United PanAm Financial Corp. Announces Second Quarter 2010 Results

IRVINE, Calif.--United PanAm Financial Corp. (UPFC)(Pink Sheets:UPFC) today announced results for its second quarter ended June 30, 2010.

Results for the Period Ended June 30, 2010

For the quarter ended June 30, 2010, UPFC reported a net loss of $1.3 million, compared to net income of $941,000 for the same period a year ago. Interest income decreased to $10.9 million for the quarter ended June 30, 2010 from $34.5 million for the same period a year ago. UPFC reported a net loss of $0.09 per diluted share for the quarter ended June 30, 2010 compared to net income of $0.06 per diluted share for the same period a year ago.

On May 10, 2010, UPFC, by and through its wholly-owned subsidiary United Auto Credit Corporation (ā€œUACCā€???), entered into a transaction with Santander Consumer USA Inc. (ā€œSantanderā€???) pursuant to which UACC transferred and sold to Santander the servicing rights and residual interests in its outstanding securitization transactions. In addition, Santander paid UACC to surrender its option to repurchase certain loans previously sold to Santander pursuant to the MayĀ 2009 transaction between the two companies. UACC also transferred the servicing of those loans to Santander.

Cash proceeds received by UPFC in connection with the consummation of these transactions totaled $58.6 million. As a result of this transaction, UPFC has significantly reduced its automobile loan receivables portfolio to $41.9 million as of June 30, 2010 from $395.8 million at December 31, 2009. The current loan portfolio size negatively affects the Companyā€™s ability to generate sufficient interest income to cover operating expenses.

UPFCā€™s reported net loss for the quarter ended June 30, 2010 includes an after-tax gain on sale of $6.3 million, or $0.41 per diluted share, which was partially offset with an after-tax charge of $5.8 million, or $0.38 per diluted share, for restructuring charges associated with branch closures and other non-recurring charges, including an adjustment to its deferred tax asset.

UPFC has consolidated servicing of all automobile installment sales contracts to its Hurst, Texas office and continues to purchase automobile installment sales contracts through its regional underwriting offices and field marketing staff. UPFC purchased approximately $19.1 million of automobile installment sales contracts for the three months ended June 30, 2010 and $32.5 million for the six months ended June 30, 2010.

For the six months ended June 30, 2010, UPFC reported a net loss of $2.6 million, compared to a net loss of $3.0 million for the same period a year ago. For the six months ended June 30, 2010 interest income decreased to $33.4 million from $75.3 million for the same period a year ago primarily as a result of a reduction in outstanding receivables. UPFC reported a net loss of $0.17 per diluted share for the six months ended June 30, 2010, compared to a net loss of $0.19 per diluted share for the same period a year ago. The reported net loss for the six months ended June 30, 2010 includes an after-tax charge of $6.9 million, or $0.45 per diluted share, for restructuring charges associated with branch closures and other non-recurring charges, including an adjustment to its deferred tax asset. The reported net loss for the six months ended June 30, 2009 included an after-tax charge of $5.4 million, or $0.34 per diluted share, for restructuring charges associated with branch closures and other non-recurring charges.

United PanAm Financial Corp.

UPFC is a specialty finance company engaged in automobile finance, which includes the purchasing and servicing of automobile installment sales contracts from independent and franchised dealers of used automobiles. UPFC conducts its automobile finance business through its wholly-owned subsidiary, United Auto Credit Corporation.

Forward Looking Statements

Any statements set forth above as well as some oral statements by our officials to securities analysts and shareholders during presentations about us are ā€œforward-looking statements.ā€??? Statements which are predictive in nature, which depend upon or refer to future events or conditions, or which include words such as ā€œexpects,ā€??? ā€œanticipates,ā€??? ā€œintends,ā€??? ā€œplans,ā€??? ā€œbelieves,ā€??? ā€œestimates,ā€??? ā€œhopes,ā€??? ā€œassumes,ā€??? ā€œmay,ā€??? ā€œproject,ā€??? ā€œwillā€??? and similar expressions constitute forward-looking statements. In addition, any statements concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible future actions, which may be provided by management, are also forward-looking statements. Forward-looking statements are based upon expectations and projections about future events and are subject to assumptions, risks and uncertainties about, among other things, our company and economic and market factors. Actual events and results may differ materially from those expressed or forecasted in the forward-looking statements due to a number of factors. The principal factors that could cause our actual performance and future events and actions to differ materially from such forward-looking statements include, but are not limited to, our dependence on securitizations, our need for substantial liquidity to run our business, loans we made to credit-impaired borrowers, reliance on operational systems and controls and key employees, competitive pressure we face, changes in the interest rate environment, general economic conditions, the effects of accounting changes, inability to manage consolidating operations and other factors or conditions. Our past performance and past or present economic conditions are not indicative of our future performance or of future economic conditions. Undue reliance should not be placed on forward-looking statements. In addition, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events or changes to projections over time unless required by federal securities law.

United PanAm Financial Corp. and Subsidiaries

Consolidated Statements of Financial Condition

June 30,

December 31,

2010

2009

(Dollars in thousands)

Assets

Cash

456

40,989

Short term investments

86,691

Cash and cash equivalents

87,147

40,989

Restricted cash

34,822

Loans

41,854

395,775

Allowance for loan losses

(5,138

)

(46,888

)

Loans, net

36,715

348,887

Premises and equipment, net

2,373

3,056

Interest receivable

533

4,462

Other assets

25,594

40,318

Total assets

152,363

472,534

Liabilities and Shareholdersā€™ Equity

Securitization notes payable

198,577

Term facility - Santander Consumer USA Inc.

121,057

Junior subordinated debentures

10,310

Accrued expenses and other liabilities

9,930

7,329

Total liabilities

20,240

337,274

Preferred stock (no par value):

Authorized, 2,000,000 shares; no shares
issued and outstanding

Common stock (no par value):

Authorized, 30,000,000 shares; 15,288,782 and 15,484,680
shares issued and outstanding at June 30, 2010
and December 31, 2009, respectively

49,502

50,016

Retained earnings

82,621

85,244

Total shareholdersā€™ equity

132,123

135,260

Total liabilities and shareholdersā€™ equity

152,363

472,534

Ā
United PanAm Financial Corp. and Subsidiaries
Consolidated Statements of Operations
Ā
Ā
(In thousands, except per share data)	Ā	Ā	Ā	Ā	Ā	Three Months Ended June 30, Ā										Ā	Ā	Ā	Ā	Ā	Six Months Ended June 30, Ā
						Ā	2010	Ā	Ā	Ā	Ā	Ā	Ā	Ā	2009						Ā	2010	Ā	Ā	Ā	Ā	Ā	Ā	Ā	2009	Ā
Interest Income
Loans						$	10,902							$	34,404						$	33,389							$	75,093
Short term investments and restricted cash						Ā	18	Ā						Ā	49						Ā	25	Ā						Ā	177	Ā
Total interest income						Ā	10,920	Ā						Ā	34,453						Ā	33,415	Ā						Ā	75,270	Ā
Interest Expense
Securitization notes payable							2,085								5,116							5,054								11,061
Term facility and warehouse line of credit - Deutsche Bank							-								2,207							-								7,474
Term facility - Santander Consumer USA Inc.							1,750								3,384							5,085								3,384
Other interest expense						Ā	85	Ā						Ā	106						Ā	167	Ā						Ā	211	Ā
Total interest expense						Ā	3,920	Ā						Ā	10,813						Ā	10,306	Ā						Ā	22,130	Ā
Net interest income							7,000								23,640							23,109								53,140
Provision for loan losses						Ā	3,096	Ā						Ā	8,287						Ā	9,751	Ā						Ā	22,542	Ā
Net interest income after provision for loan losses						Ā	3,904	Ā						Ā	15,353						Ā	13,357	Ā						Ā	30,598	Ā
																													Ā
Non-interest Income							10,670								589							12,300								1,214
																													Ā
Non-interest Expense
Compensation and benefits							5,178								7,570							12,732								17,632
Occupancy							724								1,117							1,635								2,586
Other non-interest expense							2,230								3,748							5,063								7,884
Restructuring charges							4,259								1,380							5,557								7,868
Other non-recurring charges						Ā	2,365	Ā						Ā	633						Ā	3,008	Ā						Ā	633	Ā
Total non-interest expense						Ā	14,756	Ā						Ā	14,448						Ā	27,994	Ā						Ā	36,603	Ā
																													Ā
(Loss) Income before income taxes							(182	)							1,494							(2,337	)							(4,791	)
Income tax expense (benefit)						Ā	1,128	Ā						Ā	553						Ā	287	Ā						Ā	(1,773	)
Net Loss						$	(1,310	)						$	941						$	(2,624	)						$	(3,018	)
Loss per share-basic:						Ā								Ā							Ā								Ā
Net (Loss) Income						$	(0.09	)						$	0.06						$	(0.17	)						$	(0.19	)
Weighted average basic shares outstanding						Ā	15,289	Ā						Ā	15,745						Ā	15,289	Ā						Ā	15,747	Ā
Loss per share-diluted:						Ā								Ā							Ā								Ā
Net (Loss) Income						$	(0.09	)						$	0.06						$	(0.17	)						$	(0.19	)
Weighted average diluted shares outstanding						Ā	15,269	Ā						Ā	15,819						Ā	15,269	Ā						Ā	15,747	Ā
																															Ā

Ā
United PanAm Financial Corp. and Subsidiaries
Consolidated Statement of Changes in Shareholderā€™s Equity
Ā
	Ā	Ā	Ā	Ā			Ā	Ā	Ā	Ā	Ā				Ā	Ā	Ā	Ā	Ā				Ā	Ā	Ā	Ā	Ā	Total
					Number							Common								Retained								Shareholdersā€™
					of Shares							Stock								Earnings								Equity
																												Ā
					(Dollars in thousands)
																												Ā
Balance, December 31, 2009					15,484,680							$	50,015							$	85,245							$	135,260
Net loss					-								-								(2,624	)							(2,624	)
Repurchase of common stock					(242,233	)							(1,003	)							-								(1,003	)
Issuance of restricted stock					40,000								-								-								-
Exercise of stock options					6,335								19								-								19
Stock-based compensation expense					-	Ā						Ā	471	Ā						Ā	-	Ā						Ā	471	Ā
Balance, June 30, 2010					15,288,782	Ā						$	49,502	Ā						$	82,621	Ā						$	132,123	Ā
																														Ā
																														Ā

Ā
United PanAm Financial Corp. and Subsidiaries
Selected Financial Data
Ā
(Dollars in thousands)	Ā	Ā	Ā	Ā		Three Months Ended June 30, Ā									Ā	Ā	Ā	Ā		Six Months Ended June 30, Ā
						2010		Ā	Ā	Ā	Ā		2009							2010		Ā	Ā	Ā	Ā		2009
Operating Data
Contracts purchased					$	19,072						$	11						$	32,452						$	11
Contracts outstanding					$	46,567						$	544,959						$	46,567						$	544,959
Unearned acquisition discounts					$	(4,714	)					$	(18,602	)					$	(4,714	)					$	(18,602	)
Average loan balance					$	191,350						$	587,055						$	285,077						$	637,145
Unearned acquisition discounts to gross loans						10.12	%						3.41	%						10.12	%						3.41	%
Average percentage rate to borrowers						22.74							22.70	%						22.74							22.70	%
																											Ā
Loan Quality Data
Allowance for loan losses					$	(5,138	)					$	(31,019	)					$	(5,138	)					$	(31,019	)
Allowance for loan losses to gross loans net of unearned acquisition discounts						12.28	%						5.89	%						12.28	%						5.89	%
Delinquencies (% of net contracts)
31-60 days						2.56	%						2.61	%						2.56	%						2.61	%
61-90 days						1.13	%						0.78	%						1.13	%						0.78	%
90+ days						1.03	%						0.27	%						1.03	%						0.27	%
Total						4.72	%						3.66	%						4.72	%						3.66	%
																											Ā
Repossessions over 30 days past due (% of net contracts)						0.79	%						1.40	%						0.79	%						1.40	%
Annualized net charge-offs to average loans ⁽¹⁾						3.23	%						10.21	%						7.95	%						11.00	%
																											Ā
Other Data
Number of branches						5							25							5							25
Number of employees						163							466							163							466
Interest income					$	10,920						$	34,453						$	33,415						$	75,270
Interest expense					$	3,920						$	10,813						$	10,306						$	22,130
Interest margin					$	7,000						$	23,640						$	23,109						$	53,140
Net interest margin as a percentage of interest income						64.10	%						68.62	%						69.16	%						70.60	%
Net interest margin as a percentage of average loans ⁽¹⁾						14.63	%						16.15	%						16.21	%						16.82	%
Non-interest expense to average loans ⁽¹⁾						30.85	%						9.87	%						19.64	%						11.58	%
Non-interest expense to average loans ⁽²⁾						17.00	%						8.50	%						13.63	%						8.89	%
Return on average assets ⁽¹⁾						-2.25	%						0.57	%						-1.57	%						-0.86	%
Return on average shareholdersā€™ equity ⁽¹⁾						-3.92	%						2.40	%						-3.91	%						-3.86	%
Consolidated capital to assets ratio						86.72	%						24.69	%						86.72	%						24.69	%
																											Ā

(1) Quarterly information is annualized for comparability with full year information.

(2) Excluding restructuring charges and other non-recurring charges.