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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Commission File Number 0-26686

First Investors Financial Services Group, Inc.
(Exact Name of Registrant as Specified in its Charter)

        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    No o

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

FIRST INVESTORS FINANCIAL SERVICES GROUP, INC.
AND SUBSIDIARIES

FORM 10-Q

OCTOBER 31, 2002

TABLE OF CONTENTS

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FIRST INVESTORS FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS—APRIL 30, 2002 AND OCTOBER 31, 2002

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

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FIRST INVESTORS FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months and Six Months Ended October 31, 2001 and 2002

(Unaudited)

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

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FIRST INVESTORS FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY AND
COMPREHENSIVE INCOME

For the Six Months Ended October 31, 2002

(Unaudited)

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

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FIRST INVESTORS FINANCIAL SERVICES GROUP, INC., AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended October 31, 2001 and 2002

(Unaudited)

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

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FIRST INVESTORS FINANCIAL SERVICES GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

October 31, 2002

1.    The Company

        Organization.    First Investors Financial Services Group, Inc. (First Investors) together with its wholly- and majority-owned subsidiaries (collectively referred to as the Company) is principally involved in the business of acquiring and holding for investment retail installment contracts and promissory notes secured by new and used automobiles and light trucks (receivables) originated by factory authorized franchised dealers. As of October 31, 2002, approximately 26 percent of Receivables Held for Investment had been originated in Texas. The Company currently operates in 28 states.

        On October 2, 1998, the Company completed the acquisition of First Investors Servicing Corporation (FISC) formerly known as Auto Lenders Acceptance Corporation. Headquartered in Atlanta, Georgia, FISC was engaged in essentially the same business as the Company and additionally performs servicing and collection activities on a portfolio of receivables acquired for investment. As a result of the acquisition, the Company increased the total dollar value on its balance sheet of receivables, acquired an interest in certain asset securitizations and acquired certain servicing rights along with furniture, fixtures, equipment and technology to perform the servicing and collection functions for the portfolio of receivables under management. The Company performs servicing and collection functions on loans originated from 31 states on a managed receivables portfolio of $213 million as of October 31, 2002.

        On August 8, 2000, the Company entered into a partnership agreement whereby a subsidiary of the Company is the general partner owning 70 percent of the partnership assets and First Union Investors, Inc. serves as the limited partner and owns 30 percent of the partnership assets (the "Partnership"). 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.

2.    Interim Financial Information

        Basis of Presentation.    The consolidated financial statements include the accounts of First Investors and its wholly- and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

        The results for the interim periods are not necessarily indicative of the results of operations that may be expected for the fiscal year. In 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, 2002, and the results of its operations for the three and six months ended October 31, 2001 and 2002, and its cash flows for the six months ended October 31, 2001 and 2002.

        The consolidated financial statements for the interim periods have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information not misleading. These financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's 2002 Annual Report on Form 10-K/A filed November 29, 2002.

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        Treasury Stock.    On December 14, 2001, the Board of Directors authorized the Company to repurchase up to 5% of the Company's outstanding common stock. During the quarter ended January 31, 2002, 170,000 shares were repurchased under this authorization at an average price of $3.03 and during the quarter ended July 31, 2002, 370,400 shares were repurchased at an average price of $3.40. There has been no other repurchase activity.

        Reclassifications.    Certain reclassifications have been made to the fiscal 2002 amounts to conform with the fiscal 2003 presentation.

3.    Receivables Held for Investment

        Net receivables consisted of the following:

        Activity in the allowance for credit losses was as follows:

4.    Receivables Acquired for Investment

        Receivables Acquired for Investment are comprised of loans previously originated by Auto Lenders Acceptance Corporation and include a portfolio of warehouse loans and a portfolio of loans that were previously securitized. The securitized loans were subsequently redeemed and funded through the FIACC credit facility. These loans that were purchased at a discount relating to credit quality were included in the balance sheet amounts of Receivables Acquired for Investment as follows as of April 30, 2002 and October 31, 2002:

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        The carrying amount of Receivables Acquired for Investment is net of accretable yield and nonaccretable difference. Nonaccretable difference represents contractual principal and interest payments that the Company has determined that it would be unable to collect.

        Nonaccretable difference eliminations represent contractual principal and interest amounts on loans charged-off for the period ended October 31, 2002. The increase in accretable yield results from slight improvement in forecasted loss rates coupled with an increase the remaining term of the underlying receivables. Since the loans are liquidating at a slower pace than anticipated, the cash flow projection model must be extended and accretable yield must be provided for the extended periods.

5.    Debt

        The Company finances the acquisition of its receivables portfolio through two warehouse credit facilities. The Company's credit facilities provide for one-year 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 January 2000 and January 2002, the Company issued $168 million and $159 million, respectively, in asset-backed notes ("Term Notes") secured by discrete pools of receivables. Proceeds from the two note issuances were used to repay outstanding borrowings under the various revolving credit facilities. 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, dealer fees and other comprehensive income (loss) amortization was 5.1% and 5.3% for the three-month and six-month periods ending October 31, 2002, respectively. The weighted average interest rate for the Company's secured borrowings including the effect of program fees, dealer fees and derivative instruments was 5.9% and 6.3% for the three-month and six-month periods ending October 31, 2001, respectively.

        FIRC Credit Facility.    The primary source of initial acquisition financing for receivables has been provided through a syndicated warehouse credit facility agented by Wachovia Securities. The borrowing base is defined as the sum of the principal balance of the receivables pledged and the amount on deposit with the Company to fund receivables to be acquired. The Company is required to maintain a cash reserve account based on a percentage which varies based on the origination source of the receivables securing the facility. Borrowings under the FIRC credit facility bear interest at a rate selected by the Company at the time of the advance of either the base rate, defined as the higher of the prime rate or the federal funds rate plus .5 percent, the LIBOR rate plus .5 percent, or a rate agreed to by the Company and the banks. The facility also provides for the payment of a fee of ..25 percent per annum based on the total committed amount.

        On December 7, 2001, the Company entered into an agreement with Wachovia Securities, as agent, to extend the maturity date of the facility until December 5, 2002. In conjunction with this renewal, Wachovia Securities assumed the role of agent and increased its commitment to $50 million from

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$20 million. Additionally, the total commitment was increased to $75 million on November 15, 2002 to accommodate higher originations. On December 5, 2002, the maturity date of the facility was extended to December 4, 2003. Under the terms of the renewal, the facility will revert back to $50 million on June 30, 2003 based on the anticipated issuance of additional asset-backed notes which will decrease the borrowings below the reduced facility limit. There were no other material changes to the terms and conditions of the facility. Under the renewal mechanics of the facility, should the lenders elect not to renew the facility beyond December 5, 2003, the facility would convert to a term loan facility which would mature six months thereafter and amortize monthly in accordance with the borrowing base with any remaining balance due at maturity. Borrowings under the FIRC credit facility were $28,610,000 and $41,960,000 at April 30, 2002 and October 31, 2002, respectively.

        The Company presently intends to seek a renewal of the facility from its lenders prior to maturity. 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 were not renewed however, or if material changes were made to its terms and conditions, it could have a material adverse effect on the Company.

        FIARC Commercial Paper Facility.    The Company has indirect access to the commercial paper market through a commercial paper conduit facility provided by Variable Funding Capital Corporation (VFCC), a commercial paper conduit administered by Wachovia Securities (the "FIARC commercial paper facility"). Receivables are transferred periodically from the FIRC credit facility to FIARC commercial paper facility through the assignment of an undivided interest in a specified group of receivables. VFCC issues commercial paper (indirectly secured by the receivables), the proceeds of which are used to repay the FIRC credit facility.

        The financing is provided to a special-purpose, wholly-owned subsidiary of the Company, FIARC. Credit enhancement for the $150 million facility is provided to the commercial paper investors by a surety bond issued by MBIA Insurance Corporation. The Company is not a guarantor of, or otherwise a party to, such commercial paper. Borrowings under the commercial paper facility bear interest at the commercial paper rate plus a borrowing spread equal to .30 percent per annum. Additionally, the agreement provides for additional fees based on the unused amount of the facility and dealer fees associated with the issuance of the commercial paper. A surety bond premium equal to .35 percent per annum is assessed based on the outstanding borrowings under the facility. A one percent cash reserve must be maintained as additional credit support for the facility. At October 31, 2002, the Company had borrowings of $26,411,016 outstanding under the commercial paper facility. The Company had no outstanding borrowings under the FIARC facility as of April 30, 2002.

        The FIARC commercial paper facility expired on January 12, 2002. In conjunction with the renewal of the facility to January 13, 2003 the facility commitment was assigned from Enterprise Funding Corporation, a commercial paper conduit administered by Bank of America, to VFCC. No other material changes were made to the facility in conjunction with the assignment to VFCC.

        If the facility was not extended beyond the maturity date, receivables pledged, as collateral would be allowed to amortize; however, no new receivables would be allowed to transfer from the FIRC credit facility. The Company presently intends to seek a renewal of the facility from its lenders prior to maturity. 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 were not renewed however, or if material changes were made to its terms and conditions, it could have a material adverse effect on the Company.

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        FIACC Commercial Paper Facility.    On January 1, 1998, FIACC entered into a $25 million commercial paper conduit facility with Variable Funding Capital Corporation ("VFCC"), a commercial paper conduit administered by Wachovia Securities, (the FIACC commercial paper facility"), to fund the acquisition of additional receivables generated under certain of the Company's financing programs. FIACC acquired receivables from the Company and may borrow up to 88% of the face amount of receivables, which are pledged as collateral for the commercial paper borrowings. VFCC funds the advance to FIACC through the issuance of commercial paper (indirectly secured by the receivables) to institutional or public investors. The Company is not a guarantor of, or otherwise a party to, such commercial paper. The Company's interest cost is based on VFCC's commercial paper rates for specific maturities plus .55 percent. At April 30, 2002 and October 31, 2002, borrowings were $2,603,433 and $465,087, respectively, under the FIACC c