UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended October 31, 2006

OR

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from to

For the quarterly period ended October 31, 2004

¨ 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 0-26686

First Investors Financial Services Group, Inc.

(Exact Name of Registrant as Specified in its Charter)

Texas		76-0465087
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
(State or Other Jurisdiction of Incorporation		(I.R.S. Employer Identification No.)
675 Bering Drive, Suite 710 Houston, Texas		77057
or Organization)
675 Bering Drive, Suite 710
Houston, Texas		77057
(Address of Principal Executive Offices)		(Zip Code)

(713) 977-2600

(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 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 ý x No o¨.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, ~~(as~~or ~~defined~~a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act). (Check ~~Yes o No ý.~~one):

Large Accelerated Filer ¨ Accelerated Filer ¨ Non-Accelerated Filer x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x.

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

Class		Shares Outstanding At December 136, ~~2004~~2006
Common Stock-$.001 Par Value		4,~~742~~477,~~469~~694

FIRST INVESTORS FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES

AND SUBSIDIARIES

FORM 10-Q

OctoberOCTOBER 31, 20042006

Part I	Financial Information
	Item 1.		Financial Statements
			Consolidated Balance Sheets as of April 30, 2004 and October 31, 2004
			Consolidated Condensed Balance Sheets as of April 30, 2006 and
			Consolidated Statements of Operations for the Three Months and Six Months Ended October 31, 2003 and 2004
			October 31, 2006
			Consolidated Statement of Shareholders’ Equity for the Six Months Ended October 31, 2004
			Consolidated Condensed Statements of Earnings for the Three
			Consolidated Statements of Cash Flows for the Six Months Ended October 31, 2003 and 2004
			and Six Months Ended October 31, 2005 and 2006
			Notes to Unaudited Consolidated Financial Statements
			Consolidated Condensed Statement of Shareholders’ Equity for the
	Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations
			Six Months Ended October 31, 2006
	Item 3.		Quantitative and Qualitative Disclosures About Market Risk
			Consolidated Condensed Statements of Cash Flows for the Six
	Item 4.		Controls and Procedures
			Months Ended October 31, 2005 and 2006
Part II	Other Information
			Notes to Unaudited Consolidated Condensed Financial Statements
	Item 5.		Other Information
	Item 2.		Management’s Discussion and Analysis of Financial Condition and
	Item 6.		Exhibits and Reports on Form 8-K
			Results of Operations
Signatures
	Item 3.		Quantitative and Qualitative Disclosures About Market Risk
	Item 4.		Controls and Procedures
Part II		Other Information
	Item 4.		Submission of Matters to a Vote of Security Holders
	Item 6.		Exhibits and Reports On Form 8-K
Signatures

~~FIRST INVESTORS FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES~~2

~~CONSOLIDATED~~FIRST ~~BALANCE~~INVESTORS ~~SHEETS~~FINANCIAL —SERVICES ~~APRIL 30~~GROUP, ~~2004~~INC. AND ~~OCTOBER 31, 2004~~SUBSIDIARIES

	April 30, 2004			October 31, 2004
	(Audited)			(Unaudited)
ASSETS
Receivables Held for Investment, net	$	209,777,347		$	220,737,007
Receivables Acquired for Investment, net	1,190,230			819,195
Cash and Short-Term Investments, including restricted cash of $19,036,747 and $21,230,620	21,055,237			21,716,736
Accrued Interest Receivable	2,576,023			2,610,985
Assets Held for Sale	851,426			705,169
Other Assets:
Funds held under reinsurance agreement	4,182,134			4,662,749
Deferred financing costs and other assets, net of accumulated amortization and depreciation of $5,759,477 and $6,310,712	6,115,203			5,814,087
Current income taxes receivable	8,212			—
Interest rate derivative positions	—			438,246
Total assets	$	245,755,812		$	257,504,174
LIABILITIES AND SHAREHOLDERS’ EQUITY
Debt:
Warehouse credit facilities	$	42,705,810		$	95,887,447
Term notes	164,718,190			121,706,207
Working capital facility	8,761,143			9,000,000
Other Liabilities:
Accounts payable and accrued liabilities	1,708,984			2,618,067
Current income taxes payable	—			333,712
Deferred income taxes payable	558,000			355,946
Total liabilities	218,452,127			229,901,379
Commitments and Contingencies	—			—
Shareholders’ Equity:
Common stock, $0.001 par value, 10,000,000 shares authorized, 5,583,669 issued; 5,000,269 outstanding at April 30, 2004 and 4,999,369 outstanding at October 31, 2004	5,584			5,584
Additional paid-in capital	18,754,608			18,754,608
Retained earnings	10,515,258			10,818,281
Less, treasury stock, at cost, 583,400 and 584,300 shares	(1,971,765		)	(1,975,678		)
Total shareholders’ equity	27,303,685			27,602,795
Total liabilities and shareholders’ equity	$	245,755,812		$	257,504,174

CONSOLIDATED CONDENSED BALANCE SHEETS — APRIL 30, 2006 AND OCTOBER 31, 2006

The accompanying(In notesthousands, areexcept anpar integral part of these consolidated financial statements.value)

	April 30, 2006			October 31, 2006
	(Audited)			(Unaudited)
ASSETS
Receivables Held for Investment, net	$	377,399		$	437,920
Cash and Short-Term Investments	3,380			3,176
Restricted Cash	25,538			35,683
Accrued Interest Receivable	3,218			3,684
Assets Held for Sale	960			1,239
Other Assets:
Funds held under reinsurance agreement	3,431			3,163
Deferred financing costs and other assets, net of accumulated amortization and depreciation of $3,514 and $4,346	5,362			4,974
Total assets	$	419,288		$	489,839

LIABILITIES AND SHAREHOLDERS’ EQUITY
Debt:
Warehouse credit facilities	$	47,080		$	184,586
Term notes	316,584			245,333
Working capital facility	16,454			21,504
Related party note	2,500			2,500
Other Liabilities:
Accounts payable and accrued liabilities	6,397			4,378
Income taxes	1,386			571
Deferred income taxes payable	766			543
Total liabilities	391,167			459,415

Commitments and Contingencies
Shareholders’ Equity:
Common stock, $0.001 par value, 10,000 shares authorized, 5,626 issued and 4,454 outstanding at April 30, 2006 and 5,650 issued and 4,478 outstanding at October 31, 2006	6			6
Additional paid-in capital	18,938			19,210
Retained earnings	13,644			15,675
Less: treasury stock, at cost, 1,172 shares	(4,467		)	(4,467		)
Total shareholders’ equity	28,121			30,424
Total liabilities and shareholders’ equity	$	419,288		$	489,839

~~FIRST~~The ~~INVESTORS~~accompanying ~~FINANCIAL~~notes ~~SERVICES~~are ~~GROUP,~~an ~~INC.~~integral ~~AND~~part ~~SUBSIDIARIES~~of these consolidated condensed financial statements.

~~CONSOLIDATED STATEMENTS OF INCOME~~3

~~For~~FIRST ~~the~~INVESTORS ~~Three Months and Six~~FINANCIAL ~~Months~~SERVICES ~~Ended October 31~~GROUP, ~~2003~~INC. ~~and~~AND ~~2004~~SUBSIDIARIES

~~(Unaudited)~~CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS

	For the Three Months Ended October 31,						For the Six Months Ended October 31,
	2003			2004			2003			2004
Interest Income	$	7,923,929		$	7,001,225		$	15,994,365		$	13,953,404
Interest Expense	1,889,442			1,828,779			3,907,413			3,605,552
Net interest income	6,034,487			5,172,446			12,086,952			10,347,852
Provision for Credit Losses	3,269,741			2,442,406			6,661,704			4,884,511
Net Interest Income After Provision for Credit Losses	2,764,746			2,730,040			5,425,248			5,463,341
Other Income:
Servicing revenue	1,223,605			905,409			2,498,237			1,875,364
Late fees and other	469,444			1,205,939			849,005			1,836,492
Income from investment	296,614			176,522			544,483			370,228
Other interest income	138,552			91,834			185,831			165,966
Unrealized loss on interest rate derivative positions	(149,066		)	(170,097		)	(6,309		)	(237,754		)
Total other income	1,979,149			2,209,607			4,071,247			4,010,296
Operating Expenses:
Salaries and benefits	2,163,751			2,215,196			4,382,139			4,278,641
Operating expense	1,201,730			1,325,319			2,274,104			2,624,109
General and administrative	964,193			936,232			1,959,476			1,859,053
Other interest expense	120,728			122,632			249,868			234,632
Total operating expenses	4,450,402			4,599,379			8,865,587			8,996,435
Income Before Provision for Income Taxes and Minority Interest	293,493			340,268			630,908			477,202
Provision for Income Taxes:
Current	33,528			326,252			31,226			376,233
Deferred	74,423			(202,054		)	203,227			(202,054		)
Total provision for income taxes	107,951			124,198			234,453			174,179
Minority Interest	(2,263		)	—			(11,429		)	—
Net Income	$	187,805		$	216,070		$	407,884		$	303,023
Basic and Diluted Net Income per Common Share	$	0.04		$	0.04		$	0.08		$	0.06

For the Three and Six Months Ended October 31, 2005 and 2006
(In thousands, except per share amount)
(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

	For the Three Months					For the Six Months
	Ended October 31,					Ended October 31,
	2005		2006			2005		2006

Interest Income	$	9,915	$	13,374		$	18,412	$	25,705
Interest Expense	3,476		5,813			6,436		11,020
Net interest income	6,439		7,561			11,976		14,685
Provision for Credit Losses	2,065		2,677			3,716		5,195
Net Interest Income After Provision for Credit Losses	4,374		4,884			8,260		9,490
Other Income:
Servicing revenue	495		312			1,073		676
Other finance charges and fees	598		825			1,106		1,560
Insurance products	263		268			554		481
Income from investment	111		188			237		255
Other interest income	284		454			533		860
Other income	242		—			387		—
Unrealized gain on interest rate derivative positions	23		—			20		—
Total other income	2,016		2,047			3,910		3,832
Operating Expenses:
Salaries and benefits	2,661		2,841			5,203		5,565
Operating expense	1,124		1,654			1,727		2,633
General and administrative	1,097		954			2,014		1,998
Other interest expense	304		452			565		874
Total operating expenses	5,186		5,901			9,509		11,070
Income Before Provision for Income Taxes	1,204		1,030			2,661		2,252
Provision (Benefit) for Income Taxes:
Current	224		(88		)	331		444
Deferred	215		(177		)	640		(223		)
Total provision for income taxes	439		(265		)	971		221
Net Earnings	$	765	$	1,295		$	1,690	$	2,031

Basic Net Earnings per Common Share	$	0.17	$	0.29		$	0.38	$	0.45
Diluted Net Earnings per Common Share	$	0.17	$	0.27		$	0.37	$	0.42

4The accompanying notes are an integral part of these consolidated condensed financial statements.

~~FIRST INVESTORS FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES~~4

~~CONSOLIDATED~~FIRST INVESTORS FINANCIAL ~~STATEMENT~~SERVICES OFGROUP, ~~SHAREHOLDERS’~~INC. ~~EQUITY~~AND SUBSIDIARIES

~~For~~CONSOLIDATED ~~the Six~~CONDENSED ~~Months~~STATEMENT ~~Ended~~OF ~~October~~SHAREHOLDERS’ ~~31, 2004~~EQUITY

For the Six Months Ended October 31, 2006 (In thousands, except share amounts) (Unaudited, except where stated)

	Common Stock				Additional Paid-In Capital			Retained Earnings				Treasury Stock, at cost			Total
						Additional					Treasury
Balance at April 30, 2004	$	5,584			$	18,754,608		$	10,515,258			$	(1,971,765	)	$	27,303,685
	Common Stock					Paid-In		Retained			Stock, at
Net income	—				—			303,023				—			303,023
	Shares		Amount			Capital		Earnings			cost			Total
Treasury stock purchases	—				—			—				(3,913		)	(3,913		)
Balance at May 1, 2005	5,583,669		$	6		$	18,755	$	11,199		$	(4,467	)	$	25,493
Balance at October 31, 2004	$		5,584		$		18,754,608	$		10,818,281		$	(1,975,678	)	$	27,602,795
Net income			—			—		2,445			—			2,445
Exercise of stock options	42,500		—			183		—			—			183
Balance at April 30, 2006 (Audited)	5,626,169		6			18,938		13,644			(4,467		)	28,121
Net income	—		—			—		2,031			—			2,031
Stock compensation expense	—		—			142		—			—			142
Excess tax benefits from share based arrangements	—		—			23		—			—			23
Issuance of common stock related to the exercise of stock options	23,501		—			107		—			—			107
Balance at October 31, 2006	5,649,670		$	6		$	19,210	$	15,675		$	(4,467	)	$	30,424

The accompanying notes are an integral part of ~~these~~ this consolidated condensed financial ~~statements~~statement.

FIRST INVESTORS FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS For the Six Months Ended October 31, 2005 and 2006 (In thousands) (Unaudited)

CONSOLIDATED STATEMENTS OF CASH FLOWS

	2005			2006

Cash Flows From Operating Activities:
Net income	$	1,690		$	2,031
Adjustments to reconcile net income to net cash provided by operating activities —
Depreciation and amortization expense	2,331			3,345
Provision for credit losses	3,716			5,195
Reversal of uncertain tax provision	—			(669		)
Excess tax benefits from share-based payment arrangements	—			(23		)
Share-based payment arrangements	—			142
(Increase) decrease in:
Accrued interest receivable	(554		)	(466		)
Restricted cash	(8,337		)	(10,145		)
Deferred financing costs and other assets	(567		)	(85		)
Funds held under reinsurance agreement	(632		)	268
Current income tax receivable	5			—
Interest rate derivative positions	(332		)	—
Increase (decrease) in:
Accounts payable and accrued liabilities	527			(2,019		)
Deferred income taxes payable	295			(223		)
Income taxes	640			(123		)
Net cash (used in) operating activities	(1,218		)	(2,772		)
Cash Flows From Investing Activities:
Origination of Receivables Held for Investment	(148,341		)	(152,208		)
Payments received from Investment	94			188
Contributions to Investment	—			(251		)
Principal payments from Receivables Held for Investment	58,014			79,553
Payments received on Assets Held for Sale	2,889			4,221
Purchase of furniture and equipment	(446		)	(371		)
Net cash used in investing activities	(87,790		)	(68,868		)
Cash Flows From Financing Activities:
Proceeds from advances on
Warehouse credit facilities	258,105			315,729
Term notes	175,493			—
Working capital facility	3,616			5,049
Principal payments made on
Warehouse credit facilities	(290,687		)	(178,221		)
Term notes	(55,798		)	(71,251		)
Proceeds from the issuance of common stock	145			107
Excess tax benefits from share-based payment arrangements	—			23
Net cash provided by financing activities	90,874			71,436
Increase/(Decrease) in Cash and Short-Term Investments	1,866			(204		)
Cash and Short-Term Investments at Beginning of Period	2,414			3,380
Cash and Short-Term Investments at End of Period	$	4,280		$	3,176
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for—
Interest	$	5,774		$	9,832
Income taxes	32			1,236

~~For~~The accompanying ~~the~~notes ~~Six~~are ~~Months~~an ~~Ended~~integral ~~October~~part ~~31,~~of ~~2003~~these ~~and~~consolidated ~~2004~~condensed financial statements

~~(Unaudited)~~6

	2003			2004
Cash Flows From Operating Activities:
Net income	$	407,884		$	303,023
Adjustments to reconcile net income to net cash provided by operating activities —
Depreciation and amortization expense	1,860,309			2,000,025
Provision for credit losses	6,661,704			4,884,511
Minority interest	(11,429		)	—
(Increase) decrease in:
Accrued interest receivable	231,310			(34,962		)
Restricted cash	1,518,973			(2,193,873		)
Deferred financing costs and other assets	(60,279		)	(484,754		)
Funds held under reinsurance agreement	(1,424,452		)	(480,614		)
Current income tax receivable	1,004,231			8,212
Interest rate derivative positions	2,219,885			(438,246		)
Increase (decrease) in:
Accounts payable and accrued liabilities	146,780			909,081
Deferred income taxes payable	460,963			(202,054		)
Current income taxes payable	2,090			333,713
Interest rate derivative positions	(2,588,562		)	—
Net cash provided by operating activities	10,429,407			4,604,062
Cash Flows From Investing Activities:
Origination of Receivables Held for Investment	(51,743,888		)	(67,201,988		)
Origination of Receivables Acquired for Investment	(328,787		)	—
Origination of investment	(3,068		)	—
Principal payments from Receivables Held for Investment	43,639,170			47,201,002
Principal payments from Receivables Acquired for Investment	391,404			371,036
Payments received on Assets Held for Sale	3,562,219			3,143,316
Purchase of furniture and equipment	(46,465		)	(54,401		)
Net cash used in investing activities	(4,529,415		)	(16,541,035		)
Cash Flows From Financing Activities:
Proceeds from advances on—
Warehouse credit facilities	89,171,068			121,887,990
Working capital facility	—			543,863
Principal payments made on—
Warehouse credit facilities	(69,652,984		)	(68,706,353		)
Term notes	(23,664,614		)	(43,011,983		)
Working capital facility	(1,702,887		)	(305,006		)
Treasury stock purchased	(84,630		)	(3,913		)
Net cash (used in) provided by financing activities	(5,934,047		)	10,404,598
Decrease in Cash and Short-Term Investments	(34,055		)	(1,532,375		)
Cash and Short-Term Investments at Beginning of Period	2,617,680			2,018,490
Cash and Short-Term Investments at End of Period	$	2,583,625		$	486,115
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for—
Interest	$	3,654,656		$	3,092,784
Income taxes	3,658			33,963

FIRST INVESTORS FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES

~~The~~NOTES TO ~~accompanying~~UNAUDITED ~~notes~~CONSOLIDATED ~~are~~CONDENSED anFINANCIAL ~~integral part of these consolidated financial statements~~STATEMENTS

6(Dollars in thousands, except per share data)

~~FIRST INVESTORS FINANCIAL SERVICES GROUP~~October 31, ~~INC. AND SUBSIDIARIES~~2006

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~1. The Company

~~October~~Organization. First 31Investors Financial Services Group, Inc. ~~2004~~(First Investors) was established to serve as a holding company for First Investors Financial Services, Inc. (FIFS) and FIFS’s wholly-owned subsidiaries, First Investors Insurance Company (FIIC), First Investors Auto Receivables Corporation (FIARC), F.I.R.C., Inc. (FIRC), First Investors Servicing Corporation (FISC), FIFS Acquisition Funding Corp. LLC, Farragut Financial Corporation, and First Investors Auto Funding Corporation. First Investors, together with its wholly- and majority-owned subsidiaries, is hereinafter referred to as the Company.

1FIFS began operations in May 1989 and is principally involved in the business of originating and holding for investment retail installment contracts and promissory notes secured by new and used automobiles originated by factory authorized franchised dealers or directly through consumers. As of October 31, 2006, approximately 34% and 15% of receivables held for investment had been originated in Texas and Georgia, respectively. The Company currently operates in 28 states.

~~Organization. First~~FIIC ~~Investors Financial Services Group, Inc. (First Investors)~~ was ~~established~~organized tounder ~~serve~~the ascaptive insurance ~~a holding~~ company ~~for~~laws ~~First Investors~~of ~~Financial~~the ~~Services,~~state ~~Inc.~~of ~~(FIFS)~~Vermont ~~and~~for ~~FIFS’s~~the ~~wholly-owned~~purpose ~~subsidiaries, First~~of ~~Investors Insurance Company (FIIC), First Investors Auto Receivables~~reinsuring ~~Corporation~~certain ~~(FIARC),~~credit ~~F.I.R.C.,~~enhancement ~~Inc.~~insurance ~~(FIRC),~~policies ~~First~~that ~~Investors~~have ~~Servicing~~been ~~Corporation (FISC),~~written ~~formerly known as Auto Lenders Acceptance Corporation (ALAC), FIFS~~by ~~Acquisition~~unrelated ~~Funding~~third ~~Corp.~~party ~~LLC,~~insurance ~~Farragut Financial Corporation, and First Investors Auto Funding Corporation~~companies. ~~First Investors, together with its wholly- and majority-owned subsidiaries, is hereinafter referred to as the Company.~~

~~FIFS began~~On ~~operations~~October in2, ~~May~~1998, ~~1989~~the ~~and~~Company iscompleted the ~~principally~~acquisition ~~involved~~of inFISC and the ~~business~~operations of FISC are included in the ~~originating~~consolidated ~~and~~results ~~holding~~of ~~for~~the ~~investment~~Company ~~retail~~since ~~installment~~the ~~contracts~~date ~~and~~of acquisition. ~~promissory~~Headquartered ~~notes~~in ~~secured~~Atlanta, byGeorgia, ~~new~~FISC performed servicing and ~~used~~collection activities ~~automobiles~~on a portfolio of receivables originated byfor ~~factory~~investment as well as ~~authorized~~on ~~franchised~~a ~~dealers~~portfolio orof ~~directly~~receivables ~~through~~originated ~~consumers~~and sold pursuant to two asset securitizations. As a result of ~~October~~the 31acquisition, the Company increased the ~~2004,~~total ~~approximately~~dollar ~~31%,~~value ~~19%,~~on ~~and~~its ~~11%~~balance sheet of receivables, ~~held~~acquired ~~for~~an ~~investment~~interest ~~had~~in ~~been~~certain ~~originated~~trust incertificates ~~Texas,~~related ~~Georgia,~~to the asset securitizations and ~~Ohio~~acquired certain servicing rights along with furniture, ~~respectively.~~fixtures, ~~The~~equipment ~~Company~~and ~~currently~~technology ~~operates~~to inperform 28the ~~states~~servicing and collection functions for the portfolio of receivables under management.

~~FIIC was~~On ~~organized~~August ~~under~~8, 2000, the ~~captive~~Company ~~insurance~~entered into ~~company~~a ~~laws~~partnership agreement whereby a subsidiary of the ~~state~~Company was the general partner owning 70% of ~~Vermont~~the partnership interests and First Union ~~for~~Investors, Inc. served as the ~~purpose~~limited partner and owned 30% of ~~reinsuring~~the ~~certain~~partnership interests. On ~~credit~~September ~~enhancement~~19, ~~insurance~~2003, ~~policies~~First ~~that~~Investors ~~have~~Financial ~~been~~Services, ~~written~~Inc. purchased the limited partnership interests previously held by ~~unrelated~~First ~~third~~Union ~~party~~Investors, ~~insurance~~Inc. The ~~companies~~Partnership consists primarily of a portfolio of loans previously owned or securitized by FISC and certain other financial assets including charged-off accounts owned by FISC.

On ~~October~~ 2December 24, ~~1998~~2002, the Company purchased ~~completed~~40% ~~the acquisition~~ of ~~FISC and~~ the ~~operations~~ ofcommon ~~FISC~~stock ~~are~~and ~~included~~an investment in the ~~consolidated~~junior ~~results~~mezzanine debt of ~~the~~First ~~Company since~~Auto ~~the~~Receivables ~~date~~Corporation ~~of acquisition~~(“FARC”). FARC ~~Headquartered~~purchased inan ~~Atlanta,~~approximately ~~Georgia~~$197, ~~FISC~~500 ~~performed servicing and collection activities on a~~ portfolio of ~~receivables originated~~installment ~~for~~loan ~~investment~~receivables asfrom ~~well as on~~ a ~~portfolio~~subsidiary of ~~receivables~~Union ~~originated~~Acceptance ~~and sold pursuant to two asset securitizations~~Corporation. FISC Asperforms ~~a result of the acquisition,~~ongoing ~~the Company increased the total dollar value on its balance sheet of receivables, acquired an interest in certain trust certificates related to the asset securitizations and acquired certain~~ servicing ~~rights along with furniture, fixtures, equipment~~ and ~~technology to perform the servicing and~~ collection ~~functions~~activities ~~for~~on the portfolio ~~of receivables under management~~.

On ~~August~~ 8March 19, ~~2000~~2003, ~~the~~FISC ~~Company~~ entered into a servicing ~~partnership~~ agreement ~~(Partnership) whereby~~with aan ~~subsidiary~~unrelated ofthird ~~the~~party ~~Company~~to ~~was~~service ~~the~~an ~~general partner owning 70% of the~~approximately ~~partnership interests and First Union Investors~~$300,000 ~~Inc.~~portfolio ~~served as the limited partner and owned 30%~~ of ~~the~~installment ~~partnership~~loan ~~interests. On~~receivables ~~September 19, 2003, First Investors Financial Services, Inc.~~ purchased ~~the~~from ~~limited~~a ~~partnership interests previously~~subsidiary ~~held~~of ~~by First~~ Union ~~Investors,~~Acceptance ~~Inc~~Corporation. ~~The Partnership consists primarily of a portfolio of loans previously owned or securitized by FISC and certain other financial assets including charged-off accounts owned by FISC.~~

OnIn ~~December 24~~total, ~~2002,~~at ~~the~~October ~~Company~~31, ~~purchased~~2006, ~~40%~~FISC ofperforms ~~common~~servicing ~~stock~~ and ancollection ~~investment~~functions on ina ~~the~~managed ~~junior~~receivables ~~mezzanine~~portfolio ~~debt~~ of ~~First Auto Receivables Corporation (FARC). FARC purchased an~~ approximately $~~197~~501,915.~~5 million portfolio of installment loan receivables from a subsidiary of Union Acceptance Corporation. FISC performs ongoing servicing and collection activities on the portfolio.~~

On March 19, 2003, FISC entered into a servicing agreement with an unrelated third party to service an approximately $300 million portfolio of installment loan receivables purchased from a subsidiary of Union Acceptance Corporation.7

~~In total,~~2. Interim atFinancial ~~October 31, 2004, FISC performs servicing and collection functions on a managed receivables portfolio of approximately $455 million.~~Information

7Basis of Presentation. The consolidated financial statements include the accounts of First Investors and its wholly-owned and majority-owned subsidiaries. All intercompany accounts and transactions have been eliminated. Investments in which the Company exercises significant influence, but which it does not control (generally a 20% to 50% ownership interest), are accounted for under the equity method of accounting, except for variable interest entities for which the Company is considered the primary beneficiary under Financial Accounting Standards Board (“FASB”) Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51, as amended in December 2003 by Interpretation 46R. As of October 31, 2006, the Company does not have any variable interest entities under FIN 46 as amended by Interpretation 46R.

2The results for the interim periods are not necessarily indicative of the results of operations that may be expected for the fiscal year. ~~Interim~~ ~~Financial~~In ~~Information~~the opinion of management, the information furnished reflects all adjustments which are of a normal recurring nature and are necessary for a fair presentation of the Company’s financial position as of October 31, 2006, and the results of its operations for the three and six months ended October 31, 2006 and 2005, and its cash flows for the six months ended October 31, 2006 and 2005.

~~Basis of Presentation.~~ The ~~consolidated~~ consolidated financial statements ~~include~~for the ~~accounts~~interim ofperiods ~~First~~have ~~Investors~~been ~~and its~~prepared ~~wholly-owned~~pursuant ~~and~~to ~~majority-owned~~the rules ~~subsidiaries. All~~and ~~significant~~regulations ~~intercompany~~of ~~accounts~~the Securities and ~~transactions have~~Exchange ~~been eliminated~~Commission. ~~Investments~~Certain information inand ~~which~~footnote ~~the~~disclosures ~~Company~~normally ~~exercises~~included ~~significant influence,~~in ~~but~~financial ~~which~~statements prepared itin ~~does~~accordance ~~not~~with ~~control~~accounting (principles generally aaccepted ~~20%~~in ~~to 50% ownership~~the ~~interest),~~United ~~are~~States ~~accounted~~of ~~for~~America ~~under~~have ~~the~~been ~~equity~~condensed ~~method~~or ofomitted ~~accounting,~~pursuant ~~except~~to ~~for~~such rules ~~variable~~and ~~interest~~regulations, ~~entities~~although ~~for which~~ the Company isbelieves ~~considered~~that the ~~primary~~disclosures are ~~beneficiary~~adequate ~~under~~to ~~Financial~~make ~~Accounting~~the ~~Standards~~information ~~Board~~not ~~(“FASB”) Interpretation No~~misleading. ~~46,~~These ~~Consolidation~~financial ~~of Variable Interest Entities, an~~statements ~~interpretation~~should ofbe ~~ARB~~read ~~No.~~in ~~51,~~conjunction aswith ~~amended~~the inaudited ~~December~~consolidated ~~2003 by~~financial ~~Interpretation~~statements ~~46R. As~~included ofin ~~October 31, 2004,~~ the Company’s ~~does~~2006 ~~not~~Annual ~~have~~Report ~~any~~on ~~entities~~Form ~~under~~10-K ~~which~~filed ~~FIN 46 as amended by~~July ~~Interpretation~~27, ~~46R would apply~~2006.

~~The~~Receivables ~~results~~Held for ~~the~~ ~~interim~~Investment. Receivables ~~periods~~Held ~~are~~for ~~not~~Investment ~~necessarily~~represents ~~indicative of~~ the aggregate ~~results~~outstanding balance of ~~operations that~~installment ~~may~~sales becontracts ~~expected~~and ~~for~~promissory notes ~~the~~originated ~~fiscal~~by ~~year. In~~ the ~~opinion~~Company ofthrough ~~management,~~its ~~the information~~automobile ~~furnished~~dealer ~~reflects~~relationships ~~all~~or directly ~~adjustments~~with ~~which~~consumers. The ~~are~~Company accrues ofinterest aincome ~~normal~~monthly ~~recurring nature~~using ~~and~~the ~~are~~effective ~~necessary~~interest ~~for~~method. When a ~~fair~~receivable ~~presentation~~becomes of90 ~~the~~days ~~Company’s~~past ~~financial~~due, ~~position~~the asincome ofaccrual ~~October~~is ~~31,~~suspended ~~2004,~~until ~~and~~ the ~~results~~payments ofbecome ~~its~~current. ~~operations~~When ~~for~~a ~~the~~loan ~~three~~is ~~and~~charged ~~six~~off ~~months~~or ~~ended~~the ~~October~~collateral ~~31,~~is ~~2003 and 2004~~repossessed, ~~and~~the ~~its~~remaining ~~cash~~income ~~flows for~~accrual ~~the~~is ~~six~~written ~~months ended October 31, 2003 and 2004~~off.

~~The~~Other ~~consolidated~~Income. Other Income ~~financial~~consists ~~statements~~of ~~for~~income ~~the~~received ~~interim periods~~from ~~have~~servicing ~~been~~activities, ~~prepared~~other ~~pursuant~~finance charges toand ~~the~~fees, ~~rules~~income ~~and~~from ~~regulations~~investments, ofreinvestment ~~the~~revenue, income earned ~~Securities~~from ~~and~~the ~~Exchange~~sale ~~Commission.~~of ~~Certain~~GAP ~~information~~insurance and ~~footnote disclosures~~extended ~~normally~~service ~~included~~contracts, inand ~~financial~~unrealized loss ~~statements~~on ~~prepared~~interest inrate ~~accordance~~derivative positions. ~~with~~Servicing ~~accounting~~revenue ~~principles~~is ~~generally~~accrued ~~accepted~~as inservices ~~the~~are ~~United~~rendered. ~~States~~Late offees ~~America~~and ~~have~~other ~~been~~loan-related ~~condensed~~fees orare ~~omitted~~recognized ~~pursuant~~when toreceived. Income ~~such~~from ~~rules~~investments and ~~regulations, although~~reinvestment ~~the~~revenue ~~Company~~are ~~believes~~accrued ~~that~~based on the ~~disclosures~~respective ~~are~~interest ~~adequate~~rate toof ~~make~~such investment. Income from the ~~information~~sale of GAP ~~not~~insurance ~~misleading.~~and ~~These~~extended ~~financial~~service ~~statements~~contracts ~~should~~is berecognized ~~read~~when insold ~~conjunction~~as ~~with~~ the ~~audited~~Company has ~~consolidated~~no ~~financial~~further ~~statements~~obligation ~~included~~after in the ~~Company’s 2004~~sale. ~~Annual~~Unrealized ~~Report~~loss on ~~Form~~interest ~~10-K~~rate ~~filed~~derivatives ~~July~~is ~~26,~~recognized ~~2004~~when incurred.

~~Receivables~~Allowance ~~Held~~ for ~~Investment~~Credit Losses. ~~Receivables Held for Investment represents~~The ~~the~~Company ~~aggregate~~calculates ~~outstanding balance of installment sales contracts and promissory notes originated by~~ the ~~Company~~allowance ~~through~~for ~~its~~credit ~~automobile~~losses ~~dealer~~in ~~relationships~~accordance ~~or directly~~ with ~~consumers. The~~SFAS ~~Company~~No. ~~accrues~~5, ~~interest~~Accounting ~~income~~for ~~monthly~~Contingencies. SFAS ~~using the effective interest method~~No. ~~Interest income~~114, ~~also includes additional amounts received upon early payoffs of certain~~Accounting ~~receivables~~by ~~attributable~~Creditors tofor ~~the~~Impairment ~~difference between the principal balance~~ of ~~the receivables~~a ~~calculated~~Loan ~~using~~does ~~the~~not ~~Rule~~apply ofto ~~78’s method and the principal balance~~loans ofcurrently ~~the~~held ~~receivables~~by ~~calculated using~~ the ~~effective~~Company ~~interest~~because ~~method.~~they ~~When~~comprise a ~~receivable~~ ~~becomes~~large 90group ~~days~~of ~~past due, the income accrual is suspended until the~~smaller ~~payments~~balance ~~become~~homogenous ~~current.~~loans ~~When~~that aare ~~loan~~evaluated iscollectively ~~charged~~for ~~off or the collateral is repossessed, the remaining income accrual is written off~~impairment.

~~Receivables Acquired for Investment. In connection with loans that were acquired~~The inCompany ainitiates ~~portfolio~~efforts ~~purchase~~to bymake ~~the~~customer ~~Partnership,~~contact ~~the~~as ~~Company~~early ~~estimates~~as ~~the~~when ~~amount~~the ~~and~~customer ~~timing~~is ofone ~~undiscounted~~day ~~expected~~past ~~future~~due ~~principal~~ and ~~interest~~become ~~cash~~more ~~flows. For~~aggressive ~~certain~~as ~~purchased loans,~~ the ~~amount paid for a~~ loan ~~reflects the Company’s~~becomes ~~determination~~further ~~that~~past itdue. Management ~~is probable the Company will be unable to collect all~~reviews ~~amounts~~past due ~~according~~loans toand ~~the~~considers ~~loan’s~~various ~~contractual~~factors ~~terms.~~including ~~Accordingly,~~payment ~~at acquisition~~history, ~~the Company recognizes the excess of the loan’s scheduled~~job ~~contractual~~status ~~principal~~ and ~~contractual~~any ~~interest~~events ~~payments~~that ~~over~~may ~~its~~have ~~expected~~occurred ~~cash flows~~that asprevent anthe ~~amount~~customer ~~that~~from making ~~should~~a ~~not be accreted~~payment. Through ~~The~~the evaluation, ~~remaining~~if ~~amount, representing~~it ~~the~~is ~~excess~~determined ofthat the loan’s ~~expected~~is ~~cash~~uncollectible, ~~flows over~~ the ~~amount paid,~~collateral is ~~accreted~~typically ~~into~~repossessed. Generally ~~interest~~this occurs ~~income~~at ~~over~~60 ~~the~~to ~~remaining~~90 ~~life~~days ofafter the loan~~. As~~ abecomes ~~result~~past ofdue. Upon ~~the~~repossession, ~~amortization of~~ the ~~outstanding~~ ~~principal~~uncollectible ~~balance~~ portion of the ~~receivables~~loan ~~portfolio,~~and ~~the~~100% ~~majority~~ of ~~the remaining~~accrued ~~cash~~interest ~~flows~~is ~~projected~~written ~~constitute default collections from obligors~~off. ~~Given~~The ~~the~~fair ~~nature~~value of the ~~remaining~~ ~~cash~~collateral ~~flows~~is ~~of individual loans, the Company determined that the~~recorded ~~timing~~as ofan ~~collections~~Assets onHeld ~~Receivables Acquired~~ for ~~Investment~~Sale. Fair ~~was much more~~value ~~unpredictable~~is ~~than~~determined ~~contractual~~by ~~cash~~estimating ~~flows~~the proceeds from ~~non-defaulted receivables. Therefore, under~~ the ~~guidance~~sale ~~provided by Practice Bulletin 6, Amortization~~ of ~~Discounts~~ ~~on Certain Acquired Loans, Receivables Acquired for Investment will be accounted for under~~ the ~~cost-recovery method beginning September 30~~collateral, ~~2003. Under the cost~~which ~~recovery~~primarily ~~method, cash proceeds from collections~~ are ~~applied~~comprised toof ~~first~~auction ~~reduce~~proceeds ~~the Company’s~~on ~~basis in~~ the ~~assets. Cash collected~~sale ~~in excess~~ of ~~this~~the ~~cost~~automobile ~~basis is recognized as income when received.~~

Other Income. Other Income consists of income received from servicing activities, late fees and other loan-related fees, income from investments, loan origination fees, product sales, reinvestment revenue and unrealized gain or loss on interest rate derivative positions. Servicing revenue is accrued as services are rendered. Late fees8

8less selling related expenses. After collection of all proceeds, the Company records an adjustment, positive or negative, based on the difference between the fair value estimate and the proceeds received. In the event the collateral cannot be located or if the customer refuses to pay and is not subject to bankruptcy court protection, the Company will write off the entire balance of the loan once it reaches 180 days past due. If the customer is subject to bankruptcy court protection, the loan generally remains in bankruptcy status as long as payments are being received from the trustee. If a payment is missed, the Company seeks to repossess the collateral with approval of the court. If the customer is dismissed from bankruptcy, the Company resumes collection efforts.

~~and~~The ~~other~~Company ~~loan~~applies a systematic methodology in order to determine the amount of the allowance for credit losses. The specific methodology is a six-~~related~~month ~~fees~~migration analysis whereby the Company compares the aging status of each loan on a date which is six months prior to the reporting date, to the aging loan status as of the reporting date. These factors are ~~recognized~~then ~~when~~applied ~~received~~to the aging status of each loan at the reporting date in order to calculate the number of loans that are expected to migrate to impaired status. The estimated number of impairments is then multiplied by the estimated loss per loan, which is based on historical information. Effective the quarter ended April 30, 2005, the Company elected to increase its allowance for loan losses against loans that were greater than 120 days past due and loans in which the collateral had been assigned for repossession but had not yet been repossessed as of the reporting date. ~~Income~~The ~~from~~Company ~~investments~~believes that this increase is warranted in light of the change in federal bankruptcy laws enacted during the period and ~~reinvestment~~the ~~revenue~~recognition that the migration trends of severely delinquent loans and loans subject to bankruptcy are ~~accrued~~expected ~~based~~to become more protracted. Based on this, the Company has assigned a specific allowance against these loans equal to the ~~respective~~outstanding ~~interest~~balance ~~rate~~of loans in these categories less the estimated recovery amount based on current data regarding liquidation of ~~such~~the ~~investment~~collateral and ~~unrealized~~collection ~~gain~~of orany ~~loss~~additional payments. The onCompany utilized its most ~~interest~~recent ~~rate~~recovery ~~derivatives~~rates in order to assess fair value of these loans. For loans that are not classified into these categories, the historical migration pattern is ~~recognized~~utilized in order to establish the estimated impairment. The allowance for credit losses is based on estimates and qualitative evaluations. Ultimate losses may vary from current estimates. These estimates are reviewed periodically and as ~~changes~~adjustments, ~~occur~~either positive or negative, become necessary, they are reported in ~~the~~earnings ~~derivatives~~in the ~~fair~~period ~~value~~they become known.

~~Allowance for~~Stock-Based ~~Credit Losses~~Compensation. The ~~Company~~ ~~calculates~~Company ~~the~~expenses ~~allowance~~stock-based ~~for~~compensation ~~credit~~expense ~~losses~~ in accordance with SFAS No. 5 123(R), ~~Accounting~~Share-Based ~~for~~Payment ~~Contingencies.~~ - a revision to SFAS No. ~~114~~123, ~~Accounting~~ ~~for~~Accounting ~~Creditors~~ for ~~Impairment~~Stock-Based ofCompensation a(“SFAS ~~Loan~~No. ~~does~~123(R)”) ~~not apply to loans currently~~(see ~~held~~note ~~by the Company because they are composed of a large group of smaller balance homogenous loans that are evaluated collectively for impairment~~8).

~~The Company initiates efforts to make customer contact when the customer is one day past due and becomes more aggressive as the loan becomes more delinquent~~Reclassifications. ~~Management~~ ~~reviews~~Certain ~~past~~reclassifications ~~due loans and considers various factors including payment history, job status and any events that may~~ have ~~occurred that~~been ~~prevent~~made ~~the customer from making a payment. Through the evaluation, if it is determined that the loan is uncollectible, the collateral is typically repossessed. Generally this occurs at 90~~ to ~~120 days past due. Upon repossession,~~ the ~~uncollectible~~fiscal ~~portion~~2006 ofamounts ~~the loan and 100% of accrued interest is written off. The fair value of the collateral is recorded in Assets Held for Sale. In the event the collateral is unable~~ to beconform ~~located,~~with the ~~Company~~fiscal ~~will~~2007 ~~write off the entire balance after exhausting all collection efforts~~presentation.

~~The Company applies a systematic methodology in order to determine the amount of the allowance for credit losses~~3. ~~The~~ Receivables ~~specific~~Held methodology utilized is a six-month migration analysis whereby the Company compares the aging status of each loan from six months prior to the aging loan status as of the reporting date. These factors are then applied to the aging status of each loan at the reporting date in order to calculate the number of loans that are expected to migrate to impaired status. The estimated number of impairments is then multiplied by estimated loss per loan, which is based on historical information. The computed reserve is then compared to the amount recorded for adequacy. The Company compares the six-month result to prior six-month periods to compare trends and evaluate any other internal or external factors that may affect collectibility. The allowance for credit losses is based on estimates and qualitative evaluations, and ultimate losses will vary from current estimates. These estimates are reviewed periodically and as adjustments, either positive or negative, become necessary, are reported in earnings in the period they become known.Investment

~~Treasury~~The ~~Stock. In September,~~receivables ~~2004,~~generally ~~the~~have ~~Board~~terms ofbetween ~~Directors~~48 ~~authorized~~and ~~the Company to repurchase up~~72 tomonths ~~$1.5~~and ~~million~~are ofcollateralized by the ~~Company’s~~underlying ~~outstanding common stock~~vehicles. ~~During~~Net ~~the~~receivable ~~three~~balances ~~and~~consisted ~~six~~of ~~months~~the following ~~ended~~at ~~October 31,~~April ~~2004~~30, ~~the~~2006 ~~Company~~and ~~engaged~~October in31, ~~the following transactions~~2006:

Three Months Ended October 31, 2004				Six Months Ended October 31, 2004
	April 30,			October 31,
# of Shares Repurchased	Wtd. Avg. Price/Share			# of Shares Repurchased		Wtd. Avg. Price/Share
	2006			2006
900	$	4.35		900		$	4.35
Receivables	$	368,878		$	428,416
Unamortized premium and deferred fees (1)	10,853			12,232
Allowance for credit losses	(2,332		)	(2,728		)
Net receivables	$	377,399		$	437,920

Stock-Based Compensation. The Company has an employee stock option plan and a non-employee director stock option plan, which are described more fully in Note 9. The Company has adopted the disclosure provisions of SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure, an amendment of FASB Statement No. 123. This pronouncement requires prominent disclosures in both annual and interim financial statements regarding the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company accounts for stock compensation awards under the intrinsic value method of Accounting Principles Board (~~“APB”~~1) Includes ~~Opinion~~premium ~~No. 25, Accounting for Stock Issued to Employees which requires compensation cost to be recognized based on the excess, if any, between the quoted market price of the stock at the date of grant~~ and ~~the~~discounts ~~amount~~paid ~~an employee must pay~~ to ~~acquire the stock. All options awarded under the Company’s~~dealer ~~plan~~plus ~~are~~deferred ~~granted~~acquisition ~~with an exercise price equal to or greater than the fair market value on the date of the grant~~cost.

~~The following table presents~~Activity ~~the~~in ~~Company’s net income per share had~~ the ~~Company~~allowance ~~adopted~~for ~~the~~credit ~~fair~~losses ~~value method of accounting~~ for ~~stock-based~~the ~~compensation~~periods ~~under~~ended ~~SFAS~~October ~~No. 123~~31, ~~Accounting~~2005 ~~for~~and 2006 ~~Stock-Based~~was ~~Compensation,~~ as ~~amended by SFAS No. 148.~~follows:

	For the Three Months Ended October 31,						For the Six Months Ended October 31,
	For the Six Months Ended October 31,
	2003			2004			2003		2004
	2005			2006
Net Income, as reported.	$	187,805		$	216,070		$	407,884	$	303,023
Balance, beginning of period	$	2,249		$	2,332
Deduct: Total stock option plan compensation expense determined under fair value based method for awards granted, modified or settled, net of taxes.	36,190			44,942			46,694		80,710
Provision for credit losses	3,716			5,195
Pro Forma Net Income	$	151,615		$	171,128		$	361,190	$	223,313
Charge-offs, net of recoveries	(3,706		)	(4,799		)
Basic and Diluted Net Income per Common Share, as reported.	$	0.04		$	0.04		$	0.08	$	0.06
Balance, end of period	$	2,259		$	2,728
Basic and Diluted Net Income per Common Share, pro forma	$	0.03		$	0.03		$	0.07	$	0.04

~~Reclassifications~~4. ~~Certain reclassifications have been made to the fiscal 2003 amounts to conform with the fiscal 2004 presentation.~~ Debt

3The Company finances its loan origination through two warehouse credit facilities. ~~Receivables~~ ~~Held~~The Company’s credit facilities provide for one-year ~~Investment~~terms and have been renewed annually. Management of the Company believes that the credit facilities will continue to be renewed or extended or that it would be able to secure alternate financing on satisfactory terms; however, there can be no assurance that it will be able to do so. In November, 2003, the Company issued $139,661 asset-backed notes (“Term Notes”) secured by a discrete pool of receivables. In May, 2005, the Company issued $175,493 in Term Notes secured by a discrete pool of receivables. In January, 2006, the Company issued $189,060 in Term Notes secured by a discrete pool of receivables. Substantially all receivables retained by the Company are pledged as collateral for the credit facilities and the Term Notes. The weighted average interest rate for the Company’s secured borrowings including the effect of program fees and dealer fees was 4.3% and 5.2% for the periods ended October 31, 2005 and 2006, respectively.

~~The~~Warehouse ~~receivables~~Facilities ~~generally have~~as ~~terms between 48 and 72 months and are collateralized by the underlying vehicles. Net receivable balances consisted~~ of ~~the following at April 30, 2004 and~~ October 31, ~~2004:~~2006

	April 30, 2004			October 31, 2004
										Borrowing
Receivables	$	207,489,339		$	218,022,613
										Rate At
Unamortized premium and deferred fees(1)	4,487,394			5,025,434
										October 31,
Allowance for credit losses	(2,199,386		)	(2,311,040		)
Facility	Capacity			Outstanding			Interest Rate	Fees	Insurance	2006
Net receivables	$	209,777,347		$	220,737,007
FIARC	$	300,000		$	148,062		Commercial paper rate plus .3%	.30% of Unused Facility	None	5.8	%
FIRC	$	50,000		$	36,524		Option of a) Base Rate, which is the higher of prime rate or fed funds plus .5% or b) LIBOR plus .5%	.25% of Unused Facility	See below	5.3	%

~~(1) Includes~~Warehouse ~~premium~~Facilities ~~and~~– Credit ~~discounts~~Enhancement ~~paid~~as toof ~~dealer plus~~October ~~deferred~~31, ~~acquisition cost.~~2006

Activity in the allowance for credit losses for the periods ended October 31, 2003 and 2004 was as follows:

Facility	Cash Reserve	Advance Rate		Insurance
FIARC	1% of outstanding receivables	94	%	None
FIRC	1% of borrowings	100	%	Default Insurance (ALPI)

	For the Six Months Ended October 31,
	2003			2004
Balance, beginning of period	$	2,397,216		$	2,199,386
Provision for credit losses	6,661,704			4,884,511
Charge-offs, net of recoveries	(6,695,350		)	(4,772,857		)
Balance, end of period	$	2,363,570		$	2,311,040

~~4. Receivables~~coverage ~~Acquired~~and neither the vehicle purchasers nor the dealers are charged for ~~Investment~~the coverages and they are usually unaware of their existence. The Company’s ALPI insurance policy is written by National Union Fire Insurance Company of Pittsburgh (“National Union”), which is a wholly-owned subsidiary of American International Group.

~~Receivables~~The premiums ~~Acquired~~that ~~for~~the ~~Investment~~Company ~~comprise~~paid ~~loans previously~~during ~~originated~~the bythree ~~Auto~~months ~~Lenders Acceptance Corporation~~ and ~~another~~six ~~third party. Loans~~months ~~originated by Auto Lenders~~ended ~~Acceptance~~October ~~Corporation~~31, ~~include~~2006 afor ~~portfolio~~its ofthree ~~warehouse~~credit ~~loans~~enhancement ~~and~~insurance acoverages, ~~portfolio~~ of ~~loans that were previously securitized.~~ which ~~The~~the ~~securitized~~largest ~~loans~~component ~~were~~is ~~subsequently~~basic ~~redeemed~~ALPI ~~and~~insurance, ~~funded~~represented ~~through~~approximately ~~one of the Company’s credit facilities~~1. 1% ~~Receivables~~and ~~Acquired for Investment previously originated by Auto Lenders Acceptance Corporation were purchased at a discount relating to credit quality~~1. As7%, arespectively, ~~result~~ of the ~~amortization of the outstanding~~ principal ~~balance~~amount of the receivables ~~portfolio,~~originated during the ~~majority of~~periods. ~~the~~Aggregate ~~remaining~~premiums ~~cash~~paid ~~flows~~for ~~projected~~ALPI ~~constitute~~coverage ~~default~~alone ~~collections~~were ~~from~~$1,366 ~~obligors. Given~~and ~~the~~$536 ~~nature~~during of the ~~remaining~~ ~~cash~~three ~~flows~~months ofended, ~~individual~~and ~~loans~~$2,572 ~~the~~and ~~Company~~$1,852 ~~determined that the timing of collections on Receivables Acquired~~ for ~~Investment~~six ~~was much more~~months ~~unpredictable~~ended, ~~than~~October ~~contractual cash flows from non-defaulted receivables. Therefore~~31, ~~under~~2005 ~~the~~and ~~guidance provided by Practice Bulletin 6~~2006, ~~Amortization of Discounts on Certain Acquired Loans~~respectively, ~~Receivables~~and ~~Acquired for Investment will be~~ accounted for ~~under~~ ~~the~~2.1% ~~cost-recovery~~and ~~method beginning September 30, 2003~~0. ~~Under~~9% during the ~~cost~~three ~~recovery~~months ~~method~~ended, ~~cash~~and ~~proceeds from collections are applied to first reduce the Company’s basis in the assets~~1. ~~Cash~~8% ~~collected~~and ~~in excess of this cost basis is recognized as income when received~~1.2% ~~Receivables Acquired~~ for ~~Investment~~ ~~previously~~the ~~originated~~six bymonths ~~Auto~~ended, October ~~Lenders~~31, ~~Acceptance~~2005 ~~Corporation~~and ~~were $979~~2006,~~496~~ ~~and $739~~respectively,~~545~~ as of ~~April~~the ~~30,~~principal ~~2004~~amount ~~and~~of ~~October~~the receivables ~~31,~~originated ~~2004,~~during ~~respectively~~such respective periods.

~~On September~~In 30April 1994, ~~2003~~ the Company ~~purchased~~organized ~~$9.4~~First ~~million~~Investors Insurance ofCompany ~~defaulted~~(the ~~auto~~“Insurance ~~loan~~Subsidiary”) under the captive insurance ~~receivables~~company ~~from~~laws anof ~~unrelated~~the ~~third~~State ~~party~~of Vermont. The Insurance Subsidiary is an indirect ~~These~~wholly-owned ~~loans~~subsidiary of ~~$210,734~~the Company and ~~$79,650~~is ~~are~~a ~~included~~party into ~~Receivables~~a ~~Acquired~~reinsurance ~~for~~agreement ~~Investment~~whereby on the ~~balance~~Insurance ~~sheet~~Subsidiary asreinsures 100% of ~~April~~the 30risk under the Company’s ALPI insurance policy. At the time each receivable is insured by National Union, ~~2004~~the risk is automatically reinsured to its full extent and approximately ~~October~~96% 31of the premium paid by the Company to National Union with respect to such receivable is ceded to the Insurance Subsidiary. When a loss covered by the ALPI policy occurs, ~~2004~~National Union pays it after the claim is ~~respectively~~processed, and ~~are~~National ~~accounted~~Union ~~for~~is ~~using~~then ~~the~~reimbursed ~~cost-recovery~~in ~~method~~full by the Insurance Subsidiary. ~~The~~In ~~Company~~addition ~~may,~~to ~~from~~the ~~time~~monthly premiums toand ~~time~~liquidity reserves of the Insurance Subsidiary, ~~consider~~a trust account is ~~similar~~maintained ~~acquisitions~~by inNational Union to secure the ~~future~~Insurance Subsidiary’s obligations for losses it has reinsured.

5The result of the foregoing reinsurance structure is that National Union, as the “fronting” insurer under the captive arrangement, is unconditionally obligated to the Company’s credit facility lenders for all losses covered by the ALPI policy, and the Company, through its Insurance Subsidiary, is obligated to indemnify National Union for all such losses. ~~Debt~~ As of October 31, 2006, the Insurance Subsidiary had capital and surplus of $3,607 and unencumbered cash reserves of $2,413 in addition to the $3,252 trust account.

The ~~Company~~ALPI ~~finances~~coverage ~~its loan~~as ~~origination~~well ~~through~~as ~~two~~the ~~warehouse credit facilities. The Company~~Insurance Subsidiary’s ~~credit facilities~~liability ~~provide~~under ~~for~~the ~~one-year~~Reinsurance ~~terms~~Agreement, ~~and~~remains ~~have~~in ~~been~~effect ~~renewed annually.~~for ~~Management~~each ofreceivable ~~the~~that ~~Company~~is ~~believes~~pledged ~~that~~as ~~the~~collateral ~~credit~~under ~~facilities~~the ~~will~~warehouse ~~continue to~~credit befacility. ~~renewed~~Once orreceivables ~~extended~~are ortransferred ~~that~~from itFIRC ~~would be able~~ to ~~secure~~FIARC ~~alternate~~and ~~financing~~financed onunder ~~satisfactory~~the ~~terms;~~commercial ~~however~~paper facility, ~~there~~ALPI ~~can~~coverage beand nothe ~~assurance~~Insurance ~~that it will be able~~Subsidiary’s toliability dounder ~~so. In January 2002~~ the ~~Company~~Reinsurance ~~issued~~Agreement ~~$159~~is ~~million~~cancelled inwith ~~asset-backed~~respect ~~notes~~to the ~~(“Term~~transferred ~~Notes”) secured by a discrete pool of~~ receivables. OnAny ~~November~~unearned ~~20,~~premium ~~2003, the~~associated ~~Company~~with ~~issued~~the ~~$140 million in Term Notes secured by a discrete pool of~~transferred receivables~~. Substantially~~ ~~all receivables~~is ~~retained~~returned byto the Company. ~~are~~The ~~pledged~~Company asbelieves ~~collateral for~~ the ~~credit~~losses its ~~facilities~~Insurance ~~and~~Subsidiary ~~the~~will ~~Term~~be ~~Notes.~~required ~~The~~to ~~weighted~~indemnify ~~average~~will ~~interest~~be ~~rate~~less ~~for~~than the ~~Company’s~~premiums ~~secured~~ceded ~~borrowings~~to ~~including~~it. ~~the effect of program fees~~However, ~~dealer~~there ~~fees, and~~can ~~other~~be ~~comprehensive~~no ~~income~~assurance ~~(loss)~~that ~~amortization~~losses ~~was~~will ~~3.5%~~not exceed ~~and 3.3% for~~ the ~~three~~ ~~months~~premiums ~~ended~~ceded and ~~3.5% and 3.4% for~~ the ~~six~~capital ~~months ended October 31, 2004~~ and ~~October~~surplus ~~31,~~of ~~2003,~~the ~~respectively~~Insurance Subsidiary.

~~Warehouse~~FIARC ~~Facilities~~– asCredit Enhancement for the FIARC warehouse facility is provided to the commercial paper investors by a 6% overcollaterization level and a cash reserve account equal to 1% of the receivables held by FIARC. The Company is not a guarantor of, or ~~October~~otherwise 31a party to, ~~2004~~such commercial paper.

Facility	Capacity		Outstanding		Interest Rate	Fees	Insurance		Borrowing Rate At October 31, 2004
FIARC	$	150,000,000	$	53,855,004	Commercial paper rate plus .3%	.25% of Unused Facility	.35	%	1.86	%
FIRC	$	50,000,000	$	42,032,443	Option of a) Base Rate, which is the higher of prime rate or fed funds plus .5% or b) LIBOR plus .5%	.25% of Unused Facility	See below		2.45	%

Warehouse Facilities – Agents and Expirations

Facility	Agent	Expiration	Event if not Renewed
FIARC	Wachovia	February 14, 2007	Receivables pledged would be allowed to amortize; however, no new receivables would be allowed to transfer from the FIRC facility.
FIRC	Wachovia	February 14, 2007	The loan would convert to a term loan which would mature six months thereafter and amortize monthly in accordance with the borrowing base with the remaining balance due at maturity.

~~Warehouse Facilities — Credit Enhancement as of October 31, 2004~~11

Facility	Cash Reserve	Advance Rate		Insurance
FIARC	1% of outstanding receivables	94	%	Surety Bond
FIRC	1% of borrowings	100	%	Default Insurance (ALPI)

On December 4, 2003, the FIRC facility was renewed, under similar terms and conditions, at the $50,000 commitment level until December 2, 2004, and was subsequently extended until February 14, 2007. On June 15, 2004, the FIRC facility was increased to $65,000, and reverted back to $50,000 on September 13, 2004. As of April 30, 2006 and October 31, 2006, there was $47,080 and $36,524, respectively, outstanding.

~~FIRC~~On -January In29, ~~order to~~2004, ~~obtain~~following a ~~lower~~short-term ~~cost~~extension of ~~funding,~~ the ~~Company~~original ~~has~~maturity ~~agreed~~date, tothe ~~maintain credit~~FIARC ~~enhancement~~facility ~~insurance~~was ~~covering~~renewed, ~~the~~under ~~receivables~~similar ~~pledged~~terms asand ~~collateral~~conditions, ~~under~~to ~~the FIRC~~December ~~credit~~2, ~~facility.~~2004, and ~~The~~was ~~facility~~subsequently ~~lenders~~extended ~~are~~until ~~named~~February as14, ~~additional~~2007. In ~~insureds under~~connection ~~these~~with ~~policies.~~the ~~The~~renewal, ~~coverages~~the ~~are~~ Company obtained onapproval ~~each~~from ~~receivable~~the atlender ~~the~~to ~~time it~~eliminate isthe ~~originated~~requirement bythat ~~the~~a ~~Company,~~surety bond ~~and~~be ~~the~~maintained ~~applicable~~to ~~premiums~~provide ~~are~~additional ~~prepaid~~enhancement ~~for~~ to the ~~life~~commercial ofpaper investors ~~the~~as ~~receivable.~~well ~~Each~~as ~~receivable~~eliminating isthe ~~covered~~requirement byto ~~three~~purchase ~~separate~~interest ~~credit~~rate ~~insurance~~caps. As ~~policies~~a result, ~~consisting~~the of0.35% ~~basic~~surety ~~default~~bond premium ~~insurance~~and ~~under~~the a0.25% ~~standard~~unused ~~auto loan~~surety ~~protection~~bond ~~policy~~premium ~~(known~~were aseliminated. In ~~“ALPI”~~exchange, ~~insurance)~~the ~~together~~Company ~~with~~agreed ~~certain~~to increase ~~supplemental~~the ~~coverages~~program ~~relating~~fee paid to ~~physical~~the ~~damage~~lender ~~and~~from ~~other~~0.30% ~~risks~~to 0.55% ~~Solely~~and ~~at its~~to ~~expense,~~increase the unused ~~Company~~fee ~~carries~~paid ~~these~~to ~~coverages and neither~~ the ~~vehicle purchasers~~lender ~~nor~~from ~~the~~0.25% ~~dealers~~to ~~are~~0.30%. On ~~charged~~October ~~for~~11, ~~the coverages~~2006, ~~nor~~the ~~are~~Company ~~they~~amended ~~usually~~the ~~aware~~facility ofto ~~their~~increase ~~existence.~~the ~~The~~commitment ~~Company’s~~from ~~ALPI~~$150,000 ~~insurance~~to ~~policy~~$300,000 isin ~~written~~order byto fund ~~National~~the ~~Union~~growth ~~Fire~~in ~~Insurance~~origination ~~Company~~volume. As of April ~~Pittsburgh~~30, ~~(“National~~2006 ~~Union”),~~and ~~which is~~October a31, ~~wholly-owned~~2006, ~~subsidiary~~there ofwas ~~American~~$0 ~~International~~and ~~Group~~$148,062, respectively, outstanding.

~~The~~Management ~~premiums~~presently ~~that~~intends ~~the Company~~to ~~paid~~seek ~~during the three months and six months ended October 31, 2004 for~~further ~~its~~extensions ~~three~~to ~~credit~~these ~~enhancement~~warehouse ~~insurance~~facilities ~~coverages,~~prior ofto ~~which~~ the ~~largest component~~current ~~is basic ALPI insurance, represented approximately 2~~expiration dates.4% Management offurther ~~the principal~~considers ~~amount of the receivables originated during the periods. Aggregate~~its ~~premiums~~relationship ~~paid~~with ~~for~~its ~~ALPI~~lenders ~~coverage~~to ~~alone~~be ~~was~~satisfactory ~~$901,966~~ and ~~$538,717~~has ~~during~~no ~~the three~~reason ~~months~~to ~~ended and $1,616,436 and $1,610,126 for six months ended October~~believe ~~31,~~that ~~2004 and 2003, respectively, and accounted for 2.4% and 2.4% during~~ the ~~three~~ ~~months~~FIRC ~~ended~~ and ~~2.4%~~FIARC ~~and~~facilities ~~3.1%~~will ~~for~~not ~~the~~be ~~six~~renewed ~~months~~at ~~ended~~each ~~October 31, 2004 and 2003, respectively,~~ of ~~the principal amount of the receivables originated~~their ~~during such~~ respective ~~periods~~expiration dates.

~~In April 1994, the Company organized First Investors Insurance Company (the “Insurance Subsidiary”) under the captive insurance company laws of the State of Vermont.~~ The ~~Insurance Subsidiary~~following istable ancontains ~~indirect~~pertinent ~~wholly-owned~~information ~~subsidiary~~on of the ~~Company~~Term ~~and~~Notes ~~is a party~~as ~~to a reinsurance agreement whereby the Insurance Subsidiary reinsures 100%~~ of ~~the~~ ~~risk~~October ~~under the Company’s ALPI insurance policy. At the time each receivable is insured by National Union~~31, ~~the risk is automatically reinsured to its full extent and approximately 96% of the premium paid by the Company to National Union with respect to such receivable is ceded to the Insurance Subsidiary~~2006. When a loss covered by the ALPI policy occurs, National Union pays it after the claim is processed, and National Union is then reimbursed in full by the Insurance Subsidiary. In addition to the monthly premiums and liquidity reserves of the Insurance Subsidiary, a trust account is maintained by National Union to secure the Insurance Subsidiary’s obligations for losses it has reinsured.

The result of the foregoing reinsurance structure is that National Union, as the “fronting” insurer under the captive arrangement, is unconditionally obligated to the Company’s credit facility lenders for all losses covered by the ALPI policy, and the Company, through its Insurance Subsidiary, is obligated to indemnify National Union for all such losses. As of October 31, 2004, the Insurance Subsidiary had capital and surplus of $2,763,975 and unencumbered cash reserves of $1,672,245 in addition to the $3,287,233 trust account.

Term Notes	Issuance Date	Issuance Amount		Maturity Date	Outstanding		Interest Rate
2003-A	November 11, 2003	$	139,661	April 20, 2011	$	26,561	2.58	%
2005-A Class 2	May 5, 2005	$	106,493	July 16, 2012	$	79,359	4.23	%
2006-A Class 2	January 26, 2006	$	47,000	March 16, 2009	$	29,353	4.87	%
2006-A Class 3	January 26, 2006	$	74,000	February 15, 2011	$	74,000	4.93	%
2006-A Class 4	January 26, 2006	$	36,060	April 15, 2013	$	36,060	5.00	%

~~The~~Credit ~~ALPI~~enhancement ~~coverage~~on ~~as well as~~ the ~~Insurance Subsidiary’s liability under the Reinsurance Agreement, remains~~ inTerm ~~effect~~Notes ~~for~~are ~~each receivable that is pledged~~ as collateral under the warehouse credit facility. Once receivables are transferred from FIRC to FIARC and financed under the commercial paper facility, ALPI coverage and the Insurance Subsidiary’s liability under the Reinsurance Agreement is cancelled with respect to the transferred receivables. Any unearned premium associated with the transferred receivables is returned to the Company. The Company believes the losses its Insurance Subsidiary will be required to indemnify will be less than the premiums ceded to it. However, there can be no assurance that losses will not exceed the premiums ceded and the capital and surplus of the Insurance Subsidiary.follows:

Facility	Cash Reserve	Advance Rate	Insurance
2003-A	0.5% of Initial Pool Balance increasing to 2% of Initial Pool Balance including Pre- Funding Amount	96.5% initial advance decreasing to 96.1%	Surety Bond
2005-A	1.0% of Initial Pool Balance increasing to 2% of Initial Pool Balance including Pre- Funding Amount	97.0% initial advance decreasing to 95.75%	Surety Bond
2006-A	1.0% of Initial Pool Balance increasing to 2% of Initial Pool Balance including Pre- Funding Amount	98.5% initial advance decreasing to 96.75%	Surety Bond

FIARC — Credit Enhancement for the FIARC warehouse facility is provided to the commercial paper investors by a cash reserve account equal to 1% of the receivables held by FIARC and, additionally, a surety bond issued by MBIA. The Company is not a guarantor of, or otherwise a party to, such commercial paper.12

~~Warehouse~~Term ~~Facilities~~Notes —- ~~Agents~~On November 20, 2003, the Company, through its indirect, wholly-owned subsidiary, First Investors Auto Owner Trust 2003-A (“2003 Auto Trust”), completed the issuance of $139,661 of 2.58% Class A asset-backed notes (“2003-A Term Notes”). The initial pool of automobile receivables transferred to the 2003 Auto Trust totaled $114,727, which was previously owned by FIRC and ~~Expirations~~FIARC, secure the 2003-A Term Notes. In addition to the issuance of the Class A Notes, the 2003 Auto Trust also issued a $5,066 Class B Note that was retained by the Company and pledged to secure the Working Capital Facility as further described below. Proceeds from the issuance, which totaled $139,657, were used to (i) fund a $30,000 pre-funding account to be used for future loan originations, (ii) repay all outstanding borrowings under the FIARC commercial paper facility, (iii) reduce the outstanding borrowings under the FIRC credit facility, (iv) pay transaction fees related to the 2003-A Term Note issuance, and (v) fund an initial cash reserve account of 0.5%, or $574, of the initial receivables pledged. The Class A Term Notes bear interest at 2.58% and requires monthly principal reductions sufficient to reduce the balance of the Class A Term Notes to 96.1% of the outstanding balance of the underlying receivables pool. The final maturity of the 2003-A Term Notes is April 20, 2011. The Class B Note does not bear interest but requires principal reductions sufficient to reduce the balance of the Class B Note to 3.9% of the outstanding balance of the underlying receivables pool. A surety bond issued by MBIA Insurance Corporation provides credit enhancement for the Class A Notes. In the event that certain asset quality covenants are not met, the reserve account target level will increase to 6% of the then current principal balance of the receivables pool. As of April 30, 2006, and October 31, 2006, the outstanding principal balances on the 2003-A term notes were $37,715 and $26,561, respectively.

Facility	Agent	Expiration	Event if not Renewed
FIARC	Wachovia	January 15, 2005	Receivables pledged would be allowed to amortize; however, no new receivables would be allowed to transfer from the FIRC facility
FIRC	Wachovia	December 1, 2005	Convert to a term loan which would mature six months thereafter and amortize monthly in accordance with the borrowing base with the remaining balance due at maturity

On May 5, 2005, the Company, through its indirect, wholly-owned subsidiary, First Investors Auto Owner Trust 2005-A (“2005 Auto Trust”), completed the issuance of $69,000 of 3.57% Class A-1 asset-backed notes and $106,493 of 4.23% Class A-2 asset-backed notes (collectively “2005-A Term Notes”), for a total of $175,493 of asset backed notes. The initial pool of automobile receivables transferred to the 2005 Auto Trust totaled $150,921, which was previously owned by FIRC and FIARC, and secures the 2005-A Term Notes. In addition to the issuance of the Class A-1 and Class A-2 Notes, the 2005 Auto Trust also issued a $5,428 Class B Note that was retained by the Company and pledged to secure the Working Capital Facility as further described below. Proceeds from the issuance, which totaled $175,488, were used to (i) fund a $30,000 pre-funding account to be used for future loan originations, (ii) repay all outstanding borrowings under the FIARC commercial paper facility, (iii) reduce the outstanding borrowings under the FIRC credit facility, (iv) pay transaction fees related to the 2005-A Term Note issuance, and (v) fund an initial cash reserve account of 1%, or $1,509, of the initial receivables pledged. The Class A-1 and Class A-2 Term Notes bear interest at 3.57% and 4.23%, respectively, and require monthly principal reductions sufficient to reduce the balance of the Class A Term Notes to 95.75% of the outstanding balance of the underlying receivables pool. The Class A-1 notes were paid off during the fiscal year ended April 30, 2006. The final maturity of the Class A-2 Term Notes is July 16, 2012. The Class B Note does not bear interest but requires principal reductions sufficient to reduce the balance of the Class B Note to 4.25% of the outstanding balance of the underlying receivables pool. A surety bond issued by MBIA Insurance Corporation provides credit enhancement for the Class A Notes. In the event that certain asset quality covenants are not met, the reserve account target level will increase to 2% of the then current principal balance of the receivables pool. As of April 30, 2006 and October 31, 2006, the outstanding principal balances on the 2005-A Term notes were $106,162 and $79,359, respectively.

On January ~~December 4~~26, ~~2003~~2006, the ~~FIRC~~ ~~facility~~Company, ~~was~~through ~~renewed~~its indirect, ~~under~~wholly-owned ~~similar~~subsidiary, First ~~terms~~Investors ~~and~~Auto ~~conditions~~Owner Trust 2006-A (“2006 Auto Trust”), atcompleted the issuance of $~~50 million~~32,000 ~~commitment~~of ~~level~~4.57% ~~until~~Class ~~December~~A-1 2asset-backed notes, ~~2004~~$47,000 ~~and~~of ~~was~~4.87% Class ~~subsequently~~A-2 ~~extended until~~asset-backed ~~December~~notes, 1$74,000 ~~2005~~of 4. On93% ~~June~~Class ~~15,~~A-3 ~~2004~~asset-backed notes, ~~the~~and ~~FIRC~~$36,060 ~~facility~~of ~~was~~5.00% ~~extended~~Class toA-4 ~~$65~~asset-backed ~~million~~notes (collectively “2006-A Term Notes”), ~~and~~for ~~reverted~~a ~~back~~total toof $50189,060 ~~million on~~of ~~September~~asset ~~13,~~backed ~~2004~~notes. On ~~January~~The 29initial pool of automobile receivables transferred to the 2006 Auto Trust totaled $151,939, was ~~2004~~previously owned by FIRC and FIARC, ~~following~~and asecures ~~short~~the 2006-~~term~~A ~~extension~~Term Notes. In addition to the issuance of the ~~original~~Class ~~maturity~~A-1, Class ~~date~~A-2, Class A-3, and Class A-4 notes, the ~~FIARC~~2006 Auto Trust also issued a ~~facility~~$2,879 Class B Note that was ~~renewed,~~retained ~~under~~by ~~similar~~the ~~terms~~Company and ~~conditions,~~pledged to ~~December~~secure ~~2, 2004,~~the ~~and~~Working ~~was~~Capital ~~subsequently~~Facility ~~extended~~as ~~until~~further ~~January 15,~~described ~~2005~~below. AsProceeds ~~of April~~from 30the issuance, ~~2004~~which ~~and~~totaled $188,446, ~~October~~were ~~31,~~used ~~2004,~~to ~~there~~(i) ~~was~~fund a $040,000 ~~and~~pre-funding ~~$53.9~~account ~~million~~to be used for future loan originations, (ii) repay all outstanding borrowings under the FIARC ~~respectively~~commercial paper facility, (iii) reduce the outstanding. borrowings under the FIRC credit facility, (iv) pay transaction fees related to

Management presently intends to seek further extensions to these warehouse facilities prior to the current expiration dates. Management further considers its relationship with its lenders to be satisfactory and has no reason to believe that the FIRC and FIARC facilities will not be renewed at each of their respective expiration dates.13

the 2006-A Term Note issuance, and (v) fund an initial cash reserve account of 1% or $1,519 of the initial receivables pledged. The ~~following~~2006-A ~~table~~Term ~~contains~~Notes ~~pertinent~~require monthly ~~information~~principal onreductions sufficient to reduce the balance of the notes to 96.75% of the outstanding balance of the underlying receivables pool. The Class A-1 notes were paid off during the quarter ended July 31, 2006. The final maturity of the Class A-2, Class A-3, and Class A-4 Term Notes asis March 16, 2009, February 15, 2011, and April 15, 2013, respectively. The Class B Note does not bear interest but requires principal reductions sufficient to reduce the balance of the Class B Note to 3.25% of the outstanding balance of the underlying receivables pool. A surety bond issued by MBIA Insurance Corporation provides credit enhancement for the Class A Notes. In the event that certain asset quality covenants are not met, the reserve account target level will increase to the greater of 2% of the initial pool balance or 6% of the then current principal balance of the receivables pool. As of April 30, 2006 and October 31, ~~2004~~2006, the outstanding principal balances on the 2006-A Class A term notes were $172,708 and $139,413, respectively.

Term Notes	Issuance Date	Issuance Amount		Maturity Date	Outstanding		Interest Rate
2002-A	January 29, 2002	$	159,036,000	December 15, 2008	$	29,170,916	3.46	%
2003-A	November 11, 2003	$	139,661,000	April 20, 2011	$	92,535,291	2.58	%

Working Capital Facility. The facility is provided to a special-purpose, wholly-owned subsidiary of the Company, First Investors Residual Funding LP. This facility revolves monthly in accordance with a borrowing base consisting of the overcollateralization amount and reserve account for each of the Company’s other credit facilities. The facility is secured solely by the residual cash flow and cash reserve accounts related to the Company’s warehouse credit facilities and the existing and future term note facilities. The outstanding borrowings under the facility bear interest at one-month LIBOR plus 2.25%. In addition, a commitment fee of 1.5% is paid on the total amount of this facility. On October 26, 2004, the Working Capital Facility was extended until October 10, 2005, increasing the commitment amount from $9,000 to $13,500. The interest rate remained at LIBOR plus 2.25% and the commitment fee paid on the total available amount of the facility was maintained at 1.5%. On August 15, 2005, the Working Capital Facility was extended until February 15, 2006, increasing the commitment amount to $23,500, and was subsequently extended on February 15, 2006 until February 14, 2007. The interest rate remained at LIBOR plus 2.25% and the commitment fee paid on the total available amount of the facility was maintained at 1.5%. On November 7, 2006, the Company amended the facility to increase the commitment amount from $23,500 to $28,500. As of April 30, 2006 and October 31, 2006, there was $16,454 and $21,504, respectively, outstanding under this facility.

~~Credit~~The ~~enhancement~~Company onpresently intends to seek a renewal of the ~~two~~working ~~Term~~capital ~~Notes~~facility from its lender prior to maturity. Should the facility not be renewed, the outstanding balance of the receivables would be amortized in accordance with the borrowing base. Management considers its relationship with its lenders to be satisfactory and has no reason to believe that this credit facility will not be renewed. If the facility is not renewed, however, or asif ~~follows:~~material changes are made to its terms and conditions, it could have a material adverse effect on the Company.

Facility	Cash Reserve	Advance Rate	Insurance
2002-A	2% of Initial Pool Balance including Pre-Funding Amount of $25 million	99 initial advance decreasing to 97%	Surety Bond
2003-A	0.5% of Initial Pool Balance increasing to 2 of Initial Pool Balance including Pre-Funding Amount of $30 million	96.5 initial advance decreasing to 96.1%	Surety Bond

Related Party Loans. On December 3, 2001 the Company entered into an agreement with one of its shareholders who is a member of its Board of Directors under which the Company may, from time to time, borrow up to $2,500. On December 6, 2004, the original $2,500 shareholder loan was replaced with a $2,500 loan containing identical terms and conditions between the Company and a limited partnership that is affiliated with a current shareholder and member of the Board of Directors The proceeds of the borrowings have been utilized to fund certain private and open market purchases of the Company’s common stock pursuant to a Stock Repurchase Plan authorized by the Board of Directors and for general corporate purposes. Borrowings under the facility bear interest at a fixed rate of 10% per annum. The facility is unsecured and expressly subordinated to the Company’s senior credit facilities. The facility matures on December 3, 2008 but may be repaid at any time unless the Company is in default on one of its other credit facilities. There was $2,500 outstanding under this facility as of April 30, 2006 and October 31, 2006. For the three and six months ended October 31, 2005 and October 31, 2006, the Company recorded interest expense under these facilities of $63 and $126, respectively.

13Loan Covenants. The documentation governing these credit facilities and Term Notes contains numerous covenants relating to the Company’s business, the maintenance of credit enhancement insurance covering the receivables (if applicable), the observance of certain financial covenants, the avoidance of certain levels of delinquency experience and other matters. The breach of these covenants, if not cured within the time limits specified, could precipitate events of default that might result in the acceleration of the FIRC credit facility, the Term Notes and the working capital facility or the termination of the commercial paper facilities. The Company

Term Notes - On January 29, 2002, the Company, through its indirect, wholly-owned subsidiary First Investors Auto Owner Trust 2002-A (“2002 Auto Trust”) completed the issuance of $159,036,000 of 3.46% Class A asset-backed notes (“2002-A Term Notes”). The initial pool of automobile receivables transferred to the 2002 Auto Trust totaled $135,643,109, which was previously owned by FIRC and FIARC, secure the 2002-A Term Notes. In addition to the issuance of the Class A Notes, the 2002 Auto Trust also issued $4,819,000 in Class B Notes that were retained by the Company and pledged to secure the Working Capital Facility as further described below. Proceeds from the issuance, which totaled $159,033,471 were used to (i) fund a $25,000,000 pre-funding account to be used for future loan originations; (ii) repay all outstanding borrowings under the FIARC commercial paper facility, (iii) reduce the outstanding borrowings under the FIRC credit facility, (iv) pay transaction fees related to the 2002-A Term Note issuance, and (v) fund a cash reserve account of 2% or $2,712,862 of the initial receivables pledged which will serve as a portion of the credit enhancement for the transaction. The Class A Term Notes bear interest at 3.46% and requires monthly principal reductions sufficient to reduce the balance of the Class A Term Notes to 97% of the outstanding balance of the underlying receivables pool. The final maturity of the 2002-A Term Notes is December 15, 2008. The Class B Notes do not bear interest but require principal reductions sufficient to reduce the balance of the Class B Notes to 3% of the outstanding balance of the underlying receivables pool. A surety bond issued by MBIA Insurance Corporation provides credit enhancement for the Class A Notes. In the event that certain asset quality covenants are not met, the reserve account target level will increase to 6% of the then current principal balance of the receivables pool. As of April 30, 2004 and October 31, 2004, the outstanding principal balances on the 2002-A Term Notes were $44,335,659 and $29,170,916 respectively.14

On November 20, 2003, the Company, through its indirect, wholly-owned subsidiary First Investors Auto Owner Trust 2003-A (“2003 Auto Trust”) completed the issuance of $139,661,000 of 2.58% Class A asset-backed notes (“2003-A Term Notes”). The initial pool of automobile receivables transferred to the 2003 Auto Trust totaled $114,726,891, which was ~~previously~~not ~~owned by FIRC and FIARC, secure the 2003-A Term Notes. In addition to the issuance of the Class A Notes, the 2003 Auto Trust also issued $5,065,891~~ in ~~Class~~default Bwith ~~Notes that~~respect ~~were retained by the Company and pledged~~ to ~~secure~~any ~~the~~financial Working Capital Facility as further described below. Proceeds from the issuance, which totaled $139,656,629 were used to (i) fund a $30,000,000 pre-funding account to be used for future loan originations; (ii) repay all outstanding borrowings under the FIARC commercial paper facility, (iii) reduce the outstanding borrowings under the FIRC credit facility, (iv) pay transaction fees related to the 2003-A Term Note issuance, and (v) fund an initial cash reserve account of 0.5% or $573,635 of the initial receivables pledged. The Class A Term Notes bear interest at 2.58% and requires monthly principal reductions sufficient to reduce the balance of the Class A Term Notes to 96.1% of the outstanding balance of the underlying receivables pool. The final maturity of the 2003non-~~A Term Notes is April 20, 2011.~~ financial The Class B Notes do not bear interest but require principal reductions sufficient to reduce the balance of the Class B Notes to 3.9% of the outstanding balance of the underlying receivables pool. A surety bond issued by MBIA Insurance Corporation provides credit enhancement for the Class A Notes. In the event that certain asset quality covenants ~~are~~governing ~~not~~these ~~met,~~financing ~~the~~arrangements ~~reserve~~at ~~account target level will increase to 6% of the then current principal balance of the receivables pool. As of April 30, 2004 and~~ October 31, ~~2004, the outstanding principal balances on the 2003-A Term notes were $120,382,531 and $92,535,291 respectively~~2006.

~~Working Capital~~Interest ~~Facility~~Rate Management. ~~On December~~The ~~6, 2001, the~~ Company’s ~~entered~~warehouse ~~into~~credit anfacilities ~~agreement~~and ~~with~~working ~~Wachovia~~capital ~~Securities~~facilities tobear ~~refinance~~interest ~~the~~at ~~$11,175,000~~floating ~~outstanding~~interest ~~balance~~rates ofwhich ~~the~~are ~~working~~reset ~~capital~~on a short-term ~~loan~~basis while ~~previously~~the ~~provided~~secured byTerm ~~Bank~~Notes ofbear ~~America~~interest ~~and~~at ~~Wachovia~~a ~~and~~fixed ~~increase~~rate ~~the size~~ of ~~the~~ ~~facility to $13~~interest.5 ~~million.~~ The Company’s ~~renewal~~receivables ~~facility~~bear ~~was~~interest ~~provided~~at tofixed arates ~~special-purpose,~~that ~~wholly-owned~~do ~~subsidiary~~not ~~of the~~generally ~~Company,~~vary ~~First~~with ~~Investors~~a change ~~Residual~~in ~~Funding~~market LPinterest rates. ~~The~~ ~~facility~~Since ~~originally consisted of~~ a ~~$9 million~~primary ~~revolving~~contributor ~~tranche~~to ~~and~~the aCompany’s profitability ~~$4.5~~is ~~million~~its ~~term~~ability ~~loan~~to ~~tranche~~manage ~~which~~its ~~amortizes monthly. The~~net ~~term~~interest ~~loan~~spread, ~~tranche~~the ~~of this~~Company ~~working~~seeks ~~capital~~to ~~facility~~maximize ~~was~~the ~~evidenced~~net byinterest ~~the~~spread ~~Class~~while Bminimizing ~~Notes~~exposure ~~issued~~to changes in ~~conjunction with~~interest ~~the~~rates. ~~2002~~In ~~Auto~~connection ~~Trust~~with ~~financing.~~managing ~~The~~the ~~remaining~~net $9interest ~~million~~spread, of the ~~$13.5~~ ~~million~~Company ~~working~~may ~~capital~~periodically ~~facility~~enter ~~revolves~~into ~~monthly~~interest inrate ~~accordance~~swaps ~~with~~or ~~a borrowing~~caps ~~base~~to ~~consisting~~minimize of the effects ~~over-collateralization~~of ~~amount~~market ~~and~~interest ~~reserve accounts~~rate ~~for~~fluctuations ~~each~~on of the ~~Company’s~~net ~~other~~interest ~~credit facilities~~spread. ~~The~~ ~~facility~~To ~~is secured solely by~~ the ~~residual~~extent ~~cash~~that ~~flow~~the ~~and~~Company ~~cash~~has ~~reserve~~outstanding ~~accounts~~floating ~~related~~rate toborrowings ~~the~~or ~~Company’s~~has ~~warehouse~~elected ~~credit~~to ~~facilities,~~convert ~~the~~a ~~acquisition~~portion ~~facility~~of ~~and~~its ~~the~~borrowings ~~existing~~from ~~and~~fixed ~~future~~rates ~~term note~~to ~~facilities. During~~floating ~~2002~~rates, the ~~facility~~Company ~~was~~will ~~modified~~be toexposed ~~increase the interest rate from LIBOR plus 1.5%~~ to ~~LIBOR~~ ~~plus~~fluctuations ~~2.25%. The~~in ~~commitment~~short-term ~~fee paid~~interest ~~on the total~~rates.

14On July 18, 2005, as a requirement of the FIARC commercial paper facility, the Company entered into an interest rate cap transaction, with a strike rate of 6%. The aggregate initial notional amount of the cap was $18,804 which amortizes over six years. The Company paid $59 in premium to purchase this cap. The interest rate cap was not designated as a hedge, and accordingly, changes in the fair value of the interest rate caps were recorded as an unrealized loss and are reflected in net income. During the three and six months ended October 31, 2005, the Company recorded an unrealized gain of $23 and $20, respectively, that is included as a separate line under other income. This requirement was eliminated as part of the facility’s renewal.

~~available amount of the facility was maintained at 1.~~5%. In Earnings ~~addition,~~Per the monthly principal amortization under the term loan tranche was increased to the greater of $250,000 or the principal distributions made under the Class B Notes issued under the 2002 Auto Trust financing. On December 4, 2003, the Working Capital Facility was extended to December 2, 2004. Under the terms of the extension, the monthly amortization requirement was replaced with the requirement that outstandings under the facility could not exceed the lesser of a borrowing base or the $9 million facility limit. On October 26, 2004, the Working Capital Facility was extended until October 10, 2005, increasing the commitment amount to $13.5 million. The interest rate remained at LIBOR plus 2.25% and the commitment fee paid on the total available amount of the facility was maintained at 1.5%. At April 30, 2004 and October 31, 2004, there was $8,761,143 and $9,000,000 respectively, outstanding under this facility.Share

~~The~~Earnings ~~Company~~per ~~presently~~share ~~intends~~amounts toare ~~seek~~based aon ~~renewal~~the ofweighted ~~the~~average ~~working~~number ~~capital~~of ~~facility~~shares ~~from~~of ~~its~~common ~~lender~~stock ~~prior~~and topotential ~~maturity. Should~~dilutive ~~the~~common ~~facility~~shares ~~not be renewed, the~~ outstanding ~~balance~~during of the ~~receivables would be amortized in accordance with the borrowing base~~period. ~~Management~~ ~~considers~~The ~~its relationship with its lenders to be~~weighted ~~satisfactory~~average ~~and~~number ~~has~~of noshares ~~reason~~used to ~~believe~~compute ~~that~~basic ~~this~~and ~~credit~~diluted ~~facility~~earnings ~~will~~per ~~not be~~share ~~renewed. If~~for the ~~facility~~three isand ~~not~~six ~~renewed, however,~~months orended ifOctober ~~material~~31, ~~changes~~2005 ~~are made to its terms~~ and ~~conditions,~~2006 itare ~~could have~~as ~~a material adverse effect on the Company.~~follows:

Shareholder Loans. On December 3, 2001 the Company entered into an agreement with one of its shareholders who is a member of its Board of Directors under which the Company may, from time to time, borrow up to $2.5 million. The proceeds of the borrowings will be utilized to fund certain private and open market purchases of the Company’s common stock pursuant to a Stock Repurchase Plan authorized by the Board of Directors and for general corporate purposes. Borrowings under the facility bear interest at a fixed rate of 10% per annum. The facility is unsecured and expressly subordinated to the Company’s senior credit facilities. The facility matures on December 3, 2008 but may be repaid at any time unless the Company is in default on one of its other credit facilities. There were no amounts outstanding under this facility as of April 30, 2004 and October 31, 2004 respectively.

	For the Three Months Ended October 31,		For the Six Months Ended October 31,
	2005	2006	2005	2006
Weighted average shares:
Weighted average shares outstanding for basic earnings per share	4,438,504	4,474,194	4,425,099	4,465,715
Effect of dilutive stock options and warrants	183,113	332,831	132,504	331,592
Weighted average shares outstanding for diluted earnings per share	4,621,617	4,807,025	4,557,603	4,797,307

~~Loan Covenants. The documentation~~For ~~governing~~the ~~these~~three ~~credit facilities~~ and ~~Term~~six ~~Notes~~months ~~contains numerous~~ended ~~covenants~~October ~~relating to the Company’s business~~31, ~~the maintenance of credit~~2005 ~~enhancement~~and ~~insurance~~2006, ~~covering~~ the ~~receivables~~Company ~~(if~~had ~~applicable)~~43,500 ~~the~~and ~~observance of certain financial covenants~~257,500 ~~the~~stock ~~avoidance~~options ~~of certain levels of delinquency experience~~ and ~~other~~stock ~~matters. The breach of these covenants~~warrants, ~~if not cured~~ ~~within the time limits specified~~respectively, ~~could~~which ~~precipitate~~were ~~events~~not ofincluded ~~default that might result~~ in the ~~acceleration~~computation of ~~the~~diluted ~~FIRC~~income ~~credit facility, the Term Notes~~per ~~and~~share ~~the~~because ~~working capital facility or the termination of the commercial paper facilities. The Company was not in default with respect~~ to ~~any~~do ~~financial covenants~~so ~~governing~~would ~~these~~have ~~financing~~been ~~arrangements~~antidilutive atfor ~~October~~the ~~31,~~period ~~2004~~presented.

~~Interest Rate Management~~6. ~~The~~ Investment Company’s warehouse credit facilities and working capital facilities bear interest at floating interest rates which are reset on a short-term basis while the secured Term Notes bear interest at a fixed rate of interest. The Company’s receivables bear interest at fixed rates that do not generally vary with a change in ~~market interest~~First ~~rates.~~Auto ~~Since~~Receivables a primary contributor to the Company’s profitability is its ability to manage its net interest spread, the Company seeks to maximize the net interest spread while minimizing exposure to changes in interest rates. In connection with managing the net interest spread, the Company may periodically enter into interest rate swaps or caps to minimize the effects of market interest rate fluctuations on the net interest spread. To the extent that the Company has outstanding floating rate borrowings or has elected to convert a portion of its borrowings from fixed rates to floating rates, the Company will be exposed to fluctuations in short-term interest rates.Corporation

~~During the~~On ~~six~~December ~~months ended October 31~~24, ~~2004~~2002, asthe aCompany ~~requirement~~invested of$475 ~~the~~for ~~FIARC~~a ~~commercial~~40% ownership ~~paper~~interest ~~facility,~~in ~~the~~First ~~Company~~Auto ~~entered~~Receivables ~~into~~Corporation ~~four~~(“FARC”) ~~interest~~and ~~rate~~$713 ~~cap~~for ~~transactions,~~junior ~~with~~mezzanine ~~strike~~investments ~~rates~~ of 5%FARC. ~~The aggregate~~FARC ~~initial~~purchased ~~notional~~a ~~amounts~~$197,500 ofautomobile ~~the~~loan ~~caps~~portfolio ~~were~~from ~~$55~~UAFC-2 Corporation,~~834,429~~ ~~which~~a ~~amortize~~subsidiary of ~~over~~Union ~~six years. The~~Acceptance ~~Company~~Corporation, ~~paid~~with anproceeds ~~aggregate~~from of $~~676~~186,000 in ~~premiums~~senior ~~to purchase these caps.~~ bridge ~~The~~debt, ~~interest~~$8,900 ~~rate~~of ~~caps~~senior ~~were~~mezzanine ~~not designated as hedges~~debt, ~~and accordingly~~$1, ~~changes~~800 ~~in the fair value~~ of ~~the~~junior ~~interest~~mezzanine ~~rate~~debt ~~caps~~and $1,200 ~~are~~of ~~recorded~~equity. The asbridge ~~unrealized~~debt ~~gains~~interest orrate ~~losses~~is ~~and~~LIBOR ~~reflected~~plus ~~in net income. As of October 31~~1%, ~~2004,~~ the ~~combined~~senior ~~value~~mezzanine ~~of the~~ interest ~~rates~~rate ~~caps were~~is ~~$438,246~~22.5% and the ~~are~~junior ~~recorded~~mezzanine ~~under other assets as~~ interest rate ~~derivative positions. During~~is ~~the three and six months ended~~25%.

The Company accounts for its ownership investment in FARC using the equity method in accordance with APB Opinion 18. In addition to the equity and debt investments, the Company performs loan servicing and collection activities on the portfolio. The Company recognized servicing revenue of $139 and $83 for the three months ended, and $301 and $178 for the six months ended, October 31, ~~2004~~2005 and 2006, respectively, interest income of $27 and $3 for the three months ended, and $54 and $9 for the six ~~Company~~months ~~recorded~~ended, aOctober ~~combined~~31, ~~unrealized~~2005 ~~loss~~and 2006, respectively, and equity in earnings in FARC of $~~170~~111 and $319 for the three months ended,~~097~~ and $237 and $386 for the six months ended,~~754~~ ~~that~~October is31, 2005 and 2006, respectively. As of April 30, 2006 the equity investment in ~~included~~FARC of $873 and junior mezzanine debt of $80 and as aof ~~separate~~October ~~caption~~31, 2006, the equity investment in FARC of ~~other~~$1,083 ~~income~~and junior mezzanine debt of $4 are included in Deferred Financing Costs and Other Assets on the balance sheet.

~~During fiscal year 2004, as a requirement of the FIARC commercial paper facility, the Company entered into various interest rate cap transactions at cap rates ranging from 6.5% to~~ 7.~~5% with a notional balance that amortized over five to~~ New ~~six~~Accounting year periods. The interest rate caps were not designated as hedges and, accordingly, changes in the fair value of the interest rate caps were recorded as unrealized gains or losses and reflected in net income. On December 2, 2003, the Company terminated all interest rate caps outstanding in exchange for proceeds of $356,000. The caps were terminated following the repayment of all outstandings under the FIARC facility following the issuance of the 2003-A Term Notes. As a result, a realized loss of $14,000 was incurred relative to the aggregate market value of the interest rate caps.Pronouncements

~~On June~~In 1July 2006, ~~2001,~~ the Financial ~~Company~~Accounting ~~entered~~Standards ~~into~~Board ~~interest~~(“FASB”) ~~rate~~issued ~~swaps~~FASB ~~with an aggregate~~Interpretation ~~notional~~No. 48, ~~amount~~Accounting offor ~~$100~~Uncertainty ~~million~~in ~~and~~Income Taxes—an aInterpretation ~~maturity date~~ of ~~April~~FASB ~~15,~~Statement ~~2004~~No. ~~Under~~ 109 ~~the terms of these swaps~~(“FIN 48”), ~~the Company~~ ~~paid~~which aclarifies ~~floating~~the ~~rate~~accounting ~~based~~for onuncertainty ~~one~~in ~~month~~income ~~LIBOR~~tax ~~and~~positions. This ~~received~~Interpretation arequires ~~fixed~~that ~~rate~~the ~~of 5.025%. Management~~Company ~~elected~~recognize toin ~~enter~~its ~~into~~financial ~~these~~statements ~~swap~~the ~~agreements~~impact toof ~~offset~~a ~~the~~tax ~~uneconomical~~ position ofif ~~the~~that ~~existing~~position ~~pay~~is ~~fixed rate~~more ~~swap~~likely ~~created~~than not byof ~~rapidly~~being ~~declining~~overturned ~~market~~on ~~interest~~audit, ~~rates. In~~based ~~connection~~on ~~with~~ the ~~decision~~technical tomerits ~~enter~~of ~~into~~ the position. ~~$100~~The ~~million~~provisions ~~pay~~of ~~floating~~FIN 48 ~~rate~~are ~~swap,~~effective for the Company ~~elected~~on May 1, to2007, ~~change~~with the ~~designation~~ cumulative effect of the ~~$100~~change ~~million~~in ~~pay fixed rate swap from a cash flow hedge and~~accounting ~~not~~principle, ~~account~~if ~~for~~any, ~~the~~recorded ~~instrument~~ as aan ~~hedge~~adjustment ~~under~~to ~~SFAS~~opening Noretained earnings. The ~~133. As~~Company ais ~~result,~~currently evaluating the ~~change~~impact ~~in fair value~~ of ~~the~~adopting ~~swaps~~FIN 48 ison ~~reflected~~its infinancial ~~net~~position, ~~income~~cash ~~for~~flows, ~~periods~~and ~~subsequent~~results toof ~~May 31, 2001~~operations.

6In February 2006, the FASB issued SFAS No. ~~Earnings~~ 155, ~~Per~~Accounting ~~Share~~for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 and 140 (“SFAS 155”). This statement amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”), and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities and resolves issues addressed in SFAS 133 Implementation Issue No. D1, Application of Statement 133 to Beneficial Interest in Securitized Financial Assets. This Statement: (a) permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation; (b) clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS 133; (c) establishes a requirement to evaluate beneficial interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; (d) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and, (e) eliminates restrictions on a qualifying special-purpose entity’s ability to hold passive derivative financial instruments that pertain to beneficial interests that are or contain a derivative financial instrument. The standard also requires presentation within the financial statements that identifies those hybrid financial instruments for which the fair value election has been applied and information on the income statement impact of the changes in fair value of those instruments. The Company is required to apply SFAS 155 to all financial instruments acquired, issued or subject to a remeasurement event beginning May 1, 2007 although early adoption is permitted as of the beginning of an entity’s fiscal year. The provisions of SFAS 155 are not expected to have a financial statement impact at adoption; however, the standard could affect the future income recognition for securitized financial assets because there may be more embedded derivatives identified with changes in fair value recognized in net income.

~~Earnings~~In ~~per~~March ~~share amounts~~2006, ~~are~~the ~~based~~FASB onissued ~~the~~SFAS ~~weighted~~No. 156, ~~average~~“Accounting for ~~number~~Servicing of ~~shares~~Financial Assets – an amendment of ~~common~~FASB ~~stock~~Statement ~~and~~No. 140” ~~potential~~(“SFAS ~~dilutive~~156”). ~~common~~SFAS ~~shares~~156 ~~outstanding~~requires ~~during~~an ~~the~~entity ~~period~~to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in specific situations. Additionally, ~~The~~the ~~weighted~~servicing asset or servicing liability shall be initially ~~average~~measured ~~number~~at offair ~~shares~~value, ~~used~~if practicable. SFAS 156 permits an entity to ~~compute~~choose either ~~basic~~the ~~and~~amortization ~~diluted~~method ~~earnings~~or ~~per~~fair ~~share~~value measurement method for subsequent measurement of the servicing asset or servicing liability. SFAS 156 is effective for the ~~three~~fiscal ~~and~~year ~~six~~ending ~~months~~April 30, ~~ended~~2008. ~~October~~The 31Company is currently evaluating the impact of adopting SFAS 156 on its financial position, ~~2003~~cash flows, and ~~2004~~results of operations; however it is not expected to have a material impact on our consolidated financial position, ~~are~~results asof operations ~~follows:~~or cash flows.

	For the Three Months Ended October 31,		For the Six Months Ended October 31,
	2003	2004	2003	2004
Weighted average shares:
Weighted average shares outstanding for basic earnings per share	5,005,269	4,999,960	5,014,514	5,000,114
Effect of dilutive stock options and warrants	78,474	70,766	62,856	109,378
Weighted average shares outstanding for diluted earnings per share	5,083,743	5,070,726	5,077,370	5,109,492

~~For~~ In September 2006, the ~~three~~Securities ~~months~~and ~~ended~~Exchange Commission ~~October~~issued ~~31,~~Staff ~~2003~~Accounting ~~and~~Bulletin ~~2004~~No. 108, “Considering the ~~Company~~Effects ~~had~~of ~~259,500~~Prior ~~and 468,000,~~Year ~~respectively,~~Misstatements ofwhen ~~stock~~Quantifying ~~options~~Misstatements ~~and~~in Current ~~stock~~Year ~~warrants~~Financial ~~which~~Statements” ~~were~~(“SAB ~~not~~108”). SAB 108 provides ~~included~~interpretive inguidance on how the ~~computation~~effects of ~~diluted~~the ~~earnings~~carryover ~~per~~or ~~share. For~~reversal ~~the~~of ~~six~~prior year ~~months~~misstatements ~~ended~~should ~~October~~be ~~31,~~considered ~~2003~~in ~~and 2004,~~quantifying ~~the~~a ~~Company~~current ~~had~~year misstatement. ~~259,500~~Under ~~and~~this ~~280~~bulletin,~~750,~~ ~~respectively~~registrants ofshould ~~stock~~quantify ~~options~~errors ~~and~~using ~~stock~~both ~~warrants~~a ~~which~~balance ~~were~~sheet ~~not~~and ~~included~~an inincome ~~the~~statement ~~computation~~approach ofand ~~diluted~~evaluate ~~earnings~~whether ~~per~~either ~~share. These~~approach ~~were~~results ~~not~~in ~~included~~quantifying ~~in the~~a ~~computation~~misstatement ofthat, ~~earnings~~when ~~per~~all ~~share~~relevant quantitative ~~because~~and toqualitative dofactors soare ~~would~~considered, ~~have~~is ~~been~~material. SAB 108 is ~~antidilutive~~effective for the ~~period~~fiscal ~~presented~~year ending April 30, 2007. The Company is currently evaluating the impact of adopting SAB 108 on its financial position, cash flows, and results of operations.

78. ~~Investment~~Shareholders’ ~~in First Auto Receivables Corporation~~Equity

~~On December~~Preferred ~~24,~~Stock. The ~~2002, the~~ Company ~~invested~~has ~~$475~~authorized 1,~~061~~000,000 ~~for a 40% ownership interest~~shares inof ~~First~~preferred ~~Auto~~stock ~~Receivables~~with ~~Corporation~~a ~~(“FARC”) and~~ $~~712,591~~1.00 ~~for~~par ~~junior mezzanine~~value. ~~investments~~As of ~~FARC. FARC~~October ~~purchased~~31, ~~a $197.5 million automobile loan portfolio from UAFC-2 Corporation~~2006, ano ~~subsidiary of~~shares ~~Union~~have ~~Acceptance~~been issued.

16Employee Stock Option Plan. In June 1995, the Board of Directors adopted the Company’s 1995 Employee Stock Option Plan (the Plan). The Plan is administered by the Compensation Committee of the Board of Directors and provides that options may be granted to officers and other key employees for the purchase of up to 300,000 shares of common stock, subject to adjustment in the event of certain changes in capitalization. On September 10, 2002, the number of shares of common stock available for issuance was increased to 500,000. Options may be granted either as incentive stock options (which are intended to qualify for certain favorable tax treatment) or as non-qualified stock options. The Compensation Committee selects the persons to receive options and determines the exercise price, the duration, any conditions on exercise and other terms of the options. In the case of options intended to be incentive stock options, the exercise price may not be less than 100% of the fair market value per share of common stock on the date of grant. With respect to non-qualified stock options, the exercise price may be fixed as low as 50% of the fair market value per share at the time of grant. In no event may the duration of an option exceed 10 years and no option may be granted after the expiration of 10 years from the adoption of the Plan. As of April 30, 2006 and October 31, 2006, a total of 360,500 options had been issued, and 294,500 and 278,500, respectively, options remained outstanding. This plan expired on June 27, 2005.

~~Corporation~~On September 8, ~~with~~2005, the ~~proceeds~~shareholders ~~from~~approved ~~$186~~the ~~million~~Company’s ~~in senior~~2005 ~~bridge~~Employee ~~debt,~~Stock $8Option Plan (the 2005 Plan).9 The ~~million~~2005 Plan is administered by the Compensation Committee of ~~senior~~the ~~mezzanine~~Board ~~debt~~of Directors and provides that options may be granted to officers and other key employees for the purchase of up to 200,000 ~~$1.8~~shares ~~million~~of common stock, which was subsequently amended on September 6, 2006, increasing the number of available shares to ~~junior~~400,000, ~~mezzanine~~subject ~~debt~~to ~~and~~adjustment ~~$1.2~~in ~~million~~the event of ~~equity~~certain changes in capitalization. Options may be granted either as incentive stock options (which are intended to qualify for certain favorable tax treatment) or as non-qualified stock options. The Compensation ~~bridge~~Committee ~~debt~~selects ~~interest~~the ~~rate~~persons isto ~~LIBOR~~receive ~~plus~~options and determines 1%the exercise price, the ~~senior~~duration, ~~mezzanine~~any ~~interest~~conditions ~~rate~~on isexercise 22and other terms of the options.5 The exercise price may not be less than 100% of the fair market value per share of common stock on the date of grant, and in no event may the duration ~~junior~~of ~~mezzanine~~an option exceed 10 years and no option may be granted after the ~~interest~~expiration ~~rate~~of is10 ~~25%~~years from the adoption of the Plan. As of April 30, 2006 and October 31, 2006, a total of 102,500 and 197,500, respectively, options had been issued and remained outstanding, leaving a remaining 97,500 and 202,500, respectively, available for issuance.

The ~~Company~~ ~~accounts~~exercise ~~for~~price ~~its~~of the ~~ownership~~option ~~investment~~is inpayable ~~FARC using the equity method~~ in ~~accordance~~cash ~~with~~upon ~~APB Opinion 18~~exercise. ~~In addition~~ toAt the ~~equity~~discretion ~~and~~of ~~debt investments,~~ the ~~Company performs loan~~ ~~servicing~~Compensation ~~and~~Committee, ~~collection~~options ~~activities~~may onbe ~~the~~issued ~~portfolio. The~~in ~~Company~~tandem ~~recognized~~with ~~servicing~~stock ~~revenue~~appreciation ~~of $433,803~~rights ~~and~~entitling ~~$237,310 for~~ the ~~three months~~option ~~ended~~holder ~~and~~to ~~$821,563~~receive ~~and~~an ~~$500,492~~amount ~~for~~in ~~the~~cash ~~six~~or ~~months~~in ~~ended~~shares ~~October 31, 2003 and 2004, respectively, interest income~~ of ~~$106,285 and $27,472 for the~~ ~~three~~common ~~months ended and $106~~stock,~~285~~ ~~and~~or ~~$54,945~~a ~~for~~combination ~~the six months ended October 31~~thereof, ~~2003~~equal ~~and 2004, respectively, and equity~~ in ~~earnings~~value into ~~FARC~~any ofincrease ~~$296,614 and~~since ~~$176,522 for~~ the ~~three~~date ~~months~~of ~~ended~~grant ~~and~~in ~~$544,483 and $370,228 for~~ the ~~six months~~fair ~~ended~~market ~~October~~value ~~31, 2003 and 2004, respectively. As~~ of ~~April 30, 2004 and October 31, 2004,~~ the ~~equity~~common ~~investment~~stock incovered ~~FARC~~by ~~of $968,327 and junior mezzanine debt of $716,275 are included in Deferred Financing Costs and Other Assets on~~ the ~~balance sheet~~ option.

8Non-Employee Director Stock Option Plan - In September 2002, the Non-Employee Director Stock Option Plan was established to further align the interests of the Company’s directors with the interests of the shareholders, as well as attracting and retaining qualified directors. ~~New~~ This ~~Accounting~~plan ~~Pronouncements~~was subsequently amended in July 2006 to increase the number of options available for issuance to 900,000. The Board of Directors administers the

In December 2003, the American Institute of Certified Public Accountants issued Statement of Position (SOP) 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer. SOP 03-3 addresses the accounting for loans acquired through a transfer (including a business combination) that have differences between their expected cash flows and their contractual cash flows, due in part to credit quality. The SOP requires that the excess of the expected cash flows at acquisition to be collected over the acquirer’s initial investment be recognized on a level-yield basis over the loan’s life. Any future revised estimate of cash flows in excess of the original cash flows is recognized as a future yield adjustment. Future decreases in actual cash flows over the original expected cash flows are recognized as impairment and expensed immediately. Valuation allowances can not be created or “carried over” in the initial accounting for loans acquired that are within the scope of the SOP. SOP 03-3 is effective for loans acquired in fiscal years beginning after December 15, 2004. The Company does not anticipate SOP 03-3 will have a material effect on its financial statements.17

9plan and the options will not be qualified as incentive stock options. ~~Shareholders~~ Option types will be automatic and discretionary. Automatic grants of 28,000 shares for each non-employee director, or 140,000 shares total, were approved in July 2006. Subsequent automatic grants of an option to purchase 28,000 shares shall be made to each non-employee director on July 15th each year, beginning July 15, 2007. The plan also gives the Board of Directors discretionary authority to provide for additional option grants if the Company’s annual ~~Equity~~financial performance exceeds parameters established by the Board. No discretionary grants have been awarded. As of April 30, 2006 and October 31, 2006, a total of 490,000 and 630,000, respectively, options had been issued under the plan, leaving a remaining 10,000 and 270,000, respectively, available for issuance. In addition to the options granted above, there were an additional 20,000 options granted to a director in 1995, before the adoption of the Non-Employee Director Stock Option Plan. All options issued under this plan were issued with an exercise price equal to the fair market value of the underlying common stock on the date of the grant.

~~Preferred~~Effective May 1, 2006, the Company adopted the provisions of SFAS ~~Stock~~No. 123(R) for its share-based compensation plans. The Company ~~has~~previously ~~authorized~~accounted 1for these plans under the recognition and measurement principles of Accounting Principles Board Opinion No. 25,~~000~~ Accounting for Stock Issued to Employees,~~000~~ ~~shares~~(“APB of25”) ~~preferred~~and related ~~stock~~interpretations ~~with~~and adisclosure ~~$1.00~~requirements ~~par~~established ~~value~~by Statement of Financial Accounting Standards No. 123, AsAccounting offor ~~October~~Stock-based 31Compensation, (“SFAS ~~2004~~No. 123”), noas ~~shares~~amended ~~have~~by ~~been~~SFAS No. 148, Accounting ~~issued~~for Stock Based Compensation—Transition and Disclosure.

~~Employee Stock~~Under ~~Option~~APB ~~Plan.~~25, Inno ~~June~~compensation ~~1995,~~expense ~~the~~was ~~Board~~recorded ofin ~~Directors adopted~~earnings ~~the~~for the Company’s ~~1995~~stock-based ~~Employee Stock Option Plan (the Plan). The Plan is administered by the Compensation Committee of the Board of Directors and provides that~~ options ~~may be~~ granted tounder ~~officers~~the ~~and~~Company’s ~~other~~1995 ~~key~~Employee ~~employees for~~Stock ~~the~~Option ~~purchase of up to 300~~Plan,~~000~~ ~~shares~~2005 ofEmployee ~~common~~Stock ~~stock~~Option Plan, ~~subject~~and toNon-Employee ~~adjustment~~Director inStock ~~the~~Option ~~event~~Plan ~~of certain changes in capitalization. On September 10, 2002,~~ (the ~~number~~ ~~of shares of common stock available for issuance was increased to 500,000~~“Plans”). ~~Options~~The ~~may~~pro beforma ~~granted~~effects ~~either~~on asnet ~~incentive~~income ~~stock~~and ~~options~~income ~~(which are~~per ~~intended~~share ~~to qualify~~ for ~~certain favorable tax treatment) or as non-qualified stock options. The Compensation Committee selects~~ the ~~persons~~awards toissued ~~receive~~under ~~options and determines~~ the ~~exercise price,~~Plans ~~the~~were ~~duration,~~instead ~~any~~disclosed ~~conditions~~in ~~on exercise and other terms of the options.~~a Infootnote ~~the case of options intended~~ to ~~be incentive stock options,~~ the ~~exercise~~financial ~~price may not be less than 100% of the fair market value per share of common stock on the date of grant~~statements. ~~With~~Under ~~respect~~SFAS ~~to non-qualified stock options~~No. 123(R), ~~the exercise~~all ~~price~~share-based ~~may~~compensation beis ~~fixed~~measured ~~as low as 50% of the fair market value per share~~ at the ~~time of~~ grant. Indate, nobased ~~event~~on ~~may~~ the ~~duration~~fair ~~of an option exceed 10 years and no~~value ~~option may be granted after the expiration~~ of ~~10 years from~~ the ~~adoption of the Plan. As of April 30~~award, ~~2004~~ and ~~October~~is ~~31,~~recognized ~~2004,~~as aan ~~total~~expense ofin ~~282,500~~earnings ~~and 370,500,~~over ~~respectively,~~the ~~options had been issued and remained outstanding leaving~~requisite aservice ~~remaining 217,500 and 129,500, respectively, available under the plan~~period.

The ~~exercise~~Company ~~price~~adopted ofSFAS No. 123(R) using the ~~option~~modified isprospective ~~payable~~method. inUnder ~~cash~~this ~~upon~~transition ~~exercise. At~~method, ~~the discretion~~for ofall ~~the~~share-based ~~Compensation~~awards ~~Committee~~granted prior to May 1, ~~options~~2006 ~~may~~that beremain ~~issued~~outstanding inas ~~tandem~~of ~~with stock~~that ~~appreciation~~date, ~~rights~~compensation ~~entitling~~cost is recognized for the ~~option~~unvested ~~holder~~portion toover ~~receive~~the anremaining ~~amount~~requisite inservice ~~cash~~period, orusing inthe ~~shares~~grant-date offair ~~common~~value ~~stock,~~measured orunder athe ~~combination~~original ~~thereof,~~provisions of ~~equal~~SFAS inNo. 123 ~~value~~for ~~to any~~pro ~~increase~~forma ~~since~~disclosure ~~the~~purposes. ~~date~~Furthermore, compensation ofcosts ~~grant~~will inalso ~~the~~be ~~fair~~recognized ~~market~~for ~~value~~any ofawards ~~the~~issued, ~~common~~modified, ~~stock~~repurchased, ~~covered~~or bycanceled ~~the~~after ~~option~~May 1, 2006.

17The Company utilizes the Black-Scholes-Merton model for calculating the fair value pro forma disclosures under SFAS No. 123, which is an acceptable valuation approach under SFAS No. 123(R).

~~Non-Employee~~The ~~Director~~following ~~Stock~~table ~~Option~~summarizes ~~Plan - In September 2002,~~ the ~~Non~~option-~~Employee~~pricing ~~Stock~~model ~~Option~~assumptions used ~~Plan was established~~ to ~~further align~~compute the ~~interests~~weighted ofaverage ~~the~~fair ~~Company’s~~value ~~directors with the interests~~ of ~~the shareholders, as well as attracting and retaining qualified directors. The Board of Directors administers the plan and the options will not be qualified as incentive~~ stock options~~. A~~ ~~total~~granted ~~of 500,000 shares of common stock are~~during available for issuance. Option grants will be both automatic and discretionary. Automatic grants of 20,000 shares for each non-employee director, or 100,000 shares total, were approved in September 2002. Subsequent automatic grants of an option to purchase 20,000 shares shall be made to each non-employee director on July 15th each year, beginning July 15, 2003. The plan also gives the ~~Board~~periods ofbelow ~~Directors discretionary~~that ~~authority~~remain tooutstanding ~~provide~~as ~~for additional option grants if the Company’s annual financial performance exceeds parameters established by the Board. No discretionary grants have been awarded. As~~ of ~~April 30, 2004 and~~ October 31, 2004, a total of 270,000 and 390,000, respectively, options had been issued under the plan, leaving a remaining 230,000 and 110,000, respectively, available for issuance. In addition to the options granted above, there were an additional 20,000 options granted to a director in 1995, before the adoption of the Non-Employee Stock Option Plan.2006:

10. Subsequent Events

	For the six months ended October 31,
	2005			2006
Dividend yield	—			—
Expected volatility	19.34		%	26.44		%
Risk-free interest rate	3.93		%	5.02		%
Estimated life (in years)	4			6
Weighted average fair-value of options granted	$	1.13		$	3.06

On November 16, 2004, the Company received a letter from NASDAQ, indicating that the NASDAQ is reviewing the Company’s eligibility for listing on The NASDAQ National Market as a consequence of failure to meet the minimum 400 round lot shareholder requirement of Marketplace Rule 4450(a)(4). In the letter, NASDAQ states that the Company had until December 1, 2004, to provide an acceptable plan to regain compliance, or the staff will initiate delisting of the Company’s common stock. As a result of this action, and after considering the costs and benefits associated with the continued listing on The NASDAQ National Market, the Company has elected to delist itself from The NASDAQ National Market. This decision in no way affects the Company’s status as a public company. The Company anticipates that its shares will continue to be traded in the over-the-counter bulletin board market. The Company will continue to file Forms 10-Q, 10-K, and 8-K with the Securities and Exchange Commission and mail an annual report to stockholders following each fiscal year end.18

18The following table summarizes the option activity under the Plans as of October 31, 2006, and the options exercisable at the end of the reported period:

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding options, beginning of period	867		$	4.72
Granted	237		$	8.05
Forfeited and Expired	(15	)	$	8.97
Exercised	(23	)	$	4.56
Outstanding options, end of period	1,066		$	5.40	7.4	$	1,967

Exercisable at end of period	572		$	4.61	6.1	$	1,407
Vested and expected to vest at end of period	1,023		$	5.37	7.3	$	1,913

~~Critical~~The total intrinsic value of options exercised ~~Accounting~~during ~~Policies~~the six months ended October 31, 2006 and 2005 was $79 and $0. The total grant date fair value of stock options that became fully vested for the six months ended October 31, 2006 was approximately $752.

~~Financial~~Cash ~~Reporting~~received ~~Release No.~~from ~~60,~~option ~~which~~exercises ~~was~~under ~~issued~~all byshare based ~~the~~payment ~~Securities~~arrangements ~~and~~for ~~Exchange~~the ~~Commission~~six ~~(“SEC”), requires~~months ~~all~~ended ~~registrants~~October to31, ~~discuss~~2006 ~~critical~~and ~~accounting policies or methods~~2005 ~~used~~was in$107 ~~the~~and ~~preparation~~$0, ~~of financial statements~~respectively. ~~Note~~The estimated 2tax tobenefit ~~the~~expected ~~consolidated~~to ~~financial statements~~be ~~includes~~realized afor ~~summary of~~ the ~~significant~~six ~~accounting~~months ~~policies~~ended ~~and methods~~October ~~used~~31, in2006 ~~the~~and ~~preparation~~2005 ofis ~~the~~$23 ~~Company’s~~and ~~consolidated~~$0, ~~financial statements~~respectively.

~~The~~A ~~preparation~~summary of ~~financial statements includes~~ the ~~use~~status of ~~estimates~~the ~~and~~Company’s ~~assumptions that affect the~~nonvested ~~reported~~shares ~~amounts~~as of ~~assets~~October ~~and~~31, ~~liabilities~~2006, and ~~the~~changes ~~reported amounts of net revenues and expenses~~ during the ~~reporting~~six ~~periods.~~months ~~The~~ended ~~following is a review~~October of31, ~~the more significant assumptions and estimates~~2006, asis ~~well~~presented ~~as the accounting policies and methods used in the preparation of the consolidated financial statements.~~below:

Receivables Held for Investment. The Company accrues interest income monthly using the effective interest method. Interest income also includes additional amounts received upon early payoffs of certain receivables attributable to the difference between the principal balance of the receivables calculated using the Rule of 78’s method and the principal balance of the receivables calculated using the effective interest method. When a receivable becomes 90 days past due, the income accrual is suspended until the payments become current. When a loan is charged off or the collateral is repossessed, the remaining income accrual is written off.

Nonvested Shares	Shares		Weighted Average Grant Date Fair Value
Nonvested at April 30, 2006	428		$	1.78
Granted	237		3.06
Vested	(167	)	1.22
Forfeited	(4	)	5.59
Nonvested at October 31, 2006	494		$	1.96

~~Receivables Acquired~~As ~~for Investment. The Company estimates the amount and timing~~ of ~~undiscounted~~October ~~expected~~31, ~~future principal and interest cash flows. For certain purchased loans~~2006, ~~the~~there ~~amount~~was ~~paid for~~$859 aof ~~loan reflects the Company’s determination that it is probable the Company~~total ~~will~~unrecognized becompensation ~~unable~~cost torelated ~~collect all amounts due according~~ to ~~the~~nonvested ~~loan’s~~share-based ~~contractual~~compensation ~~terms.~~arrangements ~~Accordingly,~~granted atunder ~~acquisition,~~ the ~~Company recognizes the excess of the loan’s~~Plans. ~~scheduled~~The ~~contractual~~cost ~~principal~~is ~~and contractual interest payments over its~~ expected ~~cash~~to ~~flows as an amount that should not~~ be ~~accreted.~~recognized ~~The remaining amount, representing the excess of the loan’s expected cash flows~~ over ~~the amount~~a ~~paid,~~weighted isaverage ~~accreted~~period ~~into interest income over the remaining life~~ of ~~the~~ ~~loan~~3. As2 ~~a result of the amortization of the outstanding principal balance of the receivables portfolio, the majority of the remaining cash flows projected constitute default collections from obligors~~years. ~~Given~~The ~~the~~total ~~nature~~fair ofvalue ~~the remaining cash flows~~ of ~~individual loans, the Company determined that the~~ ~~timing~~shares ofvested ~~collections~~during ~~on Receivables Acquired for Investment was much more unpredictable than contractual cash flows from non-defaulted receivables. Therefore, under~~ the ~~guidance~~six ~~provided~~months ~~by Practice~~ended ~~Bulletin~~October 631, ~~Amortization~~2006 ~~of Discounts~~and on2005 ~~Certain~~was ~~Acquired Loans~~$1, ~~Receivables Acquired for~~151 ~~Investment~~and ~~will be accounted for under the cost-recovery method beginning September 30~~$991, ~~2003~~respectively. Under the cost recovery method, cash proceeds from collections are applied to first reduce the Company’s basis in the assets. Cash collected in excess of this cost basis is recognized as income when received.

~~Other Income~~SFAS No. ~~Other~~ 123(R) ~~Income~~also ~~consists~~requires ofthe Company to ~~income~~estimate ~~received~~forfeitures ~~from~~in ~~servicing~~calculating ~~activities~~the expense relating to stock-based compensation as opposed to accounting for forfeitures as they occur, ~~late~~as ~~fees~~allowed by ~~and~~SFAS ~~other~~No. 123. ~~loan-related~~The Company adjusted for this effect with respect to ~~fees~~unvested options as of May 1, ~~income~~2006 ~~from~~in ~~investments~~the stock-based compensation expense recognized, ~~reinvestment~~which ~~revenue~~was recorded within general and ~~unrealized~~administrative ~~loss~~expense on the ~~interest~~Company’s ~~rate~~consolidated ~~derivative~~statement ~~positions~~of earnings. ~~Servicing~~ ~~revenue~~This isadjustment ~~accrued~~was not recorded as ~~services~~a ~~are~~cumulative ~~rendered.~~effect ~~Late~~adjustment ~~fees~~because ~~and other~~no ~~loan-related~~compensation ~~fees~~cost ~~are~~was recognized prior ~~when~~to ~~received~~the adoption SFAS No. ~~Income~~ 123(R). ~~from~~In ~~investments~~addition, ~~and~~SFAS ~~reinvestment~~No. 123(R) ~~revenue~~requires ~~are~~the ~~accrued~~Company ~~based~~to onreflect the ~~respective~~tax ~~interest~~savings ~~rate~~resulting from tax deductions in excess of ~~such~~expense ~~investment~~reflected in its financial statements as a financing cash ~~and~~flow ~~unrealized~~rather ~~loss~~than onas ~~interest~~an ~~rate~~operating ~~derivatives~~cash isflow ~~recognized~~as ~~when~~in ~~incurred~~prior periods.

Allowance for Credit Losses. The Company calculates the allowance for credit losses in accordance with SFAS No. 5, Accounting for Contingencies. SFAS No. 114, Accounting for Creditors for Impairment of a Loan does not apply to loans currently held by the Company because they are composed of a large group of smaller balance homogenous loans that are evaluated collectively for impairment.19

~~The~~Total ~~Company~~compensation ~~initiates efforts~~costs related to ~~make~~stock-based compensation ~~customer~~that ~~contact~~have ~~when~~been ~~the~~charged ~~customer~~against isincome ~~one~~during ~~day~~the ~~past~~three ~~due and~~months ~~become~~ended ~~more~~October 31, ~~aggressive~~2006 aswere ~~the~~$79, ~~loan~~net ~~becomes~~of ~~further~~income ~~past~~tax ~~due~~benefits of $24. ~~Management~~Total ~~reviews~~compensation ~~past~~costs ~~due~~related ~~loans and~~to ~~considers~~stock-based ~~various~~compensation ~~factors~~that ~~including~~have ~~payment~~been ~~history,~~charged ~~job~~against ~~status~~income ~~and~~during ~~any~~the ~~events~~six ~~that~~months ~~may~~ended ~~have~~October 31, ~~occurred~~2006 ~~that~~were ~~prevent~~$110, ~~the~~net ~~customer~~of ~~from~~income ~~making~~tax abenefits ~~payment~~of $32. ~~Through~~Included ~~the~~in ~~evaluation,~~this iftotal it is ~~determined~~$79 and ~~that~~$110 ~~the~~for ~~loan is uncollectible,~~ the ~~collateral~~three isand ~~typically~~six ~~repossessed. Generally~~months ~~this~~ended ~~occurs~~October ~~when~~31, a2006, ~~loan is 90 to 120 days past due. Upon repossession~~respectively, ~~the~~resulting ~~uncollectible~~from ~~portion of~~ the ~~loan~~adoption ~~and 100%~~ of ~~accrued~~SFAS ~~interest is written off~~No. ~~The~~ 123(R), ~~fair~~which ~~value~~would ~~of the collateral is~~have ~~recorded~~previously asbeen anpresented ~~Assets~~in ~~Held~~a ~~for~~pro ~~Sale. Fair~~forma ~~value~~footnote isdisclosure, ~~determined~~as ~~by estimating the proceeds of the collateral,~~discussed ~~which~~above.

19The following table illustrates the effect on net earnings and earnings per share as if the Company had applied the fair-value recognition provisions of SFAS No. 123(R) to all of its share-based compensation awards for periods prior to the adoption of SFAS No. 123(R), and the actual effect on net earnings and earnings per share for the period subsequent to the adoption of SFAS No. 123(R):

primarily are composed of auction proceeds on the sale of the automobile less selling related expenses. After collection of all proceeds, the Company records an adjustment, positive or negative, based on the difference between the fair value estimate and the true proceeds received. In the event the collateral is unable to be located, the Company will write off the entire balance after exhausting all collection efforts.

	For the Three Months Ended October 31,						For the Six Months Ended October 31,
	2005			2006			2005			2006
Net Earnings, as reported	$	765		$	1,295		$	1,690		$	2,031
Add: Total stock option plan compensation expense included in the determination of reported net earnings, net of taxes	—			79			—			110

Deduct: Total stock option plan compensation expense determined under fair value based method for awards granted, modified or settled, net of taxes	(57		)	(79		)	(103		)	(110		)
Pro Forma Net Earnings	$	708		$	1,295		$	1,587		$	2,031

Basic Net Earnings per Common Share, as reported	$	0.17		$	0.29		$	0.38		$	0.45
Diluted Net Earnings per Common Share, as reported	$	0.17		$	0.27		$	0.37		$	0.42
Basic Net Earnings per Common Share, pro forma	$	0.16		$	0.29		$	0.35		$	0.45
Diluted Net Earnings per Common Share, pro forma	$	0.15		$	0.27		$	0.34		$	0.42

~~The Company applies a systematic methodology in order to determine the amount of the allowance for credit losses~~9. ~~The~~ Income specific methodology utilized is a six-month migration analysis whereby the Company compares the aging status of each loan from six months prior to the aging loan status as of the reporting date. These factors are then applied to the aging status of each loan at the reporting date in order to calculate the number of loans that are expected to migrate to impaired status. The estimated number of impairments is then multiplied by the estimated loss per loan, which is based on historical information. The computed reserve is then compared to the amount recorded for adequacy. The Company compares the six-month result to prior six-month periods to compare trends and evaluate any other internal or external factors that may affect collectibility. The allowance for credit losses is based on estimates and qualitative evaluations and ultimate losses will vary from current estimates. These estimates are reviewed periodically and as adjustments, either positive or negative, become necessary, are reported in earnings in the period they become known.Taxes

~~Stock-Based Compensation.~~ The Company has anrecorded ~~employee~~income ~~stock~~tax ~~option~~expense ~~plan~~as ~~and~~ a ~~non employee director stock option~~percentage ~~plan. The Company has adopted the disclosure provisions~~ of ~~SFAS~~income ~~No.~~before ~~148,~~taxes ~~Accounting~~ for Stock-Based Compensation—Transition and Disclosure, an amendment of FASB Statement No. 123. This pronouncement requires prominent disclosures in both annual and interim financial statements regarding the ~~method~~three ~~of accounting for stock-based employee compensation~~ and ~~the~~six ~~effect of~~months the method used on reported results. The Company accounts for stock compensation awards under the intrinsic value method of Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees which requires compensation cost to be recognized based on the excess, if any, between the quoted market price of the stock at the date of grant and the amount an employee must pay to acquire the stock. All options awarded under the Company’s plan are granted with an exercise price equal to or greater than the fair market value on the date of the grant.ended:

Managed Receivables

	For the Three Months Ended October 31,				For the Six Months Ended October 31,
	2005		2006		2005		2006
Income tax - statutory rate	34.0	%	35.0	%	34.0	%	35.0	%
State income tax, net of federal benefit	2.0	%	3.7	%	2.0	%	3.9	%
Reversal of uncertain tax position	—		(65.0	)%	—		(29.7	)%
Non-deductible expenses	0.5	%	0.6	%	0.5	%	0.6	%
Effective income tax rate	36.5	%	(25.7	)%	36.5	%	9.8	%

~~The Company’s managed receivables are (dollars in thousands):~~20

	As of or for the Periods Ended October 31,
	2003		2004
Receivables Held for Investment:
Number	17,866		16,397
Principal balance	$	222,978	$	218,023
Average principal balance of receivables outstanding during the six-month period	$	226,395	$	209,670
Average principal balance of receivables outstanding during the three-month period	$	225,452	$	211,909
Receivables Acquired for Investment:
Number	116		654
Principal balance	$	212	$	819
Other Servicing:
Number	21,923		16,223
Principal balance	$	347,456	$	236,399
Total Managed Receivables Portfolio:
Number	39,905		33,274
Principal balance	$	570,647	$	455,241
Average principal balance of receivables outstanding during the six-month period	$	618,420	$	469,366
Average principal balance of receivables outstanding during the three-month period	$	597,541	$	459,285

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~The following~~Critical ~~table~~Accounting sets forth information with regard to the Company’s net interest spread, which represents the difference between the effective yield on Receivables Held for Investment and the Company’s average cost of debt utilized to fund these receivables, and its net interest margin (averages based on month-end balances):Policies

	Three Months Ended October 31,				Six Months Ended October 31,
	2003		2004		2003		2004
Receivables Held for Investment:
Effective yield on Receivables Held for Investment(1)	14.0	%	13.2	%	14.1	%	13.3	%
Average cost of debt(2)	3.3	%	3.5	%	3.4	%	3.5	%
Net interest spread(3)	10.7	%	9.7	%	10.7	%	9.8	%
Net interest margin(4)	10.7	%	9.8	%	10.7	%	9.9	%

Financial Reporting Release No. 60, which was issued by the Securities and Exchange Commission (“SEC”), requires all registrants to discuss critical accounting policies or methods used in the preparation of financial statements. Note 2 to the consolidated condensed financial statements includes a summary of the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements.

~~(1) Represents~~The ~~interest~~preparation ~~income~~of asfinancial statements includes the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of net revenues and expenses during the reporting periods. The following is a ~~percentage~~review of ~~average~~the ~~Receivables~~more ~~Held~~significant ~~for~~assumptions ~~Investment~~and estimates, as ~~outstanding~~well as the accounting policies and methods used in the preparation of the consolidated financial statements.

~~(2) Represents~~Receivables Held for Investment. Receivables Held for Investment represents the aggregate outstanding balance of installment sales contracts and promissory notes originated by the Company through its automobile dealer relationships or directly with consumers, which includes the amortization of premiums or discounts associated with the loan originations. The Company accrues interest ~~expense~~income asmonthly using the effective interest method. When a ~~percentage~~receivable ofbecomes ~~average~~90 ~~debt~~days ~~outstanding~~past due, the income accrual is suspended until the payments become current. When a loan is charged off or the collateral is repossessed, the remaining income accrual is written off.

~~(3) Represents~~Other Income. ~~effective~~Other ~~yield~~Income consists of income received from servicing activities, late fees and other loan-related fees, income from investments, reinvestment revenue, GAP insurance and extended service contracts, and unrealized loss on interest ~~Receivables~~rate ~~Held~~derivative ~~for~~positions. Servicing ~~Investment~~revenue ~~less~~is ~~average~~accrued ~~cost~~as services are rendered. Late fees and other loan-related fees are recognized when received. Income from investments and reinvestment revenue are accrued based on the respective interest rate of ~~debt~~such investment. Revenue from the sale of GAP insurance and extended service contracts is recognized when sold as the Company has no further obligation after the sale. Unrealized loss on interest rate derivatives is recognized when incurred.

~~(4) Represents~~Advertising ~~net~~Costs. The Company ~~interest~~expenses ~~income~~advertising costs as ~~a percentage of average Receivables Held for Investment outstanding~~incurred.

~~Net interest~~Allowance ~~income~~for isCredit ~~the~~Losses. The Company ~~difference~~calculates ~~between~~the ~~interest~~allowance ~~earned~~for ~~from~~credit ~~the~~losses ~~receivables portfolio~~in ~~and~~accordance ~~interest~~with ~~expense~~SFAS ~~incurred~~No. 5, onAccounting ~~the~~for ~~credit~~Contingencies. SFAS ~~facilities~~No. ~~used~~114, toAccounting ~~finance~~by ~~the~~Creditors ~~receivables.~~for ~~Net~~Impairment ~~interest~~of ~~income~~a ~~was~~Loan ~~$5.2~~does ~~million~~not ~~and~~apply ~~$10.3~~to ~~million~~loans ~~for~~currently ~~the~~held ~~three~~by ~~and~~the ~~six~~Company ~~months~~because ~~ended~~they ~~October~~comprise ~~31,~~a ~~2004,~~large ~~respectively,~~group aof ~~decrease~~smaller ofbalance ~~14.3%~~homogenous ~~and~~loans ~~14.4%~~that ~~when~~are ~~compared~~evaluated tocollectively ~~amounts reported~~ for ~~the three and six months ended October 31, 2003, respectively~~impairment.

The ~~amount~~Company ofinitiates ~~net~~efforts ~~interest~~to make customer ~~income~~contact as early as when the customer is one day past due and become more aggressive as the ~~result~~loan ofbecomes further past due. Management reviews past due loans and considers various factors including payment history, job status and any events that may have occurred that prevent the ~~relationship~~customer ~~between~~from making a payment. Through the ~~average~~evaluation, ~~principal~~if ~~amount~~it is determined that the loan is uncollectible, the collateral is typically repossessed. Generally this occurs at 60 to 90 days after the loan becomes past due. Upon repossession, the uncollectible portion of ~~receivables~~the ~~held~~loan and ~~average~~100% ~~rate~~of ~~earned~~accrued interest ~~thereon~~is ~~and~~written off. The fair value of the ~~average~~collateral ~~principal~~is recorded as Assets Held for Sale. Fair value is determined by estimating the ~~amount~~proceeds from the sale of ~~debt~~the ~~incurred~~collateral, towhich ~~finance~~primarily ~~such~~are ~~receivables~~comprised ~~and~~of auction proceeds on the ~~average~~sale ~~rates~~of ~~paid~~the automobile less selling related ~~thereon~~expenses. After ~~Changes~~collection inof all proceeds, the ~~principal~~Company ~~amount~~records ~~and~~an ~~rate~~adjustment, ~~components~~positive ~~associated~~or ~~with~~negative, based on the difference between the ~~receivables~~fair value estimate and ~~debt~~the ~~can~~proceeds received. In the event the collateral cannot be ~~segregated~~located or if the customer refuses to ~~analyze~~pay and is not subject to bankruptcy court protection, the ~~periodic~~Company ~~changes~~will inwrite off the entire balance of the loan once it ~~net~~reaches ~~interest~~180 ~~income~~days past due. If ~~The~~the customer ~~following~~is ~~table~~subject ~~analyzes~~to bankruptcy court protection, the ~~changes~~loan ~~attributable~~generally toremains in bankruptcy status as long as payments are being received from the trustee. If ~~principal~~a ~~amount~~payment ~~and~~is ~~rate~~missed, ~~components~~the Company seeks to repossess the collateral with approval of ~~net~~the ~~interest~~court. If ~~income~~the ~~(dollars~~customer inis dismissed from bankruptcy, ~~thousands):~~the Company resumes collection efforts.

	Three Months Ended October 31, 2003 to 2004										Six Months Ended October 31, 2003 to 2004
	Increase (Decrease) Due to Change in										Increase (Decrease) Due to Change in
	Average Principal Amount				Average Rate			Total Net			Average Principal Amount			Average Rate			Total Net
Receivables Held for Investment:
Interest income	$		(476	)	$	(447	)	$	(923	)	$	(1,182	)	$	(859	)	$	(2,041	)
Interest expense	$		(150	)	$	89		$	(61	)	$	(350	)	$	48		$	(302	)
Net interest income	$	(326		)	$	(536	)	$	(862	)	$	(832	)	$	(907	)	$	(1,739	)

The Company applies a systematic methodology in order to determine the amount of the allowance for credit losses. The specific methodology is a six-month migration analysis whereby the Company compares the aging

~~Results~~status of ~~Operations~~each loan on a date which is six months prior to the reporting date, to the aging loan status as of the reporting date. These factors are then applied to the aging status of each loan at the reporting date in order to calculate the number of loans that are expected to migrate to impaired status. The estimated number of impairments is then multiplied by the estimated loss per loan, which is based on historical information. During the quarter ended April 30, 2005, the Company elected to increase its allowance for loan losses against loans that were greater than 120 days past due and loans in which the collateral had been assigned for repossession but had not yet been repossessed as of the reporting date. The Company believes that this increase is warranted in light of the change in federal bankruptcy laws enacted during the period and the recognition that the migration trends of severely delinquent loans and loans subject to bankruptcy are expected to become more protracted. Based on this, the Company has assigned a specific allowance against these loans equal to the outstanding balance of loans in these categories less the estimated recovery amount based on current data regarding liquidation of the collateral and collection of any additional payments. The Company utilized its most recent recovery rates in order to assess fair value of these loans. For loans that are not classified into these categories, the historical migration pattern is utilized in order to establish the estimated impairment. Despite the increase in allowance associated with the higher delinquency loans and bankrupt accounts, the total allowance for loan losses decreased during the period as a percentage of Receivables Held for Investment due to improving overall delinquency trends and lower repossession and loss rates. The allowance for credit losses is based on estimates and qualitative evaluations. Ultimate losses may vary from current estimates. These estimates are reviewed periodically and as adjustments, either positive or negative, become necessary, are reported in earnings in the period they become known.

~~Three~~Stock-Based ~~Months~~Compensation. The ~~and~~Company ~~Six~~expenses ~~Months~~stock-based ~~Ended~~compensation expense ~~October~~in ~~31,~~accordance ~~2004~~with ~~and~~SFAS ~~2003~~No. 123(~~dollars~~R), inShare-Based Payment - a ~~thousands~~revision to SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS No. 123(R)”). Prior to SFAS 123R adoption, we accounted for share-based payments under APB 25 and accordingly, accounted for our stock-based compensation using the intrinsic value method.

~~Key Factors. The critical factors affecting the Company’s~~Managed ~~profitability during any period are (i) loan origination volume and the corresponding growth in~~ Receivables Held For Investment; (2) the level of net interest spread, which is defined as the difference between the effective yield on Receivables Held for Investment and the cost of funds under the Company’s credit facilities and securitizations utilized to finance these receivables; (3) the level of provision for credit losses; (4) the amount of income derived from other activities; and (5) the ability of the Company to control operating expenses relative to the total amount of the managed portfolio.

Executive Summary. Net income for the three and six months ended October 31, 2004 was $216 and $303 compared to $188 and $408 for the three and six months ended October 31, 2003. Basic and diluted earnings per common share were $0.04 and $0.06 for the three and six months ended October 31, 2004 compared to $0.04 and $0.08 for the three and six months ended October 31, 2003. The ~~increase in net income for the three~~ ~~months~~Company’s ~~ended~~managed ~~October~~receivables 31, 2004 compared to October 31, 2003 is due to (i) a lower provision for loan losses and (ii) an increase in other income from product sales and loan related fee collections, partially offset by several factors including (i) a decline in effective yields, (ii) a decline in average Receivables Held for Investment, (iii) a decline in loan servicing income and (iv) an increase in the unrealized loss on interest rate derivatives. The decline in net income for the six months ended October 31, 2004 compared to October 31, 2003 is due to several factors including (i) a decline in effective yields, (ii) a decline in average Receivables Held for Investment, (iii) a decline in loan servicing income and (iv) an increase in the unrealized loss on interest rate derivatives, partially offset by (i) a lower provision for loan losses and (ii) an increase in other income from product sales and loan related fee collections.are:

Interest Income. Interest income for the three and six months ended October 31, 2004 decreased to $7,001 and $13,953 compared to $7,924 and $15,994 for the three and six months ended October 31, 2003.

	As of or for the Periods
	Ended October 31,
	2005		2006
Receivables Held for Investment:
Number	20,826		25,879
Principal balance	$	324,225	$	428,416
Average principal balance of receivables outstanding during the six-month period	$	288,749	$	402,098
Average principal balance of receivables outstanding during the three-month period	$	310,276	$	417,196
Other Servicing:
Number	11,753		8,127
Principal balance	$	143,095	$	73,499
Total Managed Receivables Portfolio:
Number	32,579		34,006
Principal balance	$	467,320	$	501,915
Average principal balance of receivables outstanding during the six-month period	$	456,789	$	490,954
Average principal balance of receivables outstanding during the three-month period	$	465,260	$	497,972

The level of interest income, a primary driver of financial results, is impacted by the average outstanding balance of the portfolio of Receivables Held for Investment, the weighted average interest rate on receivables originated by the Company, the mix of direct and indirect receivables within Receivables Held for Investment, and the level of prepayments and charge-offs. Interest income on Receivables Held for Investment decreased 12% and 13% for the three and six months ended October 31, 2004 compared to the three and six months ended October 31, 2003. The reduction in yield for the three and six months ended October 31, 2004 is due to (i) a decrease in weighted average interest rate of 84 basis points for the three months ended and 82 basis points for the six months ended October 31, 2004 compared to the three and six months ended October 31, 2003. This reflects the Company’s increased focus on receivables originated directly to consumers which typically carry lower interest rates and (ii) a 6% and 7% decrease in the average portfolio outstanding for the three and six months ended October 31, 2004 compared the three and six months ended October 31, 2003.22

~~Interest~~The ~~Expense.~~following ~~Interest~~table ~~expense~~sets ~~for the~~forth ~~three~~information ~~and~~with ~~six~~regard ~~months ended October 31, 2004 decreased~~ to ~~$1,828~~ ~~and $3,606 compared to $1,889 and $3,907 for~~ the ~~three and six months~~Company’s ~~ended~~net ~~October 31, 2003. Interest expense on Receivables Held for Investment decreased 3% and 8% for the three and six months ended October 31, 2004. The reduction in~~ interest ~~expense is primarily due to (i) the average debt outstanding decreased $18~~spread,~~147~~ orwhich 8%represents ~~for~~ the ~~three months~~difference ~~ended~~between ~~October 31, 2004 and $20,532 or 9% for~~ the ~~six months ended~~effective ~~October~~yield ~~31,~~on ~~2004 compared to the three and six months ended October 31, 2003 as a result of a 6% and 7% decrease in the average portfolio of~~ Receivables Held for Investment ~~for the three~~ and ~~six months ended October 31, 2004 compared to October 31, 2003 and (ii)~~ the ~~termination of swap agreements in April 2004. These events were partially offset by (i) the~~ Company’s ~~decision~~average tocost ~~lock in interest rates on $140 million~~ of debt ~~in November 2003 through the issuance of~~ ~~Term~~utilized ~~Notes~~ to ~~minimize~~fund ~~the~~these ~~risk~~receivables, ofand ~~future~~its ~~interest~~net ~~rate increases as longer term fixed rate Term Notes typically carry higher~~ interest ~~rates~~margin ~~than shorter term floating rate debt and~~ (~~ii)~~averages ~~an increase in overall market interest rates~~based ason amonth-end ~~result of the current economic environment and market rate increases adopted by the Federal Reserve Board.~~balances):

Provision for Credit Losses. The provision for credit losses for the three and six months ended October 31, 2004 decreased to $2,442 and $4,885 as compared to $3,270 and $6,662 for the three and six months ended October 31, 2003. The decrease in provision for credit losses is primarily due to (i) improving economic trends (ii) the decrease in the average Receivables Held for Investment of 6% and 7% for the three and six months ended

	Three Months Ended October 31,				Six Months Ended October 31,
	2005		2006		2005		2006
Receivables Held for Investment:
Effective yield on Receivables Held for Investment (1)	12.8	%	12.8	%	12.8	%	12.8	%
Average cost of debt (2)	4.5	%	5.6	%	4.5	%	5.5	%
Net interest spread (3)	8.3	%	7.2	%	8.3	%	7.3	%
Net interest margin (4)	8.3	%	7.3	%	8.3	%	7.3	%

22(1) Represents interest income as a percentage of average Receivables Held for Investment outstanding.

~~October 31, 2004 compared to October 31, 2003,~~ (~~iii~~2) Represents ainterest ~~change~~expense inas ~~portfolio mix to loans originated directly to the customer which typically has~~ a ~~lower~~percentage ~~loss frequency~~of ~~and~~average ~~(iv)~~debt ~~the increase in recovery rates on repossessions and defaults~~outstanding.

Net charge-offs for the three and six months ended October 31, 2004 decreased to $2,333 and $4,773 compared to $3,333 and $6,695 for the three and six months ended October 31, 2003. The decrease in net charge-offs for the three and six months ended October 31, 2004 is primarily due to (i3) Represents ~~the~~yield ~~decrease~~on ~~in the average~~ Receivables Held for Investment ofless 6%average ~~and~~cost 7%of for the three and six months ended October 31, 2004 compared to October 31, 2003 (ii) a decrease in loss frequency and severity from repossessions and (iii) an increase in recoveries from defaulted loansdebt.

~~The~~(4) Represents ~~level~~net ofinterest ~~provision~~income ~~for~~as ~~credit losses is~~ a ~~key~~percentage ~~driver~~ of ~~overall financial performance and should be positively impacted by~~ ~~improvement~~average inReceivables ~~general~~Held ~~economic~~for ~~conditions,~~Investment improvements in wholesale used car prices and lower net losses resulting from stricter underwriting controls adopted by the Company during 2000 and 2001. Any additional economic deterioration or further decline in wholesale used car prices will negatively impact provision expense as will increases in the outstanding ~~balance of receivables held for investment~~.

~~Servicing Revenue. Servicing~~Net ~~revenue decreased~~interest toincome ~~$905~~is ~~and $1,875 for~~ the ~~three~~difference ~~and~~between ~~six~~interest ~~months~~earned ~~ended~~from ~~October~~the ~~31,~~receivables ~~2004~~portfolio ~~compared~~and tointerest ~~$1,224~~expense incurred ~~and~~on ~~$2,498~~the ~~for~~credit ~~three and~~facilities ~~six~~used ~~months~~to ~~ended~~finance ~~October~~the ~~31, 2003~~receivables. Net interest ~~The~~income ~~decrease~~was in$7,561 ~~servicing~~and ~~revenue~~$14,685 for the three and six months ended October 31, ~~2004 is due to the decrease in principal balance of the servicing~~ ~~portfolio~~2006, ~~partially~~respectively, ~~offset~~an byincrease ~~revenues~~of ~~related~~17.4% ~~to incentive servicing fees that were not present in 2003~~ and ~~have~~22.6% ~~been~~when ~~realized~~compared ~~due~~ to ~~the favorable~~amounts ~~performance~~reported offor the ~~related~~three ~~serviced~~and ~~portfolio.~~six ~~Revenue~~months ~~derived~~ended ~~from~~October ~~servicing activities~~31, ~~will~~2005, ~~increase or decrease in direct proportion to the average outstanding balance of serviced receivables~~respectively.

~~Late~~The amount ~~Fees~~of ~~and~~net ~~Other~~interest ~~Income. Late fees and other~~ income ~~increased~~is tothe ~~$1,206~~result ~~and~~of ~~$1,836~~the ~~for~~relationship ~~the~~between ~~three~~the ~~and~~average ~~six~~principal ~~months~~amount ~~ended~~of ~~October~~receivables ~~31,~~held ~~2004, compared to $469~~ and ~~$849~~average ~~for~~rate ~~the~~earned ~~three~~thereon and ~~six~~the ~~months~~average ~~ended~~principal ~~October~~amount ~~31,~~of ~~2003. The~~debt ~~increase~~incurred ~~is attributable~~ to ~~(i)~~finance ~~increased~~such ~~collections of payments~~receivables ~~allocated to late fees~~ and ~~other~~the ~~income,~~average ~~(ii)~~rates anpaid ~~increase~~thereon. Changes in ~~loans~~the ~~originated for~~principal aamount ~~third party (iii) income received related to GAP insurance~~ and ~~extended~~rate components ~~service~~associated ~~contracts sold to consumers in connection~~ with the ~~Company’s~~receivables ~~direct lending~~and ~~activities~~debt ~~that~~can ~~were~~be ~~not~~segregated ~~present~~to ~~during~~analyze the ~~three and six months ended~~ ~~October~~periodic ~~31,~~changes ~~2003 and (iv) an increase~~ in ~~collection~~net ~~efforts~~interest income. ~~Income~~ ~~derived~~The ~~from~~following ~~late~~table ~~fees~~analyzes ~~and collection~~the ~~activities~~changes ~~are~~attributable ~~recognized~~to ~~when~~the ~~received,~~principal amount and ~~therefore~~rate ~~can~~components beof ~~potentially~~net ~~volatile~~interest ~~from period to period based on overall cash collection, seasonality, delinquency rates and other factors.~~income:

Late fees and other income are driven by a number of factors including overall delinquency rates, the percentage of customers utilizing electronic payment products and growth rates in the Company’s direct lending business which will affect the ability of the Company to generate fee income from marketing insurance and warranty products.

	Three Months Ended October 31, 2005 to 2006							Six Months Ended October 31, 2005 to 2006
	Increase (Decrease) Due to Change in							Increase (Decrease) Due to Change in
	Average Principal Amount		Average Rate			Total Net		Average Principal Amount		Average Rate			Total Net

Receivables Held for Investment:
Interest income	$	3,412	$	47		$	3,459	$	7,221	$	72		$	7,293
Interest expense	1,183		1,154			2,337		2,490		2,094			4,584
Net interest income	$	2,229	$	(1,107	)	$	1,122	$	4,731	$	(2,022	)	$	2,709

~~Unrealized Loss~~Results ~~on Interest Rate Derivative Positions. In conjunction with the adoption~~ of SFAS No. 133, the Company is required to record interest rate derivative positions at fair value. An unrealized loss of $170 and $238 for the three and six months ended October 31, 2004, compared to an unrealized loss of $149 and $6 for the three and six months ended October 31, 2003 are principally due to changes in the fair value of the Company’s derivative positions.Operations

~~Salaries~~Three and ~~Benefit Expenses.~~ ~~Salaries~~Six ~~and~~Months ~~benefit~~Ended ~~expense increased to $2,215 the three months ended~~ October ~~31,~~ ~~2004, compared to $2,164 for the three months ended October~~ 31, ~~2003. The~~2006 ~~increase is primarily due to additional permanent~~ and temporary staffing to support an increase in new loan originations during the three months ended October 31, 2004 partially offset by a decrease in bonuses paid to collection personnel. Salaries and benefit expense decreased to $4,279 for the six months ended October 31, 2004, compared to $4,382 for the six months ended October 31, 2003. The decrease is primarily due to (i) a decrease in staff associated with a decrease in the Company’s serviced portfolio and (ii) a decrease in costs associated with new hires.2005

~~Operating~~Key ~~Expenses~~Factors. The ~~Operating~~critical ~~expenses~~factors ~~increased~~affecting tothe ~~$1,325~~Company’s profitability during any period are (i) loan origination volume and $the corresponding growth in Receivables Held For Investment; (2) the level of net interest spread,~~624~~ ~~for~~which is defined as the ~~three~~difference ~~and~~between ~~six~~the ~~months~~effective yield ~~ended~~on ~~October~~Receivables ~~31,~~Held ~~2004,~~for ~~compared~~Investment toand ~~$1,202~~the ~~and~~cost ~~$2,274~~of ~~for~~funds under the ~~three~~Company’s credit facilities and ~~six months~~securitizations ~~ended~~utilized ~~October~~to ~~31,~~finance ~~2003. An~~these receivables; ~~increase~~(3) inthe level of provision for credit ~~bureau~~losses; ~~and~~(4) ~~postage~~the ~~costs~~amount isof ~~due~~income toderived from other activities; and (5) the ~~Company’s~~ability ~~decision~~of the Company to control operating ~~grow~~expenses relative to the ~~direct~~total ~~lending~~amount ~~business~~of inthe managed portfolio.

~~fiscal~~Executive ~~year~~Summary. Net earnings for the three and six months ended October 31, 2006 were $1,295 and $2,031, respectively, compared to $765 and $1,690 for the three and six months ended October 31, 2005, respectively. ~~Overall~~Basic ~~operating~~earnings per common share were $0.29 and $0.45, respectively, for the three and six months ended October 31, 2006, compared to $0.17 and $0.38, respectively, for the three and six months ended October 31, 2005. Diluted earnings per common share were $0.27 and $0.42, respectively, for the three and six months ended October 31,2006, compared to $0.17 and $0.37, respectively, for the three and six months ended October 31, 2005. The increase in net income for the three and six months ended October 31, 2006 compared to October 31, 2005 is due to several factors, including (i) a $1,122 increase in net interest income for the three months ended October 31, 2006, and a $2,709 increase in net interest income for the six months ended October 31, 2006 due to a 34% and 39% increase in the average balance of Receivables Held for Investment for the three and six months ended October 31, 2006, respectively, (ii) an increase in other interest income due to higher average cash balances, (iii) a decrease in general and administrative expenses ~~are~~primarily ~~generally~~due to the defense of a class action lawsuit ~~correlated~~during the six months ended April 30, 2006, and (iv) a decrease in income tax expense of $704 and $750 for the three and six months ended October 31, 2006, respectively, primarily due to the ~~total~~recognition ~~number~~of a $669 income tax benefit that was previously recorded as an uncertain tax provision. This is partially offset by several factors, including (i) an increase in interest expense of $2,337 and $4,584 for the three and six months ended October 31, 2006, respectively, due to a 34% and 39% increase in the average debt outstanding and a 110 and 104 basis point increase for the three and six months ended October 31, 2006, respectively, (ii) a $612 and $1,479 increase in provision for credit losses, for the three and six months ended October 31, 2006, respectively, primarily associated with the growth in the portfolio of Receivables Held for Investment and an associated increase in the allowance for credit losses, (iii) a $242 and $387 reduction in other income, for the three and six months ended October 31, 2006, respectively, primarily due to lower servicing revenue resulting from the continued decline in serviced receivables outstanding ~~managed~~and bylower dealer marketing fees due to the elimination of certain dealer programs, (iv) a $180 and $362 increase in salaries and benefits expense, for the three and six months ended October 31, 2006, respectively, to support an increase in origination volume, staffing for the Company’s inbound call center which was moved from a third party provider during 2005, and the implementation of FASB 123(R) during the period, (v) a $530 and $906 increase in operating costs, for the three and six months ended October 31, 2006, respectively, associated with an increase in origination volume and a decrease in the dollar amount of expenses which the Company was able to capitalize as deferred acquisition costs and, (vi) a $148 and $309 increase in other interest expense, for the three and six months ended October 31, 2006, respectively, due to an increase in the average outstanding balance of the Company’s working capital facility. The increase in net interest income was partially offset by a reduction in the net interest spread created by flat effective yields on the portfolio of Receivables Held for Investment and an increasing cost of funds. The decline in net interest spread reduced net interest income by $1,107 and $2,022 for the three and six months ended October 31, 2006 as compared to the three and six months ended October 31, 2005, respectively.

~~General~~Interest ~~and Administrative~~Income. ~~General~~ ~~and~~Interest ~~administrative~~income ~~expenses decreased to $936 and $1,859~~ for the three and six months ended October 31, ~~2004,~~2006 ~~compared~~increased to $~~964~~13,374 and $125,~~959~~705 ~~for~~compared ~~the~~to ~~three and six months ended October 31~~$9,915 ~~2003.~~ and ~~The~~$18,412 for the three and six months ended October 31, ~~2004 experienced a general decline in occupancy, travel, depreciation and amortization expense, partially offset by an increase in professional fees~~2005. ~~General and administrative costs tend to be more fixed in nature and not as dependent on the overall level of managed receivables.~~

Interest Expense. Interest expense for the three and six months ended October 31, 2006 increased to $5,813 and $11,020 compared to $3,476 and $6,436 for the three and six months ended October 31, 2005. Interest expense increased 67% and 71% for the three and six months ended October 31, 2006. The increase in interest expense is primarily due to (i) a $106,118 or 34% and $112,273, or 39%, increase in the average debt outstanding for the three and six months ended October 31, 2006, compared to the three and six months ended October 31, 2005 as a result of a 34% and 39% increase in the average portfolio of Receivables Held for Investment, (ii) an increase in overall market interest rates as a result of short-term market rate increases and (iii) the Company’s decision to lock in interest rates on $189,060 of debt in January 2006 through the issuance of term notes to minimize the risk of future interest rate increases, as longer term fixed rate term notes typically carry higher

interest rates than shorter term floating rate debt. The combined effects of the increase in overall market interest rates and the decision to lock in a fixed interest rate on $189,060 of debt resulted in a 110 and 104 basis point increase in the average interest rate for the three and six months ended October 31, 2006, as compared to the three and six months ended October 31, 2005.

Provision for Credit Losses. The provision for credit losses for the three and six months ended October 31, 2006 increased to $2,677 and $5,195 as compared to $2,065 and $3,716 for the three and six months ended October 31, 2005. The increase in provision for credit losses is primarily due to a 34% and 39% increase in the average portfolio outstanding for the three and six months ended October 31, 2006, compared to the three and six months ended October 31, 2005. Provision for credit losses as a percentage of average Receivables Held for Investment on an annual basis decreased to 2.6% as compared to 2.7% for the three months ended October 31, 2005. Provision for credit losses as a percentage of average Receivables Held for Investment on an annual basis remained constant at 2.6% for the six months ended October 31, 2006 and October 31, 2005.

Net charge-offs for the three and six months ended October 31, 2006 increased to $2,651 and $4,799 compared to $1,998 and $3,706 for the three and six months ended October 31, 2005. The increase in net charge-offs for the three and six months ended October 31, 2006 is primarily due to a 34% and 39% increase in the average portfolio outstanding for the three and six months ended October 31, 2006, compared to the three and six months ended October 31, 2005. This is partially offset by an increase in recoveries from defaulted loans. As a result, the allowance for loan loss as a percentage of the portfolio of Receivables Held for Investment decreased from 0.7% as of October 31, 2005 to 0.6% as of October 31, 2006. This compares to 0.6% as of April 30, 2006.

The level of provision for credit losses is a key driver of overall financial performance and should be positively impacted by improvement in general economic conditions, improvements in wholesale used car prices and lower delinquency rates and net losses projected for the portfolio of Receivables Held for Investment. Any additional economic deterioration or decline in wholesale used car prices will negatively impact provision expense to the extent that these events cause an increase in delinquency rates, bankruptcy rates or net charge-off rates in the portfolio of Receivables Held for Investment.

Servicing Revenue. On December 24, 2002, the Company entered into an agreement to provide loan servicing and collection activities on behalf of FARC. FARC, which is 40% owned by the Company, purchased a portfolio of approximately $200,000 of installment loan receivables. On March 19, 2003, the Company entered into an agreement to provide loan servicing and collection activities on $276,000 of installment loan receivables for unrelated third parties. Servicing revenue decreased to $312 and $676 for the three and six months ended October 31, 2006 compared to $495 and $1,073 for three and six months ended October 31, 2005. The decrease in servicing revenue for the three and six months ended October 31, 2006 is due to the liquidation of serviced receivables during the periods. Revenue derived from servicing activities will increase or decrease in direct proportion to the average outstanding balance of serviced receivables.

Other Finance Charges and Fees. Other finance charges and fees increased to $825 and $1,560 for the three and six months ended October 31, 2006, compared to $598 and $1,106 for the three and six months ended October 31, 2005. The increase is primarily attributable to (i) increased assessment and collection of fees due to a 34% and 39% increase in the average portfolio of Receivables Held for Investment and (ii) an increase in fees charged to customers for processing electronic payments. Income derived from late fees and collection activities are recognized when received, and therefore can be potentially volatile from period to period based on overall cash collection, seasonality, delinquency rates and other factors. Late and loan related fees are driven by a number of factors including overall delinquency rates, the percentage of customers utilizing electronic payment products and growth rates in the Company’s direct lending business.

Insurance Products. Insurance products decreased to $481 from $554 for the six months ended October 31, 2006. The decrease is primarily attributable to the Company’s decision to stop selling extended warranties. This is partially offset by increased penetration rates on insurance products. Insurance products revenue is primarily driven by growth rates in the Company’s direct lending business, which will affect the ability of the Company to generate fee income from marketing insurance products.

Income from Investments. Income from investments increased to $188 from $111 for the three months ended October 31, 2006. The increase is primarily attributable to the increase in earnings in FARC, which is accounted for under the equity method of accounting for investments.

Other Interest Income. Other interest income increased to $454 and $860 for the three and six months ended October 31, 2006, compared to $284 and $533 for the three and six months ended October 31, 2005. The increase is attributable to (i) an increase in the average cash on hand balance due to increased collections as a result of a 34% and 39% increase in the average portfolio of Receivables Held for Investment and (ii) an increase in overall market interest rates as a result of the current economic environment and market rate increases adopted by the Federal Reserve System.

Other Income. Other income decreased to $0 for the three and six months ended October 31, 2006, compared to $242 and $387 for the three and six months ended October 31, 2005. The decrease is attributable to the cancellation of a marketing program with several dealerships.

Salaries and Benefit Expenses. Salaries and benefit expense increased to $2,841 and $5,565 for the three and six months ended October 31, 2006, compared to $2,661 and $5,203 for the three and six months ended October 31, 2005. The increase is primarily due to (i) the Company implementing a call center that was previously outsourced, (ii) additional staffing levels necessary to support the increase in loan origination volume, and (iii) an additional $103 and $142 of expense for the three and six months ended October 31, 2006, due to the implementation of SFAS 123(R)

Operating Expenses. Operating Expenses increased to $1,654 and $2,633 for the three and six months ended October 31, 2006, compared to $1,124 and $1,727 for the three and six months ended October 31, 2005. Expenses characterized as operating expenses are generally variable in nature and are typically dependent on a number of factors including origination volume, the outstanding balance of the managed portfolio, credit quality and operating efficiency levels. The increase was primarily due to (i) an increase in postage and printing expense associated with the growth in the Company’s direct originations, (ii) an increase in other loan origination costs including credit bureau and verification fees associated with the increase in total origination volume, (iii) increased repossession and collection related costs, and (iv) a decrease in the dollar amount of expenses which the Company was able to capitalize as deferred acquisition costs. These were partially offset by (i) lower temporary help and third party fees associated with completion of the Company’s inbound call center location which had previously been outsourced and (ii) lower marketing commissions.

General and Administrative. General and administrative expenses decreased to $954 for the three months ended October 31, 2006, compared to $1,097 for the three months ended October 31, 2005. The decrease is primarily attributable to decreased legal expenses associated with the defense of a class action lawsuit during the fiscal year ended April 30, 2006. General and administrative costs tend to be more fixed in nature and not as dependent on the overall level of managed receivables.

Other Interest Expense. Other interest expense increased to $452 and $874 for the three and six months ended October 31, 2006, compared to $304 and $565 for the three and six months ended October 31, 2005. The increase was due to (i) a 58% and 60% increase in the average outstanding borrowings on the Company’s working capital line for the three and six months ended October 31, 2006 compared to the three and six months ended October 31, 2005, and (ii) an increase in overall market interest rates as a result short-term rate increases adopted by the Federal Reserve System.

Provision for Income Taxes. Provision for income taxes decreased to $(265) and $221 for the three and six months ended October 31, 2006, compared to $439 and $971 for the three and six months ended October 31, 2005. The decrease is primarily due to the recognition of $669 related to an uncertain tax provision that was previously classified as a liability. This is partially offset by an increase in the tax rate due to increased state income taxes.

Portfolio Characteristics

General. In selecting receivables for inclusion in its portfolio, the Company seeks to identify potential borrowers whom it regards as creditworthy despite credit histories that limit their access to traditional sources of

consumer credit. In addition to personal credit qualifications, the Company attempts to assure that the characteristics of the automobile sold and the terms of the sale are likely to result in a consistently performing receivable. These considerations include amount financed, monthly payments required, duration of the loan, age of the automobile, mileage on the automobile and other factors.

Customer Profile. The Company’s primary goal in credit evaluation is to make loans to customers having stable personal situations, predictable incomes and the ability and inclination to perform their obligations in a timely manner. Many of the Company’s customers are persons who have experienced credit difficulties in the past by reason of illness, divorce, job loss, reduction in pay or other adversities, but who appear to the Company to have the capability and commitment to meet their obligations. Through its credit evaluation process, the Company seeks to distinguish these persons from those applicants who are chronically poor credit risks.

Credit Evaluation

General. In connection with the origination of a receivable by the Company, the Company follows systematic procedures designed to reduce unacceptable risks. This involves a three-step process in which (i) the creditworthiness of the borrower and the terms of the proposed transaction are evaluated and either approved, declined or modified by the Company’s credit verification department, (ii) the loan documentation and collateralization is reviewed by the Company’s funding department, and (iii) additional collateral verification procedures and customer interviews are conducted by the Company. During the course of this process, the Company’s credit verification and funding personnel coordinate closely with the finance and insurance departments of the dealers or with individuals to whom the Company lends directly. The Company has developed financing programs under which it approves loans that vary in pricing and loan terms depending on the relative credit risk determined for each loan. Credit or default risk is evaluated by the Company’s loan officers in conjunction with a proprietary, empirical credit scoring model developed from the Company’s 17 year database of non-prime lending results.

In addition to this credit underwriting process, and prior to the origination of a receivable by the Company, the Company performs additional procedures to validate the details of the credit application, including income and/or employment information, to verify that the collateral is insured, and to confirm that the material terms of the sale conform to the purchaser’s understanding of the transaction. The Company will originate a receivable only after receipt and review of a satisfactory audit report.

Liquidity and Capital Resources

~~The~~Sources ~~Company~~and ~~finances~~Uses ~~its loan~~of ~~origination~~Cash ~~through two warehouse credit facilities~~Flows. The Company’s ~~credit facilities~~business ~~provide~~requires ~~for one-year terms and have been renewed annually.~~significant ~~Management~~cash offlow ~~the Company believes that the credit facilities will continue~~ to be ~~renewed~~support orits ~~extended~~operating ~~or that it would be able to secure alternate financing on satisfactory terms; however, there can be no assurance that it will be able to do so~~activities. InThe ~~January~~principal ~~2002~~cash ~~the Company issued $159 million in asset-backed notes~~requirements ~~(“Term~~include ~~Notes”~~(i) ~~secured~~amounts bynecessary ato ~~discrete~~acquire ~~pool of~~ receivables. Onfrom ~~November~~dealers ~~20,~~and ~~2003,~~fund ~~the~~required ~~Company~~reserve ~~issued~~accounts, ~~$140~~(ii) ~~million~~amounts innecessary ~~Term~~to ~~Notes~~fund ~~secured~~premiums ~~by a discrete pool of receivables. Substantially all receivables retained by the Company are pledged as collateral~~ for ~~the~~ credit ~~facilities~~enhancement ~~and~~insurance ~~the~~or ~~Term~~other ~~Notes.~~credit ~~The~~enhancement ~~weighted~~required ~~average~~by ~~interest rate for~~ the Company’s financing ~~secured~~programs, ~~borrowings~~and ~~including~~(iii) ~~the~~amounts ~~effect~~necessary ofto ~~program~~fund ~~fees,~~costs ~~dealer~~to ~~fees,~~retain ~~and~~receivables, ~~other~~primarily ~~comprehensive~~interest ~~income (loss) amortization was 3~~expense.5% ~~and~~The ~~3.3%~~Company ~~for~~also ~~the~~requires a ~~three~~significant ~~months~~amount ~~ended~~of ~~and~~cash ~~3.5%~~flow ~~and 3.4%~~ for ~~the~~working ~~six~~capital ~~months~~to ~~ended~~fund ~~October~~fixed 31operating expenses, ~~2004 and~~primarily ~~October~~salaries ~~31,~~and ~~2003, respectively~~benefits.

~~Warehouse~~The Company’s ~~Facilities~~most assignificant cash flow requirement is for the origination of receivables. The Company originated $71,889 and $152,208 of receivables to be held for investment for the three and six months ended October 31, 2006 compared to $66,861 and $148,341 for the three and six months ended October 31, ~~2004~~2005.

Facility	Capacity		Outstanding		Interest Rate	Fees	Insurance		Borrowing Rate At October 31, 2004
FIARC	$	150,000,000	$	53,855,004	Commercial paper rate plus .3%	.25% of Unused Facility	.35	%	1.86	%
FIRC	$	50,000,000	$	42,032,443	Option of a) Base Rate, which is the higher of prime rate or fed funds plus .5% or b) LIBOR plus .5%	.25% of Unused Facility	See below		2.45	%

The Company funds loan originations through a combination of two warehouse credit facilities. The FIRC credit facility generally permits the Company to borrow up to the outstanding principal balance of qualified receivables, not to exceed $50,000. Receivables that have accumulated in the FIRC credit facility may be transferred to the FIARC commercial paper facility at the option of the Company. The FIARC commercial paper facility provides an additional financing source of up to $300,000. Additionally, the Company has transferred receivables from the warehouse credit facilities and issued term notes. Substantially all of the Company’s receivables are pledged to collateralize these credit facilities and term notes. The Company is obligated to meet certain financial covenants. Noncompliance may significantly affect cash flow.

~~Warehouse Facilities — Credit Enhancement as of October 31, 2004~~27

Facility	Cash Reserve	Advance Rate		Insurance
FIARC	1% of outstanding receivables	94	%	Surety Bond
FIRC	1% of borrowings	100	%	Default Insurance (ALPI)

The Company’s most significant source of cash flow is the principal and interest payments received from its receivables portfolios. The Company received such payments in the amount of $53,027 and $104,792 during the three and six months ended October 31, 2006, and $40,101 and $75,875 during the three and six months ended October 31, 2005. Such cash flow funds were used to repay amounts borrowed under the Company’s credit facilities and other holding costs, primarily interest expense, and servicing and custodial fees. During the three and six months ended October 31, 2006, the Company required net cash of $18,862 and $47,416 as compared to $26,760 and $72,466 for the three and six months ended October 31, 2005, as the receivables originated exceeded portfolio collections. The Company relies on borrowed funds to provide cash flow in periods of growth. As of October 31, 2006, the Company had $165,414 of available capacity in the FIRC and FIARC credit facilities to fund future growth.

~~FIRC -~~ In ~~order~~addition to ~~obtain~~ athe ~~lower~~cash ~~cost~~flow ofgenerated ~~funding~~from the principal and interest collections on its receivables portfolio, the Company ~~has~~collects ~~agreed~~servicing tofees funded ~~maintain~~from ~~credit~~each of the servicing portfolios. ~~enhancement~~Servicing ~~insurance~~fees ~~covering~~range from 1.4% to 2.5% of the ~~receivables~~outstanding ~~pledged~~principal balance asof ~~collateral~~the ~~under~~loans in the portfolio. ~~FIRC~~Cash ~~credit~~flow ~~facility~~and servicing fees are received after month end, but relate to the prior month activity. Thus ~~The~~upon filing ~~facility~~of ~~lenders~~the ~~are~~monthly ~~named~~servicing asstatements, ~~additional~~a ~~insureds~~portion of the restricted cash is ~~under~~converted ~~these~~to ~~policies~~cash available to fund operations. At October 31, 2006 and 2005, the Company’s unencumbered cash was $3,176 and $4,280, respectively. The ~~coverages~~decrease ~~are~~in ~~obtained~~available oncash ~~each~~is ~~receivable~~primarily due atto an increase in operating expenses due to the ~~time~~Company’s continued itgrowth. This is partially offset by an increase in revenues due to a 34% and 39% increase in the average portfolio of Receivables Held for Investment for the three and six months ended October 31, 2006. Management believes the unencumbered cash and cash inflows and amounts available under the working capital facility are adequate to fund cash requirements for operations.

24Capitalization. The Company expects to rely primarily on its credit facilities and the issuance of secured term notes to acquire and retain receivables. The Company believes its existing credit facilities have adequate capacity to fund the increase of the receivables portfolio expected in the foreseeable future. While the Company has no reason to believe that these facilities will not continue to be available, their termination could have a material adverse effect on the Company’s operations if substitute financing on comparable terms was not obtained.

~~originated~~Financing byArrangements. The ~~the~~ Company, ~~and~~finances ~~the~~its ~~applicable~~loan ~~premiums~~origination ~~are~~through ~~prepaid~~two warehouse credit facilities. The Company’s credit facilities provide for ~~the~~one-year ~~life~~terms and have been renewed annually. Management of the ~~receivable.~~Company ~~Each~~believes ~~receivable~~that isthe ~~covered~~credit facilities will continue to bybe ~~three~~renewed ~~separate~~or ~~credit~~extended ~~insurance~~or ~~policies~~that it would be able to secure alternate financing on satisfactory terms; however, ~~consisting~~there ofcan ~~basic~~be ~~default~~no assurance that it will be able ~~insurance~~to ~~under~~do aso. In ~~standard~~November, ~~auto~~2003, ~~loan~~the ~~protection~~Company issued ~~policy~~$139,661 ~~(known~~asset-backed asnotes (“~~ALPI~~Term Notes” ~~insurance~~) ~~together~~secured ~~with~~by ~~certain~~a ~~supplemental~~discrete ~~coverages~~pool ~~relating~~of receivables. In toMay, ~~physical~~2005, the Company ~~damage~~issued ~~and~~$175,493 ~~other~~in ~~risks.~~Term ~~Solely~~Notes atsecured ~~its~~by ~~expense~~a discrete pool of receivables. In January, 2006, the Company ~~carries~~issued ~~these~~$189,060 ~~coverages~~in ~~and~~Term ~~neither~~Notes ~~the~~secured ~~vehicle~~by ~~purchasers~~a ~~nor~~discrete ~~the~~pool ~~dealers~~of receivables. Substantially all receivables retained by the Company are ~~charged~~pledged as collateral for the ~~coverages,~~credit ~~nor~~facilities ~~are~~and ~~they~~the ~~usually~~Term ~~aware~~Notes. The ofweighted ~~their~~average ~~existence.~~interest ~~The~~rate for the Company’s secured borrowings ~~ALPI~~including ~~insurance~~the ~~policy~~effect isof ~~written~~program byfees ~~National~~and ~~Union~~dealer ~~Fire~~fees ~~Insurance~~was ~~Company~~4.3% ~~of Pittsburgh~~and ~~(“National~~5.2% ~~Union”),~~for ~~which~~the periods isended aOctober ~~wholly-owned~~31, ~~subsidiary~~2005 ofand ~~American International~~2006, ~~Group~~respectively.

~~The~~Warehouse ~~premiums~~Facilities ~~that~~as ~~the Company paid during the three months and six months ended October 31, 2004 for its three credit enhancement insurance coverages,~~ of which the largest component is basic ALPI insurance, represented approximately 2.4% of the principal amount of the receivables originated during the periods. Aggregate premiums paid for ALPI coverage alone was $901,966 and $538,717 during the three months ended and $1,616,436 and $1,610,126 for six months ended October ~~31,~~ ~~2004 and 2003, respectively, and accounted for 2.4% and 2.4% during the three months ended and 2.4% and 3.1% for the six months ended October~~ 31, ~~2004 and 2003, respectively, of the principal amount of the receivables originated during such respective periods.~~2006

Facility	Capacity		Outstanding		Interest Rate	Fees	Insurance	Borrowing Rate At October 31, 2006
FIARC	$	300,000	$	148,062	Commercial paper rate plus .3%	.30% of Unused Facility	None	5.8	%
FIRC	$	50,000	$	36,524	Option of a) Base Rate, which is the higher of prime rate or fed funds plus .5% or b) LIBOR plus .5%	.25% of Unused Facility	See below	5.3	%

Warehouse Facilities – Credit Enhancement as of October 31, 2006

Facility	Cash Reserve	Advance Rate		Insurance
FIARC	1% of outstanding receivables	94	%	None
FIRC	1% of borrowings	100	%	Default Insurance (ALPI)

FIRC - In order to obtain a lower cost of funding, the Company has agreed to maintain credit enhancement insurance covering the receivables pledged as collateral under the FIRC credit facility. The facility lenders are named as additional insureds under these policies. The coverage is obtained on each receivable at the time it is purchased by the Company and the applicable premiums are prepaid for the life of the receivable. The insurance enhancing this facility is default insurance under a standard auto loan protection policy (known as “ALPI” insurance) which covers the difference between the outstanding balance of a receivable and the liquidation proceeds in the event the underlying collateral is repossessed. Solely at its expense, the Company carries this coverage and neither the vehicle purchasers nor the dealers are charged for the coverages and they are usually unaware of their existence. The Company’s ALPI insurance policy is written by National Union Fire Insurance Company of Pittsburgh (“National Union”), which is a wholly-owned subsidiary of American International Group.

The premiums that the Company paid during the three months and six months ended October 31, 2006 for its three credit enhancement insurance coverages, of which the largest component is basic ALPI insurance, represented approximately 1.1% and 1.7%, respectively, of the principal amount of the receivables originated during the periods. Aggregate premiums paid for ALPI coverage alone were $1,366 and $536 during the three months ended, and $2,572 and $1,852 for six months ended, October 31, 2005 and 2006, respectively, and accounted for 2.1% and 0.9% during the three months ended, and 1.8% and 1.2% for the six months ended, October 31, 2005 and 2006, respectively, of the principal amount of the receivables originated during such respective periods.

In April 1994, the Company organized First Investors Insurance Company (the “Insurance Subsidiary”) under the captive insurance company laws of the State of Vermont. The Insurance Subsidiary is an indirect wholly-owned subsidiary of the Company and is a party to a reinsurance agreement whereby the Insurance Subsidiary reinsures 100% of the risk under the Company’s ALPI insurance policy. At the time each receivable is insured by National Union, the risk is automatically reinsured to its full extent and approximately 96% of the premium paid by the Company to National Union with respect to such receivable is ceded to the Insurance Subsidiary. When a loss covered by the ALPI policy occurs, National Union pays it after the claim is processed, and National Union is then reimbursed in full by the Insurance Subsidiary. In addition to the monthly premiums and liquidity reserves of the Insurance Subsidiary, a trust account is maintained by National Union to secure the Insurance Subsidiary’s obligations for losses it has reinsured.

The result of the foregoing reinsurance structure is that National Union, as the “fronting” insurer under the captive arrangement, is unconditionally obligated to the Company’s credit facility lenders for all losses covered by the ALPI policy, and the Company, through its Insurance Subsidiary, is obligated to indemnify National Union for all such losses. As of October 31, ~~2004~~2006, the Insurance Subsidiary had capital and surplus of $23,~~763,975~~ 607 and unencumbered cash reserves of $12,~~672,245~~413 in addition to the $3,~~287,233~~252 trust account.

The ALPI coverage as well as the Insurance Subsidiary’s liability under the Reinsurance Agreement, remains in effect for each receivable that is pledged as collateral under the warehouse credit facility. Once receivables are transferred from FIRC to FIARC and financed under the commercial paper facility, ALPI coverage and the Insurance Subsidiary’s liability under the Reinsurance Agreement is cancelled with respect to the transferred receivables. Any unearned premium associated with the transferred receivables is returned to the Company. The Company believes the losses its Insurance Subsidiary will be required to indemnify will be less than the premiums ceded to it. However, there can be no assurance that losses will not exceed the premiums ceded and the capital and surplus of the Insurance Subsidiary.

FIARC —– Credit Enhancement for the FIARC warehouse facility is provided to the commercial paper investors by a ~~cash~~6% overcollaterization level and a cash reserve account equal to 1% of the receivables held by ~~FIARC and, additionally, a surety bond issued~~ by ~~MBIA~~FIARC. The Company is not a guarantor of, or otherwise a party to, such commercial paper.

~~Warehouse Facilities — Agents and Expirations~~29

Facility	Agent	Expiration	Event if not Renewed
FIARC	Wachovia	January 15, 2005	Receivables pledged would be allowed to amortize; however, no new receivables would be allowed to transfer from the FIRC facility
FIRC	Wachovia	December 1, 2005	Convert to a term loan which would mature six months thereafter and amortize monthly in accordance with the borrowing base with the remaining balance due at maturity

Warehouse Facilities – Agents and Expirations

Facility	Agent	Expiration	Event if not Renewed
FIARC	Wachovia	February 14, 2007	Receivables pledged would be allowed to amortize; however, no new receivables would be allowed to transfer from the FIRC facility.
FIRC	Wachovia	February 14, 2007	The loan would convert to a term loan which would mature six months thereafter and amortize monthly in accordance with the borrowing base with the remaining balance due at maturity.

On December 4, 2003, the FIRC facility was renewed, under similar terms and conditions, at the $50 ~~million~~,000 commitment level until December 2, 2004, and was subsequently extended until ~~December~~February 114, ~~2005~~2007. On June 15, 2004, the FIRC facility was ~~extended~~increased to $65 ~~million~~,000, and reverted back to $50,000 ~~million~~ on September 13, 2004. ~~On January 29,~~ 2004, following a short-term extension of the original maturity date, the FIARC facility was renewed, under similar terms and conditions, to December 2, 2004, and was subsequently extended until January 15, 2005. As of April 30, ~~2004~~2006 and October 31, ~~2004~~2006, there was $047,080 and $~~53.9 million~~36,524, respectively, outstanding.

On January 29, 2004, following a short-term extension of the original maturity date, the FIARC facility was renewed, under similar terms and conditions, to December 2, 2004, and was subsequently extended until February 14, 2007. In connection with the renewal, the Company obtained approval from the lender to eliminate the requirement that a surety bond be maintained to provide additional enhancement to the commercial paper investors as well as eliminating the requirement to purchase interest rate caps. As a result, the 0.35% surety bond premium and the 0.25% unused surety bond premium were eliminated. In exchange, the Company agreed to increase the program fee paid to the lender from 0.30% to 0.55% and to increase the unused fee paid to the lender from 0.25% to 0.30%. On October 11, 2006, the Company amended the facility to increase the commitment from $150,000 to $300,000 in order to fund the growth in origination volume. As of April 30, 2006 and October 31, 2006, there was $0 and $148,062, respectively, outstanding.

The following table contains pertinent information on the Term Notes as of October 31, ~~2004~~2006.

Term Notes	Issuance Date	Issuance Amount		Maturity Date	Outstanding		Interest Rate
2002-A	January 29, 2002	$	159,036,000	December 15, 2008	$	29,170,916	3.46	%
2003-A	November 11, 2003	$	139,661	April 20, 2011	$	26,561	2.58	%
2003-A	November 11, 2003	$	139,661,000	April 20, 2011	$	92,535,291	2.58	%
2005-A Class 2	May 5, 2005	$	106,493	July 16, 2012	$	79,359	4.23	%
2006-A Class 2	January 26, 2006	$	47,000	March 16, 2009	$	29,353	4.87	%
2006-A Class 3	January 26, 2006	$	74,000	February 15, 2011	$	74,000	4.93	%
2006-A Class 4	January 26, 2006	$	36,060	April 15, 2013	$	36,060	5.00	%

~~Credit enhancement on the two Term Notes is as follows:~~30

Facility	Cash Reserve	Advance Rate	Insurance
2002-A	2% of Initial Pool Balance including Pre-Funding Amount of $25 million	99% initial advance decreasing to 97%	Surety Bond
2003-A	0.5% of Initial Pool Balance increasing to 2% of Initial Pool Balance including Pre-Funding Amount of $30 million	96.5% initial advance decreasing to 96.1%	Surety Bond

Credit enhancement on the Term Notes are as follows:

Facility	Cash Reserve	Advance Rate	Insurance
2003-A	0.5% of Initial Pool Balance increasing to 2% of Initial Pool Balance including Pre-Funding Amount	96.5% initial advance decreasing to 96.1%	Surety Bond
2005-A	1.0% of Initial Pool Balance increasing to 2% of Initial Pool Balance including Pre-Funding Amount	97.0% initial advance decreasing to 95.75%	Surety Bond
2006-A	1.0% of Initial Pool Balance increasing to 2% of Initial Pool Balance including Pre-Funding Amount	98.5% initial advance decreasing to 96.75%	Surety Bond

Term Notes - On November 20, 2003, the Company, through its indirect, wholly-owned subsidiary, First Investors Auto Owner Trust 2003-A (“2003 Auto Trust”), completed the issuance of $139,661 of 2.58% Class A asset-backed notes (“2003-A Term Notes”). The initial pool of automobile receivables transferred to the 2003 Auto Trust totaled $114,727, which was previously owned by FIRC and FIARC, secure the 2003-A Term Notes. In addition to the issuance of the Class A Notes, the 2003 Auto Trust also issued a $5,066 Class B Note that was retained by the Company and pledged to secure the Working Capital Facility as further described below. Proceeds from the issuance, which totaled $139,657, were used to (i) fund a $30,000 pre-funding account to be used for future loan originations, (ii) repay all outstanding borrowings under the FIARC commercial paper facility, (iii) reduce the outstanding borrowings under the FIRC credit facility, (iv) pay transaction fees related to the 2003-A Term Note issuance, and (v) fund an initial cash reserve account of 0.5%, or $574, of the initial receivables pledged. The Class A Term Notes bear interest at 2.58% and requires monthly principal reductions sufficient to reduce the balance of the Class A Term Notes to 96.1% of the outstanding balance of the underlying receivables pool. The final maturity of the 2003-A Term Notes is April 20, 2011. The Class B Note does not bear interest but requires principal reductions sufficient to reduce the balance of the Class B Note to 3.9% of the outstanding balance of the underlying receivables pool. A surety bond issued by MBIA Insurance Corporation provides credit enhancement for the Class A Notes. In the event that certain asset quality covenants are not met, the reserve account target level will increase to 6% of the then current principal balance of the receivables pool. As of April 30, 2006, and October 31, 2006, the outstanding principal balances on the 2003-A term notes were $37,715 and $26,561, respectively.

~~October~~On May 315, ~~2004~~2005, the ~~outstanding~~Company, ~~principal~~through its indirect, wholly-owned subsidiary, First ~~balances~~Investors onAuto Owner Trust 2005-A (“2005 Auto Trust”), completed the ~~2002~~issuance of $69,000 of 3.57% Class A-1 asset-backed notes and $106,493 of 4.23% Class A-2 asset-backed notes (collectively “2005-A Term Notes”), for a total of $175,493 of asset backed notes. The initial pool of automobile receivables transferred to the 2005 Auto Trust totaled $150,921, which was previously owned by FIRC and FIARC, and secures the 2005-A Term Notes. In addition to the issuance of the Class A-1 and Class A-2 Notes, the 2005 Auto Trust also issued a $5,428 Class B Note that was retained by the Company and pledged to secure the Working Capital Facility as further described below. Proceeds from the issuance, which totaled $175,488, were used to (i) fund a $4430,~~335~~000 pre-funding account to be used for future loan originations,~~659~~ (ii) repay all outstanding borrowings under the FIARC commercial paper facility, (iii) reduce the outstanding borrowings under the FIRC credit facility, (iv) pay transaction fees related to the 2005-A Term Note issuance, and (v) fund an initial cash reserve account of 1%, or $291,~~170~~509,~~916~~ of the initial receivables pledged. The Class A-1 and Class A-2 Term Notes bear interest at 3.57% and 4.23%, respectively, and require monthly principal reductions sufficient to reduce the balance of the Class A Term Notes to 95.75% of the outstanding balance of the underlying receivables pool. The Class A-1 notes were paid off during the fiscal year ended April 30, 2006. The final maturity of the Class A-2 Term Notes is July 16, 2012. The Class B Note does not bear interest but requires principal reductions sufficient to reduce the balance of the Class B Note to

On November 20, 2003, the Company, through its indirect, wholly-owned subsidiary First Investors Auto Owner Trust 2003-A (“2003 Auto Trust”) completed the issuance of $139,661,000 of 2.58% Class A asset-backed notes (“2003-A Term Notes”). The initial pool of automobile receivables transferred to the 2003 Auto Trust totaled $114,726,891, which was previously owned by FIRC and FIARC, secure the 2003-A Term Notes. In addition to the issuance of the Class A Notes, the 2003 Auto Trust also issued $5,065,891 in Class B Notes that were retained by the Company and pledged to secure the Working Capital Facility as further described below. Proceeds from the issuance, which totaled $139,656,629 were used to (i) fund a $30,000,000 pre-funding account to be used for future loan originations; (ii) repay all outstanding borrowings under the FIARC commercial paper facility, (iii) reduce the outstanding borrowings under the FIRC credit facility, (iv) pay transaction fees related to the 2003-A Term Note issuance, and (v) fund an initial cash reserve account of 0.5% or $573,635 of the initial receivables pledged. The Class A Term Notes bear interest at 2.58% and requires monthly principal reductions sufficient to reduce the balance of the Class A Term Notes to 96.1% of the outstanding balance of the underlying receivables pool. The final maturity of the 2003-A Term Notes is April 20, 2011. The Class B Notes do not bear interest but require principal reductions sufficient to reduce the balance of the Class B Notes to 3.9% of the outstanding balance of the underlying receivables pool. A surety bond issued by MBIA Insurance Corporation provides credit enhancement for the Class A Notes. In the event that certain asset quality covenants are not met, the reserve account target level will increase to 6% of the then current principal balance of the receivables pool. As of April 30, 2004 and October 31~~, 2004, the outstanding principal balances on the 2003-A Term notes were $120,382,531 and $92,535,291 respectively.~~

~~Working Capital Facility~~4. On25% ~~December 6,~~of ~~2001,~~ the ~~Company entered into an agreement with Wachovia Securities to refinance the $11,175,000~~ outstanding balance of the ~~working~~underlying ~~capital term loan~~receivables ~~previously provided by Bank of America and Wachovia and increase the size of the facility to $13~~pool.~~5 million.~~ ~~The renewal~~A ~~facility~~surety ~~was~~bond ~~provided~~issued toby ~~a special-purpose, wholly-owned subsidiary of~~MBIA ~~the~~Insurance ~~Company,~~Corporation ~~First~~provides ~~Investors~~credit ~~Residual~~enhancement ~~Funding~~for LP. The facility originally consisted of a $9 million revolving tranche and a $4.5 million term loan tranche which amortizes monthly. The term loan tranche of this working capital facility was evidenced by the Class BA Notes ~~issued in conjunction with the 2002 Auto Trust financing~~. In ~~The remaining $9 million of~~ the ~~$13.5~~ ~~million~~event ~~working~~that ~~capital~~certain ~~facility~~asset ~~revolves monthly in accordance with a~~quality ~~borrowing~~covenants ~~base~~are ~~consisting~~not ofmet, the ~~over-collateralization amount and~~ reserve ~~accounts~~ ~~for~~account ~~each~~target oflevel ~~the~~will Company’s other credit facilities. The facility is secured solely by the residual cash flow and cash reserve accounts related to the Company’s warehouse credit facilities, the acquisition facility and the existing and future term note facilities. During 2002, the facility was modified to increase ~~the interest rate from LIBOR plus 1.5%~~ to ~~LIBOR~~ ~~plus~~ 2~~.25~~%~~. The~~ ~~commitment fee~~of ~~paid on~~ the ~~total~~then ~~available~~current ~~amount of the facility was maintained at 1.5%. In addition, the monthly~~ principal ~~amortization~~ ~~under~~balance ~~the term loan tranche was increased to the greater~~ of ~~$250,000~~ or the ~~principal~~receivables ~~distributions made under the Class B Notes issued under the 2002 Auto Trust financing~~pool. ~~On December~~As ~~4, 2003, the Working Capital Facility was extended to December 2, 2004. Under the terms~~ of ~~the~~April ~~extension~~30, ~~the~~ ~~monthly~~2006 ~~amortization~~and ~~requirement was replaced with the requirement that outstandings under the facility could not exceed the lesser of a borrowing base or the $9 million facility limit. On~~ October 2631, ~~2004~~2006, ~~the Working Capital Facility was extended until October 10,~~ ~~2005, increasing~~ the ~~commitment~~outstanding ~~amount~~principal tobalances ~~$13.5 million. The interest rate remained at LIBOR plus 2.25% and the commitment fee paid~~ on the ~~total~~2005-A ~~available~~Term ~~amount~~Notes ofwere ~~the facility was maintained at 1.5%. At April 30, 2004 and October 31, 2004, there was~~ $8106,~~761,143~~162 and $979,~~000~~359,~~000~~ respectively~~, outstanding under this facility~~.

On January 26, 2006, the Company, through its indirect, wholly-owned subsidiary, First Investors Auto Owner Trust 2006-A (“2006 Auto Trust”), completed the issuance of $32,000 of 4.57% Class A-1 asset-backed notes, $47,000 of 4.87% Class A-2 asset-backed notes, $74,000 of 4.93% Class A-3 asset-backed notes, and $36,060 of 5.00% Class A-4 asset-backed notes (collectively “2006-A Term Notes”), for a total of $189,060 of asset backed notes. The initial pool of automobile receivables transferred to the 2006 Auto Trust totaled $151,939, was previously owned by FIRC and FIARC, and secures the 2006-A Term Notes. In addition to the issuance of the Class A-1, Class A-2, Class A-3, and Class A-4 notes, the 2006 Auto Trust also issued a $2,879 Class B Note that was retained by the Company and pledged to secure the Working Capital Facility as further described below. Proceeds from the issuance, which totaled $188,446, were used to (i) fund a $40,000 pre-funding account to be used for future loan originations, (ii) repay all outstanding borrowings under the FIARC commercial paper facility, (iii) reduce the outstanding borrowings under the FIRC credit facility, (iv) pay transaction fees related to the 2006-A Term Note issuance, and (v) fund an initial cash reserve account of 1% or $1,519 of the initial receivables pledged. The 2006-A Term Notes require monthly principal reductions sufficient to reduce the balance of the notes to 96.75% of the outstanding balance of the underlying receivables pool. The Class A-1 notes were paid off during the quarter ended July 31, 2006. The final maturity of the Class A-2, Class A-3, and Class A-4 Term Notes is March 16, 2009, February 15, 2011, and April 15, 2013, respectively. The Class B Note does not bear interest but requires principal reductions sufficient to reduce the balance of the Class B Note to 3.25% of the outstanding balance of the underlying receivables pool. A surety bond issued by MBIA Insurance Corporation provides credit enhancement for the Class A Notes. In the event that certain asset quality covenants are not met, the reserve account target level will increase to the greater of 2% of the initial pool balance or 6% of the then current principal balance of the receivables pool. As of April 30, 2006 and October 31, 2006, the outstanding principal balances on the 2006-A Class A term notes were $172,708 and $139,413, respectively.

The Company presently intends to seek a renewal of the working capital facility from its lender prior to maturity. Should the facility not be renewed, the outstanding balance of the receivables would be amortized in accordance with the borrowing base. Management considers its relationship with its lenders to be satisfactory and has no reason to believe that this credit facility will not be renewed. If the facility is not renewed, however, or if material changes are made to its terms and conditions, it could have a material adverse effect on the Company.

~~Shareholder~~ Related Party Loans. On December 3, 2001 the Company entered into an agreement with one of its shareholders who is a member of its Board of Directors under which the Company may, from time to time, borrow up to $2,500.~~5 million.~~ ~~The~~On ~~proceeds~~December of6, 2004, the ~~borrowings~~original ~~will~~$2,500 beshareholder ~~utilized~~loan towas ~~fund~~replaced ~~certain~~with ~~private~~a ~~and~~$2,500 ~~open~~loan ~~market purchases~~containing ofidentical ~~the~~terms ~~Company’s~~and ~~common~~conditions ~~stock~~between ~~pursuant~~the toCompany and a ~~Stock~~limited ~~Repurchase~~partnership that ~~Plan~~is ~~authorized~~affiliated ~~by the~~with ~~Board~~a ofcurrent ~~Directors~~shareholder and ~~for~~member ~~general~~of ~~corporate~~the ~~purposes. Borrowings~~Board ~~under~~of Directors ~~the~~The ~~facility~~proceeds ~~bear~~of ~~interest at~~the aborrowings ~~fixed~~have ~~rate~~been ofutilized ~~10%~~to ~~per~~fund ~~annum. The~~certain ~~facility~~private ~~is unsecured~~ and ~~expressly~~open ~~subordinated~~market topurchases of the Company’s ~~senior~~common ~~credit~~stock pursuant to a ~~facilities.~~Stock ~~The~~Repurchase

2732

Plan authorized by the Board of Directors and for general corporate purposes. Borrowings under the facility bear interest at a fixed rate of 10% per annum. The facility is unsecured and expressly subordinated to the Company’s senior credit facilities. The facility matures on December 3, 2008 but may be be repaid at any time unless the Company is in default on one of its other ~~credit~~ credit facilities. There ~~were~~was no$2,500 ~~amounts~~ outstanding under this facility as of April 30, ~~2004~~2006 and October 31, ~~2004~~2006. For the three and six months ended October 31, 2005 and October 31, 2006, the Company recorded interest expense under these facilities of $63 and $126, respectively.

Loan Covenants. The documentation governing these credit facilities and Term Notes contains numerous covenants relating to the Company’s business, the maintenance of credit enhancement insurance covering the receivables (if applicable), the observance of certain financial covenants, the avoidance of certain levels of delinquency experience and other matters. The breach of these covenants, if not cured within the time limits specified, could precipitate events of default that might result in the acceleration of the FIRC credit facility, the Term Notes and the working capital facility or the termination of the commercial ~~paper~~ paper facilities. The Company was not in default with respect to any financial and non-financial covenants governing these financing arrangements at October 31, ~~2004~~ 2006.

Interest Rate Management. The Company’s warehouse credit facilities and working capital facilities bear interest at floating interest rates which are reset on a short-term basis while the secured Term Notes bear interest at a fixed rate of interest. The Company’s receivables bear interest at fixed rates that do not generally vary with a change in market interest rates. Since a primary contributor to the Company’s profitability is its ability to manage its net interest spread, the Company seeks to maximize the net interest spread while minimizing exposure to changes in interest rates. In connection with managing the net interest spread, the Company may periodically enter into interest rate swaps or caps to minimize the effects of market interest rate fluctuations on the net interest spread. To the extent that the Company has outstanding floating rate borrowings or has elected to convert a portion of its borrowings from fixed rates to floating rates, the Company will be exposed to fluctuations in short-term interest rates.

~~During the~~On ~~six~~July ~~months ended October 31~~18, ~~2004~~2005, as a requirement of the FIARC commercial paper facility, the Company entered into ~~four~~ an interest rate cap ~~transactions~~transaction, with a strike ~~rates~~rate of 56%. The aggregate initial notional ~~amounts~~amount of the cap ~~caps~~was ~~were~~ $5518,~~834,429~~804 which ~~amortize~~amortizes over six years. The Company paid ~~an aggregate of~~ $~~676,000~~59 in ~~premiums~~premium to purchase ~~these~~this ~~caps~~cap. The interest rate ~~caps~~cap ~~were~~was not designated as ~~hedges~~a hedge, and accordingly, changes in the fair value of the interest rate caps were ~~are~~ recorded as an unrealized ~~gains~~ orloss ~~losses~~ and are reflected in net income. ~~As of October 31, 2004, the combined value of the interest rates caps were $438,246 and are recorded under other assets as interest rate derivative positions.~~ During the three and six months ended October 31, ~~2004~~2005, the Company recorded aan ~~combined~~ unrealized ~~loss~~ gain of $~~170,097~~23 and $~~237~~20,~~754~~ respectively, that is included as a separate ~~caption~~line ofunder other income. This requirement was eliminated as part of the facility’s renewal.

During fiscal year 2004, as a requirement of the FIARC commercial paper facility, the Company entered into various interest rate cap transactions at cap rates ranging from 6.5% to 7.5% with a notional balance that amortized over five to six year periods. The interest rate caps were not designated as hedges and, accordingly, changes in the fair value of the interest rate caps were recorded as unrealized gains or losses and reflected in net income. On December 2, 2003, the Company terminated all interest rate caps outstanding in exchange for proceeds of $356,000. The caps were terminated following the repayment of all outstandings under the FIARC facility following the issuance of the 2003-A Term Notes. As a result, a realized loss of $14,000 was incurred relative to the aggregate market value of the interest rate caps.

On June 1, 2001, the Company entered into interest rate swaps with an aggregate notional amount of $100 million and a maturity date of April 15, 2004. Under the terms of these swaps, the Company paid a floating rate based on one month LIBOR and received a fixed rate of 5.025%. Management elected to enter into these swap agreements to offset the uneconomical position of the existing pay fixed rate swap created by rapidly declining market interest rates. In connection with the decision to enter into the $100 million pay floating rate swap, the Company elected to change the designation of the $100 million pay fixed rate swap from a cash flow hedge and not account for the instrument as a hedge under SFAS No. 133. As a result, the change in fair value of the swaps is reflected in net income for periods subsequent to May 31, 2001.

Delinquency and Credit Loss Experience

The Company’s results of operations, financial condition and liquidity may be adversely affected by nonperforming receivables. The Company seeks to manage its risk of credit loss through (i) prudent credit evaluations, (ii) risk management activities, (iii) effective collection procedures, and (iv) by maximizing recoveries on defaulted loans. The allowance for credit losses of $2,728 as of October 31, 2006, and $2,332 as of April 30, 2006, as a percentage of Receivables Held for Investment of $428,416 as of October 31, 2006, and $368,878 as of April 30, 2006, was 0.6%.

28The Company considers a loan to be delinquent when the borrower fails to make a scheduled payment of principal and interest. Accrual of interest is suspended when the payment from the borrower is over 90 days past due. Generally, repossession procedures are initiated 60 to 90 days after the payment default.

~~evaluations,~~The ~~(ii)~~Company retains the credit risk associated with the receivables originated. The Company purchases ~~management~~credit ~~activities,~~enhancement ~~(iii)~~insurance ~~effective~~from ~~collection~~third ~~procedures,~~party ~~and~~insurers ~~(iv)~~which bycovers the risk of ~~maximizing~~loss ~~recoveries~~upon ondefault ~~defaulted~~and ~~loans~~certain other risks. The ~~allowance~~Company ~~for~~established ~~credit~~a ~~losses of~~captive ~~$2,311,040~~insurance assubsidiary ofto ~~October~~reinsure ~~31,~~certain ~~2004~~risks ~~and~~under ~~$2,199,386~~the ascredit ofenhancement insurance ~~April~~coverage 30for all receivables. In addition, ~~2004~~receivables asfinanced aunder the Auto Trust and FIARC ~~percentage~~commercial ofpaper ~~Receivables~~facilities ~~Held~~do not carry default insurance. Provisions for ~~Investment~~credit losses of $~~218~~2,~~022~~677 and $5,~~613~~195 asfor ofthe three and six months ended October 31, ~~2004~~ 2006 compared to $2,065 and $~~207~~3,~~489,339~~716 asfor ofthe ~~April~~three ~~30,~~and ~~2004~~six ~~was~~months ~~1.1%~~ended ~~and~~October ~~1.1%~~31, ~~respectively~~2005 have been recorded.

The Company considers a loan to be delinquent when the borrower fails to make a scheduled payment of principal and interest. Accrual of interest is suspended when the payment from the borrower is over 90 days past due. Generally, repossession procedures are initiated 90 to 120 days after the payment default.33

The Company ~~retains~~calculates the ~~credit~~ ~~risk~~allowance ~~associated~~for ~~with the receivables originated. The Company purchases~~ credit ~~enhancement~~losses ~~insurance~~in ~~from~~accordance ~~third~~with ~~party~~SFAS ~~insurers, which covers the risk of loss upon default and certain other risks~~No. ~~The Company established a captive~~ ~~insurance~~5, ~~subsidiary~~Accounting ~~to reinsure certain risks under the credit enhancement insurance coverage~~ for ~~all~~Contingencies. SFAS ~~receivables~~No. In ~~addition~~114, ~~receivables~~Accounting by ~~financed~~Creditors ~~under~~for ~~the~~Impairment ~~Auto~~of ~~Trust~~a ~~and~~Loan ~~FIARC commercial~~does ~~paper facilities do~~ not ~~carry~~apply ~~default~~to ~~insurance. Provisions for credit losses of $2,442,406~~loans ~~and~~currently ~~$4,884,511~~held ~~for~~by the ~~three~~Company ~~and~~because ~~six~~they ~~months~~are ~~ended~~comprised ~~October~~of ~~31,~~a ~~2004~~large ~~compared~~group toof ~~and~~smaller ~~$3,269,741~~balance ~~and~~homogenous ~~$6,661,704~~loans ~~for~~that ~~the~~are ~~three~~evaluated ~~and~~collectively ~~six months ended October 31,~~for ~~2004 have been recorded~~impairment.

The Company ~~calculates~~applies ~~the~~a systematic methodology in order to determine the amount of the allowance for credit losses. The specific methodology is a six-month migration analysis whereby the Company compares the aging status of each loan on a date which is six months prior to the reporting date, to the aging loan status as of the reporting date. These factors are then applied to the aging status of each loan at the reporting date in ~~accordance~~order ~~with~~to ~~SFAS~~calculate Nothe number of loans that are expected to migrate to impaired status. The 5estimated number of impairments is then multiplied by the estimated loss per loan, ~~Accounting~~which is based ~~for~~on ~~Contingencies. SFAS~~historical Noinformation. Effective the ~~114~~quarter ended April 30, ~~Accounting~~2005, the Company elected to increase its allowance for loan ~~Creditors~~losses against loans that were greater than 120 days past due and loans in which the collateral had been assigned for ~~Impairment~~repossession but had not yet been repossessed as of athe ~~Loan~~reporting date. ~~does~~The ~~not~~Company ~~apply~~believes tothat this increase is warranted in light of the change in federal bankruptcy laws enacted during the period and the recognition that the migration trends of severely delinquent loans ~~currently~~and ~~held~~loans bysubject to bankruptcy are expected to become more protracted. Based on this, the Company ~~because~~has ~~they~~assigned ~~are~~a specific ~~composed~~allowance against these loans equal to the outstanding balance of loans in these categories less the estimated recovery amount based on current data regarding liquidation of athe ~~large~~collateral ~~group~~and collection of ~~smaller~~any ~~balance~~additional payments. The ~~homogenous~~Company utilized its most recent recovery rates in order to assess fair value of these loans. For loans that are ~~evaluated~~not classified into these ~~collectively~~categories, ~~for~~the historical migration pattern is utilized in order to establish the estimated impairment. The allowance for credit losses is based on estimates and qualitative evaluations. Ultimate losses may vary from current estimates. These estimates are reviewed periodically and as adjustments, either positive or negative, become necessary, they are reported in earnings in the period they become known.

The ~~Company applies a~~ ~~systematic~~following ~~methodology~~table insets ~~order~~forth tocertain ~~determine~~information ~~the~~regarding ~~amount of~~ the ~~allowance for~~Company’s ~~credit~~delinquency ~~losses. The~~and ~~specific methodology utilized is a six~~charge-~~month~~off ~~migration~~experience ~~analysis~~over ~~whereby~~ the ~~Company compares the aging status of each loan from~~ six months prior to the aging loan status as of the reporting date. These factors are then applied to the aging status of each loan at the reporting date in order to calculate the number of loans that are expected to migrate to impaired status in the next six months. The estimated number of impairments is then multiplied by estimated loss per loan, which is based on historical information. The computed reserve is then compared to the amount recorded for adequacy. The Company compares the six-month ~~result to prior six-month~~ periods ~~to compare trends and evaluate any other internal or~~indicated ~~external~~(dollars factors that may affect collectibility. The allowance for credit losses is based on estimates and qualitative evaluations and ultimate losses will vary from current estimates. These estimates are reviewed periodically and as adjustments, either positive or negative, become necessary, are reported in ~~earnings~~ ~~in the period they become known.~~thousands):

The following table sets forth certain information regarding the Company’s delinquency and charge-off experience over its last two fiscal years (dollars in thousands):

	For the Six Months Ended October 31,
	2005					2006
	Number					Number
	of Loans		Amount			of Loans		Amount
Receivables Held for Investment:
Delinquent amount outstanding (1):
30 - 59 days	110		$	907		96		$	1,053
60 - 89 days	53		288			37		291
90 days or more	48		289			35		266
Total delinquencies	211		$	1,484		168		$	1,610
Total delinquencies as a percentage of outstanding receivables.	1.0	%	0.5		%	0.7	%	0.4		%
Net charge-offs as a percentage of average receivables outstanding during the period (2)			2.6		%			2.4		%

	As of or for the Six Months Ended October 31,
	2003					2004
	Number of Loans		Amount			Number of Loans		Amount
Receivables Held for Investment:
Delinquent amount outstanding(1):
30 - 59 days	274		$	2,467		284		$	2,879
60 - 89 days	139		1,280			80		895
90 days or more	350		3,333			215		1,948
Total delinquencies	763		$	7,080		579		$	5,722
Total delinquencies as a percentage of outstanding receivables.	4.3	%	3.2		%	3.5	%	2.6		%
Net charge-offs as a percentage of average receivables outstanding during the period(2)	5.9	%	4.6		%

(1) Delinquent amounts outstanding do not include loans in bankruptcy status since collection activity is limited and highly regulated for bankrupt accounts.

(2) The percentages have been annualized and are not necessarily indicative of the results for a full year.

The lower annualized charge-off rate results from an improving economic environment coupled with an increase in the Company’s direct to consumer lending program ~~and higher recovery rates on repossessions~~.

As of October 31, ~~2004~~2006, there were ~~409~~182 accounts totaling $32,~~951,168~~522 that were in bankruptcy status and were more than 30 days past due. As of October 31, ~~2003~~2005, there were ~~514~~ 460 accounts totaling $5,~~185,257~~280 that were in ~~bankruptcy status and were more than 30 days past due. As of October 31, 2004 and 2003, 91% and 90%, respectively, of the bankruptcy delinquencies filed for protection under Chapter 13.~~

bankruptcy status and were more than 30 days past due. As of October 31, 2006 and 2005, 86% of the bankruptcy delinquencies filed for protection under Chapter 13.

New Accounting Pronouncements

In ~~December 2003~~July 2006, the ~~American~~Financial ~~Institute~~Accounting ofStandards ~~Certified~~Board ~~Public~~(“FASB”) ~~Accountants~~ issued ~~Statement~~FASB ~~of Position~~Interpretation ~~(SOP) 03-3~~No. 48, Accounting for ~~Certain~~Uncertainty ~~Loans~~in orIncome Taxes—an ~~Debt~~Interpretation ~~Securities Acquired~~of inFASB aStatement ~~Transfer~~No. 109 ~~SOP~~(“FIN 48”), which ~~03-3~~clarifies ~~addresses~~ the accounting for ~~loans acquired~~uncertainty ~~through~~in aincome ~~transfer~~tax ~~(including~~positions. This aInterpretation ~~business~~requires ~~combination)~~ that ~~have differences~~the ~~between~~Company ~~their~~recognize ~~expected~~in ~~cash~~its ~~flows and their contractual cash flows,~~financial ~~due~~statements inthe ~~part~~impact toof ~~credit~~a ~~quality.~~tax ~~The~~position ~~SOP~~if ~~requires~~ that ~~the~~position ~~excess~~is ofmore ~~the~~likely ~~expected~~than ~~cash~~not ~~flows~~of atbeing ~~acquisition~~sustained toon beaudit, ~~collected~~based ~~over~~on the ~~acquirer’s~~technical ~~initial investment~~merits beof ~~recognized on a level-yield basis over~~ the ~~loan’s life~~position. ~~Any~~ ~~future~~The ~~revised~~provisions ~~estimate~~ of ~~cash~~FIN 48 ~~flows~~are ineffective ~~excess~~for of the ~~original~~Company ~~cash~~on ~~flows is~~August 1, ~~recognized~~2006, aswith athe ~~future~~cumulative ~~yield~~effect ~~adjustment.~~of ~~Future decreases in actual cash flows over~~ the ~~original~~change ~~expected cash flows are recognized as impairment and expensed immediately. Valuation allowances can not be created or “carried over”~~ in ~~the initial~~ accounting ~~for~~principle, ~~loans~~if ~~acquired that are within the scope of the SOP. SOP~~any, ~~03-3~~recorded isas ~~effective~~an ~~for~~adjustment ~~loans~~to ~~acquired~~opening inretained ~~fiscal years beginning after December 15, 2004~~earnings. The Company ~~does not~~is ~~anticipate~~currently ~~SOP~~evaluating ~~03-3~~the ~~will~~impact ~~have~~of aadopting ~~material~~FIN 48 ~~effect~~ on its financial position, ~~statements~~cash flows, and results of operations.

~~Forward~~ In ~~Looking~~February 2006, the ~~Information~~FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 and 140 (“SFAS 155”). This statement amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”), and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities and resolves issues addressed in SFAS 133 Implementation Issue No. D1, “Application of Statement 133 to Beneficial Interest in Securitized Financial Assets”. This Statement: (a) permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation; (b) clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS 133; (c) establishes a requirement to evaluate beneficial interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; (d) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and, (e) eliminates restrictions on a qualifying special-purpose entity’s ability to hold passive derivative financial instruments that pertain to beneficial interests that are or contain a derivative financial instrument. The standard also requires presentation within the financial statements that identifies those hybrid financial instruments for which the fair value election has been applied and information on the income statement impact of the changes in fair value of those instruments. The Company is required to apply SFAS 155 to all financial instruments acquired, issued or subject to a remeasurement event beginning May 1, 2007 although early adoption is permitted as of the beginning of an entity’s fiscal year. The provisions of SFAS 155 are not expected to have a financial statement impact at adoption; however, the standard could affect the future income recognition for securitized financial assets because there may be more embedded derivatives identified with changes in fair value recognized in net income.

~~Statements~~In ~~and~~March ~~financial~~2006, ~~discussion~~the ~~and~~FASB ~~analysis~~issued ~~included~~SFAS inNo. 156, ~~this~~“Accounting for ~~report~~Servicing ~~that~~of ~~are~~Financial ~~not historical~~Assets ~~are~~– ~~considered~~an toamendment beof ~~forward-looking~~FASB inStatement ~~nature~~No. ~~Forward-looking~~ 140” ~~statements~~(“SFAS ~~involve~~156”). aSFAS ~~number~~156 ofrequires ~~risks~~an ~~and~~entity ~~uncertainties~~to ~~that~~recognize ~~may~~a ~~cause~~servicing ~~actual~~asset or ~~results~~servicing toliability ~~differ~~each ~~materially~~time ~~from~~it ~~anticipated~~undertakes ~~results.~~an ~~Specific~~obligation ~~factors~~to ~~that~~service a ~~could~~financial ~~cause~~asset ~~such~~by ~~differences~~entering ~~include~~into ~~unexpected~~a ~~fluctuations~~servicing contract in ~~market~~specific ~~interest~~situations. ~~rates~~Additionally, ~~changes~~the inservicing ~~economic~~asset ~~conditions,~~or ~~changes~~servicing inliability ~~the~~shall ~~competition~~be ~~for~~initially measured ~~loans~~at fair value, orif practicable. SFAS 156 permits an entity to choose either the ~~inability~~amortization tomethod ~~renew~~or fair value measurement method for subsequent measurement of the servicing asset or ~~obtain~~servicing ~~financing~~liability. ~~Further~~SFAS ~~information~~156 ~~concerning~~is ~~risks~~effective ~~and~~for ~~uncertainties~~the fiscal year ending April 30, 2008. The Company is currently ~~included~~evaluating inthe ~~this~~impact ~~report~~of adopting SFAS 156 on its financial position, cash flows, and ~~the~~results ~~company’s~~of ~~other~~operations; however it is not expected to ~~reports~~have ~~filed~~a ~~with~~material ~~the~~impact ~~Securities~~on ~~and~~our ~~Exchange~~consolidated ~~Commission~~financial position, results of operations or cash flows.

~~The Company~~In ~~believes~~September 2006, the ~~factors~~Securities ~~discussed~~and inExchange Commission ~~its~~issued ~~reports~~Staff ~~are~~Accounting ~~important~~Bulletin ~~factors that~~No. ~~could~~108, ~~cause~~“Considering the ~~actual~~Effects ~~results~~of toPrior ~~differ~~Year ~~materially~~Misstatements ~~from~~when ~~those~~Quantifying ~~expressed~~Misstatements in ~~any~~Current ~~forward~~Year ~~looking~~Financial ~~statement~~Statements” ~~made~~(“SAB ~~herein~~108”). orSAB ~~elsewhere~~108 byprovides interpretive ~~the~~guidance ~~Company or~~ on ~~its behalf. The~~how ~~factors~~the ~~listed~~effects ~~are not necessarily all~~ of the ~~important~~carryover ~~factors. Unpredictable~~ or ~~unknown~~reversal ~~factors~~of ~~not~~prior year ~~discussed~~misstatements ~~could~~should ~~also~~be ~~have~~considered ~~material adverse~~in ~~effects~~quantifying ona ~~actual~~current ~~results. The~~year ~~Company~~misstatement. ~~does~~Under ~~not~~this ~~intend~~bulletin, toregistrants ~~update~~should ~~its~~quantify ~~description~~errors ofusing both ~~important~~a ~~factors~~balance ~~each time~~sheet aand ~~potential~~an ~~important~~income ~~factor~~statement ~~arises. The~~approach ~~Company~~and ~~advises~~evaluate ~~its~~whether either ~~stockholders~~approach ~~that~~results ~~they~~in ~~should: (1)~~quantifying bea ~~aware~~misstatement that, ~~important~~when ~~factors~~all ~~not~~relevant ~~described~~quantitative ~~herein~~and ~~could~~qualitative ~~affect~~factors ~~the~~are ~~accuracy~~considered, ofis ~~our~~material. ~~forward~~SAB ~~looking~~108 ~~statements,~~is ~~and~~effective ~~(2)~~for ~~use~~the ~~caution~~fiscal ~~and~~year ~~common~~ending ~~sense~~April ~~when~~30, ~~analyzing~~2007. The ~~our~~Company ~~forward~~is ~~looking statements~~currently inevaluating ~~this document or elsewhere.~~ the ~~All~~impact of ~~such~~adopting ~~forward~~SAB ~~looking~~108 ~~statements~~on ~~are~~its ~~qualified~~financial inposition, ~~their~~cash ~~entirety by~~flows, ~~this~~and ~~cautionary~~results of ~~statement~~operations.

~~ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~35

~~The~~ITEM ~~market risk discussion and the estimated amounts generated from the analysis that follows are forward-looking statements of market risk assuming certain adverse market conditions occur~~3. ~~Actual~~QUANTITATIVE ~~results in~~AND ~~the~~QUALITATIVE ~~future~~DISCLOSURES ~~may~~ABOUT ~~differ~~MARKET ~~materially due to changes in the Company’s product and debt mix, developments in the financial markets, and further utilization by the company of risk-mitigating strategies such as hedging.~~RISK

The ~~Company’s~~market ~~operating revenues are~~risk ~~derived~~discussion ~~almost~~and ~~entirely from~~ the ~~collection~~estimated ofamounts ~~interest~~generated onfrom the ~~receivables~~analysis ~~it retains and its primary expense is the interest~~ that ~~it pays on borrowings~~follows ~~incurred~~are toforward-looking ~~purchase~~statements ~~and~~of ~~retain~~market ~~such~~risk ~~receivables.~~assuming ~~The~~certain ~~Company’s~~adverse ~~credit~~market ~~facilities~~conditions ~~bear~~occur. ~~interest~~Actual atresults ~~floating~~in ~~rates~~the ~~which~~future ~~are~~may ~~reset~~differ onmaterially adue ~~short-term~~to ~~basis,~~changes ~~whereas~~in ~~its~~the ~~receivables~~Company’s ~~bear~~product ~~interest~~and atdebt ~~fixed~~mix, ~~rates~~developments ~~which~~in dothe ~~not~~financial ~~generally~~markets, ~~vary~~and ~~with~~further ~~changes~~utilization inby ~~interest~~the ~~rates.~~company ~~The~~of ~~Company~~risk-mitigating ~~is therefore exposed~~strategies ~~primarily~~such toas ~~market risks associated with movements in interest rates on~~hedging.

30The Company’s operating revenues are derived almost entirely from the collection of interest on the receivables it retains and its primary expense is the interest that it pays on borrowings incurred to purchase and retain such receivables. The Company’s credit facilities bear interest at floating rates which are reset on a short-term basis, whereas its receivables bear interest at fixed rates which do not generally vary with changes in interest rates. The Company is therefore exposed primarily to market risks associated with movements in interest rates on its credit facilities. The Company believes that it takes the necessary steps to appropriately reduce the potential impact of interest rate increases on the Company’s financial position and operating performance.

~~its~~The Company relies almost exclusively on revolving credit facilities. ~~The~~to ~~Company~~fund ~~believes~~its ~~that~~origination itof receivables. ~~takes~~Periodically, the ~~necessary~~Company ~~steps~~will ~~to appropriately~~transfer ~~reduce~~receivables ~~the~~from ~~potential~~a revolving ~~impact~~to ofa ~~interest~~term ~~rate~~credit ~~increases~~facility. onCurrently all of the Company’s ~~financial~~credit facilities ~~position~~in ~~and~~bear ~~operating~~interest ~~performance~~at floating rates tied to either a commercial paper index or LIBOR.

~~The~~As of October 31, 2006, the Company ~~relies~~had $206,090 ~~almost~~of ~~exclusively~~floating onrate secured debt outstanding under the FIRC warehouse and ~~revolving~~working ~~credit~~capital facilities. For toevery ~~fund~~1% increase ~~its~~in ~~origination~~LIBOR ofannual ~~receivables.~~after-tax earnings would decrease by approximately ~~Periodically~~$1,309 assuming the Company ~~will~~maintains ~~transfer~~a ~~receivables~~level ~~from~~amount aof ~~revolving~~floating torate adebt ~~term~~and ~~credit~~assuming ~~facility.~~an ~~Currently~~immediate ~~all~~increase in rates. As of October 31, 2005, the Company’s ~~credit~~had ~~facilities~~$153,096 inof ~~bear~~floating rate ~~interest~~secured atdebt ~~floating~~outstanding ~~rates~~net ~~tied~~of toswap ~~either~~and acap agreements. For every 1% increase in commercial paper ~~index~~rates or LIBOR, annual after-tax earnings would decrease by approximately $972 assuming the Company maintains a level amount of floating rate debt and assuming an immediate increase in rates.

~~As of~~Forward ~~October~~Looking 31, 2004, the Company had $104.9 million of floating rate secured debt outstanding under the FIRC warehouse and working capital facilities. For every 1% increase in LIBOR annual after-tax earnings would decrease by approximately $.7 million assuming the Company maintains a level amount of floating rate debt and assuming an immediate increase in rates. As of October 31, 2003, the Company had $168.5 million of floating rate secured debt outstanding net of swap and cap agreements. For every 1% increase in commercial paper rates or LIBOR, annual after-tax earnings would decrease by approximately $1.1 million assuming the Company maintains a level amount of floating rate debt and assuming an immediate increase in rates.Information

~~ITEM~~Statements 4and financial discussion and analysis included in this report that are not historical are considered to be forward-looking in nature. ~~CONTROLS~~ ~~AND~~Forward-looking ~~PROCEDURES~~statements involve a number of risks and uncertainties that may cause actual results to differ materially from anticipated results. Specific factors that could cause such differences include unexpected fluctuations in market interest rates, changes in economic conditions, changes in the competition for loans, or the inability to renew or obtain financing. Further information concerning risks and uncertainties is included in this report and the company’s other reports filed with the Securities and Exchange Commission.

InThe Company ~~accordance~~believes ~~with~~the ~~Exchange~~factors ~~Act~~discussed ~~Rules~~in ~~13a-15~~its ~~and~~reports ~~15d-15,~~are weimportant factors ~~carried~~that ~~out~~could ancause ~~evaluation,~~actual ~~under~~results ~~the~~to ~~supervision~~differ ~~and~~materially ~~with~~from ~~the~~those ~~participation~~expressed ofin ~~management,~~any ~~including~~forward ~~our~~looking ~~Chief~~statement ~~Executive~~made ~~Officer~~herein ~~and~~or ~~Chief~~elsewhere ~~Financial~~by ~~Officer, of~~ the ~~effectiveness~~Company ofor ~~our~~on ~~disclosure~~its behalf. The ~~controls~~factors ~~and~~listed ~~procedures~~are asnot necessarily all of the ~~end~~important offactors. ~~the~~Unpredictable ~~period~~or ~~covered~~unknown byfactors ~~this~~not ~~report. Based on~~discussed ~~that~~could ~~evaluation,~~also ~~our~~have ~~Chief~~material adverse ~~Executive~~effects ~~Officer~~on ~~and~~actual ~~Chief Financial Officer~~results. The ~~concluded~~Company ~~that~~does ~~our~~not ~~disclosure~~intend ~~controls~~to ~~and~~update ~~procedures~~its ~~were~~description ~~effective~~of asimportant offactors each ~~October~~time ~~31,~~a ~~2004~~potential toimportant ~~provide~~factor ~~reasonable~~arises. The ~~assurance~~Company advises its stockholders that ~~information~~they ~~required~~should: (1) to be ~~disclosed~~aware inthat ~~our~~important ~~reports~~factors ~~filed~~not described orherein ~~submitted~~could ~~under~~affect the ~~Exchange~~accuracy ~~Act~~of ~~is recorded,~~our ~~processed~~forward looking statements, and ~~summarized~~(2) use caution and ~~reported~~common ~~within~~sense ~~the~~when ~~time~~analyzing ~~periods~~our ~~specified~~forward looking statements in ~~the~~this ~~Securities~~document ~~and~~or ~~Exchange~~elsewhere. All ~~Commission’s~~of ~~rules~~such ~~and~~forward ~~forms~~looking statements are qualified in their entirety by this cautionary statement.

~~There~~ITEM ~~has~~4. ~~been~~CONTROLS noAND change in our internal controls over financial reporting that occurred during the three months ended October 31, 2004 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.PROCEDURES

In accordance with Exchange Act Rules 13a-15 and 15d-15, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of October 31, 2006 to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

~~PART II~~36

~~OTHER~~There ~~INFORMATION~~has been no change in our internal controls over financial reporting that occurred during the three months ended October 31, 2006 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

~~ITEM~~PART 5. II – OTHER INFORMATION

OnITEM November 16, 2004, the Company received a letter from NASDAQ, indicating that the NASDAQ is reviewing the Company’s eligibility for listing on The NASDAQ National Market as a consequence of failure to meet the minimum 400 round lot shareholder requirement of Marketplace Rule 4450(a)(4). In ~~the~~SUBMISSION ~~letter,~~OF ~~NASDAQ~~MATTERS ~~states~~TO ~~that~~A ~~the~~VOTE ~~Company~~OF ~~had~~SECURITY until December 1, 2004, to provide an acceptable plan to regain compliance, or the staff will initiate delisting of the Company’s common stock. As a result of this action, and after considering the costs and benefits associated with the continued listing on The NASDAQ National Market, the Company has elected to delist itself from The NASDAQ National Market. This decision in no way affects the Company’s status as a public company. The Company anticipates that its shares will continue to be traded in the over-the-counter bulletin board market. The Company will continue to file Forms 10-Q, 10-K, and 8-K with the Securities and Exchange Commission and mail an annual report to stockholders following each fiscal year end.HOLDERS

~~ITEM~~On September 6~~. EXHIBITS~~, ~~AND~~2006, the Company held its Annual Meeting of Shareholders to elect ~~REPORTS~~the ONCompany’s ~~FORM~~Board ~~8-K~~of Directors for a term of one year, (ii) approve a 200,000 share increase in the number of shares available for issuance under the of the 2005 Employee Stock Option Plan and receive authorization to make available 200,000 shares of common stock for issuance under the plan, and (iii) ratify the appointment of Grant Thornton LLP as the Company’s independent auditors. Below are the results of the vote:

~~(a) Exhibits~~Proposal Number 1: Election of Directors of the Company

31.1 Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002.

	For	Against	Abstain	Broker Non-Votes

Tommy A. Moore, Jr.	3,849,947	535,213	0	0

Robert L. Clarke	4,339,713	45,447	0	0

W.A. Stockard, Jr.	4,339,713	45,447	0	0

Roberto Marchesini	3,858,947	526,213	0	0

Seymour M. Jacobs	4,339,713	45,447	0	0

John H. Buck	4,339,713	45,447	0	0

Daniel M. Theriault	4,339,713	45,447	0	0

~~31.~~Proposal Number 2 ~~Certification~~: ofApprove ~~Chief~~a ~~Financial~~200,000 ~~Officer~~share ~~pursuant~~increase toin ~~section~~the number ~~302~~of shares available for issuance under the of the ~~Sarbanes-Oxley~~ ~~Act~~2005 ofEmployee ~~2002.~~Stock Option Plan

32.1 Certification of Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

For	Against	Abstain	Broker Non-Votes

2,941,771	400,831	0	1,042,558

~~32.2 Certification~~Proposal ofNumber ~~Chief~~3: Appointment ~~Financial~~of ~~Officer~~Grant ~~pursuant~~Thornton toLLP ~~section 906 of the~~as ~~Sarbanes-Oxley~~independent ~~Act of 2002.~~auditors

Filed with this 10-Q

For	Against	Abstain	Broker Non-Votes

3,979,926	300	404,934	0

~~(b) Reports on Form 8-K~~37

~~Form~~ITEM ~~8-K~~6. ~~filed September~~EXHIBITS ~~13,~~AND ~~2004,~~REPORTS ~~press~~ON ~~release~~FORM ~~announcing the quarter end July 31, 2004 financial results.~~8-K

~~Form 8-K filed November 19, 2004, press release announcing preliminary results for the quarter end October 31, 2004 and~~ (a ~~NASDAQ notice of potential delisting from The National Market Exchange.~~) Exhibits

SIGNATURES

10.131(w)		Amendment No. 1 to Second Amendment and Restated Security Agreement dated October 11, 2006, between First Investors Auto Receivables Corp., First Investors Financial Services, Inc., First Investors Servicing Corporation, Variable Funding Capital Company LLC, Wachovia Capital Markets, LLC, and Wells Fargo Bank, National Association.

31.1		Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

		Filed with this 10-Q

~~Pursuant to~~(b) Reports ~~the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed~~ on ~~its~~Form ~~behalf by the undersigned thereunto duly authorized.~~8-K

		First Investors Financial Services Group, Inc.
		(Registrant)
Date: December 13, 2004	By:	/s/ TOMMY A. MOORE, JR.
		Tommy A. Moore, Jr.
		President and Chief Executive Officer
Date: December 13, 2004	By:	/s/ BENNIE H. DUCK
		Bennie H. Duck
		Secretary, Treasurer and Chief Financial Officer

Form 8-K filed September 7, 2006, press release announcing the quarter end July 31, 2006 financial results.

32SIGNATURES

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 Investors Financial Services Group, Inc.
	(Registrant)

Date: December 13, 2006	By: /s/TOMMY A. MOORE, JR.
	Tommy A. Moore, Jr.
	President and Chief Executive Officer

Date: December 13, 2006	By: /s/BENNIE H. DUCK
	Bennie H. Duck
	Secretary, Treasurer and Chief Financial Officer

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