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 March 31, 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              
 incorporation or organization)              (I.R.S. Employer Identification
   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 May 12, 1998

                                
<TABLE>                                
FIRST ALLIANCE CORPORATION
                                
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in dollars)
<CAPTION>
                                
                                                    March 31,    December 31,
                                                      1998           1997
                                                   (Unaudited)
<S>                                                <C>           <C>
Assets                                 

Investments:
  Available-for-sale fixed maturities, 
  at fair value (amortized cost, $7,058,411 
  and $9,016,891 in 1998 and 1997, respectively)   $7,107,440    $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)                         319,397       334,923

Total investments                                   8,446,837    10,393,617

Cash and cash equivalents                           3,595,567     1,335,455
Investments in related parties                        125,000       125,000
Receivables from related parties                       38,808        21,286
Accrued investment income                             112,214       151,813
Deferred policy acquisition costs (net of 
amortization of $80,939 in 1998 and $128,183 
in 1997)                                            1,215,589     1,074,485
Prepaid expenses                                       49,858        20,662
Office furniture and equipment, less accumulated            
depreciation of $57,046 and $ 53,533 in 1998 
and 1997, respectively                                 50,690        32,026
Advances to agents                                     32,824        23,251
Premiums due                                           26,219        27,951
Other assets                                           18,244        92,818

Total Assets                                      $13,711,850   $13,298,364


Liabilities and Shareholders' Equity

Policy liabilities and accruals                     2,529,064     2,259,567
Federal income taxes payable                          254,886       205,706
Accounts payable                                       85,757        31,134
Other liabilities                                     245,844       235,599

Total liabilities                                   3,115,551     2,732,006

Shareholders' equity:

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

Additional paid in capital                         12,141,925    12,141,546
Unrealized investment gains (losses) 
  (net of deferred federal income tax benefit 
  (expense) of $1,170 in 1998 and ($7,413) 
  in 1997                                              40,449        14,390
Retained Earnings                                  (2,147,549)   (2,147,562)

Total Shareholders' equity                         10,596,299    10,566,358

Total liabilities and shareholders' equity        $13,711,850   $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
                                                   March 31,        March 31,
                                                     1998             1997
                                                  (Unaudited)      (Unaudited)
<S>                                               <C>              <C>
Revenues
  Premium Income (net of reinsurance of 
  $20,158 in 1998 and $20,849 in 1997)            $  495,417       $  397,249
  Net Investment Income                              139,639          152,357
  Earnings of unconsolidated affiliates 
    and other income                                  13,158          (44,910)

    Total revenue                                    648,214          504,696


Benefits and expenses
  Salaries, wages and employee benefits              199,998          175,170
  Increase in policy reserves                        160,708          101,567
  Commissions                                        168,229          124,132
  Policy acquisition costs deferred                 (222,034)        (234,305)
  Amortization of deferred policy 
    acquisition costs                                 80,939          128,183
  Other insurance benefits and expenses               39,092           45,357
  Agency expenses                                     55,589           40,809
  Professional fees                                   41,863           34,157
  Other expenses                                      75,700           69,235

  Total benefits and expenses                        600,084          484,305

Income/(loss) from operations                         48,130           20,391

Federal income taxes                                  48,116           42,500

Net income/(loss)                                 $       14       $  (22,109)

Net income/(loss) per common share-basic 
   and diluted                                    $    0.000       $   (0.004)

See notes to condensed consolidated financial statements.

</TABLE>
<PAGE>

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

<CAPTION>
                                                        Three months ended
                                                   March 31,        March 31,
                                                     1998             1997
                                                  (Unaudited)      (Unaudited)
<S>                                               <C>              <C>
Operating activities:

Net cash provided/(used) in operating 
   activities                                     $  153,154       $  (41,114)

Investing activities:

  Purchase of available-for-sale fixed 
    maturities                                             -         (251,452)
  Maturity of available-for-sale fixed 
    maturities                                     1,949,863        1,240,781
  Notes Receivable                                         -         (186,108)
  Purchase of Preferred Stock                              -       (1,000,000)
  Purchase of Common Stock                                 -          (20,000)
  Purchase of furniture and equipment                (22,177)          (2,863)

Net cash used in investing activities              1,927,686         (219,642)

Financing activities:

  Deposits on annuity contracts                      175,402          202,444
  Exercise of common stock options                     3,870                -

Net cash provided by financing activities            179,272          202,444

Increase/decrease in cash and cash equivalents     2,260,112          (58,312)

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

Cash and cash equivalents at end of period        $3,595,567       $  849,964

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 three 
     month period ended March 31, 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 three month period ending March 31, 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 March 31, 1998:

<TABLE>

<CAPTION>
                                      Gross         Gross
                         Amortized    Unrealized    Unrealized     
                         Cost         Gains         Loss         Fair Value
<S>                      <C>          <C>           <C>          <C>  
                       
U.S. Government Bonds    $4,049,983   $    5,066    $  (12,771)  $ 4,042,278

Municipal Bonds           1,238,208       37,286          (631)    1,274,863

Corporate Bonds           1,770,220       21,260        (1,181)    1,790,299

    Totals               $7,058,411   $   63,612    $  (14,583)  $ 7,107,440


</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 March 31, 1998, FACC had raised total capital of 
     $5,410,725 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 March 31, 1998, MAAC had raised total capital 
     of $952,600 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 March 31, 1998 and December 
     31, 1997, the fair values of notes receivable were $319,396 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 Income/(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 income/(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 income/(loss) per common share is based upon the weighted average 
     number of common shares outstanding each year.  For the three months 
     ended March 31, 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.

<PAGE>


(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 the first quarter of 1998, 34,900 of these options were 
     exercised.

(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 
     quarter ended March 31, 1998 is calculated using an effective rate derived 
     from the previous year tax expense.  At March 31, 1998 and 1997 estimated 
     Federal Income tax expense was $48,116 and $42,500, 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 
     $6,000 during 1998.  Further, the Company has accounts receivable of 
     $6,425 and $32,383 from FACC and MAAC, respectively, at March 31, 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 March 31, 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

<PAGE>

-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 three months ended March 31 totaled $648,214 in 1998 and  
$504,696 in 1997.  The primary source of revenue for the Company is life 
insurance premium income.  Premium income for the first three months of 1998 
increased $98,168 in comparison to 1997 results.  Premium income consists of 
life insurance premium sales of the Company's initial product referred to as 
the "Alliance 2000."  An annuity rider is also included with the Alliance 
2000; 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 quarter of 1998 and 1997 totaled 
$176,686 and $202,444, 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 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 March 31, 1998 and 1997, amortization of reinsurance premiums 
payable totaled $18,550 and $3,089, respectively.

Combined net investment income for FAIC and the Company totaled $139,639 for 
the quarter ended March 31, 1998 and $152,357 for the same period in 1997.  
Net investment income decreased during 1998 in comparison to 1997 due 
primarily to the loss of interest as a result of the U.S. Star preferred 
stock investment.

For the period ended March 31, 1998, expenses totaled $600,084 representing 
an increase of $115,779 over the same period of 1997.  Life policy reserve 
expense increased from $101,567 for the three months ended March 31, 1997 
to $160,708 for the three months ended March 31, 1998.  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 
$222,034 for the quarter ended March 31, 1997 and $234,305 for the same 
period in 1997.  Amortization of these costs totaled $80,939 for the quarter 
ended March 31, 1997 and $128,183 for the same period in 1997.  Death claims 
incurred during the first quarter of 1997 totaled $17,069.  There were no 
death claims for the same period in 1998.  Expenses directly related to FAIC's 
agency totaled $55,589 for the first quarter of 1998.  These expenses include 
agent's health insurance , agency meetings,  recruiting , and other expenses 
directly related to the sale of insurance and annuities.  Direct agency 
expenses totaled $40,809 for the same period in 1997.

Salaries and benefit expenses totaled $199,998 for the first quarter of 1998 
and $175,170 for the same period of 1997.  Professional fees totaled $41,863 
for the first quarter of 1998 and $34,157 in 1997.  The increase from last
year is attributable to additional audit fees related to the 1997 year end 
audit.

During the first quarter of 1997, FKCC incurred operating losses totaling 
$39,119.  These losses are the result of the inclusion of operating losses 
from Medical Acceptance Corporation ("MAC") in the operating results of the
Company and the equity in the losses of LGP, Inc. and Cybertyme, Inc.   In 
1997, FKCC sold its interest in MAC and wrote off the investments of LGP, Inc. 
and Cybertyme, Inc., and accordingly, there is no resulting impact from
venture capital operations in 1998.

Income tax expense, which is calculated based on the earnings of FAIC, totaled 
$48,116 during the first quarter of 1998 and $42,500 for the same period of 
1997.  Current tax expense is estimated based on the effective tax rate for

<PAGE>

fiscal year 1997.   

Consolidated Financial Condition

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

Total assets increased by $413,486 from December 31, 1997 to March 31, 1998.  
Deferred policy acquisition costs increased $141,104 net of $80,939 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 $269,497 principally because of (i)
life policy reserves increased $160,708 due to policies written in 1998 and 
existing policies entering an additional duration and (ii) annuity contract
liabilities increased $175,402 as the result of annuity premiums received 
which are recorded as a liability. 

Changes in other liabilities include (i) a decrease of $76,695 in accrued 
payroll due to the payment employee incentives; (ii) an increase of $45,870 
in the deferred tax liability and  (iii) an increase in other liabilites of 
$79,744 due to cash received on pending policy applications.

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.

<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 three 
          months ended March 31, 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)





/s/ Michael N. Fink                                 Date      May 15, 1998     
Michael N. Fink, President



/s/ Thomas I. Evans                                 Date      May 15, 1998     
Thomas I. Evans, Vice President/Asst. Secretary