease (increase) in notes receivable                        (466,624)      118,472      113,287
Short term investments acquired (disposed) net                  200,000             -            -
Purchase of investments in unconsolidated affiliates           (112,500)            -            -
Purchase of furniture and equipment (net)                       (23,628)       (3,723)     (28,094)
                                                            ------------  ------------  -----------
Net cash provided by (used in) investing activities         $(3,370,739)  $(2,840,153)  $4,114,262

                                      F-7
<PAGE>


FINANCING ACTIVITIES:
Deposits on annuity contracts, net                          $ 1,295,669   $ 1,057,423   $  549,013
Policyholder deposits and withdrawals, net                      (11,275)        9,886       50,685
Proceeds from exercise of stock options                               -             -       42,892
Proceeds from sale of company stock                             186,312       376,187            -
Cost of stock offering                                           (1,050)      (54,558)           -
Purchase of company stock                                      (414,430)     (190,782)           -
                                                            ------------  ------------  -----------
Net cash provided by financing activities                     1,055,226     1,198,156      642,590
                                                            ------------  ------------  -----------
Increase (decrease) in cash and cash equivalents             (1,495,656)   (1,046,693)   5,251,809
Cash and cash equivalents, beginning of year                  5,540,571     6,587,264    1,335,455
                                                            ------------  ------------  -----------
CASH AND CASH EQUIVALENTS, END OF YEAR                      $ 4,044,915   $ 5,540,571   $6,587,264
                                                            ============  ============  ===========

See notes to consolidated financial statements.
</TABLE>

                                      F-8
<PAGE>

                           FIRST ALLIANCE CORPORATION

                CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)


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 had capital and surplus of $480,501 at
the  date of purchase.  Operating results of BCLIC are included in the financial
statements  since  the  date  of  acquisition.

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 Indiana,
Kansas, Kentucky, Ohio and Tennessee.  Currently, the products are only marketed
in  Kentucky  and  Indiana.

The  Company  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, 2000 was $150,000 with the remaining
amount  of  the  commitment  due  in equal installments on the second and fourth
anniversaries  of  the initial capital contribution, however the general partner
has  the  right  to  accelerate  or  delay  capital  calls.

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").

                                      F-9
<PAGE>
                   FIRST  ALLIANCE  CORPORATION

      NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS  (continued)

Principles  of  Consolidation
-----------------------------

The  accompanying  consolidated  financial  statements  include the accounts and
operations  of  the  Company,  FAIC, FKCC, BCLIC.  All intercompany accounts and
transactions  are  eliminated  in  consolidation.

Reclassifications
-----------------

Certain reclassifications have been made in the prior years financial statements
to  conform  to  current  year  classifications.  These reclassifications had no
effect  on  previously  reported  net  income  or  shareholder  equity.

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 carried
at  unpaid principal balance, net of allowance for uncollectible amounts.  Other
invested assets are carried 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.

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

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  $116,975 and
$96,427  at  December  31,  2000  and  1999,  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
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, 2000, 1999 and 1998 totaled $91,268, $87,386
and  $77,633,  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.

                                      F-10
<PAGE>

2.     SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)

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, 2000 accumulated amortization was $7,949 (no
amortization  had  been  recorded  at  December  31  1999).

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.  At  December  31,  2000  accumulated  amortization  was  $4,087  (no
amortization  had  been  recorded  at  December  31  1999).

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.

Participating  Insurance
------------------------

The  Company's  subsidiary  BCLIC had $6,106,000 and $7,671,000 of participating
insurance  in  force  at December 31, 2000 and 1999 respectively.  Participating
insurance  represents  40.1%  and  44.3% of BCLIC's inforce at December 31, 2000
and  1999, respectively, and 2.8% and 4.1% of  all insurance inforce at December
31,  2000  and 1999, respectively, and 91.5% and 91.3% of BCLIC's premium income
at  December 31, 2000 and 1999, respectively, and 1.3% of  all premium income at
December  31, 2000.  Participating dividends are determined at the discretion of
the  board  of  directors.  No  dividends  were  paid  during  2000.


                                      F-11
<PAGE>

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.

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
5,602,062,  5,645,035  and  5,583,016  during 2000, 1999 and 1998, respectively.

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.  Results  of  operations  are  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.  A capital contribution of
$37,000  was  made  during  2000.

                                      F-12
<PAGE>


4.  INVESTMENTS

The  amortized cost and fair value of investments in fixed maturities and equity
securities  at  December  31,  2000  and  1999  are  summarized  as  follows:

<TABLE>
<CAPTION>

                                       Gross       Gross
                           Amortized  Unrealized  Unrealized   Fair
                              Cost      Gains      Losses      Value
<S>                        <C>         <C>       <C>         <C>
December 31, 2000:
-------------------------
Fixed maturities
    U.S. government bonds  $5,292,461  $171,427  $    9,621  $5,454,267
    Municipal bonds           749,771     4,647         476     753,942
    Corporate bonds         2,506,275    23,445       3,529   2,526,191
                           ----------  --------  ----------  ----------
Total                      $8,548,507  $199,519  $   13,626   8,734,400
                           ----------  --------  ----------  ----------
Equity securities          $3,168,318  $147,725  $1,183,948   2,132,095
                           ----------  --------  ----------  ----------

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
                           ----------  --------  ----------  ----------
</TABLE>

The  amortized  cost and fair value of fixed maturities at December 31, 2000, 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.

<TABLE>
<CAPTION>
                                         Amortized      Fair
                                           Cost        Value
<S>                                     <C>         <C>
Due in one year or less                 $  275,124  $  276,609
Due after one year through five years    5,367,821   5,445,946
Due after five years through ten years   2,554,720   2,667,375
Due after ten years                        350,842     344,470
                                        ----------  ----------
                                        $8,548,507  $8,734,400
                                        ==========  ==========
</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 $7,861,184 at
December  31,  2000  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.

At December 31, 2000, the Company had $173,722 of notes receivable that had been
non-income  producing  for  the  twelve  months  prior  to  December  31,  2000.

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

                                      F-13
<PAGE>

4.  INVESTMENTS  (CONTINUED)

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.   A valuation allowance of
$143,082  has  been  established.  At  December  31,  2000  and 1999, 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.

Gross  gains  of  $4,773,  $205  and  $6,988  were  realized  on  the  sale  of
available-for-sale  fixed  maturity  investments  during  2000,  1999  and 1998,
respectively  and gross losses of $38,524 and $459  were realized on the sale of
available-for-sale  fixed  maturity  investments  during  2000  and  1998,
respectively.  There  were  no  realized  investment  losses  during  1999.

Gross  gains  of $115,587 and gross losses of $228,254 were realized on the sale
of  available-for-sale  equity  securities  during 2000.  There were no realized
investment  gains or losses on the sale of available-for-sale equity  securities
during  1999  and  1998.

As  of  December  31,  2000  and 1999, the Company had recorded an allowance for
uncollectible  accounts  on  notes  receivable  of  $149,698.

The  following  are  the  components  of  net  investment  income:

<TABLE>
<CAPTION>
                                    Year  ended  December  31,

                                    2000       1999       1998
<S>                               <C>        <C>        <C>
Fixed maturities                  $588,308   $339,448   $439,310
Equity securities                   15,153        286          -
Notes receivable                    17,043     18,801     28,149
Short-term and other investments   138,328    319,624    147,996
                                  ---------  ---------  ---------
Gross investment income            758,832    678,159    615,455
Investment expenses                (50,457)   (18,850)   (19,843)
                                  ---------  ---------  ---------
Net investment income             $708,375   $659,309   $595,612
                                  =========  =========  =========
</TABLE>


5.  CONCENTRATIONS  OF  CREDIT  RISK

Credit  risk  is  limited  by  emphasizing  investment  grade  securities and by
diversifying  the  investment portfolio among government, special revenue public
utility  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  $1,627,695 at December 31, 2000.  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 $237,500 and $125,000  at
December  31,  2000 and 1999, respectively,  which are reported at cost as these
investments  represent  organizer  shares  purchased  in  the  initial  private

                                      F-14
<PAGE>

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  $35,675  and  $14,203  at  December  31,  2000  and  1999,
respectively.

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.  On
January 15, 1999, FACC completed its public stock offering raising total capital
of  $14,562,000.  The proceeds of the public offering were used to form a Kansas
domiciled  life  insurance company, First Life America Corporation.  The Company
owns  9.7%  of  the  outstanding  common  stock of FACC at December 31, 2000  At
December  31,  2000  and  1999, the Company had accounts receivable from FACC of
$18,047  and  $9,160,  respectively.

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.  MAAC  has raised total capital of $10,832,840 from the sale of private
placement  shares  and  through  a  $16,000,000 Missouri intrastate public stock
offering.  The  Company owns approximately 11.9% of the outstanding common stock
of  MAAC at December 31, 2000   On December 31, 1997, MAAC acquired Mid American
Century  Life  Insurance Company ("MACLIC"), a Missouri domiciled life insurance
company.  These shares are not registered under the Securities Act of 1933, they
are  subject  to  restrictions  on  transferability  and  resale  and may not be
transferred  or  resold  except  as permitted under the act and applicable state
securities laws, pursuant to registration or exemption therefrom.  Thomas Evans,
Company  Secretary  and Treasurer, is Assistant Secretary and Treasurer of MAAC.
At  December 31, 2000 and 1999, the Company had accounts receivable from MAAC of
$10,119  and  $4,529,  respectively.

On  June  12,  2000,  the  Company  purchased, thru a private placement, 585,000
shares  of  no  par  value Class A common stock of Integrity Capital Corporation
("ICC")  of  Indianapolis,  IN for $58,500.  At December 31, 2000 ICC had raised
$860,000  from  the  sale  of  private  placement  shares.  After  ICC's private
placement  and public offerings are complete, the Company will own approximately
9.75% of the common stock.  These shares are not registered under the Securities
Act  of 1933, they are subject to restrictions on transferability and resale and
may  not  be  transferred  or  resold  except  as  permitted  under  the act and
applicable  state  securities  laws,  pursuant  to  registration  or  exemption
therefrom.  Michael Fink, Company President, is Chairman of the Board of ICC and
Thomas  Evans,  Company  Secretary  and Treasurer, is Secretary and Treasurer of
ICC.  At December 31, 2000 the Company had accounts receivable from ICC of $573.

On July 6, 2000, the Company purchased, thru a private placement, 540,000 shares
of no par value Class A common stock of Mid-Atlantic Capital Corporation ("MCC")
of  Charleston,  WV  for  $54,000.   At  December  31,  2000  MCC  had
raised  $544,500 from the sale of private placement shares.  After MCC's private
placement  and public offerings are complete, the Company will own approximately
9.75% of the common stock.  These shares are not registered under the Securities
Act  of 1933, they are subject to restrictions on transferability and resale and
may  not  be  transferred  or  resold  except  as  permitted  under  the act and
applicable  state  securities  laws,  pursuant  to  registration  or  exemption
therefrom.

Michael  Fink,  Company  President,  is  Co-Chairman  of  the  Board of MCC.  At
December  31,  2000  the  Company  had  accounts  receivable from MCC of $2,782.

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 purchased
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  of  $147,049.  Due  to  the

                                      F-15
<PAGE>

7.  VENTURE  CAPITAL  SUBSIDIARY  INVESTMENTS  (continued)

uncertainty  of  collectibility  of  the  notes,  the  Company  has  a valuation
allowance  of $6,616 at December 31, 2000.  The unpaid balance on this agreement
was  $6,616  at  December  31,  2000  and  1999.

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, however the general partner
has  the  right  to  accelerate  or  delay  capital  calls.

8.  FEDERAL  INCOME  TAXES

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, 2000, 1999 and 1998 consisted of the
following:

<TABLE>
<CAPTION>
                              Year  ended December 31,

                              2000      1999      1998
<S>                         <C>       <C>       <C>
Current                     $ 35,568  $ 23,757  $ 54,671
Deferred                     225,431   230,783   210,431
                            --------  --------  --------
Federal income tax expense  $260,999  $254,540  $265,102
                            ========  ========  ========

</TABLE>


Federal  income  tax  expense  differs  from the amount computed by applying the
statutory  federal  income  tax  rate  of  34%  as  follows:

<TABLE>
<CAPTION>
                                                                      Year ended December 31,

                                                                    2000       1999       1998
<S>                                                               <C>        <C>        <C>
Federal income tax expense (benefit) at statutory rate            $ 68,380   $134,306   $135,829
Small life insurance company deduction                             (72,666)   (60,672)   (74,692)
Increase in valuation allowance                                    243,596    180,759    176,967
Surtax exemptions                                                   (9,626)   (10,802)    (9,427)
Other                                                               31,315     10,949     36,425
                                                                  ---------  ---------  ---------
Federal income tax expense                                        $260,999   $254,540   $265,102
                                                                  =========  =========  =========

</TABLE>

                                      F-16
<PAGE>

8.  FEDERAL  INCOME  TAXES  (CONTINUED)

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:

<TABLE>
<CAPTION>
                                                     December  31,

                                                  2000          1999
<S>                                           <C>           <C>
Deferred tax liability:
Deferred policy acquisition                   $   882,152   $   734,002
Due and deferred premiums                          46,929        26,875
Total deferred tax liability                      929,081       760,877

Deferred tax asset:
Policy reserves and contract liabilities           20,283        73,805
Unearned revenue                                   24,700        29,162
Reinsurance premiums                               19,159        18,402
Net unrealized investment losses                  289,113        36,841
Net operating loss carry forward                1,581,392     1,337,796
Alternative minimum tax credit carry forward       44,846        44,846
                                              ------------  ------------
Total deferred tax asset                        1,979,493     1,540,852
Valuation allowance                            (1,626,238)   (1,382,642)
                                              ------------  ------------
Net deferred tax asset                            353,255       158,210
                                              ------------  ------------
Net deferred tax liability                    $   575,826   $   602,667
                                              ============  ============

</TABLE>

The  Company  has net operating loss carry forwards of approximately $4,651,152,
expiring  in 2009 through 2020.  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  2000,  1999  and  1998  were  $16,000, $26,000 and $15,000 respectively.

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  Departments  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.
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.

                                      F-17
<PAGE>

9.     SHAREHOLDERS'  EQUITY  AND  STATUTORY  ACCOUNTING  PRACTICES  (CONTINUED)

Net income for 2000, 1999 and 1998 and capital and surplus at December 31, 2000,
1999  and  1998  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:

<TABLE>
<CAPTION>
                  GAAP                                SAP
                 ------                              -----
      Net Income   Capital and Surplus   Net Income   Capital and Surplus
<S>   <C>          <C>                   <C>          <C>

2000  $   612,929  $          8,275,892  $    83,479  $          5,564,827

1999  $   791,210  $          8,154,804  $   100,989  $          6,460,894

1998      670,447             7,458,286      107,579             6,306,783
</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 was $670,000 and
$635,757  at  December  31,  2000  and  1999,  respectively.

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 realistic investment, mortality and withdrawal 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  impose  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
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  excessof  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

                                      F-18
<PAGE>

10.  REINSURANCE  (CONTINUED)

Business  Men's Assurance Company ("BMA").   At December 31, 2000 and 1999, FAIC
ceded  $78,308,236  and  $61,333,753  of insurance in-force and received reserve
credits  of  $340,172  and  $203,776  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, 2000, and
1999,  the  unpaid  reinsurance  premiums  net  of  amortization totaled $56,349
and  $61,450,  respectively.  During  2000,  1999  and 1998, FAIC paid $969,589,
$472,735  and  $79,375  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,  2000  and  1999,  BCLIC ceded $7,898,481 and
$8,612,671  of  reinsurance in force and received reserve credits of $11,477 and
$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 $847,530,
$821,562  and  $595,146  for  the  years ended December 31, 2000, 1999 and 1998,
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,  data  processing,  accounting  and reporting services in return for a
$2,000  per  month  service  fee  from  each  company.

In  December  of  1998, the Company contracted with FACC to provide underwriting
and  accounting  services  for FLAC. 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.

In  February  1999,  the  MAAC  fees  increased  to  $3,000  per  month and upon
completion  of  the  their public stock offering  effective April 2000, the fees
decreased  to  $1,000  per  month.

The  Company  entered  into  a service agreement with MACLIC effective April 14,
2000.  Pursuant  to  the  terms  of  the  agreements,  the Company provides data
processing,  accounting,  reporting  services,  policy  underwriting  and  issue
services,  policy  owner  services  and  claims processing in return for fees of
$2,500  per  month  plus  an amount equal to the policy fees collected on MACLIC
insurance  policies.

                                      F-19
<PAGE>

11.  RELATED  PARTY  TRANSACTIONS  (CONTINUED)

Effective  October  1,  2000,  the  Company  contracted  with  MAAC  to  provide
accounting services to Security Alliance Insurance Company (SAIC"), a subsidiary
of  MACLIC.  Under  the  terms  of  the  service  agreement  MAAC  pays  fees
of  $500  per  month  for all months except March, June, September and December,
$750  per  month  for the months of March, June and September and $1,000 for the
month  of  December.

Under  the  terms of the agreements, FACC incurred expenses of $117,246, $60,531
and  $24,816 during 2000, 1999 and 1998, respectively, MAAC incurred expenses of
$22,500,  $35,000  and  $24,000  during  2000,  1999 and 1998, respectively, and
MACLIC  incurred  expenses  of  $34,079  during 2000.  No expenses were incurred
during  1999 and 1998.  Further, the Company has accounts receivable of $18,047,
$10,119 and $4,154 from FACC MAAC and MACLIC, respectively, at December 31, 2000
and  $9,160  and  $4,529 from FACC and MAAC, respectively, at December 31, 1999.
No  amounts  were  receivable  from  MACLIC  at  December 31, 1999 (see Note 4).
Various  officers and directors of the Company hold similar positions with FACC,
MAAC  and  MACLIC.

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, 2000 and 1999, the fair value of fixed maturities was
$8,734,400  and  $8,774,608,  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, 2000 and 1999 the fair value of equity securities
was  $2,132,095  and  $407,881,  respectively.

Short-Term  Investments
-----------------------

The  carrying value of short-term investments approximates their fair value.  No
short-term  investments were held at December 31, 2000. At December 31, 1999 the
fair  value  of  short-term  investments  was  $200,000.

Cash  and  Cash  Equivalents
----------------------------

The  carrying  values of cash and cash equivalents approximate their fair value.
At  December  31, 2000 and 1999, the fair value of cash and cash equivalents was
$4,044,915  and  $5,540,571,  respectively.

Notes  Receivable
-----------------

The  carrying  amount  of  notes  receivable  approximates their fair value.  At
December  31,  2000  and  1999  the  fair value of notes receivable $569,788 and
$103,164,  respectively.

Policy  Loans
-------------

The  carrying  value of policy loans approximates their fair value.  At December
31,  2000  and  1999,  the  fair value of policy loans was $100,687 and $32,194,
respectively.

                                      F-20
<PAGE>

12.  FAIR  VALUES  OF  FINANCIAL  INSTRUMENTS  (CONTINUED)

Other  Invested  Assets
-----------------------

The  carrying  value of other invested assets approximates their fair value.  At
December  31, 2000 and 1999 the fair value of other invested assets was $510,000
and  $150,000,  respectively.

Investments  in  Related  Parties
---------------------------------

The  Company  holds  investments  in related parties of $237,500 and $125,000 at
December  31,  2000  and  1999.  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  investmentsThese  investments  are  carried  at cost in the
accompanying  consolidated  balance  sheets.

Investment  Contracts
---------------------

The carrying value of investment-type fixed annuity contracts approximates their
fair  value.  At  December  31, 2000 and 1999, the fair value of investment-type
fixed  annuity  contracts  were  $4,629,330  and  $3,004,186,  respectively.

13.  STOCK  OPTIONS

The  Company  adopted  a stock option plan for 200,000 common stock shares.  The
option  exercise  price  pursuant to the plan was $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.  The plan was terminated on June 7, 1999.  There are
no  options  outstanding  under  the  plan.

14.  STOCK  COMPENSATION  PLAN

The  Company  adopted  a  stock compensation plan  on June 7, 1999.  The maximum
number  of shares to be awarded under the plan is 500,000.  Participants are any
employee,  director,  officer,  consultant  or  advisor  of  the  Company or its
subsidiaries  or  who  derive  more  than  50% of their annual income from those
entities  ("Insurance Agents").  Stock may be granted under the plan for present
or  past  services  rendered,  future  services to be rendered, or as bonuses in
recognition  of past service or performance.  The stock acquired pursuant to the
plan is non-transferable for a period of two years from the date of acquisition.
At  December  31,  2000  no  grant  had  been  made  under  the  plan.

5.     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.

                                      F-21
<PAGE>

The  components  of  comprehensive income along with the related tax effects are
presented  for  2000,  1999  and  1998  as  follows:

<TABLE>
<CAPTION>




                                                         2000        1999       1998
<S>                                                   <C>         <C>         <C>
Unrealized gain on available-for-sale securities:
Unrealized holding gains/(losses) during the period   $(791,227)  $(244,669)  $132,706
        Tax benefit/(expense)                           269,017      83,186    (45,120)
                                                      ----------  ----------  ---------
                                                       (522,210)   (161,483)    87,586
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             38,093           -          -
        Tax (benefit)/expense                           (12,951)          -          -
                                                      ----------  ----------  ---------
                                                         25,142           -          -
                                                      ----------  ----------  ---------
Other comprehensive income                            $(497,068)  $(161,618)  $ 83,079
                                                      ==========  ==========  =========

Net income/(loss)                                     $ (59,881)  $ 140,478   $134,397
Other comprehensive income/(loss) net of tax
   effect:
        Unrealized investment gains (losses)           (497,068)   (161,618)    83,079
                                                      ----------  ----------  ---------
Comprehensive income/(loss)                           $(556,949)  $ (21,140)  $217,476
                                                      ==========  ==========  =========

Net income/(loss) per common share - basic
and diluted                                           $   (0.10)  $    0.00   $   0.02
                                                      ----------  ----------  ---------
</TABLE>

                                      F-22
<PAGE>

16.  SEGMENT  INFORMATION

 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,
2000,  1999  and  1998  and  for  the  years  then  ended  is  as  follows:

<TABLE>
<CAPTION>

                                            2000          1999          1998
<S>                                     <C>           <C>           <C>
Revenues:
Life and annuity insurance operations   $ 4,235,693   $ 3,882,532   $ 2,814,106
Venture capital operations                        -        30,923         4,101
Corporate operations                        245,280       199,834       167,002
                                        ------------  ------------  ------------
Total                                   $ 4,480,973   $ 4,113,289   $ 2,985,209
                                        ============  ============  ============

Income (loss) before income taxes:
Life and annuity insurance operations   $   873,928   $ 1,045,750   $   935,549
Venture capital operations                        -        30,923         4,085
Corporate operations                       (672,810)     (681,655)     (540,135)
                                        ------------  ------------  ------------
Total                                   $   201,118   $   395,018   $   399,499
                                        ============  ============  ============

Assets:
Life and annuity insurance operations   $19,163,645   $16,729,347   $11,850,273
Venture capital operations                  208,766       208,766        50,343
Corporate operations                      1,712,838     2,125,589     3,332,409
                                        ------------  ------------  ------------
Total                                   $21,085,249   $19,063,702   $15,233,025
                                        ============  ============  ============

Depreciation and amortization expense:
Life and annuity insurance operations   $   645,784   $   760,468   $   426,476
Venture capital operations                        -             -             -
Corporate operations                         17,111        15,708        16,436
                                        ------------  ------------  ------------
Total                                   $   662,895   $   776,176   $   442,912
                                        ============  ============  ============

</TABLE>


                                      F-23
<PAGE>


17.  PRIVATE  PLACEMENT  OFFERING

In  February 1999 the Company commenced an offering of 200,000 shares of class A
common stock no par value for $2.50 per share.  The securities are exempted from
registration  in  reliance  on Rule 506 of Regulation D of the Securities Act of
1933  and related exemptions at the state level.  Additionally, these securities
are  restricted  from transfer for thirty months from the date of purchase.  The
shares  of  common  stock  were  offered  directly to potential subscribers on a
direct participation basis by agents of the Company.  The Company  completed the
sale  of  200,000  shares  that  raised  total proceeds of $500,000 and incurred
offering  cost,  including  commissions,  of  $55,608.

18.  PURCHASE  OF  FAC  STOCK AND SALE OF BENEFIT CAPITAL LIFE INSURANCE COMPANY

On  June 27, 2000, the Company purchased 132,000 shares of FAC common stock from
Chris Haas ("Haas"),  former Chairman of the Board of the Company, for $2.49 per
share for an aggregate purchase price of  $328,680 and entered into an agreement
with  HAAS  to  exchange  all  the outstanding common capital stock of BCLIC for
268,000  shares of FAC common stock.  Under the terms of the agreement, FAC will
purchase  BCLIC from FAIC for $670,000 cash and FAC will exchange BCLIC for HAAS
FAC shares.  The agreement is subject to regulatory approval by the Kentucky and
Louisiana  Departments  of  Insurance.

19.  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, however the general partner
has  the  right  to  accelerate  or  delay  capital  calls.

On  May  2,  2000  the  Company  entered  into  an agreement with Ken Belsky and
Associates,  LLC  to  provide  a  credit  facility  of $600,000 at a 10% rate of
interest  to  Ken  Belsky  &  Associates,  LLC ("Borrower").  Advances under the
credit  facility  will  be  made as follows: (I) $300,000 as of the closing date
through  March  31, 2001 and (ii) $300,000 as of the satisfaction of the funding
conditions  through  March  31,  2001,  funding conditions were met on March 10,
2000.  Upon  the  Company's  advance to Borrower of the first $100,000, Borrower
will issue a one percent (1%) membership interest in Borrower to the Company and
upon  the  Company's  advance  to  borrow  of  any amount in excess of $300,000,
Borrower  will  issue  an  additional  one  percent  (1%) membership interest in
Borrower  to  the  Company.   Principal  and  interest under the credit facility
shall  be  due  and payable as follows: monthly payments of interest only on the
outstanding  balance  of  the loans through March 1, 2001 and then principal and
interest  will  be  payable  in thirty (30) equal monthly installments beginning
April  1,  2001.  At December 31, 2000, $250,000 had been loaned pursuant to the
agreement.

On  June  21,  2000  the Company agreed to purchase 100,000 shares of its common
stock  from  Stephen  T.  Haas  and  Tracy M. Hoggard for $1.50 per share for an
aggregate  purchase price of $150,000, over a period not to exceed 30 months, if
certain  conditions  occur.  On  December  7,  2000 a new purchase agreement was
entered  into  whereby  the  Company will purchase 12,500 shares per quarter for
eight  consecutive  quarters, beginning December 7, 2000.  At December 31, 2000,
12,500  shares  have  been  purchased  under  the  agreement.

20.  SUBSEQUENT  EVENT

On  March  5,  2001  the  sale  of  BCLIC  to  Haas was completed (see Note 18).

                                      F-24
<PAGE>

                                  Exhibit 10(g)

        Amended service agreement between First Alliance Corporation and
                       First American Capital Corporation


                            ADMINISTRATION AGREEMENT


This  AGREEMENT  is  made and entered into by and between FIRST AMERICAN CAPITAL
CORPORATION,  a  Kansas  corporation with principal offices located at 3360 S.W.
Harrison  Street, Topeka, Kansas (the "Client"), and FIRST ALLIANCE CORPORATION,
a  Kentucky  corporation with principal offices located at 2285 Executive Drive,
Suite  308,  Lexington,  Kentucky  ("First  Alliance")  as  of  January  1, 2000
("Effective  Date").

WHEREAS,  the Client desires to have services performed in the administration of
the  life  insurance  and  annuity business of its wholly-owned subsidiary FIRST
LIFE  AMERICA  CORPORATION  ("First  Life");  and

WHEREAS,  the  Client  desires to have administrative services performed for its
operations  as a life insurance holding company and for its wholly-owned venture
capital  subsidiary  FIRST  CAPITAL  VENTURE,  INC.("First  Capital");  and

WHEREAS,  First  Alliance is willing to provide these services to the Client and
its  subsidiaries,  subject  to  the  terms  and  conditions  set  forth in this
AGREEMENT  below.

NOW,  THEREFORE,  in  consideration  of  the mutual agreements herein contained,
First  Alliance  and  Client  agree  as  follows:

1.     ACCOUNTING  AND  REPORTING

First Alliance will provide Client accounting services related to the operations
of  the  Client  and  its  subsidiaries.  These  services  shall  include:

     a.  Investments

First  Alliance  shall  provide  monthly  investment transaction recognition and
reporting  which  shall  include  purchases  and  sales  of  investments; income
received  from  investment  transactions;  and  all normal monthly accrual basis
accounting  reporting.  First Alliance shall provide this investment information
in  a  format and schedule as agreed to by both parties.  Client agrees to, in a
timely  fashion,  provide  or  to have provided to First Alliance all investment
reports  received  from  banks,  investment managers or any source providing the
information  required  for  the  preparation  of  investment  reports  by  First
Alliance.

     b.  Securities  and  Exchange  Commission  ("SEC")  Reporting
First  Alliance  shall  provide  to  Client  accounting services required in the
preparation  of  financial  statements  and  reports  using  Generally  Accepted
Accounting Principals ("GAAP") required to be filed with the SEC.  These reports
shall  include,  but  are  not  limited  to,  quarterly reporting using SEC Form
10-QSB;  annual  reporting  using  SEC  Form 10-KSB and the filing of definitive
proxy  statements  with the SEC.  First Alliance shall be responsible for filing
of  reports  electronically  using  the  SEC  EDGAR  system  or any other method
required  by  the  SEC.

     c.  Insurance Department and National Association of Insurance Commissioner
("NAIC")  Filings

First Alliance shall prepare financial statements on the forms prescribed by the
NAIC  using  Statutory  Accounting Principals ("SAP") to be filed on a quarterly
and  annual basis with the NAIC and any insurance department in which First Life
is  obligated  to  file  said  statements.  Additionally,  First  Alliance shall
prepare  any  report  required to be filed with any insurance  department in any
state  in  which  First  Life  is  obligated  to  file based on the statutes and
insurance  laws  of  said  state.

                                      F-25
<PAGE>

     d.  Taxes

First  Alliance  shall  prepare  all  tax  returns  to be filed based on income,
premiums, property owned or leased, payroll, organizational or any other form of
taxation  or  remittance  to  any  taxing body under which Client is required to
file.

     e.  Auditor  Support

First  Alliance  shall  interface  with  the  Client's  independent  auditors or
insurance department auditors, prepare working papers and assist the auditors in
the  completion  of  the  audit  or  examination.  Any  travel, lodging and meal
expense  incurred  by First Alliance related to an audit or examination shall be
borne  by  Client.

     f.  General  Accounting

First  Alliance  shall  perform  all  normal  monthly  account  reconciliations,
reconciliation  of data processing reports, maintenance of the Client's chart of
accounts  and  any  other  general  accounting  functions  with the exception of
general  ledger  posting  of  cash  transactions  and  accounts  payable.

g.     Miscellaneous  Accounting  and  Reporting

First  Alliance  shall  provide  Client  any  other miscellaneous accounting and
reporting  services  as  agreed  to  by  both  parities.

h.     Document  Review

Prior  to  filing  all documents enumerated in items a. through g. above, Client
shall  be  provided  all  documents based on the schedule attached as Exhibit B.
Further, First alliance shall file said documents only upon the authorization of
Client.

1.1     CONTRACTED  SERVICES

Additional  services  not  included in Section 1 above such as consulting for an
acquisition  or  merger may be provided by First Alliance at a rate of cost plus
ten  percent  (10%) of which cost includes normal employee compensation, payroll
costs  and employee benefits.  Costs for travel and meals shall be reimbursed as
incurred.

2.     INSURANCE  ADMINISTRATION  SERVICES

First  Alliance  shall  provide Client services related to the administration of
insurance  operations  of  First  Life.  These  services  shall  include:

     a.  Application  Underwriting

First  Alliance  shall  review  life insurance and annuity applications received
from  Client and issue an underwriting decision on the acceptance or declination
of  risk  related  to  each  insured.  In  the  course  of underwriting, a First
Alliance  representative  may  direct  an  employee  of  the  Client  to request
information necessary to underwrite an application.  These requests may include,
but  are  not  limited  to,  medical  exams,  attending physician statements and
inspection  reports.  Client  agrees  to  provide the requested information on a
timely  basis  to  First Alliance.  From time to time, a representative of First
Alliance  may  consult  with  the  Medical  Director of First Life regarding the
review  of  an  application.

     b.  Reinsurance

First  Alliance shall provide information to Client necessary for the payment of
Accidental  Death  Benefit  reinsurance  premium  payments  due  annually.
Additionally,  First  Alliance  management  will  provide  consultation services
related  to  any  reinsurance  transaction  as  requested  by  Client.

     c.  Claim  Processing

First Alliance will investigate and recommend the payment or denial of any death
claims  of  First  Life.

                                      F-26
<PAGE>

     d.  Policy  Development  and  Actuarial  Interface  Services

First Alliance shall provide assistance, as requested, regarding the development
of  additional  products  to  be  marketed  by  First Life.  Additionally, First
Alliance  will  interface with actuaries related to any audits, illustrations or
any  other  necessary  actuarial  communications.

3.     CLIENT  OBLIGATIONS

First  Alliance  shall  provide  (and  bear the expense of providing) all of the
services  described  in  Sections  1  and 2 above.  First Alliance shall neither
provide  nor  bear the expense of providing 1.) items not related to the conduct
of  the  Client's life insurance and annuity business; or 2.) arising out of the
interpretation  or  enforcement  of this Agreement.  First Alliance shall not be
responsible  for  any  losses  incurred  by  the  Client  and  its  wholly owned
subsidiaries  resulting  from  the  providing  of the services described in this
Agreement  absent  of  showing  gross  negligence.

4.     CLIENT  RETAINED  EXPENSES

The  Client  shall  be  directly  responsible  for  the payment of the following
expenses  related  to  the  Client's  operations  and  the  operations  of  its
subsidiaries; fees to independent auditors, actuaries, legal counsel, investment
advisors,  or any other professional advisor or consultant; filing fees required
of  any  federal, state or local government authorities; federal, state or local
income, capital, franchise, premium or any other type of tax on revenue, income,
assets  or  capital;  interest on indebtedness; medical director fees; attending
physician  statement  expenses;  inspection  reports;  para-med  exams; fees for
membership  in  the MIB and monthly processing charges; fees or costs related to
publications;  costs related to the merger or acquisition of company such as due
diligence  costs,  consulting  fees,  brokers  fees,  legal  fees  and any other
acquisition  related  expenses;  office  rent;  general office expense including
postage, overnight courier expense, telephone, telegraph, printing, bank service
fees,  service  bureau  fees,  bureau  and association dues, periodicals, office
supplies,  equipment purchase and rental and any other general business expense;
employee  compensation  and  related  taxes  and  benefits  including travel and
entertainment  and  computer  hardware  and software including data transmission
requirements.

5.     EXPENSES  NOT  ENUMERATED

In  the  event  that  any  expense  is  incurred  by the Client which is neither
enumerated  nor  described  in  the  Agreement,  First  Alliance  shall  have no
obligation  to  bear  the  cost of said expense.  However, the parties may enter
into a separate agreement with respect to said expense or expenses provided that
the  agreement(s) is/(are) not in violation of any applicable laws or regulation
in  any  jurisdiction  in  which  the  Client  conducts  its  operations.

6.     TERM

The  term  of  the  agreement  shall  be for a period of four (4) years from the
Effective  Date  of this Agreement or for the period of time in which First Life
markets  it's  primary product referred to as the "First America 2000" or unless
sooner  terminated  pursuant  to  Section  9  herein.

7.     CHARGES

In  consideration  for the services provided in this Agreement, Client agrees to
pay  First  Alliance  based  on  the  fee  schedule  attached  as  Exhibit  A.

8.     TIME  OF  PAYMENT

The  payments  to  First  Alliance  arising out of the calculations set forth in
Section  7  above are to be remitted on a monthly basis and are due on or before
the  fifth  day  of  the month following the incurring of the obligation to pay.

                                      F-27
<PAGE>

9.     TERMINATION

The  Agreement  may  be terminated by either party with 120 days written notice.
Upon  termination  of  the  contract,  all fees to be paid under Section 7 shall
continue  until  all  such  earned  fees  have  been received by First Alliance.

10.     GOVERNING  LAW

This  Agreement  shall  be  governed  and  enforced  by the laws of the state of
Kentucky.

11.     BINDING  ARBITRATION

In  the  event  that  any  dispute  cannot  be resolved among the parties, it is
herein  agreed that any disputes arising under this agreement shall be submitted
to binding arbitration under the rules of commercial arbitration of the American
Arbitration  Association.

12.     ENTIRE  AGREEMENT

This  Agreement  shall constitute the entire agreement between the parties.  Any
prior  understanding  or  representation  of any kind preceding the date of this
Agreement  shall  not  be binding on either party except to the extent expressly
set  out  in  this  Agreement.

13.     MODIFICATIONS

Any  modification  of  this Agreement or additional obligation assumed by either
party  in connection with this agreement shall be binding only if evidenced in a
written  document  signed  by  both  parties.

14.     BINDING  EFFECT

This  Agreement shall inure to the benefit of and be binding upon the parties to
this  Agreement,  their  successors  and  assigns.

15.     PARTIAL  INVALIDITY

The invalidity of any part of this Agreement will not and shall not be deemed to
affect  the validity of any other part of this Agreement.  In the event that any
provision  of  this  Agreement is held to be invalid, the parties agree that the
remaining  provisions  shall remain in full force and effect as if they had been
executed by both parties subsequent to the expungement of the invalid provision.

16.     NOTIFICATION

Any  notices required under this Agreement shall be made to the party to receive
notice  at  the  party's  principal  place of business as described in the first
paragraph  of  this  Agreement unless said party has notified the other party in
writing  of  a  change  of  address  pursuant  to  this  section.

17.     PARAGRAPH  HEADINGS

The titles to the paragraphs of this Agreement are solely for the convenience of
the  parties  and shall not be used to explain, modify or simplify the provision
of  this  Agreement.

18.     FAILURE  TO  INSIST  ON  PERFORMANCE

Failure  at  any  time to insist on performance of any term or provision of this
Agreement  shall  not  be  deemed  a  waiver  of any right reserved or any other
provision  of  this  Agreement.

19.     FORCE  MAJEURE

Neither  party  shall  be  liable  for delays in their performance of any of its
obligations  hereunder  due  to  causes beyond its reasonable control including,
without  limitation,  acts  of  God,  strikes, computer equipment malfunction or
inability  to  obtain  timely  services  or  materials  from  usual  sources.

                                      F-28
<PAGE>

                              SIGNATURES


FIRST  AMERICAN  CAPITAL  CORPORATION

by:  /s/  Rick  D.  Meyer

officer's  title:  President

date:  1/1/2000


ACCEPTED  BY:

FIRST  ALLIANCE  CORPORATION

by:  /s/  Thomas  Evans

officer's  title:  Vice  President

date:  1/5/2000
                                      F-29
<PAGE>
                                    Exhibit A

Charges  shall  be  based  on  a  percentage  of  the life insurance and annuity
premiums  of  the  "First  America  2000"  delivered  by  First Life.  Delivered
premiums are defined as premiums received on new written business which has been
underwritten  and  the  policy accepted by the policyholder upon delivery by the
agent.   The  percentages  shall  be  five  percent (5%) of first year premiums;
three and one half percent (3.5%) of second year premiums; three percent (3%) of
third  year premiums; two percent (2%) of fourth year premiums; one percent (1%)
of  fifth  year premiums; one percent (1%) for premiums in years six (6) through
ten  (10) for ten pay contracts and one-half percent (.5%) for premiums in years
six  (6)  through  twenty  (20)  for  twenty  pay  contracts.

                                      F-30
<PAGE>


                                  EXHIBIT 21.1

Subsidiaries  of  Registrant

First  Alliance  Corporation  (Kentucky  Corporation)
100%  First  Kentucky  Capital  Corporation  (Kentucky  Corporation)
100%  First  Alliance  Insurance  Company  (Kentucky  Corporation)

First  Alliance  Insurance  Company  owns 100% of Benefit Capital Life Insurance
Corporation  (Louisiana  Corporation)


                                    Page 25
<PAGE>