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

                                   FORM 10-QSB

(Mark  One)
[X]  QUARTERLY  REPORT  PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
       EXCHANGE  ACT  OF  1934 For  the  quarterly  period
                         Ended  June  30,  2001

                                       or

[ ]  TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
       EXCHANGE  ACT  OF  1934 For  the  transition  period  From    to   .

                        Commission file number : 33-67312
                                                 --------

                         FIRST ALLIANCE CORPORATION
  ------------------------------------------------------------------------------
        (exact name of small business issuer as specified in its charter)


           Kentucky                                61-1242009
------------------------------------             -------------
(State  or  other  jurisdiction                (IRS Employer number)
of  incorporation  or  organization)


  2285 Executive Drive, Suite 308      Lexington, Kentucky     40505
  --------------------------------------------------------------------
                 (Address of principal executive offices)



                         (859) 299-7656
                    -----------------------
                   (Issuer's telephone number)


                 APPLICABLE ONLY TO CORPORATE INSURERS

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

Common  Stock,  No  Par  Value  5,522,655  shares  as  of  July  31,  2001

Transitional  Small  Business  Disclosure  Format  (Check  one):  Yes___  No   X
                                                                             ---


<PAGE>
                           FIRST ALLIANCE CORPORATION

                               INDEX TO FORM 10-Q
                               ------------------


Part  I.      FINANCIAL  INFORMATION                                  Page  No.
------------------------------------                                 ----------

Item  1.  Financial  Statements:


     Condensed  Consolidated  Balance  Sheets  at
     June  30,  2001  and  December  31,  2000                            1

     Condensed  Consolidated  Statements  of  Operations
     for  the  three  months  ended  June  30, 2001 and 2000 and
     for  the  six  months  ended  June  30,  2001  and  2000             3

     Condensed  Consolidated  Statements  of  Cash  Flows  for  the
     for  the  three  months  ended  June  30,  2001  and  2000  and
     for  the  six  months  ended  June  30,  2001  and  2000             4

     Notes  to  Condensed Consolidated Financial Statements               6

     Management's  Discussion  and  Analysis  or  Plan  of  Operation     10

Part  II.
---------

Item  6.  Exhibits  and Reports on Form 8-K                               12

Signatures                                                                13
----------

<PAGE>

<TABLE>
<CAPTION>
                                 FIRST ALLIANCE CORPORATION

                            CONDENSED CONSOLIDATED BALANCE SHEETS

                                                                     June 30,   December 31,
                                                                       2001         2000
                                                                    -----------  -----------
ASSETS                                                               Unaudited
<S>                                                                 <C>          <C>
Investments:
Available-for-sale fixed maturities, at fair value
  (amortized cost, $8,057,506 and $8,548,507
  in 2001 and 2000, respectively)                                   $ 8,233,249  $ 8,734,400
Equity securities (cost of $2,434,753 and $3,168,318
  in 2001 and 2000, respectively)                                     1,304,041    2,132,095
Policy loans                                                             64,808      100,687
Notes receivable (net of $254,334 and $149,698 valuation
  allowance in 2001 and 2000, respectively)                             813,330      569,788
Other invested assets                                                   425,000      510,000
                                                                    -----------  -----------
Total investments                                                    10,840,428   12,046,970

Cash and cash equivalents                                             4,873,193    4,044,915
Investments in related parties                                          237,500      237,500
Receivables from related parties                                         35,973       35,675
Accrued investment income                                               139,080      144,074
Premiums receivable                                                     121,971      136,069
Advances to agents                                                       46,772       36,382
Reinsurance recoverable                                                 903,259      714,561
Deferred policy acquisition costs                                     4,067,211    3,364,088
Value of insurance acquired                                                   -       57,224
Goodwill                                                                      -      151,027
Office furniture and equipment, less accumulated depreciation of
  $101,707 and $116,975 in 2001 and 2000, respectively                   60,488       45,580
Other assets                                                             41,103       71,184
                                                                    -----------  -----------
Total assets                                                        $21,366,978  $21,085,249
                                                                    ===========  ===========

See notes to condensed consolidated financial statements
</TABLE>

                                        2
<PAGE>

<TABLE>
<CAPTION>
                              FIRST ALLIANCE CORPORATION

                   CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

                                                              June 30,    December 31,
                                                                2001          2000
                                                            ------------  ------------
LIABILITIES AND SHAREHOLDERS' EQUITY                        (Unaudited)
<S>                                                         <C>           <C>
Policy and contract liabilities:
Annuity contract liabilities                                $ 5,591,328   $ 4,629,330
Life policy reserves (net of reinsurance ceded
  reserves of $484,483 and $340,172 in 2001 and
  2000, respectively)                                         3,976,915     4,379,730
Unearned premium reserves                                       484,483       358,981
Policy and contract claims                                       45,647       108,889
Policyholder dividend deposits                                        -        42,726
Policyholder premium deposits                                   203,537       187,798
Deposits on pending policy applications                         292,615       276,287
Unearned revenue                                                124,579        77,010
Reinsurance premiums payable                                     59,624        56,349
                                                            ------------  ------------
Total policy and contract liabilities                        10,778,728    10,117,100

Commissions, salaries, wages and benefits payable               219,178       175,191
Accrued expenses and other liabilities                           51,099        55,232
Federal income taxes payable:
     Current                                                          -        11,583
     Deferred                                                   817,712       575,826
                                                            ------------  ------------
Total liabilities                                            11,866,717    10,934,932

Shareholders' equity:
Common stock, no par value, 8,000,000 shares authorized;
  5,522,655 and 5,527,360 shares issued and outstanding at
  June 30, 2001 and December 31, 2000, respectively             552,266       552,736
Additional paid in capital                                   13,391,827    12,628,272
Retained Earnings - deficit                                  (3,861,569)   (2,469,474)
Accumulated other comprehensive income                         (582,263)     (561,217)
                                                            ------------  ------------
Total shareholders' equity                                    9,500,261    10,150,317
                                                            ------------  ------------
Total liabilities and shareholders' equity                  $21,366,978   $21,085,249
                                                            ============  ============

See notes to condensed consolidated financial statements.
</TABLE>

                                        3
<PAGE>

<TABLE>
<CAPTION>

                                             FIRST ALLIANCE CORPORATION

                                   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


                                                                 Three months ended           Six months ended
                                                               June 30,       June 30,      June 30,      June 30,
                                                                 2001           2000          2001          2000
                                                              ------------  ------------  ------------  ------------
                                                              (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
REVENUES
<S>                                                           <C>           <C>           <C>           <C>
Premium Income (net of reinsurance
  of $533,045 in June 2001 and of $485,423 in June 2000)      $ 1,154,209   $   766,329   $ 2,272,795   $ 1,682,372
Net Investment Income                                             176,929       172,321       347,611       364,124
Net realized investment gain (loss)                                62,336          (857)     (152,212)      (27,952)
Service fee revenue                                                79,675        36,912       135,979        78,079
Other income                                                        9,805       147,464        17,829       258,319
                                                              ------------  ------------  ------------  ------------
Total revenue                                                   1,482,954     1,122,169     2,622,002     2,354,942

BENEFITS AND EXPENSES
Increase in policy reserves                                       252,655       174,579       441,597       362,676
Death claims (net of reinsurance of
  $138,945 in June 2001 and $23,988 in June 2000                   18,923        29,887        21,195        42,473
Policyholder surrender values                                      48,443        40,453       111,007        94,250
Interest credited on annuities and premium deposit fund           123,486        79,016       234,883       147,646
Payment of dividend accumulations                                       -           459             -         1,418
Commissions                                                       386,359       354,029       706,477       818,190
Policy acquisition costs deferred                                (559,763)     (247,792)   (1,038,434)     (654,949)
Amortization expense:
  Deferred policy acquisition costs                               212,489       194,301       335,311       315,141
  Value of insurance acquired                                           -         1,022           681         2,044
Selling, administrative and general insurance expenses            209,837       118,804       439,759       300,637
Salaries, wages and employee benefits                             391,761       257,272       742,107       546,998
Professional fees                                                  82,905        54,734       101,508       110,842
Depreciation expense                                                4,878         4,919         9,481         9,403
Other expenses                                                     64,433       111,956       208,389       227,566
                                                              ------------  ------------  ------------  ------------
Total benefits and expenses                                     1,236,406     1,173,639     2,313,961     2,324,335
                                                              ------------  ------------  ------------  ------------
INCOME FROM OPERATIONS                                            246,548       (51,470)      308,041        30,607

Federal income taxes                                              125,077        57,082       266,716       146,921
                                                              ------------  ------------  ------------  ------------
Net income (loss)                                             $   121,471   $  (108,552)  $    41,325   $  (116,314)
                                                              ============  ============  ============  ============
Net income (loss) per common share-
basic and diluted                                             $      0.02   $     (0.02)  $      0.01   $     (0.02)
                                                              ============  ============  ============  ============
See notes to condensed consolidated financial statements
</TABLE>

                                        4
<PAGE>

<TABLE>
<CAPTION>

                                FIRST ALLIANCE CORPORATION

                      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                     Six months ended
                                                                  June 30,      June 30,
                                                                    2001          2000
                                                                ------------  ------------
                                                                (Unaudited)   (Unaudited)
<S>                                                             <C>           <C>
OPERATING ACTIVITIES:
Net income (loss)                                               $    41,325   $  (116,314)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
   Interest credited on annuities and premium deposits              239,278       142,052
   Provision for depreciation                                         9,481         9,403
   Amortization of premium and accretion of discount on
     fixed maturity investments                                      10,948        10,833
   Amortization of value of insurance acquired                          681         2,044
   Net realized investment (gains) loss                             143,481        27,952
   Provision for deferred federal income taxes                      266,231       133,686
   Increase in policy loans                                          (3,584)      (28,292)
   Increase in accrued investment income                             (4,713)       (4,152)
   Increase in receivables from related parties                        (298)       (3,328)
   Increase in reinsurance recoverable                             (188,698)       (1,918)
   Decrease in federal income tax recoverable                             -         7,985
   Increase in deferred policy acquisition costs, net              (703,123)     (339,808)
   Increase (decrease) in unearned revenue                           47,569        (6,977)
   (Increase) decrease in premiums due                               12,177        (9,808)
   (Increase) decrease in other assets                               16,864       (10,967)
   Increase in policy reserves                                      631,993       362,676
   Increase (decrease)in deposits on pending policy applications     16,328       (72,375)
   Decrease in claims payable                                       (63,242)      (41,345)
   Increase (decrease) in reinsurance premiums payable                3,275        (2,684)
   Increase (decrease) in federal income taxes payable              (11,583)        9,045
   Increase in commissions, salaries, wages and benefits             43,987         8,074
   Decrease in accounts payable, accrued expenses and other
      liabilities                                                    (1,749)      (52,023)
                                                                ------------  ------------
Net cash provided by operating activities                           506,628        23,759

INVESTING ACTIVITIES:
   Purchase of available-for-sale fixed maturities               (1,586,189)   (2,414,770)
   Sale of available-for-sale fixed maturities                    1,011,823     2,585,094
   Purchase of common stock                                               -    (4,792,679)
   Sale of common stock                                             581,841     1,226,508
   Sale of subsidiary net of cash disposed                         (232,850)       (3,719)
   Purchase of limited partnership interest                        (150,000)            -
   Purchase of limited liability company interest                    (5,000)     (360,000)
   Short term investments disposed                                        -       200,000
   Purchase of investment in unconcolidated affiliate                     -       (58,500)
   Decrease in notes receivable                                      (4,794)     (232,437)
   Purchase of furniture and equipment, net                         (31,528)       (6,823)
                                                                ------------  ------------
Net cash used in investing activities                              (416,697)   (3,857,326)

</TABLE>

                                        5
<PAGE>

<TABLE>
<CAPTION>

                                FIRST ALLIANCE CORPORATION

                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

                                                                 Six months ended
                                                              June 30,      June 30,
                                                                2001          2000
                                                            ------------  ------------
                                                            (Unaudited)   (Unaudited)
<S>                                                         <C>           <C>
FINANCING ACTIVITIES:
 Deposits on annuity contracts, net                             733,917       671,175
 Policyholder premium deposits, net                               4,542         7,304
 Policyholder dividend deposits, net                                223          (592)
 Proceeds from sale of common stock                                   -       186,312
 Cost of stock offering                                               -        (1,050)
 Dividends paid                                                    (335)            -
 Repurchase of company stock                                          -      (388,780)
                                                            ------------  ------------
 Net cash provided by financing activities                      738,347       474,369
                                                            ------------  ------------

Increase (decrease) in cash and cash equivalents                828,278    (3,359,198)

Cash and cash equivalents beginning of period                 4,044,915     5,540,571
                                                            ------------  ------------

Cash and cash equivalents at end of period                  $ 4,873,193   $ 2,181,373
                                                            ============  ============

Noncash investing and financing activities

 Exchange of 8% equity investment in Ken Belsky &
   Associates LLC for a note receivable in the amount of
   $350,000                                                 $   350,000             -
                                                            ============  ============

 Common stock dividend                                      $   789,885             -
                                                            ============  ============

See notes to condensed consolidated financial statements.
</TABLE>

                                        6
<PAGE>

                           FIRST ALLIANCE CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1)     BASIS  OF  PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared  in  accordance  with  generally  accepted  accounting  principles  for
interim  financial  information  and  with  the  instructions  to  Form  10-QSB.
Accordingly,  they  do not include all of the information and footnotes required
by  generally  accepted accounting principles for complete financial statements.
In  the  opinion  of management, all adjustments (consisting of normal recurring
accruals)  considered  necessary  for a fair presentation of the results for the
interim  periods  have  been  included.

Certain financial information which is normally included in financial statements
prepared  in accordance with generally accepted accounting principles, but which
is  not  required  for  interim  reporting  purposes,  has  been  omitted.  The
accompanying  condensed  consolidated  financial  statements  should  be read in
conjunction  with  the  financial  statements  and notes thereto included in the
Company's  Form  10-KSB  for  the  fiscal year ended December 31, 2000.  Certain
reclassifications  have  been  made  in the prior period financial statements to
conform  with  the  current  year  presentation.

(2)     SUBSIDIARY  OPERATIONS

The  Company's  wholly  owned  subsidiaries',  First  Alliance Insurance Company
("FAIC")  and  First  Kentucky Capital Corporation ("FKCC"), are included in the
condensed  consolidated  financial  information.  Benefit Capital Life Insurance
Company  ("BCLIC") is included from the date of acquisition of December 30, 1999
until  its  sale  effective  February  28,  2001.

(3)     COMPREHENSIVE  INCOME

The  components  of  comprehensive income along with the related tax effects are
presented  for  the  three months and six months ended June 30, 2001 and 2000 as
follows:


<TABLE>
<CAPTION>
                                                                            Three months ended      Six months ended
                                                                            June 30    June 30,    June 30,    June 30,
                                                                             2001        2000        2001        2000
                                                                           ---------  ----------  ----------  ----------
<S>                                                                        <C>        <C>         <C>         <C>
Unrealized gain on available-for-sale securities
   Unrealized holding losses during the period                             $(15,349)  $(373,187)  $ (45,459)  $(447,660)
   Tax benefit                                                                5,372     126,884      24,413     152,205
                                                                           ---------  ----------  ----------  ----------
Other comprehensive income                                                 $ (9,977)  $(246,303)  $ (21,046)  $(295,455)
                                                                           =========  ==========  ==========  ==========


Net income (loss)                                                          $121,471   $(108,552)  $  41,325   $(116,314)
Other comprehensive income/(loss) net of tax effect:
     Unrealized investment loss                                              (9,977)   (246,303)    (21,046)   (295,455)
                                                                           ---------  ----------  ----------  ----------
Comprehensive income (loss)                                                $111,494   $(354,855)  $  20,279   $(411,769)
                                                                           =========  ==========  ==========  ==========
Net income (loss) per common share - basic
     and diluted                                                           $   0.02   $   (0.02)  $    0.01   $   (0.02)
                                                                           =========  ==========  ==========  ==========
</TABLE>

                                        7
<PAGE>

                           FIRST ALLIANCE CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)


(4)     INVESTMENTS

On  February  17,  2000  the  Company  executed  an agreement with Ken Belsky to
purchase  a  10%  interest in Ken Belsky & Associates, LLC ("KBA"), for $300,000
cash.  The  Company  also  received an option to purchase up to an additional 5%
interest  for  an amount equal to $30,000 for each 1% of the additional interest
purchased.  The  option was not exercised and expired February 17, 2001.  During
April  2000  the  Company purchased an additional 2% interest in KBA for $60,000
cash.  On  June  14,  2001  the  Company  invested  an  additional $5,000 in KBA
pursuant  to  a capital call.  KBA is a general insurance agency specializing in
the  marketing  of  substandard  life  insurance  policies.

Effective  June  14,  2001  the  Company  sold  an 8% interest in KBA to KBA for
$350,000.  Under  the terms of the sale, KBA issued a 12% promissory note in the
amount  of  the  sale  price.  The note is interest only until May 1, 2002.  The
interest  rate on the note decreases to 10% effective May 1, 2002.  The note and
accrued  interest  are to be paid in thirty-six equal monthly payments beginning
June  1,  2002  and  the  balance  is  due May 31, 2005.  The thirty-six monthly
payments  are  based  on  a  sixty  month-amortization  schedule.

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 KBA.  Advances under the credit  facility  may  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.  Prior  to  June 14,  2001,
$250,000  had  been  loaned  pursuant  to  the  agreement.

On  June 14, 2001 the Company and KBA agreed to terminate the original agreement
for  the  Company  to  provide  a credit facility to KBA and to amend and modify
KBA's  $250,000  note.  The  Company  loaned  KBA an additional $50,000 bringing
total  loans to borrower to $300,000.  No payments of principal or interest will
be  due  on  the loan until April 1, 2002.  Interest shall accrue on the note at
the  rate  of 12% per annum through February 28, 2002.  The interest rate on the
note  decreases  to  10%  effective  March 1, 2002.  Beginning April 1, 2002 the
adjusted  principal  balance due plus accrued and unpaid interest are to be paid
in thirty-six equal monthly payments and the balance is due March 31, 2005.  The
thirty-  six  monthly payments are based on a sixty-month amortization schedule.

On  January  31, 2001 the Company invested an additional $150,000 in Prosperitas
Investment  Partners,  LP  ("Prosperitas")  as  a  result  of  a capital call by
Prosperitas.

(5)     RELATED  PARTY  TRANSACTIONS

The  Company entered into a service agreement with Integrity Capital Corporation
effective  March  1,  2001  and  Mid Atlantic Capital Corporation April 1, 2001.
Pursuant  to  the terms of the agreements, the Company provides data processing,
accounting  and  reporting services in return for a $4,000 per month service fee
from  each  entity.

                                        8
<PAGE>

(6)  SEGMENT  INFORMATION

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
June  30,  2001  and  June 30, 2000 and for the quarters ended June 30, 2001 and
2000  is  as  follows:

<TABLE>
<CAPTION>
                                            Three months ended          Six months ended
                                          June 30,      June 30,      June 30,      June 30,
                                            2001          2000          2001          2000
                                        (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
<S>                                     <C>           <C>           <C>           <C>
Revenues:
Life and annuity insurance operations   $ 1,400,768   $ 1,065,138   $ 2,681,119   $ 2,221,814
Venture capital operations                      884             -           884             -
Corporate operations                         81,302        57,031       (60,001)      133,128
                                        ------------  ------------  ------------  ------------
Total                                   $ 1,482,954   $ 1,122,169   $ 2,622,002   $ 2,354,942
                                        ============  ============  ============  ============

Income (loss)before income taxes:
Life and annuity insurance operations   $   254,807   $   150,757   $   573,294   $   406,186
Venture capital operations                      770             -           704             -
Corporate operations                         (9,029)     (202,227)     (265,957)     (375,579)
                                        ------------  ------------  ------------  ------------
Total                                   $   246,548   $   (51,470)  $   308,041   $    30,607
                                        ============  ============  ============  ============


Depreciation and amortization expense:
Life and annuity insurance operations   $   212,489   $   196,182   $   336,512   $   318,903
Venture capital operations                        -             -             -             -
Corporate operations                          4,878         3,982         8,961         7,685
                                        ------------  ------------  ------------  ------------
Total                                   $   217,367   $   200,164   $   345,473   $   326,588
                                        ============  ============  ============  ============

</TABLE>

Segment  asset  information  as  of  June  30,  2001  and  December  31,  2000.

<TABLE>
<CAPTION>
Assets:
<S>                                            <C>          <C>
Life and annuity insurance operations          $20,029,533  $19,163,645
Venture capital operations                         309,470      208,766
Corporate operations                             1,027,975    1,712,838
                                               -----------  -----------
      Total                                    $21,366,978  $21,085,249
                                               ===========  ===========
</TABLE>

(7)     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.  The  weighted  average  outstanding  common  shares  for the three months
ending  June 30, 2001 and 2000 was 5,259,360 and 5,652,356, respectively and for
the  six  months  ending  June  30,  2001  and 2000 was 5,354,122 and 5,661,759,
respectively.

                                        9
<PAGE>

(8)     SALE  OF  BENEFIT  CAPITAL  LIFE  INSURANCE  COMPANY

On  June  27,  2000,  the  Company  entered  into  an  agreement with Chris Haas
("Haas"),  former  Chairman  of  the  Board  of the Company, to exchange all the
outstanding  common  capital  stock  of  BCLIC  for 268,000 shares of FAC common
stock.  On  March  5,  2001  the sale of BCLIC to Haas was completed.  Under the
terms  of the agreement, FAC purchased BCLIC from FAIC for $670,000 cash and FAC
exchanged  BCLIC  for  268,000  shares  of  FAC  stock.

(9)     STOCK  DIVIDEND

On  June  30,  2001  the  Company paid a 5% stock dividend.  263,295 shares were
issued  and  $335  will be paid in cash for 111.65 fractional shares.  $3.00 per
share  was  capitalized  for  a  total  of  $790,220.

(10)     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.
Total payments in the amount of $300,000 have been made and the remaining amount
of  the  commitment  is  due  on  the  fourth anniversary of the initial capital
contribution.

At  June  30,  2001  the  agreement to provide a credit facility to KBA had been
terminated  and  the  loan  had  been  restructured.  (see  Note  4).

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 June 30, 2001,
12,500  shares have been purchased by the Company and the remaining shares to be
purchased under the agreement have been purchased by third parties.  The Company
has  no  obligation  remaining  under  the  agreement.

                                       10
<PAGE>

Item  2.    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  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 statements.
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  following  discussion  should  be  read  in  conjunction with the condensed
consolidated  financial  statements  and  the  notes  thereto.

For  the  six  months  ended June 30, 2001 net income increased $157,639, from a
$116,314  loss to a $41,325 gain, compared to the six months ended June 30, 2000
results.  Earnings per share increased to a gain per share of $.01 compared to a
loss per share of $.02 for the six months ended June 30, 2000.  Equity per share
decreased  3%  to $1.72. The decline in equity per share is primarily the result
of  a  5%  stock  dividend.

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

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

On  June  27,  2000,  the  Company  entered  into  an  agreement with Chris Haas
("Haas"),  former  Chairman  of  the  Board  of the Company, to exchange all the
outstanding  common  capital  stock  of  BCLIC for 268,000 shares of  FAC common
stock.  On  March  5,  2001  the sale of BCLIC to Haas was completed.  Under the
terms  of the agreement, FAC purchased BCLIC from FAIC for $670,000 cash and FAC
exchanged  BCLIC  for  268,000  shares  of  FAC  stock.

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

Shareholders'  equity  totaled  $9,500,261  and $10,150,317 at June 30, 2001 and
December  31,  2000,  respectively.  The  June  30,  2001 balance reflects a net
decrease of approximately 6% for the six month period then ended.  Comprehensive
income  (loss)  totaled $20,279 and ($411,769) for the six months ended June 30,
2001  and  2000,  respectively.  A  significant  portion of comprehensive income
activity  arose  from  the  Company's  equity  securities  portfolio.  Equity
securities  comprised  approximately 6% and 10% of the Company's total assets as
of  June  30, 2001 and 2000, respectively.  Equity portfolio positions decreased
$733,565  on a cost basis and $828,054 on a market value basis for the first six
months  of  2001.  Fixed  maturity portfolio positions decreased  $494,001 on an
amortized  cost  basis and $501,082 on a market value basis during the same time
period.  The  increase  of  $240,542 in notes receivable resulted primarily from
receiving  a  note  as  payment  for  the  sale  of  an 8% interest in a limited
liability company.   The increase of $85,000 in other invested assets during the
period  resulted  from  the  Company's  investment  in a venture capital limited
partnership and the sale of an 8% interest in a limited liability company.  Cash
and  cash  equivalents  increased  $828,278  during  the  six  month  period.

                                       11
<PAGE>

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

Net  premiums  increased  approximately  35% during the first six months of 2001
compared  to  the  first  six months of 2000.  Revenues for the six months ended
June  30  totaled  $2,622,002  in  2001  and $2,354,942 in 2000. The increase is
primarily  attributable  to  a  $590,000  increase  in net premium income, and a
$58,000  increase  in  service fee revenue offset by an increase in net realized
investment  losses  of  $114,000  primarily  resulting  from  the sale of equity
securities  and  a  $10,000 loss from the sale of its subsidiary Benefit Capital
Life Insurance Company.  Service fee revenue increased $57,900 or 74% during the
period.

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

Cash  flow provided by operations totaled $506,628 for the six months ended June
30,  2001  compared to $23,759 provided by operations for the same period in the
prior  year.  The change resulted primarily from the increase in premium income.
$416,697 of cash was used in investing activities during the first six months of
2001.  The  change  resulted  primarily  from  the  sale of a subsidiary and the
purchase  of  a  limited  partnership  interest.  $738,347  of  cash provided by
financing  activities  during  the  first six months of 2001 is due primarily to
annuity  deposits.

The  insurance  operations  generally  provide  adequate  cash flow from premium
collections  and  investment income to meet their obligations.  Insurance policy
liabilities  are  primarily  long-term  and  generally are paid from future cash
flows.  The  Company's  bonds  and  equity  security  investments  are  readily
marketable.  Although  there  is  no  present  need or intent to dispose of such
investments, the Company could liquidate portions of their investments if such a
need arose.  The Company has a commitment to purchase investments of $150,000 in
2003.

                                       12
<PAGE>

Part  II.  -  Other  information

Item  6.    Exhibits  and  Reports  on  Form  8-K

     (b)     The  Company  did not file any reports on Form 8-K during the three
               months ended  June  30,  2001

                                       13
<PAGE>

Signatures


In  accordance  with the requirements of the Exchange Act, the registrant caused
this  report  to  be  signed  on  its  behalf be the undersigned, thereunto duly
authorized.


                                                   First  Alliance  Corporation
                                                   ----------------------------
                                                           (registrant)


Date  August  11, 2001                                 /s/ Michael N. Fink
    ----------------------------                       -------------------
                                                       Michael  N.  Fink,
                                                       President

Date  August  11,  2001                                /s/ Thomas  I.  Evans
     ---------------------------                       ----------------------
                                                       Thomas  I.  Evans,
                                                       Vice  President/Secretary


                                       14
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