<PAGE>
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 Period Ended June 30, 2000
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)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period 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
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 - 5,541,510 shares as of July 31, 2000
Transitional Small Business Disclosure Format (Check one): Yes___ No X
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FIRST ALLIANCE CORPORATION
INDEX TO FORM 10-QSB
Part I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets at
June 30, 2000 and December 31, 1999 1
Condensed Consolidated Statements of Operations
for the three months ended June 30, 2000 and 1999
for the six months ended June 30, 2000 and 1999 3
Condensed Consolidated Statements of Cash Flows for the
three months ended June 30, 2000 and 1999 4
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis or Plan of Operation 10
Part II.
Item 2. Changes in Securities
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
<TABLE>
FIRST ALLIANCE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, December 31,
2000 1999
------------- -------------
<S> <C> <C>
Assets Unaudited
Investments:
Available-for-sale fixed maturities,
at fair value (amortized cost, $8,678,874
and $8,897,097 in 2000 and 1999,
respectively) $ 8,564,026 $ 8,774,608
Equity securities (cost of $3,957,870
and $382,588 in 2000 and 1999, respectively) 3,527,864 407,881
Policy loans 60,486 32,194
Notes receivable (net of $149,698 valuation
allowance in 2000 and 1999) 335,601 103,164
Investments in partnership 150,000 150,000
Investment in limited liability company 360,000 -
Short-term investments - 200,000
------------- -------------
Total investments 12,997,977 9,667,847
Cash and cash equivalents 2,181,373 5,540,571
Investments in related parties 183,500 125,000
Reinsurance recoverable 3,336 1,418
Receivables from related parties 17,531 14,203
Federal income tax recoverable - 7,985
Accrued investment income 139,634 135,482
Deferred policy acquisition costs 3,082,919 2,743,111
Value of insurance acquired 59,267 61,311
Goodwill 158,975 155,256
Premiums due 91,498 81,690
Office furniture and equipment, less
accumulated depreciation of $105,830 and
$96,427 in 2000 and 1999, respectively 39,919 42,499
Other assets 128,782 117,815
------------- -------------
Total assets $ 19,084,711 $ 18,694,188
============= =============
See notes to condensed consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
FIRST ALLIANCE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
<CAPTION>
June 30, December 31,
2000 1999
------------- -------------
<S> <C> <C>
Liabilities and Shareholders' Equity (Unaudited)
Policy and contract liabilities:
Annuity contract liabilities $ 3,817,413 $ 3,004,186
Life policy reserves (net of reinsurance
ceded reserves of $276,080 and $203,776
in 2000 and 1999, respectively) 3,636,240 3,273,564
Policy and contract claims 754 42,099
Policyholder dividend deposits 42,596 43,188
Policyholder premium deposits 194,718 187,414
Deposits on pending policy applications 160,783 233,158
Unearned revenue 79,901 86,878
Reinsurance premiums payable 58,766 61,450
------------- -------------
Total policy and contract liabilities 7,991,171 6,931,937
Federal income taxes payable:
Current 9,045 -
Deferred 584,148 602,667
Other taxes payable 13,774 8,207
Commissions, salaries, wages and benefits
payable 141,456 133,382
Accounts payable and accrued expenses 23,970 81,562
------------- -------------
Total liabilities 8,763,564 7,757,755
Shareholders' equity:
Common stock, no par value, 8,000,000 shares
authorized; 5,541,510 and 5,643,185 shares
issued and outstanding at June 30, 2000 and
December 31, 1999 554,151 564,318
Additional paid in capital 12,628,572 12,466,943
Retained Earnings - deficit (2,501,972) (2,030,679)
Accumulated other comprehensive income (359,604) (64,149)
------------- -------------
Total shareholders' equity 10,321,147 10,936,433
------------- -------------
Total liabilities and shareholders' equity $ 19,084,711 $ 18,694,188
============= =============
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST ALLIANCE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
----------- ----------- ------------ -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues
Premium Income $ 766,329 $ 785,590 $ 1,682,372 $ 1,578,654
Net Investment Income 172,321 166,627 364,124 319,309
Realized gains (loss)
on investments (857) - (27,952) -
Other income 184,376 38,108 336,398 58,135
----------- ----------- ------------ -----------
Total revenue 1,122,169 990,325 2,354,942 1,956,098
Benefits and expenses
Increase in policy
reserves 174,579 186,043 362,676 440,640
Death claims 29,887 6,219 42,473 74,969
Policyholder surrender
values 40,453 10,187 94,250 21,438
Interest credited on
annuities and premium
deposit fund 79,016 50,278 147,646 90,425
Payment of dividend
accumulations 459 - 1,418 -
Commissions 354,029 314,634 818,190 615,894
Policy acquisition costs
deferred (247,792) (399,412) (654,949) (782,386)
Amortization of deferred
policy acquisition costs 194,301 176,360 315,141 334,584
Amortization of cost of
insurance acquired 1,022 - 2,044 -
Salaries, wages and
employee benefits 257,272 273,811 546,998 521,023
Agency expenses 118,804 71,873 300,637 152,044
Professional fees 54,734 48,194 110,842 91,680
Other expenses 116,875 102,410 236,969 245,964
----------- ----------- ------------ -----------
Total benefits and
expenses 1,173,639 840,597 2,324,335 1,806,275
----------- ----------- ------------ -----------
Income from operations (51,470) 149,728 30,607 149,823
----------- ----------- ------------ -----------
Federal income taxes 57,082 74,941 146,921 124,437
----------- ----------- ------------ -----------
Net income/(loss) $ (108,552) $ 74,787 $ (116,314)$ 25,386
=========== =========== ============ ===========
Net income/(loss) per
common share-basic
and diluted $ (0.02) $ 0.01 $ (0.02) $ 0.00
=========== =========== ============ ===========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST ALLIANCE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Six months ended
June 30, June 30,
2000 1999
------------- -------------
<S> <C> <C>
(Unaudited) (Unaudited)
Operating activities:
Net loss $ (116,314) $ 25,387
Adjustments to reconcile net loss to net cash
provided by operating activities:
Interest credited on annuities and premium
deposits 142,052 87,376
Provision for depreciation 9,403 7,655
Amortization of premium and accretion of
discount on fixed maturity investments 10,833 12,816
Amortization of insurance acquired 2,044 -
Realized investment loss 27,952 -
Provision for deferred federal income taxes 133,686 102,959
Increase in policy loans (28,292) (825)
Increase (decrease) in accrued investment
income (4,152) 16,362
Increase in receivables from related parties (3,328) (12,920)
Decrease in reinsurance recoverable (1,918) -
Decrease in federal income tax recoverable 7,985 -
Increase in deferred policy acquisition
costs, net (339,808) (447,802)
Decrease in unearned revenue (6,977) -
Increase in premiums due (9,808) (10,736)
Decrease (increase) in other assets (10,967) (30,140)
Increase in policy reserves 362,676 440,640
Decrease (Increase) in deposits on pending
policy applications (72,375) 28,546
Increase (decrease) in claims payable (41,345) -
Decrease in reinsurance premiums payable (2,684) 17,310
Decrease in federal income taxes payable 9,045 (22,519)
Increase (decrease) in commissions, salaries,
wages and benefits 8,074 26,170
Increase (decrease) in accounts payable,
accrued expenses and other liabilities (52,023) (10,756)
------------- -------------
Net cash provided by operating activities 23,759 229,523
Investing activities:
Purchase of available-for-sale fixed
maturities (2,414,770) -
Sale of available-for-sale fixed
maturities 2,335,094 -
Maturity of available-for-sale fixed
maturities 250,000 750,000
Purchase of common stock (4,792,679) -
Sale of common stock 1,226,508 -
Purchase price paid for Benefit Capital
Life Insurance Company in excess of cash
acquired (3,719) -
Purchase of limited partnership interest - (22,500)
Purchase of limited liability company
interest (360,000) -
Short term investments disposed 200,000 -
Purchase of investment in unconsolidated
affiliate (58,500) -
Decrease in notes receivable (232,437) 91,252
Net (increase) decrease in furniture and
equipment (6,823) 863
------------- -------------
Net cash provided by investing activities (3,857,326) 819,615
Financing activities:
Deposits on annuity contracts, net 671,175 503,930
Policyholder premium deposits, net 7,304 19,175
Policyholder dividend deposits, net (592) -
Proceeds from sale of common stock 186,312 155,985
Cost of stock offering (1,050) -
Repurchase of common stock (388,780) (24,200)
------------- -------------
Net cash provided by financing activities 474,369 654,890
------------- -------------
Increase in cash and cash equivalents (3,359,198) 1,704,028
Cash and cash equivalents beginning of period 5,540,571 6,587,264
------------- -------------
Cash and cash equivalents at end of period $ 2,181,373 $ 8,291,292
============= =============
See notes to condensed consolidated financial statements.
</TABLE>
<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-K for the fiscal
year ended December 31, 1999. 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.
<TABLE>
(3) Comprehensive income
The components of comprehensive income along with the related tax
effects are presented for the quarters ended June 30, 2000 and 1999
as follows:
<CAPTION>
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Unrealized gain on
available-for-sale
securities
Unrealized holding
gains/(losses) during
the period $ (373,187) $ (81,443) $ (447,660)$ (161,759)
Tax benefit/(expense) 126,884 27,691 152,205 54,997
----------- ----------- ------------ -----------
Other comprehensive
income $ (246,303) $ (53,752) $ (295,455)$ (106,762)
=========== =========== ============ ===========
Net income/(loss) $ (108,552) $ 74,787 $ (116,314)$ 25,386
Other comprehensive
income/(loss) net of
tax effect:
Unrealized investment
gains/(loss) (246,303) (53,752) (295,455) (106,762)
----------- ----------- ------------ -----------
Comprehensive income/
(loss) $ (354,855) $ 21,035 $ (411,769)$ (81,377)
=========== =========== ============ ===========
Net income/(loss) per
common share - basic
and diluted $ (0.02) $ 0.01 $ (0.02) $ 0.00
=========== =========== ============ ===========
</TABLE>
<PAGE>
(4) Investments
On February 17, 2000 the Company executed an agreement with Ken
Belsky to purchase a 10% interest in Ken Belsky & Associates, LLC,
for $300,000 c ash. The Company also received an option to purchase
up to an additional 5% interest for an a mount equal to $30,000 for
each 1% of the additional interest purchased. The option expires
February 17, 2001. During April 2000 the Company purchased an
additional 2% interest in Ken Belsky &Associates for $60,000 cash.
Ken Belsky & Associates, LLC is a general insurance agency
specializing in the marketing of substandard life insurance policies.
(5) Investment in Related Party
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, 2000, MAAC had raised total
capital of $10,832,840 from the sale of private placement shares and
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.
On June 12, 2000, the Company purchased, thru a private placement,
585,000 shares of no par value Class A common stock of Integrity
Capital Corporation ("ICC") of Indianapolis, IN for $58,500. At
June 30, 2000 ICC had raised $260,000 from the sale of private
placement shares. After ICC's private placement and public offerings
are complete, the Company will own approximately 9.75% of the common
stock. 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. Michael Fink, Company president is Chairman of
the Board of ICC and Thomas Evans, Company Secretary and Treasurer is
Secretary and Treasurer of ICC.
<PAGE>
<TABLE>
(6) Segment Information
The operations of the Company and its subsidiaries have been classified
into three operating segments as follows: life and annuity insurance
operations, venture capital operations, and corporate operations.
Segment information as of June 30, 2000 and June 30, 1999 and for the
quarters ended June 30, 2000 and 1999 is as follows:
<CAPTION>
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
----------- ----------- ------------ -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Life and annuity
insurance operations $ 1,065,138 $ 921,878 $ 2,221,814 $ 1,838,897
Venture capital
operations - 452 - 923
Corporate operations 57,031 67,995 133,128 116,278
----------- ----------- ------------ -----------
Total $ 1,122,169 $ 990,325 $ 2,354,942 $ 1,956,098
=========== =========== ============ ===========
Income (loss)before
income taxes:
Life and annuity
insurance operations $ 150,757 $ 308,074 $ 406,186 $ 525,415
Venture capital
operations - 452 - 923
Corporate operations (202,227) (161,224) (375,579) (376,515)
----------- ----------- ------------ -----------
Total $ (51,470) $ 147,302 $ 30,607 $ 149,823
=========== =========== ============ ===========
Depreciation and
amortization expense:
Life and annuity
insurance operations $ 196,182 $ 176,360 $ 318,903 $ 334,584
Venture capital
operations - - - -
Corporate operations 3,982 3,513 7,685 7,655
----------- ----------- ------------ -----------
Total $ 200,164 $ 179,873 $ 326,588 $ 342,239
=========== =========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
Segment asset information as of June 30, 2000 and December 31, 1999.
<S> <C> <C>
Assets:
Life and annuity insurance operations $ 16,925,939 $ 16,359,833
Venture capital operations 208,766 208,766
Corporate operations 1,950,006 2,125,589
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Total $ 19,084,711 $ 18,694,188
============= =============
</TABLE>
<PAGE>
(7) Earnings Per Share
Net income (loss) per common share for basic and diluted earnings per
share is based upon the weighted average number of common shares
outstanding during the year. The weighted average outstanding common
shares for the three months ending June 30, 2000 and 1999 was
5,652,356 and 5,638,638, respectively and for the six months ending
June 30, 2000 and 1999 was 5,661,759 and 5,657,041, respectively.
(8) Private Placement Offering
In February 1999 the Company commenced an offering of 200,000 shares
of class A common stock no par value for $2.50 per share. The
securities are exempted from registration in reliance on Rule 506 of
Regulation D of the Securities Act of 1933 and related exemptions at
the state level. Additionally, these securities are restricted from
transfer for 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 June 30, 2000,
the Company had completed the sale of 200,000 shares that raised total
proceeds of $500,000 and incurred offering cost, including commissions,
of $55,608.
(9) Purchase of FAC Stock and Sale of Benefit Capital Life Insurance Company
On June 27, 2000, the Company purchased 132,000 shares of FAC common
stock from Chris Haas ("HAAS"), former Chairman of the Board of the
Company, for $2.49 per share for an aggregate purchase price of
$328,680 and entered into an agreement with HAAS to exchange all the
outstanding common capital stock of BCLIC for 268,000 shares of FAC
common stock. Under the terms of the agreement, FAC will purchase
BCLIC from FAIC for $670,000 cash and FAC will exchange BCLIC for
HAAS FAC shares. The agreement is subject to regulatory approval by
the Kentucky and Lousiana Departments of Insurance.
(10) Commitments
On June 16, 1999, First Kentucky Capital Corporation executed a
commitment to purchase three units of the Prosperitas Investment
Partners, LP ("Prosperitas") for $450,000. Prosperitas is a venture
capital fund based in Louisville, Kentucky. An initial payment of
$22,500, which represents five percent of the total investment, was
paid upon the execution of the subscription agreement. On November
29, 1999 a payment of $127,500 was made and the remaining amount of
the commitment is due in equal installments on the second and fourth
anniversaries of the initial capital contribution.
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 Ken Belsky & Associates, LLC ("Borrower").
Advances under the credit facility will 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.
$100,000 was advanced under the credit agreement on May 2, 2000.
<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.
Results of Operations
Revenues for the six months ended June 30 totaled $2,354,942 in 2000 and
$1,956,098 in 1999. The primary source of revenue for the Company is life
insurance premium income. Premium income for the first six months of 2000
increased $103,718 in comparison to 1999 results. This increase is due to
life insurance premium renewals and new sales. An annuity rider is also
included with most of the life insurance products; however, according to
Statement of Financial Accounting Standards ("SFAS") No. 97, "Accounting and
Reporting by Insurance Enterprises for Certain Long-Duration Contracts and
for Realized Gains and Losses from Sales of Investments", annuity premium
income is not recognized as revenue. Annuity premium receipts for the first
six months of 2000 and 1999 totaled $795,494 and $542,701, respectively, and
are recognized as annuity contract liabilities. Pursuant to the terms of the
reinsurance agreement between FAIC and Business Men's Assurance Company,
there are no first year reinsurance premiums due. However, SFAS No. 113,
"Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration
Contracts", requires this unpaid premium to be recognized as an expense and
amortized over the term of the contracts reinsured. At June 30, 2000 and
1999 amortization of reinsurance premiums payable totaled $7,193 and $1,642,
respectively.
Net investment income totaled $364,124 for the six months ended June 30, 2000
and $319,309 for the same period in 1999. Approximately half of the increase
in net investment income is attributable to the BCLIC acquisition and the
remainder is attributable to an increase in investments in fixed maturities
and higher yields on fixed maturities.
For the quarter ended June 30, 2000, expenses totaled $2,324,335 representing
an increase of $518,060 over the same period of 1999. Life policy reserve
expense decreased from $440,640 for the six months ended June 30, 1999 to
$362,084 for the six months ended June 30, 2000. 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 $654,949 for the six months
ended June 30, 2000 and $782,386 for the same period in 1999. Amortization
of these costs totaled $315,141 for the six months ended June 30, 2000 and
$334,584 for the same period in 1999. Death claims incurred during the first
six months of 2000 totaled $42,473, net of reinsurance of $3,658. Death
claims for the same period in 1999 totaled $74,969, net of reinsurance of
$163,552. Expenses directly related to FAIC's agency totaled $300,637 for
the first six months of 2000 and $152,044 for the same period in 1999. These
expenses include agent's health insurance, agency meetings, recruiting,
and other expenses directly related to the sale of insurance and annuities.
Salaries and benefit expenses totaled $546,998 for the first six months of
2000 and $521,023 for the same period of 1999. The increase is due to the
hiring of additional employees and the adjustment of employee compensation.
<PAGE>
Income tax expense, which is calculated based on the earnings of FAIC,
totaled $146,921 during the first six months of 2000 and $124,437 for the
same period of 1999.
Financial Position
Fixed maturities decreased $218,223 based on amortized cost, during the first
six months of 2000. Equity securities increased $3,575,282 on a cost basis
and increased $3,119,983 on market value basis, during the same period.
Gross unrealized appreciation on available-for-sale fixed maturities and
equity securities decreased approximately $447,660 during the six months
ended June 30, 2000. Short term investments decreased $200,000 during the
six months ended June 30, 2000. Investment in Ken Belsky & Associates, LLC
increased $360,000 during the six months ended June 30, 2000. Cash and cash
equivalents decreased $3,359,198 during the six months ended June 30, 2000.
Cash Flow and Liquidity
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 commitments to (i) purchase investments
of $187,500 in 2000 and $127,500 in 2002 and (ii) fund a credit facility of
$500,000 in 2000.
<PAGE>
Part II. - Other information
Item 2. Changes in Securities
In February 1999 the Company commenced an offering of 200,000
shares of class A common stock no par value for $2.50 per share.
The securities are exempted from registration in reliance on Rule
506 of Regulation D of the Securities Act of 1933 and related
exemptions at the state level. Additionally, these securities are
restricted from transfer for 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 June 30, 2000, the Company had completed the sale
of 200,000 shares that raised total proceeds of $500,000 and
incurred offering cost, including commissions, of $55,608.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 Financial data schedule
(b) The Company did not file any reports on Form 8-K during the six
months ended June 30, 2000
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
First Alliance Corporation
--------------------------
(registrant)
/s/ Michael N. Fink Date August 14, 2000
----------------------------------------- ---------------
Michael N. Fink, President
/s/ Thomas I. Evans Date August 14, 2000
----------------------------------------- ---------------
Thomas I. Evans, Vice President/Secretary
<PAGE>
