United States
               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, 1998
                              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 - 5,614,740  shares as of August 1, 1998.
                   

<TABLE>                   
FIRST ALLIANCE CORPORATION
                                
CONDENSED CONSOLIDATED BALANCE SHEETS
(amouonts in dollars)
<CAPTION>
                                                   June 30,      December 31,
                                                     1998           1997
                                                 (Unaudited)
<S>                                              <C>             <C>        
Assets
                                
Investments:
  Available-for-sale fixed maturities, 
  at fair value (amortized cost, $7,300,081 
  and $9,016,891 in 1998 and 1997, respectively) $ 7,379,435     $ 9,038,694
Preferred stock at cost                            1,000,000       1,000,000
Common stock at cost                                  20,000          20,000
Notes receivable (net of $149,698 valuation 
  allowance in 1998 and 1997)                        274,484         334,923

Total investments                                  8,673,919      10,393,617

Cash and cash equivalents                          3,616,696       1,335,455
Investments in related parties                       125,000         125,000
Receivables from related parties                      18,006          21,286
Accrued investment income                            120,955         151,813
Deferred policy acquisition costs (net of 
 amortization of $200,201 in 1998 and $128,183 
 in 1997)                                          1,420,730       1,074,485
Prepaid expenses                                      39,822          20,662
Office furniture and equipment, less accumulated            
 depreciation of $60,965 and $53,533 in 1998 
 and 1997, respectively                               48,152          32,026
Advances to agents                                    44,097          23,251
Premiums due                                          41,940          27,951
Other assets                                          20,926          92,818

Total Assets                                    $ 14,170,243    $ 13,298,364

Liabilities and Shareholders' Equity

Policy liabilities and accruals                    2,869,956       2,259,567
Federal income taxes payable                         338,091         205,706
Accounts payable                                      83,361          31,134
Other liabilities                                    291,883         235,599

Total liabilities                                  3,583,291       2,732,006

Commitments and Contingencies (Note I)

Shareholders' equity:

Common stock, no par value, 8,000,000 
   shares authorized; 5,614,740 shares 
   issued and outstanding at June 30, 1998 
   and 5,579,840 shares issued and outstanding 
   at December 31, 1997                              561,474         557,984

Additional paid in capital                        12,148,278      12,141,546
Unrealized investment gains (losses) net of 
   deferred federal income tax expense of 
   $17,975 in 1998 and $7,413 in 1997                 52,374          14,390
Retained Earnings                                 (2,175,174)     (2,147,562)

Total Shareholders' equity                        10,586,952      10,566,358

Total liabilities and shareholders' equity      $ 14,170,243    $ 13,298,364

See notes to condensed consolidated financial statements.

</TABLE>
<PAGE>

<TABLE>
FIRST ALLIANCE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in dollars)

<CAPTION>
                                Three months ended          Six months ended
                              June 30,      June 30,     June 30,     June 30,
                                1998          1997         1998         1997
                            (Unaudited)   (Unaudited)  (Unaudited) (Unaudited)
<S>                         <C>           <C>          <C>          <C>        
Revenues
  Premium Income            $   528,861   $  248,946   $ 1,024,278  $  646,195
  Net Investment Income         149,321      132,194       288,960     284,551
  Earnings of unconsolidated 
    affiliates and other        
    income                       24,353        8,052        37,511     (36,858)
  
Total revenue                   702,535      389,192     1,350,749     893,888

Benefits and expenses
  Salaries, wages and 
    employee benefits           193,018      162,239       393,016     337,409
  Increase in policy 
    reserves                    200,620       80,125       361,328     181,692
  Commissions                   229,730       97,412       397,959     221,544
  Policy acquisition costs 
    deferred                   (323,409)    (189,060)     (545,443)   (423,366)
  Amortization of deferred 
    policy acquisition costs    119,262       64,210       200,201     192,393
  Other insurance benefits 
    and expenses                 50,384       46,334        89,476      91,691
  Agency expenses                59,503       26,901       115,092      67,710
  Professional fees              42,817       71,784        84,680     105,941
  Other expenses                 93,430      126,394       169,130     190,645

Total benefits and expenses     665,355      486,339     1,265,439     965,659

Income/(loss) from operations    37,180      (97,147)       85,310     (71,771)

Federal income taxes             64,807       36,700       112,923      79,200

Net loss                    $   (27,627)  $ (133,847)  $   (27,613) $ (150,971)

Net loss per common share
  -basic and diluted        $    (0.005)  $   (0.024)  $    (0.005) $   (0.027)

See notes to condensed consolidated financial statements.

</TABLE>
<PAGE>

<TABLE>
FIRST ALLIANCE CORPORATION
                                
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in dollars)                               

<CAPTION>                                        Six months ended
                                            June 30,           June 30,
                                              1998               1997
                                          (Unaudited)         (Unaudited)
<S>                                       <C>                 <C>           
Operating activities:

Net cash provided/(used) in operating 
   activities                             $   237,212         $   (106,518)

Investing activities:

   Purchase of available-for-sale 
    fixed maturities                         (250,000)            (501,452)
   Maturity of available-for-sale 
    fixed maturities                        1,949,863            1,539,680
   Short-term investments sold/(acquired)           -                    -
   Notes Receivable                            60,440             (164,428)
   Purchase of Preferred Stock                      -           (1,000,000)
   Purchase of Common Stock                         -              (20,000)
   Purchase of furniture and equipment        (23,559)              (3,144)

Net cash used in investing activities       1,736,744             (149,344)

Financing activities:

   Deposits on annuity contracts              297,442              336,304
   Additional paid in capital                   6,353                    -
   Sale of common stock                         3,490                    -
   Cost of stock offering                           -                    -
   
Net cash provided by financing activities     307,285              336,304

Increase(Decrease) in cash and cash 
  equivalents                               2,281,241               80,442

Cash and cash equivalents beginning 
  of period                               $ 1,335,455         $    908,276

Cash and cash equivalents at end 
  of period                               $ 3,616,696         $    988,718

See notes to condensed consolidated financial statements.

</TABLE>
<PAGE>
Part I
                   
                   FIRST ALLIANCE CORPORATION
                                
                NOTES TO CONDENSED CONSOLIDATED 
                      FINANCIAL STATEMENTS
                                
(A)  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, 1998 and 1997 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, 1997.  Certain reclassifications have been made in the prior 
     period financial statements to conform with the current year presentation.

(B)  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 period ending June 30, 1998. 
     
     During 1997, the venture capital investments of FKCC were written-off.  
     The Board of Directors of FKCC elected to place a moratorium on any new 
     investments until certain criteria can be established for these 
     investments.

(C)  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, 1998:

<TABLE>

<CAPTION>
                                      Gross         Gross
                        Amortized     Unrealized    Unrealized    
                        Cost          Gains         Loss         Fair Value
<S>                    <C>            <C>           <C>          <C>

U.S. Government Bonds  $ 4,047,910    $  16,985     $  (4,154)   $  4,060,741

Municipal Bonds          1,483,913       41,659          (269)      1,525,303

Corporate Bonds          1,768,258       25,607          (474)      1,793,391

  Totals               $ 7,300,081    $  84,251     $  (4,897)   $  7,379,435


</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.   At June 30, 1998, FACC had raised total capital of 
     $7,856,750 from the sale of private placement shares and through a 
     $12,500,000 Kansas intrastate public stock offering which commenced on 
     March 11, 1997.  The proceeds of the public offering have been used to
     form a Kansas domiciled life insurance company, First Life America 
     Corporation.  When the public offering is completed, the Company will 
     own less than 10% of outstanding common stock. 

<PAGE>
     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, 1998, MAAC had raised total capital 
     of $1,801,600 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.

     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 are collateralized with securities, which are in the 
     possession of the Company, that equal the total investment.  All 
     interest earned on the collateral is retained by U.S. Star.  The 
     Preferred shares are convertible into common shares at a rate of one 
     share of preferred for one share of common.  U.S. Star can require the 
     conversion if it meets conditions set forth in the security agreement.  
     If the Preferred shares are not converted within eighteen months of the 
     date of purchase, the Preferred shares can be redeemed at the original
     purchase price.  As a result, these shares have been recorded in the 
     financial statements at cost.

     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. 

     The carrying values of notes receivable and investments in unconsolidated 
     affiliates approximate their fair values.  At June 30, 1998 and December 
     31, 1997, the fair values of notes receivable were $274,484 and $334,923, 
     respectively.

(D)  Deferred Policy Acquisition Costs

     Certain costs related to the acquisition of life insurance have been 
     deferred to the extent recoverable from future policy revenues and gross 
     profits.  These acquisition costs are being amortized over the premium 
     paying period of the related policies.

(E)  Net Loss Per Common Share

     In 1997, the Financial Accounting Standards Board issued SFAS No. 128, 
     "Earnings per Share".  SFAS No. 128 replaced the calculation of primary 
     and fully diluted earnings per share with basic and diluted earnings per
     share.  Unlike primary earnings per share, basic earnings per share 
     excludes any dilutive effects of convertible securities.  Diluted earnings 
     per share is very similar to fully diluted earnings per share.  The net 
     loss per share amounts for all periods have been presented to conform to 
     the SFAS 128 requirements for basic earnings per share.  The diluted 
     earnings per share amounts are not presented as the effect of inclusion of 
     the stock options granted at December 31, 1997 as common stock equivalents 
     would be antidilutive.  

     Net loss per common share is based upon the weighted average number of 
     common shares outstanding each year.  For the six months ended June 30, 
     1998 and 1997, all shares are assumed to be outstanding for the entire
     year.  The weighted average outstanding common shares were 5,614,740 in 
     1998 and 5,579,840 in 1997.

(F)  Stock Options

     The Company has adopted a stock option plan for 200,000 common stock 
     shares.  On December 31, 1997, the Stock Option Committee granted 54,650 
     options, all of which were exercisable and outstanding at December 31, 
     1997.  During 1998, 34,900 of these options were exercised.

<PAGE>

(G)  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.  Federal income tax expense for the six 
     months ended June 30, 1998 is calculated using an effective rate derived 
     from the previous year tax expense.  For the six months ended June 30, 
     1998 and 1997 estimated Federal Income tax expense was $112,923 and 
     $79,200, respectively.

(H)  Related Party Transactions

     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. 
     Under the terms of the agreements, FACC and MAAC each incurred expenses
     of $12,000 during 1998.  Further, the Company has accounts receivable of 
     $8,961 and $9,045 from FACC and MAAC, respectively, at June 30, 1998 and 
     $6,914 and $14,372 from FACC and MAAC, respectively, at December 31, 1997. 
     Various officers and directors of the Company hold similar positions with 
     FACC and MAAC.

(I)  Commitments 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 alleges 
     that the officer was acting in the course and scope of employment with the 
     Company at the time of the accident.  The outcome of this matter is not 
     predictable with assurance.  Although any actual liability is not 
     determinable as of June 30, 1998, the Company believes that any liability 
     resulting from this matter, after taking into consideration insurance 
     coverages, should not have a material adverse effect on the Company's
     financial position.

         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.

<PAGE>

Results of Operations

Revenues for the six months ended June 30, 1998 and June 30, 1997 totaled 
$1,350,749 and $893,888, respectively. The increase in revenues $456,861 for 
the six months ended June 30, 1998 compared to June 30, 1997 is the result of
an increase in premium revenues of $378,083.  Premium income during 1998 
consists of $584,701 of first year premiums and $475,830  of renewal premiums.  
During 1997, first year premium income totaled $333,624  and renewal premium 
income totaled $312,572.  The primary product marketed by the company was 
modified in August of 1997 which changed the allocation between life and 
annuity premiums.  All first year premiums in 1998 are allocated to life
insurance.

Current year net investment income was comparable with previous year results. 
Investment income for the first six months of 1998 totaled $288,960 which was 
$4,409 increase over the same period of 1997.  While the invested asset base 
of insurance operations continued to increase, the investment base of the 
parent company decreased due to investment sales.  These factors, along with 
a decrease in the interest rates earned on investments accounted for lower
than anticipated investment income.

Earnings of unconsolidated affiliates and other income increased $74,369 
during the first six months of 1998 as compared to the same period in 1997.  
As of December 31,1997, all of the venture capital investments had been 
written off.  Accordingly, 1998 operating results are not impacted by any 
losses of venture capital investments.  The primary component of other income 
for the six month period ended June 30, 1998 is service fee revenue from First 
American Capital Corporation and Mid-American Alliance Corporation.

For the six month period ended June 30, 1998, benefits and expenses totaled 
$1,265,439.  For the same period in 1997, benefits and expenses totaled 
$965,659.  This increase of $299,780 is the result of increased insurance 
administration expenses related to higher sales volume offset by a decline in 
death benefits paid.  For the first six months of 1998, no death claims had 
been incurred as compared to $17,069 for the same period of 1997.  Increased 
employee wages and higher incentive compensation earnings related to higher 
premium volume accounted for the $55,607 increase in salaries, wages and 
employee benefits.  Policy reserves increased $179,636 due to new business 
written and existing business reaching another duration.  Agency expenses 
increased $47,392 to $115,092 for the six months ended June 30, 1998 compared 
to the same period in 1997.  Additional agents hired, more extensive 
recruiting and agent incentive contest accruals accounted for this increase.  
Professional fees decreased from $105,941 for the six month period ended
June 30, 1997 to $84,680 for the same period in 1998.  During 1997, the 
company incurred actuarial charges for the re-design of the revised product 
being marketed which did not reoccur in 1998.

Income from operations for the six months ended June 30, 1998 totaled $85,310.  
For the same period in 1997, the loss from operations totaled $71,771.  This 
change is reflective of the increase in premium income and the elimination of
losses from venture capital investments.

Income tax expense totaled $112,923 for the six months ended June 30, 1998.  
Income tax expense is calculated based on the earnings of First Alliance 
Insurance Company.  Income tax expense for the same period in 1997 totaled 
$79,200. Of the current year tax expense of $112,923,  $106,811 represent 
deferred taxes which are based on timing differences between taxable income 
and income reported under generally accepted accounting principles.  

The increase in operating revenues for the three months ended June 30, 1998 
and 1997 reflect the increases in the volume of new and renewal life insurance 
sales along with the elimination of the losses of the venture capital 
investments in 1998.  The increase in expenses is also attributed to the 
increase in the volume of insurance operations.  


Consolidated Financial Condition

Changes in the consolidated balance sheet of June 30, 1998 compared to 
December 31, 1997 reflect the operations of the Company and the capital 
transactions listed below.

Total assets increased by $871,879 from December 31, 1997 to June 30, 1998.  
Deferred policy acquisition costs increased $346,245 net of $72,018 of 
amortization as the result of new business written by FAIC and the costs 
related to existing policies entering an additional duration being deferred.

Policy and contract liabilities increased $610,389 principally because  (i) 
life policy reserves increased $361,329 due to policies written in 1998 and 
existing policies entering an additional duration and (ii) annuity contract 
liabilities increased $297,442 as the result of annuity premiums received 
which are recorded as a liability.  

Changes in other liabilities include (i) a decrease of $75,086 in accrued 
payroll due to the payment of employee incentives; (ii) an increase of 
$126,378 in deferred tax liability due to timing difference between taxable 
income and generally accepted accounting principles income; and (iii) an 
increase in other liabilities of $147,555 due to cash received on pending 
policy applications.

<PAGE>

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. Most of the Company's invested assets are in bonds which are readily 
marketable.  Although there is no present need or intent to dispose of such 
investments, the Company could liquidate portions of their investments if such 
a need arose.



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, 1998



<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)


Michael N. Fink, President                          Date  August 14, 1998



Thomas I. Evans, Vice President/Asst. Secretary     Date  August 14, 1998