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
      September  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  of                  (I.R.S. Employer Number)
  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  5,559,155  shares  as  of  October  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
     September  30,  2001  and  December  31,  2000                          1

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

     Condensed  Consolidated  Statements  of  Cash  Flows
     for  the nine months ended September 30, 2001 and 2000                  4

     Notes  to  Condensed  Consolidated  Financial  Statements               6

Item  2.  Management's  Discussion  and  Analysis  or  Plan  of  Operation  10


Part  II.   OTHER  INFORMATION
------------------------------

Item  2.  Changes in Securities                                             12

Item  4.  Submission of Matters to a Vote of Shareholders                   12

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

Signatures                                                                  13

<PAGE>


<TABLE>
<CAPTION>


                               FIRST  ALLIANCE  CORPORATION

                         CONDENSED  CONSOLIDATED  BALANCE  SHEETS



                                                                    September 30,   December 31,
                                                                        2001            2000
                                                                   ---------------  -------------

ASSETS                                                               (Unaudited)
<S>                                                                <C>              <C>
Investments:
Available-for-sale fixed maturities, at fair value
 (amortized cost, $8,342,409 and $8,548,507
 in 2001 and 2000, respectively)                                   $     8,830,653  $   8,734,400
Equity securities (cost of $2,344,377 and $3,168,318
 in 2001 and 2000, respectively)                                           922,176      2,132,095
Policy loans                                                                69,337        100,687
Notes receivable (net of $260,950 and $149,698 valuation
 allowance in 2001 and 2000, respectively)                                 796,232        569,788
Other invested assets                                                      425,000        510,000
                                                                   ---------------  -------------
Total investments                                                       11,043,398     12,046,970

Cash and cash equivalents                                                5,290,036      4,044,915
Investments in related parties                                             262,500        237,500
Receivables from related parties                                            64,313         35,675
Accrued investment income                                                  181,231        144,074
Premiums receivable                                                         98,973        136,069
Advances to agents                                                          43,864         36,382
Reinsurance recoverable                                                    935,346        714,561
Deferred policy acquisition costs                                        4,492,429      3,364,088
Value of insurance acquired                                                      -         57,224
Goodwill                                                                         -        151,027
Office furniture and equipment, less accumulated depreciation of
     $107,590 and $116,975 in 2001 and 2000, respectively                   73,373         45,580
Other assets                                                                56,706         71,184
                                                                   ---------------  -------------
Total assets                                                       $    22,542,169  $  21,085,249
                                                                   ===============  =============
See notes to condensed consolidated financial statements
</TABLE>

                                        1
<PAGE>

<TABLE>
<CAPTION>


                                 FIRST ALLIANCE CORPORATION

                     CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

                                                             September 30,    December 31,
                                                                 2001             2000
                                                            ---------------  --------------
<S>                                                         <C>              <C>
LIABILITIES AND SHAREHOLDERS  EQUITY                           (Unaudited)
Policy and contract liabilities:
Annuity contract liabilities                                $    6,322,635   $   4,629,330
Life policy reserves (net of reinsurance ceded
  reserves of $439,787 and $340,172 in 2001 and
  2000, respectively)                                            4,252,390       4,379,730
Unearned premium reserves                                          508,628         358,981
Policy and contract claims                                          45,647         108,889
Policyholder dividend deposits                                           -          42,726
Policyholder premium deposits                                      205,710         187,798
Deposits on pending policy applications                            310,374         276,287
Unearned revenue                                                    90,199          77,010
Reinsurance premiums payable                                        65,932          56,349
                                                            ---------------  --------------
Total policy and contract liabilities                           11,801,515      10,117,100

Commissions, salaries, wages and benefits payable                  239,267         175,191
Accrued expenses and other liabilities                              83,947          55,232
Federal income taxes payable:
     Current                                                          (143)         11,583
     Deferred                                                      939,879         575,826
                                                            ---------------  --------------
Total liabilities                                               13,064,465      10,934,932

Shareholders  equity:
Common stock, no par value, 8,000,000 shares authorized;
5,553,655 and 5,527,360 shares issued and outstanding at
September 30, 2001 and December 31, 2000, respectively             555,366         552,736
Additional paid-in capital                                      13,461,547      12,628,272
Retained Earnings - deficit                                     (3,932,137)     (2,469,474)
Accumulated other comprehensive income                            (607,072)       (561,217)
                                                            ---------------  --------------
Total shareholders  equity                                       9,477,704      10,150,317
                                                            ---------------  --------------
Total liabilities and shareholders  equity                  $   22,542,169   $  21,085,249
                                                            ===============  ==============
See notes to condensed consolidated financial statements.
</TABLE>

                                        2
<PAGE>

<TABLE>
<CAPTION>

                                                  FIRST ALLIANCE CORPORATION

                                       CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                  Three months ended               Nine months ended

                                                             September 30,    September 30,    September 30,    September 30,
                                                                 2001             2000             2001             2000
                                                           ---------------  ---------------  ---------------  ---------------
                                                              (Unaudited)      (Unaudited)      (Unaudited)     (Unaudited)
<S>                                                        <C>              <C>              <C>              <C>
REVENUES
Premium income                                             $    1,294,566   $      885,086   $    4,100,406   $    2,650,752
Premiums ceded                                                   (168,455)         (30,328)        (701,500)        (113,622)
                                                           ---------------  ---------------  ---------------  ---------------
   Net premiums earned                                          1,126,111          854,758        3,398,906        2,537,130
Net investment income                                             195,505          165,664          543,116          529,788
Net realized investment gain (loss)                                (7,196)        (100,832)        (159,408)        (128,784)
Service fee revenue                                                79,867           52,623          215,846          130,702
Other income                                                       12,298           97,991           30,127          356,310
                                                           ---------------  ---------------  ---------------  ---------------
  Total revenue                                                 1,406,585        1,070,204        4,028,587        3,425,146

BENEFITS AND EXPENSES
Death claims                                                      130,212           46,421          290,352          112,882
Death claims ceded                                                (97,462)         (22,780)        (236,407)         (46,768)
                                                           ---------------  ---------------  ---------------  ---------------
     Net death claims                                              32,750           23,641           53,945           66,114
Increase in policy reserves                                       267,081          171,805          708,678          534,481
Policyholder surrender values                                      35,718           40,800          146,725          135,050
Interest credited on annuities and
  premium deposit fund                                            156,018           89,747          390,901          237,393
Payment of dividend accumulations                                       -              463                -            1,881
Commissions                                                       397,250          334,461        1,103,727        1,152,651
Policy acquisition costs deferred                                (747,191)        (260,996)      (1,785,625)        (915,945)
Amortization expense:
  Deferred policy acquisition costs                               321,972          148,486          657,283          463,627
  Value of insurance acquired                                           -            1,022              681            3,066
Selling, administrative and general
   expense                                                        305,688          108,068          745,447          408,705
Salaries, wages and employee benefits                             429,801          230,845        1,171,908          777,843
Professional fees                                                  78,607           48,103          180,115          158,945
Depreciation expense                                                5,884            4,292           15,365           13,695
Interest expense                                                    4,370                -            6,840                -
Other expenses                                                     53,822          117,880          259,741          345,446
                                                           ---------------  ---------------  ---------------  ---------------

Total benefits and expenses                                     1,341,770        1,058,617        3,655,731        3,382,952
                                                           ---------------  ---------------  ---------------  ---------------

INCOME FROM OPERATIONS                                             64,815           11,587          372,856           42,194
                                                           ---------------  ---------------  ---------------  ---------------

Federal income taxes                                              135,383           23,974          402,099          170,895
                                                           ---------------  ---------------  ---------------  ---------------

Net income (loss)                                          $      (70,568)  $      (12,387)  $      (29,243)  $     (128,701)
                                                           ===============  ===============  ===============  ===============
Net loss per common share -
basic and diluted                                          $        (0.01)  $         0.00   $        (0.01)  $        (0.02)
                                                           ===============  ===============  ===============  ===============

See notes to condensed consolidated financial statements

</TABLE>

                                        3
<PAGE>

<TABLE>
<CAPTION>
                                   FIRST ALLIANCE CORPORATION

                         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                      Nine months ended

                                                                 September 30,    September 30,
                                                                     2001             2000
                                                                ---------------  ---------------
                                                                  (Unaudited)      (Unaudited)
<S>                                                             <C>              <C>
OPERATING ACTIVITIES:
Net loss                                                        $      (29,243)  $     (128,701)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
  Interest credited on annuities and premium deposits                  386,022          228,931
  Provision for depreciation                                            15,365           13,695
  Amortization of premium and accretion of discount on
    fixed maturity investments                                          16,864           15,676
  Amortization of value of insurance acquired                              681            3,066
  Net realized investment (gains) loss                                 135,368          128,785
  Provision for deferred federal income taxes                          401,757          142,395
  Increase in policy loans                                              (8,113)         (44,096)
  Increase in accrued investment income                                (46,864)         (41,294)
  Increase in receivables from related parties                         (28,638)         (27,004)
  Increase in reinsurance recoverable                                 (220,785)             (94)
  Decrease in federal income tax recoverable                                 -            7,985
  Increase in deferred policy acquisition costs, net                (1,128,341)        (452,318)
  Increase (decrease) in unearned revenue                               13,189           (8,916)
  (Increase) decrease in premiums due                                   35,175           (3,065)
  (Increase) decrease in other assets                                    4,169           (1,213)
  Increase in policy reserves                                          931,613          534,481
  Increase in deposits on pending policy applications                   34,087            8,687
  Decrease in claims payable                                           (63,242)         (41,345)
  Increase in reinsurance premiums payable                               9,583            3,257
  Increase (decrease) in federal income taxes payable                  (11,726)           8,310
  Increase in commissions, salaries, wages and benefits payable         64,076           21,509
  Increase (decrease) in accounts payable, accrued expenses and
    other liabilities                                                   31,099          (39,298)
                                                                ---------------  ---------------
Net cash provided by operating activities                              542,096          329,433

INVESTING ACTIVITIES:
  Purchase of available-for-sale fixed maturities                   (1,936,189)      (2,639,847)
  Sale of available-for-sale fixed maturities                        1,011,823        2,748,896
  Purchase of common stock                                                   -       (5,136,341)
  Sale of common stock                                                 681,118        1,503,674
  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 unconsolidated affiliate                   (25,000)        (112,500)
  Decrease in notes receivable                                          12,304         (309,529)
  Purchase of furniture and equipment, net                             (51,084)         (11,093)
                                                                ---------------  ---------------
Net cash used in investing activities                                 (694,878)      (4,120,459)
</TABLE>

                                        4
<PAGE>

<TABLE>
<CAPTION>
                                   FIRST ALLIANCE CORPORATION

                    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

                                                               September 30,    September 30
                                                                   2001             2000
                                                              --------------   --------------
                                                                (Unaudited)      (Unaudited)
<S>                                                           <C>              <C>
FINANCING ACTIVITIES:
  Deposits on annuity contracts, net                               1,318,480         935,711
  Policyholder premium deposits, net                                   6,715           5,922
  Policyholder dividend deposits, net                                    223            (638)
  Proceeds from sale of common stock                                  93,000         186,312
  Cost of stock offering                                             (20,180)         (1,050)
  Dividends paid                                                        (335)              -
  Repurchase of company stock                                              -        (388,780)
                                                              --------------   --------------
Net cash provided by financing activities                          1,397,903         737,477
                                                              --------------   --------------

Increase (decrease) in cash and cash equivalents                   1,245,121      (3,053,549)

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

Cash and cash equivalents at end of period                    $    5,290,036   $   2,487,022
                                                              ==============   ==============

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>


                                        5
<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 nine months ended September 30, 2001 and 2000
as  follows:

<TABLE>
<CAPTION>
                                                           Three months ended               Nine months ended
                                                    September 30,    September 30,    September 30,    September 30,
                                                        2001             2000             2001             2000
                                                   ---------------  ---------------  --------------- ----------------
<S>                                                <C>              <C>              <C>              <C>
Unrealized loss on available-for-sale securities
     Unrealized holding losses during the period   $      (38,168)  $     (224,370)  $      (83,627)  $     (672,030)
     Tax benefit                                           13,359           76,286           37,772          228,491
                                                   ---------------  ---------------  --------------- ----------------
Other comprehensive income (loss)                  $      (24,809)  $     (148,084)  $      (45,855)  $     (443,539)
                                                   ===============  ===============  =============== ================

Net loss
                                                   $      (70,568)  $      (12,387)  $      (29,243)  $     (128,701)
Other comprehensive income (loss) net of
tax effect:
   Unrealized investment loss                             (24,809)        (148,084)         (45,855)        (443,539)
                                                   ---------------  ---------------  --------------- ----------------
Comprehensive income (loss)                        $      (95,377)  $     (160,471)  $      (75,098)  $     (572,240)
                                                   ===============  ===============  =============== ================
Net income (loss) per common share - basic
     and diluted                                   $        (0.01)  $         0.00   $        (0.01)  $        (0.02)
                                                   ===============  ===============  =============== ================
</TABLE>

                                        6
<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  June14,  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)    INVESTMENT  IN  RELATED  PARTY

On  August  16,  2001,  the Company purchased, thru a private placement, 250,000
shares  of  no  par  value  Class  A  common  stock of Arkansas Security Capital
Corporation ( ASCC ) of Springdale, Arkansas for $25,000.  At September 30, 2001
ASCC  had raised $240,000 from the sale of private placement shares.  ASCC plans
to  conduct  another  private placement of $600,000 in March of 2002.  ASCC then
plans  to register an Arkansas intrastate public offering of $12,500,000.  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.  Scott  Engebritson,  Company  Vice
Chairman  is  Chairman  of  the  Board  of  ASCC.

                                        7
<PAGE>

(6)     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.

(7)    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 September 30, 2001 and September 30, 2000 and for the quarters
ended  September  30,  2001 and  2000  is  as  follows:

<TABLE>
<CAPTION>
                                                                     Three months ended          Nine months ended

                                                                     Sept 30,      Sept 30,      Sept 30,     Sept 30,
                                                                       2001          2000          2001         2000
                                                                   -----------   -----------   -----------   -----------
                                                                   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
<S>                                                                <C>           <C>           <C>           <C>
Revenues:
 Life and annuity insurance operations                             $ 1,323,249   $ 1,019,855   $ 4,004,368   $3,241,669
 Venture capital operations                                                  -             -           884            -
 Corporate operations                                                   83,336        50,349        23,335      183,477
                                                                   -----------   -----------   -----------   -----------
Total                                                              $ 1,406,585   $ 1,070,204   $ 4,028,587   $3,425,146
                                                                   ===========   ===========   ===========   ===========
Income (loss) before income taxes:
 Life and annuity insurance operations                             $    51,212   $    (3,150)  $   624,506   $  403,036
 Venture capital operations                                               (604)            -           100            -
 Corporate operations                                                   14,207      (156,158)     (251,750)    (531,737)
                                                                   -----------   -----------   -----------   -----------
Total                                                              $    64,815   $  (159,308)  $   372,856   $ (128,701)
                                                                   ===========   ===========   ===========   ===========

Depreciation and amortization expense:
 Life and annuity insurance operations                             $   321,972   $   150,367   $   658,484   $  469,270
 Venture capital operations                                                  -             -             -            -
 Corporate operations                                                    5,884         3,433        14,845       11,117
                                                                   -----------   -----------   -----------   -----------
Total                                                              $   327,856   $   153,800   $   673,329   $  480,387
                                                                   ===========   ===========   ===========   ===========
</TABLE>

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

<TABLE>
<CAPTION>

Assets:
<S>                                            <C>          <C>
   Life and annuity insurance operations       $21,113,701  $19,163,645
   Venture capital operations                      309,392      208,766
   Corporate operations                          1,119,076    1,712,838
                                               -----------  -----------
      Total                                    $22,542,169  $21,085,249
                                               ===========  ===========
</TABLE>

                                        8
<PAGE>

(8)     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 September 30, 2001 and 2000 was 5,525,397 and 5,541,510, respectively and
for  the  nine  months  ending  September  30,  2001  and 2000 was 5,413,659 and
5,614,165,  respectively.

(9)     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.

(10)     STOCK  DIVIDEND

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

(11)     PRIVATE  PLACEMENT  OFFERING

In  August  2001  the Company commenced an offering of 500,000 shares of class A
common stock no par value for $3.00 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.  At September 30, 2001, the
Company  had  sold  31,000  shares  that  raised  total  proceeds of $93,000 and
incurred  offering  cost,  including  commissions,  of  $20,180.

(12)     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  14,  2001  the  agreement  to  provide  a  credit  facility to KBA was
terminated  and  the  loan  was  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.

                                        9
<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 nine months ended September 30, 2001 net income increased $99,458, from
a  $128,701  loss to a $29,243 loss, compared to the nine months ended September
30,  2000  results.  Earnings  per  share  increased to a loss per share of $.01
compared  to  a  loss  per share of $.02 for the nine months ended September 30,
2000.  Equity  per  share for the nine months decreased 7% to $1.71. 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  $9,477,704  and $10,150,317 at September 30, 2001
and December 31, 2000, respectively.  The  September 30, 2001 balance reflects a
net  decrease  of  approximately  6.6%  for  the  nine-month  period then ended.
Comprehensive income (loss) totaled ($75,098) and ($572,240) for the nine months
ended  September  30,  2001  and  2000,  respectively.  A significant portion of
comprehensive  income  activity  arose  from  the  Company  s  equity securities
portfolio.  Equity  securities comprised approximately 4% and 16% of the Company
s  total  assets  as  of  September  30,  2001  and  2000, respectively.  Equity
portfolio  positions  decreased  $823,941  on  a  cost basis and $1,209,919 on a
market  value basis for the first nine months of 2001.  Fixed maturity portfolio
positions  decreased  $206,098  on an amortized cost basis and increased $96,253
on  a  market value basis during the same time period.  The increase of $226,444
in  notes receivable resulted primarily from receiving a note as payment for the
sale  of an 8% interest in a limited liability company.  The decrease 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
$1,245,121  during  the  nine-month  period.

                                       10
<PAGE>


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

Net  premiums  increased  approximately 34% during the first nine months of 2001
compared  to  the first nine months of 2000.  Revenues for the nine months ended
September  30 totaled $4,028,587 in 2001 and $3,425,146 in 2000. The increase is
primarily  attributable  to  an  $861,776 increase in net premium income, and an
$85,144  or  65%  increase  in  service fee revenue offset by an increase in net
realized  investment  losses  of  $30,624  primarily  resulting from the sale of
equity  securities  and  a $10,000 loss from the sale of its subsidiary, Benefit
Capital  Life  Insurance  Company.

Cash  Flow  and  Liquidity
--------------------------

Cash  flow  provided  by  operations  totaled $542,096 for the nine months ended
September  30,  2001  compared  to  $329,433 provided by operations for the same
period  in  the  prior year.  The change resulted primarily from the increase in
premium  income.  $694,878  of  cash was used in investing activities during the
first  nine  months  of  2001.  The change resulted primarily from the sale of a
subsidiary  and  the  purchase  of a limited partnership interest. $1,397,903 of
cash  provided  by  financing activities during the first nine months of 2001 is
due  primarily  to  annuity deposits and proceeds from the sale of the Company's
stock.

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.

                                       11
<PAGE>

Part  II.  -  Other  information
--------------------------------
Item  2.     Changes  in  Securities

             In  August  2001  the  Company  commenced an offering of 500,000
             shares of class A common stock no  parvalue for $3.00 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, the sesecurities 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.  At September  30, 2001,  the  Company  had
             sold  31,000  shares that raised total proceeds  of  $93,000  and
             incurred  offering  cost,  including commissions, of $20,180.

Item  4.     Submission  of  Matters  to  a  Vote  of  Shareholders

     (a)     The  annual meeting of the stockholders was held July 25, 2001 at
             10 a.m.
             The  purpose  of  the  meeting  was  to elect directors and the
             approval of independent  auditors for  2001.

     (b)     Individuals  elected for a term of one year and the number of votes
             cast  were  as  follows:

 Michael  N.  Fink        Number of votes cast FOR: 2,610,329 ; Withheld: 11,350
 Jimmy Dan Conner         Number of votes cast FOR: 2,621,904 ; Withheld: 11,350
 Denzel  E.("Denny")Crum  Number of votes cast FOR: 2,625,704 ; Withheld: 11,350
 Scott  J.  Engebritson   Number of votes cast FOR: 2,607,629 ; Withheld: 11,350
 James M. Everett         Number of votes cast FOR: 2,607,829 ; Withheld: 11,350
 Thomas  I. Evans         Number of votes cast FOR: 2,570,729 ; Withheld: 11,350
 Charles Hamilton         Number of votes cast FOR: 2,621,529 ; Withheld: 11,350
 Ronda  S.  Paul          Number of votes cast FOR: 2,610,329 ; Withheld: 11,350

     Approval  of  the appointment of Kerber, Eck & Braeckel, LLP as independent
     auditors  for  2001.

     For:        2,568,129
     Against:       32,300
     Abstain:       38,700

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  September  30,  2001

                                       12
<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           November  12,  2001                /s/  Michael  N.  Fink
    ------------------------------                ----------------------
                                                 Michael  N.  Fink,  President



Date           November  12,  2001                /s/  Thomas  I.  Evans
     -----------------------------                ----------------------
                                                     Thomas  I.  Evans,
                                                   Vice  President/Secretary

                                       13
<PAGE>