<PAGE>


               Securities and Exchange Commission
                     Washington, D.C. 20549

                           FORM 10-Q
                           (Mark One)


[X]  Quarterly Report Pursuant to Section 14 or 15(d) of the Securities
      Exchange Act of 1934 for the Period Ended June 30, 1999

                               or

[ ]  Transition Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 For the Transition Period From     to      .

               Commission file number : 33-67312

                   FIRST ALLIANCE CORPORATION

      (exact name of registrant as specified in its charter)


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


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



                       (606) 299-7656
      (Registrant's telephone number, including area code)


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




             Applicable Only to Corporate Insurers

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

Common Stock, No Par Value - 5,714,365  shares as of July 30, 1999.


<PAGE>



                   FIRST ALLIANCE CORPORATION

                       INDEX TO FORM 10-Q


Part I.      FINANCIAL INFORMATION

Item 1.  Financial Statements:


     Condensed Consolidated Balance Sheets at
          June 30, 1999 and December 31, 1998                           1

     Condensed Consolidated Statements of Operations
          for the three months ended June 30, 1999 and 1998
          and for the six months ended June 30, 1999 and 1998           3

     Condensed Consolidated Statements of Changes in Shareholders'
          Equity for the six months ended June 30, 1999 and 1998
          and for the year ended December 31, 1998                      4

     Condensed Consolidated Statements of Cash Flows for the
          six months ended June 30, 1999 and 1998                       5

     Notes to Condensed Consolidated Financial Statements               6

     Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                     10



<PAGE>

<TABLE>


FIRST ALLIANCE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

<CAPTION>

                                               June 30,        December 31,
                                                 1999             1998
<S>                                       <C>                <C>
Assets                                        Unaudited

Investments:

Available-for-sale fixed maturities,
 at fair value (amortized cost,
 $5,210,636 and $5,973,453 in 1999
 and 1998, respectively)                  $    5,196,555     $    6,121,129
Common stock at cost                              20,000             20,000
Limited partnership                               22,500                  -
Notes receivable (net of $149,698
 valuation allowance in 1999 and 1998)           130,384            221,636
Policy loans                                         825                  -
                                            ------------      -------------
Total investments                              5,370,264          6,362,765


Cash and cash equivalents                      8,291,292          6,587,264
Investments in related parties                   125,000            125,000
Receivables from related parties                  33,416             20,496
Accrued investment income                         91,054            107,416
Deferred policy acquisition costs              2,296,221          1,848,419
Prepaid expenses                                  50,321             23,427
Office furniture and equipment, less
 accumulated depreciation of $73,336
 and $60,965 in 1999 and 1998,
 respectively                                     35,166             43,684
Advances to agents                                56,795             57,676
Premiums due                                      57,866             47,130
Other assets                                      13,875              9,748
                                            ------------      -------------
Total assets                              $   16,421,270    $    15,233,025
                                            ============      =============

See notes to condensed consolidated financial statements

</TABLE>
<PAGE>

<TABLE>
FIRST ALLIANCE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)


<CAPTION>
                                               June 30,        December 31,
                                                 1999             1998
<S>                                       <C>               <C>
Liabilities and Shareholders' Equity         (Unaudited)

Policy and contract liabilities:
Annuity contract liabilities              $    2,352,816    $     1,763,029
Life policy reserves (net of reinsurance
 ceded reserves of $103,314 and $88,534
 in 1999 and 1998, respectively)               1,934,406          1,493,766
Deposits on pending policy applications          245,111            216,565
Unearned revenue                                  97,247            102,993
Policyholder premium deposits                    203,968            177,528
Reinsurance premiums payable                      82,493             65,183
                                            ------------      -------------

Total policy and contract liabilities          4,916,041          3,819,064


Federal income taxes payable:
 Current                                           9,739             32,258
 Deferred                                        506,893            458,932
Other taxes payable                                9,500                  -
Commissions, salaries, wages and
 benefits payable                                 90,910             64,740
Accounts payable and accrued expenses             11,052             31,305
                                            ------------      -------------

Total liabilities                              5,544,135          4,406,299


Claims and contingencies (Note 12)

Shareholders' equity:

Common stock, no par value, 8,000,000
 shares authorized; 5,686,190 and
 5,620,690 shares issued and outstanding
 at June 30, 1999 and December 31, 1998          568,619            562,069

Additional paid in capital                    12,322,788         12,180,353

Retained Earnings - deficit                   (2,004,979)        (2,013,165)

Accumulated other comprehensive income            (9,293)            97,469
                                            ------------      -------------

Total shareholders' equity                    10,877,135         10,826,726

                                            ------------      -------------
Total liabilities and
  shareholders' equity                    $   16,421,270    $    15,233,025
                                            ============      =============

See notes to condensed consolidated financial statements.

</TABLE>
<PAGE>

<TABLE>

FIRST ALLIANCE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<CAPTION>
                              Three months ended          Six months ended
                            June 30,       June 30,     June 30,     June 30,
                              1999           1998         1999         1998
                          (Unaudited)    (Unaudited)  (Unaudited)  (Unaudited)
<S>                       <C>            <C>         <C>          <C>
Revenues
 Premium Income           $  785,590     $  528,861  $ 1,578,654  $ 1,024,278
 Net Investment Income       166,627        149,321      319,309      288,960
 Other income                 38,108         24,353       58,135       37,511
                          ----------     ----------  -----------  -----------
  Total revenue              990,325        702,535    1,956,098    1,350,749


Benefits and expenses
 Increase in policy
  reserves                   186,043        200,620      440,640      361,328
 Death claims                  6,219              -       74,969            -
 Policyholder surrender
  values                      10,187              -       21,438            -
 Interest credited on
  annuities and premium
  deposit Premium
  deposit fund                50,278         25,644       90,425       48,012
 Commissions                 314,634        229,730      615,894      397,959
 Policy acquisition
  costs deferred            (399,412)      (323,409)    (782,386)    (545,443)
 Amortization of
  deferred policy
  acquisition costs          176,360        119,262      334,584      200,201
 Selling, administrative
  and general insurance
  expenses                    71,873         92,424      152,044      159,632
 Salaries, wages and
  employee benefits          273,811        193,018      521,023      393,016
 Professional fees            48,194         42,817       91,680       84,680
 Miscellaneous taxes           4,835              -       10,179            -
 Advisory board and
  directors fees              20,537         17,518       46,732       34,055
 Rent expense                 22,294         19,609       42,798       38,415
 Depreciation expense          3,513          3,919        7,655        7,432
 Other expenses               51,231         44,203      138,600       86,152
                          ----------     ----------  -----------  -----------
 Total benefits and
  expenses                   840,597        665,355    1,806,275    1,265,439
                          ----------     ----------  -----------  -----------

Income from operations       149,728         37,180      149,823       85,310
                          ----------     ----------  -----------  -----------

Federal income taxes          74,941         64,807      124,437      112,923
                          ----------     ----------  -----------  -----------

Net income/(loss)         $   74,787     $  (27,627) $    25,386  $   (27,613)
                          ==========     ==========  ===========  ===========

Net income/(loss) per
 common share-basic and
 diluted                  $     0.01     $     0.00  $      0.00  $      0.00
                          ==========     ==========  ===========  ===========

See notes to condensed consolidated financial statements


</TABLE>
<PAGE>

<TABLE>

FIRST ALLIANCE CORPORATION

CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY

<CAPTION>
                                     Six months ended         Year ended
                                          June 30,            December 31,

                                    1999          1998           1998
                                 (Unaudited)
<S>                             <C>           <C>             <C>
Common stock:
 Balance, beginning of year     $  562,069    $  557,984      $  557,984
  Exercise of stock options
  (34,900 and 40,850 shares)             -         3,490           4,085
  Sale of shares in private
   placement (79,500 shares)         7,950             -               -
  Company stock acquired
   (14,000 shares)                  (1,400)            -               -
                                -----------   ----------      ----------
  Balance, end of year             568,619       561,474         562,069


Additional paid-in capital:
 Balance, beginning of year     12,180,353    12,141,546      12,141,546
 Exercise of stock options
  (34,900 and 40,850 shares)             -         6,732          38,807
 Sale of shares in private
  placement (79,500 shares)        190,800             -               -
 Cost of private placement         (42,765)            -               -
 Company stock acquired
  (14,000 shares)                   (5,600)            -               -
                                -----------   ----------      ----------
 Balance, end of year           12,322,788    12,148,278      12,180,353


Retained earnings-deficit:
 Balance, beginning of year     (2,013,165)   (2,147,562)     (2,147,562)
  Net income (loss)                 25,386       (27,612)        134,397
  Company stock acquired           (17,200)            -               -
                                -----------   ----------      ----------
 Balance, end of year           (2,004,979)   (2,175,174)     (2,013,165)


Accumulated other comprehensive
 income:
 Balance, beginning of year         97,469        14,390          14,390
 Net unrealized gain (loss)
  on available-for-sale
  securities net of
  reclassification adjustment
  (see below)                     (106,762)       37,984          83,079
                                -----------   ----------      ----------
 Balance, end of year               (9,293)       52,374          97,469
                                -----------   ----------      ----------

Total shareholders' equity     $10,877,135   $10,586,952     $10,826,726
                                ==========    ==========      ==========

Disclosure of reclassification
 amount:

Unrealized holding gains
 (loss) arising during period  $  (106,762)  $    37,984     $    87,586
Less: reclassification
 adjustment for (gains) loss
 included in net income                  -             -          (4,507)
                                -----------   ----------      ----------

Net unrealized gains (loss)
 on securities                $    (106,762) $    37,984     $    83,079
                                ===========   ==========      ==========

</TABLE>
<PAGE>


<TABLE>

FIRST ALLIANCE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<CAPTION>
                                                 Six months ended

                                           June 30,             June 30,
                                             1999                 1998
                                         (Unaudited)          (Unaudited)
<S>                                     <C>                  <C>
Cash Flows from Operations:
Net cash provided by operating
 activities                             $   229,523          $   237,212


Investing activities:

 Purchase of available-for-sale
  fixed maturities                                -             (250,000)
 Maturity of available-for-sale
  fixed maturities                          750,000            1,949,863
 Purchase of limited partnership
  interest                                  (22,500)                   -
 Decrease in notes receivable                91,252               60,440
 Net (increase)/decrease in
  furniture and equipment                       863              (23,559)
                                        -----------          -----------

Net cash provided by investing
 activities                                 819,615            1,736,744


Financing activities:

 Deposits on annuity contracts, net         503,930              297,442
 Policyholder premium deposits, net          19,175                    -
 Purchase of company stock                  (24,200)                   -
 Additional paid in capital                       -                6,353
 Proceeds from sale of common stock         155,985                3,490
                                        -----------          -----------
Net cash provided by financing
 activities                                 654,890              307,285
                                        -----------          -----------
Increase in cash and cash equivalents     1,704,028            2,281,241

Cash and cash equivalents
 beginning of period                    $ 6,587,264          $ 1,335,455
                                        -----------          -----------
Cash and cash equivalents at
 end of period                          $ 8,291,292          $ 3,616,696
                                        ===========          ===========

See notes to condensed consolidated financial statements.

</TABLE>
<PAGE>



                   FIRST ALLIANCE CORPORATION

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1)   Basis of Presentation

   The accompanying condensed consolidated financial statements of First
   Alliance Corporation and its Subsidiaries ( the "Company") for the six
   month period ended June 30, 1999 and 1998 are unaudited. However, in the
   opinion of the Company, all adjustments (consisting of normal recurring
   accruals) considered necessary for a fair presentation have been reflected
   therein.

   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-K for the fiscal year ended
   December 31, 1998.  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"), results of
   operations are included in the condensed consolidated financial information
   for the six month periods ending June 30, 1999 and 1998.

(3)   Investments

   The Company classifies all of its available-for-sale fixed maturities at
   the current market value.  Adjustments to market value are recognized as a
   separate component of shareholders' equity net of applicable federal income
   tax effects.  The following table details the investment values at June 30,
   1999:

<TABLE>

<CAPTION>
                                          Gross        Gross
                           Amortized    Unrealized   Unrealized      Fair
                              Cost        Gains        Loss         Value
<S>                      <C>           <C>         <C>          <C>
U.S. Government Bonds    $ 1,793,361   $    3,077  $  (11,591)  $ 1,784,847

Municipal Bonds            1,129,578        6,482      (8,368)    1,127,692

Corporate Bonds            2,287,697        8,005     (11,686)    2,284,016
                         -----------   ----------  ----------   -----------

                         $ 5,210,636   $   17,564  $  (31,645)  $ 5,196,555
                         ===========   ==========  ==========   ===========

</TABLE>

   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.   FACC completed its Kansas intrastate public stock offering
   on January 11, 1999, raising total capital of $13,750,000.  The proceeds
   of the public offering have been used to form a Kansas domiciled life
   insurance company, First Life America Corporation.  The Company own's 9.9%
   of the outstanding common stock of FACC.

   On August 8, 1996, the Company purchased 725,000 shares of the common
   stock of Mid-American Alliance Corporation ("MAAC") of Jefferson City,
   Missouri, for $72,500.   At June 30, 1999, MAAC had raised total capital
   of $4,989,425 from the sale of  shares through a $16,000,000 Missouri
   intrastate public stock offering.  On December 31, 1997, MAAC acquired
   Mid American Century Life Insurance Company ("MACLIC"), a Missouri
   domiciled life insurance company.  The proceeds of the public offering
   will be used to further capitalize MACLIC.  When the public offering is
   completed, the Company will own less than 10% of MAAC's outstanding common
   stock.


<PAGE>


(3)   Investments (continued)

   On March 31, 1997, the Company purchased 500,000 shares of the $2.00 par
   value Secured Non-Cumulative Redeemable Convertible Preferred Stock of
   U.S. Star Financial Corporation ("U.S. Star") for $1,000,000.  The
   Preferred shares were convertible into common shares at a rate of one
   share of preferred for one share of common.  U.S. Star could have required
   the conversion if it met conditions set forth in the security agreement.
   If the Preferred shares were not converted within eighteen months of the
   date of purchase, the Preferred shares could have been redeemed at the
   original purchase price.  On September 30, 1998, the Preferred shares were
   redeemed for approximately the original purchase price.  The preferred
   shares contained a provision under which the Company received dividends in
   the form of common stock.  During 1998, the Company received 45,000 shares
   of U.S. Star common stock.  The common stock received is restricted from
   sale or transfer under rule 144 of the Act.  Accordingly, the value of the
   common stock dividend could not be determined and therefore the Company
   did not recognize any dividend income or record the common stock at any
   value.

   On March 31, 1997, the Company purchased 200,000 shares of Paradise Plus
   USA, Inc. and 200,000 shares of Paradise Plus Holding Company, Inc. for a
   total investment of $20,000 or $.05 per share.  Each company is offering a
   total of 700,000 shares of its no par value common stock through a private
   placement stock offering. As these shares represent organizer shares and
   are restricted under Rule 144 of the Act, the common stock investments
   have been recorded at cost.   In addition, the Company executed a $100,000
   promissory note bearing interest at an annual rate of 8.5% with Paradise
   Plus Holding Company, Inc. on March 5, 1997.  At March 31, 1999 and
   December 31, 1998, the unpaid principal balance on this note was $69,636.

   On June 16, 1999, First Kentucky Capital Corporation 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 five percent
   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,
   twenty-eight percent of the capital commitment is due.  The remaining
   amount of the commitment is due in equal installments on the second and
   fourth anniversaries of the initial capital contribution.

   The carrying values of notes receivable and investments in unconsolidated
   affiliates approximate their fair values.  At June 30, 1999 and December
   31, 1998, the fair values of notes receivable were $130,384 and $221,636,
   respectively.

(4)  Deferred Policy Acquisition Costs

   Commissions and other cost 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 premium
   paying period of the related policies using assumptions consistent with
   those used in computing policy reserves.

(5)  Earnings Per Share

   Basic and diluted earnings per share are calculated in accordance with
   Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
   Share".  All earnings and losses per share amounts for all periods
   have been presented to conform with the requirements of  SFAS No. 128.

   Net income (loss) per common share is based upon the weighted average
   number of common shares  outstanding each year.  For the three months
   ended June 30, 1999 and 1998 and for the six months ended
   June 30, 1999 and 1998, all shares are assumed to be outstanding for the
   entire period.  The weighted average outstanding common shares were
   5,686,190 in 1999 and 5,614,740 in 1998.

<PAGE>


(6)  Federal Income Taxes

   The company does not file a consolidated federal income tax 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.  At June 30, 1999 and 1998 estimated
   Federal Income tax expense was $124,437 and $112,923, respectively.

(7)  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
   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 expense
   and agent's health insurance.  Pursuant to the terms of the agreement,
   FAIC had incurred expenses of $396,304 and $281,267 for the six months
   ended June 30, 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 investment management, data processing, accounting and reporting
   services in return for a $1,000 per month service fee from each company.
   Upon commencement of their public stock offerings (April 1, 1997 for FACC
   and November 1, 1997 for MAAC), these fees increased to $2,000 per month
   and the MAAC fees increased to $3,000 per month on February 1, 1999.

   In December 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, 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%) of fifth
   year premiums 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.

   Under the terms of the agreements, FACC and MAAC incurred expenses of
   $29,424 and $17,000, respectively, during the six months ending June 30,
   1999 and $12,000 and $12,000, respectively, during the six months ending
   June 30, 1998.  Further, the Company has accounts receivable of $26,024
   and $7,392 from FACC and MAAC, respectively, at June 30, 1999 and $14,134
   and $6,362 from FACC and MAAC, respectively, at December 31, 1998.


(8)  Private Placement Offering

   The Company is currently offering 200,000 shares of no par value common
   stock 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 one year after the close of the offering
   under Rule 144 of the Securities Act of 1933.  At June 30, 1999, the
   Company had sold 79,500 shares raising total proceeds of $198,750.


<PAGE>


(9) Comprehensive income

   The components of comprehensive income along with the related tax effects
   are presented for the quarters ended June 30, 1999 and 1998 as follows:

<TABLE>

<CAPTION>

                                             1999                1998
<S>                                     <C>                  <C>
Unrealized gain on available
 -for-sale securities:

 Unrealized holding gains/(losses)
  during the period                     $  (161,759)         $   57,551

  Tax benefit/(expense)                      54,997             (19,567)
                                        -----------          ----------
Other comprehensive income                 (106,762)             37,984
                                        ===========          ==========

Net income/(loss)                       $   (58,519)         $  (27,627)

 Other comprehensive income/(loss)
  net of tax effect:
   Unrealized investment gains/(loss)      (106,762)             37,984
                                        -----------          ----------
Comprehensive income/(loss)             $  (165,281)         $   10,356
                                        ===========          ==========

Net income/(loss) per common share
 - basic and diluted                    $     (0.01)         $    (0.00)
                                        ===========          ==========

</TABLE>
<PAGE>



(10)  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, 1999 and December 31, 1998 and for the quarters
   ended June 30, 1999 and 1998 is as follows:


<TABLE>

<CAPTION>
                                                 1999              1998
<S>                                        <C>               <C>
Revenues:
 Life and annuity insurance operations     $   1,838,897     $   1,261,338
 Venture capital operations                          923             1,858
 Corporate operations                            116,278            87,553
                                           -------------     -------------
   Total                                   $   1,956,098     $   1,350,749
                                           =============     =============


Income (loss) before income taxes:
 Life and annuity insurance operations     $     525,415     $     402,922
 Venture capital operations                          923             1,842
 Corporate operations                           (376,515)         (319,454)
                                           -------------     -------------
   Total                                   $     149,823     $      85,310
                                           =============     =============


Assets:
 Life and annuity insurance operations     $  13,355,046     $  10,609,674
 Venture capital operations                       51,266            48,100
 Corporate operations                          3,014,958         3,512,469
                                           -------------     -------------
   Total                                   $  16,421,270     $  14,170,243
                                           =============     =============


Depreciation and amortization expense:
 Life and annuity insurance operations     $     334,584     $     200,201
 Venture capital operations                            -                 -
 Corporate operations                              7,655             7,432
                                           -------------     -------------
   Total                                   $     342,239     $     207,633
                                           =============     =============

</TABLE>


(11) Claims and Contingencies

   The Company received a civil summons on October 6, 1997 related to an
   automobile accident in October 1996 which involved an officer of the
   Company, who was driving the automobile.  The summons was served by the
   Circuit Court in Fayette County, Kentucky and lists Katherine Stockton,
   Individually, and as Administratrix of the Estate of Frank Novak, and as
   next friend of Bradley Novak, as the Plaintiff.  The legal action alleged
   that the officer was acting in the course and scope of employment with
   the Company at the time of the accident.  A settlement, which is within
   the insurance policy limits, has been reached and agreed to in principle
   by all parties and insurance carriers, subject to final court approval
   and the negotiation and execution of definitive settlement documents.



<PAGE>



         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS

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

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

Results of Operations

Revenues for the six months ended June 30, 1999 and 1998 totaled $1,956,098
and $1,350,749, respectively.  Revenues for the three months ended June 30
1999 and 1998  totaled $990,325 and $702,535 respectively.  The primary
source of revenue for the Company is life insurance premium income.
Premium income for the first six months of 1999 increased $554,376 in
comparison to 1998 results.  This increase is due to life insurance premium
renewals and new sales.  An annuity rider is also included with most of the
life insurance products; however, according to Statement of Financial
Accounting Standards ("SFAS") No. 97, "Accounting and Reporting by
Insurance Enterprises for Certain Long-Duration Contracts and for Realized
Gains and Losses from Sales of Investments", annuity premium income is not
recognized as revenue.  Annuity premium receipts for the first six months of
1999 and 1998 totaled $542,701 and $288,023, respectively, and are recognized
as annuity contract liabilities.  Pursuant to the terms of the reinsurance
agreement between FAIC and Business Men's Assurance Company, there are no
first year reinsurance premiums due.  However, SFAS No. 113, "Accounting
and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts",
requires this unpaid premium to be recognized as an expense and amortized
over the term of the contracts reinsured.  At June 30, 1999 amortization of
reinsurance premiums payable totaled $1,642.  There was no amortization for
the six months ended June 30, 1998.

Combined net investment income for FAIC and the Company totaled $319,309 for
the six months ended June 30, 1999 and $288,960 for the same period in 1998.
Cash of $1,000,000 made available from the redemption of the U.S. Star
preferred stock investment earned interest during 1999.  There was no
investment income from the U.S. Star investment during 1998.

For the six month period ended June 30, 1999, benefits and expenses totaled
$1,806,275 representing an increase of $540,836 over the same period of 1998.
Life policy reserve expense increased from $361,328 for the six months ended
June 30, 1998 to $440,640 for the six months ended June 30, 1999.  This
increase is due to new insurance sales and existing policies reaching
another duration.  Expenses related to the acquisition of life insurance are
deferred and amortized over the premium paying period of the related policy.
These expenses, which include commissions and administrative costs, totaled
$782,386 for the six months ended June 30, 1999 and $545,443 for the same

<PAGE>


period in 1998.  Amortization of these costs totaled $334,584 for the six
months ended June 30, 1999 and $200,201 for the same period in 1998.  Death
claims incurred during the first six months of 1999 totaled $74,969, net of
reinsurance of $163,552.  There were no death claims for the same period in
1998.  Selling, administrative and general expenses totaled $152,044 for the
first six months of 1999 and $159,632 for the same period of 1998.

Salaries and benefit expenses totaled $521,023 for the first six months of
1999 and $393,016 for the same period of 1998.  The increase is due to the
hiring of additional employees and the adjustment of employee compensation.
Income tax expense, which is calculated based on the earnings of FAIC,
totaled $124,437 during the first six months of 1999 and $112,923 for the
same period of 1998.

Consolidated Financial Condition

Changes in the consolidated balance sheet of June 30, 1999 compared to
December 31, 1998 reflect the operations of the Company and the capital
transactions listed below.

Total assets increased by $1,188,245 from December 31, 1998 to June 30,
1999.  Deferred policy acquisition costs increased $447,802  net of $334,584
of amortization as the result of new business written by FAIC.

Policy and contract liabilities increased $1,096,977 principally because
of (I) life policy reserves increased $440,640 due to policies written in
1999 and existing policies entering an additional duration; (ii) annuity
contract liabilities increased $589,787 as the result of annuity premiums
received which are recorded as a liability; (iii) deposits on pending policy
applications increased $28,546; and (iv) policyholder premium deposit funds
increased $26,440.

Changes in other liabilities include (I) an increase of $25,442 in the
federal income tax liability;  (ii) an increase of $9,500 in other taxes
payable; (iii) an increase of $26,170 in commissions, salaries and other
benefits;  and (iv) a decrease in accounts payable and accrued expenses of
$20,253.

Liquidity

FAIC's insurance operations generally receive 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 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.

Year 2000 Considerations

A growing concern is the ability of computer systems to accurately process
date calculations in the year 2000 and beyond.  The problem arises from the
initial design of date values which only recognize a two digit year value.
As a result, a computer may interpret a date entered for the year 2000 as the
year 1900.  Any computer system that performs date comparisons and
calculations is exposed to such a problem.  These systems are typically
referred to as information technology systems ("ITS") or computer based
systems.  Another concern is microchips which may also be encoded with a two
digit date value.  These microchips are typically found in such office
equipment as facsimile machines and telephone systems.  These systems are
referred to as non-information technology systems ("NITS").

The Company's primary exposure to any business interruption would be the
result of an ITS failure.  The life insurance industry relies heavily on date
sensitive calculations in daily operations.  The inability to process
transactions could be detrimental to the Company's ability to continue
operations.  The Company out-sources its primary computer processing system
through Navisys, Inc. of Saint Louis, Missouri.   Navisys has assured the
Company that its hardware and software systems have been modified to
eliminate any potential year 2000 problems.  Testing is scheduled to be
completed by mid year 1999.  Evaluation of internal hardware and software is
being performed.  However, management does not believe that a failure of
these internal systems would cause an interruption of business.
Additionally, a NITS failure would not substantially disrupt operations.

The costs to address year 2000 issues have been and will continue to be
relatively insignificant for the Company.  All of the major costs related to
the insurance processing system have been borne by Navisys.  Internally, year
2000 issues may require the replacement of such items as personal computers
and facsimile machines, however these are not expected to cause any
significant financial impact.

<PAGE>

The ultimate risk of the year 2000 issue is the Company's inability continue
as a going concern in the event of major computer system failure.  The impact
could alter, not only the Company's ability to transact business, but also
global financial systems.  Even though the Company is confident that these
issues will not cause significant internal problems, a danger exists
regarding the lack of preparedness of consumers and other institutions,
including federal and state government.

The Company is in the process of developing contingency plans to address any
system failure related to the year 2000.  These plans are expected to be
completed during the fall of 1999.

<PAGE>

Part II.

Item 1.   Legal Proceedings

          Not Applicable

Item 2.   Changes in Securities

          Not Applicable

Item 3.   Defaults upon Senior Securities

          Not Applicable

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

          Not Applicable

Item 5.   Other Information

          Not Applicable

Item 6.   Exhibits and Reports on Form 8-K

          Exhibits  - None

          Form 8-K

          The Company did not file any reports on Form 8-K during the six
          months ended June 30, 1999


<PAGE>



Signatures


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

First Alliance Corporation
(registrant)





/s/ Michael N. Fink                        Date     August 13, 1999
Michael N. Fink, President



/s/ Thomas I. Evans                        Date     August 13, 1999
Thomas I. Evans,
Vice President/Asst. Secretary