United Panam Financial Corp. Announces Q3 and Nine-Month Results
20 October 1998
United Panam Financial Corp. Announces Third Quarter and Nine-Month Results
SAN MATEO, Calif.--Oct. 19, 1998--United PanAm Financial Corp. today announced results for its third quarter ended September 30, 1998.
Net income for the 1998 third quarter advanced to $4.7 million, a 93 percent increase from $2.4 million for the comparable period a year ago. On a diluted per share basis, net income for the quarter rose to $0.26 from $0.21 a year ago. Net interest income for the third quarter rose to $7.0 million from $3.8 million a year ago, and non-interest income (substantially all from cash gains on sales of whole loans from the Company's mortgage finance operations) increased to $17.3 million from $8.4 million, in the corresponding period last year.
For the nine months ended September 30, 1998, the Company reported net income of $10.3 million, a 188 percent increase from $3.6 million for the comparable period a year ago. On a diluted per share basis, net income for the nine months rose to $0.67 from $0.32 a year ago. Net interest income for the nine months ended September 30, 1998 increased to $19.2 million from $10.1 million a year ago, and non-interest income (substantially all from cash gains on sales of whole loans from the Company's mortgage finance operations) increased to $44.9 million from $15.8 million in the corresponding period last year.
"This quarter's results continue to reflect the strength of United PanAm's balanced growth strategy and diversified sources of lending and income," said Lawrence J. Grill, President and Chief Executive Officer. "Our mortgage, insurance premium and auto finance operations all registered strong gains over the corresponding period a year ago. The quality of our earnings is underscored by the all cash nature of United PanAm's income and the positive cash flow we generate from the whole loan sales in our mortgage operations. Our access to lower cost retail deposits through Pan American Bank continues to play an important role in our profitability and competitive positioning."
Grill added, "Through Pan American Bank's strong capital to assets position, we have the ability to provide and expand our liquidity to fund loans through deposits. In addition, the holding company, UPFC, has $61 million of available cash from its recent initial public stock offering for financing future business development and growth. UPFC has shareholders' equity of approximately 20% of total assets, which we believe is one of the highest in the industry. At quarter end, we internally funded all of our loans held for sale and had no warehouse debt. We believe, given this strong combined financial condition, we are in a position to operate and grow in this challenging environment and position ourselves to take advantage of possible emerging opportunities."
Contributing to the increase in net interest income was an increase in both insurance premium finance and automobile finance receivables resulting from continued growth and expansion of these businesses. Insurance premium finance receivables increased to $51.5 million at September 30, 1998 from $40.0 million at December 31, 1997. Automobile finance receivables (net of unearned finance charges) increased to $56.6 million at September 30, 1998 from $30.3 million at December 31, 1997.
During the 1998 third quarter, the Company, through its subsidiaries and divisions, originated $358.6 million in mortgage loans, $35.4 million in insurance premium finance loans, and purchased gross auto contracts totaling $23.0 million. This compares with originations of $161.1 million, $31.9 million and $12.4 million, respectively, in the third quarter a year ago.
Gain on sale of whole loans from the Company's mortgage finance operations increased 109 percent to $17.1 million during the third quarter of 1998 from $8.2 million in the comparable period a year ago. The increase was due to an increase in loan sales to $347.9 million during the 1998 third quarter from $140.4 million during the third quarter of 1997. The Company's loan sale gains are generated primarily through non-recourse whole loan sales for cash, and the Company does not securitize or retain any residual interests from these loan sales. The Company's weighted average sales price was 105.2 percent of the principal balance of loans sold in the third quarter of 1998, compared with 105.7 percent in the comparable period in 1997, and 105.5 percent and 105.3 percent in the first and second quarters of 1998, respectively.
"During the quarter, we experienced a decline in gross sales premiums related to our whole loan sales, which was a continuation of price erosion during the year. This has been a reflection of market conditions and issues causing disruptions in the capital markets generally," Grill said. "We have increased pricing to mitigate this narrowing of spreads and are taking steps to reduce expenses. If present market conditions continue or worsen throughout the fourth quarter, we expect to see a decline in the profit contributions from our mortgage operations."
In keeping with the Company's loan growth, during the 1998 third quarter, the provision for losses was increased to $661,000 compared with $66,000 in the comparable period a year ago. Delinquencies (mortgage loans more than 90 days past due) increased as a result of the Company's strong growth in mortgage loan originations and the repurchase of mortgage loans relating to first payment defaults on loans originated prior to June 1998. The Company has taken steps to strengthen its underwriting policies and practices and correct this situation through various actions. For the quarter ended September 30, 1998, net charge-offs to total average loans were 1.92 percent compared with 1.04 percent for the comparable period a year ago.
United PanAm Financial Corp., a diversified specialty finance company, originates and acquires for sale and investment residential mortgage loans, automobile insurance premium finance contracts and retail automobile installment sales contracts. The Company's principal operating units include Pan American Bank, FSB, the largest Hispanic-controlled savings association in California, with five retail branch offices in the state and $317.3 million in deposits at September 30, 1998; the mortgage division with 22 retail branches and six wholesale centers serving 44 states; the insurance premium finance division, which through a joint venture is the largest provider of financing for consumer automobile insurance premiums in California; and United Auto Credit Corporation, with 14 branch offices in California, Arizona, Colorado, Oregon, Washington and Utah. The Company completed its initial public offering in April 1998 and received approximately $65 million from the sale of its common stock.
Any statements set forth above that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act ("SLRA") of 1995, including statements concerning the Company's strategies, plans, objectives and intentions. Such statements are subject to a variety of risks and uncertainties, known and unknown which may cause the Company's actual results to differ materially from those anticipated in such forward-looking statements. Potential risks and uncertainties include, but are not limited to, such factors as limited operating history, the impaired or limited credit history of the Company's borrowers, the availability of additional financing, competitive pressure in the banking and mortgage lending industry, the concentration of the Company's business in California, the reliance on the Company's systems and controls and key employees, fluctuations in market rates of interest, pricing of loans in the whole loan and securitization markets, risks inherent in loan securitization and other risks detailed from time to time in the Company's filings with the United States Securities and Exchange Commission.
United PanAm Financial Corp. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per Three Months Nine Months
share data) Ended September 30, Ended September 30,
------------------- -------------------
1998 1997 1998 1997
--------- --------- --------- ---------
Interest Income
Loans $ 11,617 $ 6,775 $ 32,786 $ 17,867
Short term investments and
securities available for
sale 353 174 819 447
--------- --------- --------- ---------
Total interest income 11,970 6,949 33,605 18,314
--------- --------- --------- ---------
Interest Expense
Deposits 4,063 2,532 11,186 6,710
Federal Home Loan Bank
advances 114 389 659 1,001
Warehouse line of credit 652 -- 2,118 --
Notes payable 145 184 485 482
--------- --------- --------- ---------
Total interest expense 4,974 3,105 14,448 8,193
--------- --------- --------- ---------
Net interest income 6,996 3,844 19,157 10,121
Provision for loan losses 661 66 1,784 445
--------- --------- --------- ---------
Net interest income
after provision for
loan losses 6,335 3,778 17,373 9,676
--------- --------- --------- ---------
Non-interest Income
Gain on sale of loans, net 17,071 8,183 44,262 15,260
Loan related charges and
fees 33 166 105 360
Service charges and fees 173 18 478 123
Other income 33 17 96 40
--------- --------- --------- ---------
Total non-interest income 17,310 8,384 44,941 15,783
--------- --------- --------- ---------
Non-interest Expense
Compensation and benefits 9,961 5,164 28,733 12,195
Occupancy expense 1,458 720 3,936 1,847
Other expenses 4,223 2,105 11,737 5,243
--------- --------- --------- ---------
Total non-interest expense 15,642 7,989 44,406 19,285
--------- --------- --------- ---------
Income before income taxes 8,003 4,173 17,908 6,174
Income taxes 3,333 1,752 7,572 2,580
--------- --------- --------- ---------
Net income $ 4,670 $ 2,421 $10,336 $ 3,594
========= ========= ========= =========
Earnings per share-basic $ 0.27 $ 0.23 $ 0.71 $ 0.34
========= ========= ========= =========
Earnings per share-diluted $ 0.26 $ 0.21 $ 0.67 $ 0.32
========= ========= ========= =========
Weighted average shares
outstanding-basic 17,275 10,669 14,565 10,669
========= ========= ========= =========
Weighted average shares
outstanding-diluted 18,021 11,126 15,359 11,117
========= ========= ========= =========
United PanAm Financial Corp. and Subsidiaries
Consolidated Statements of Financial Condition
(Unaudited)
September 30, December 31,
(Dollars in thousands, except per
share data) 1998 1997
------------ ------------
Assets
Cash and due from banks $ 45,436 $ 15,026
Short term investments 15,500 4,000
------------ ------------
Cash and cash equivalents 60,936 19,026
Securities available for sale, at fair
value -- 1,002
Residual interests in securitizations,
at fair value -- 8,230
Loans, net 187,197 148,535
Loans held for sale 167,070 120,002
Federal Home Loan Bank stock, at cost 2,089 1,945
Accrued interest receivable 2,046 1,494
Real estate owned, net 1,192 562
Premises and equipment, net 4,650 3,085
Deferred tax assets 2,975 3,171
Intangible assets 363 457
Other assets 8,758 3,333
------------ ------------
Total assets $ 437,276 $ 310,842
============ ============
Liabilities and Stockholders' Equity
Deposits $ 317,342 $ 233,194
Notes payable 10,930 12,930
Federal Home Loan Bank advances -- 28,000
Warehouse line of credit -- 6,237
Accrued expenses and other liabilities 22,285 17,472
------------ ------------
Total liabilities 350,557 297,833
------------ ------------
Commitments and contingencies -- --
Preferred stock (par value $0.01
per share):
Authorized, 2,000,000 shares
None issued and outstanding -- --
Common stock (par value $0.01
per share):
Authorized, 20,000,000 shares
Issued and outstanding, 17,275,000
and 10,950,000 shares at
September 30, 1998 and December 31, 1997,
respectively 173 110
Additional paid-in capital 68,438 5,127
Retained earnings 18,108 7,772
------------ ------------
Total stockholders' equity 86,719 13,009
------------ ------------
Total liabilities and stockholders'
equity $ 437,276 $ 310,842
============ ============
United PanAm Financial Corp. and Subsidiaries
Selected Financial Data
(Dollars in thousands) At or For the At or For the
Three Months Ended Nine Months Ended
------------------- -------------------
September September September September
30, 30, 30, 30,
1998 1997 1998 1997
--------- --------- --------- ---------
Return on average assets 3.89% 3.83% 3.22% 2.09%
Return on average stockholders'
equity (1) 22.57% 99.81% 28.96% 62.55%
Net interest margin 6.34% 6.58% 6.29% 6.36%
Subprime Mortgage Finance Data
Loan origination activities:
Wholesale originations $241,113 $ 90,803 $633,962 $198,854
Retail originations 117,454 70,258 323,421 138,025
--------- --------- --------- ---------
Total loan originations 358,567 161,061 957,383 336,879
Average balance per loan 100 110 98 112
Loans sold through whole loan
transactions 347,930 140,363 886,352 273,080
Insurance Premium Finance Data
Loans originated $ 35,387 $ 31,864 $123,191 $117,119
Loans outstanding at
period end 51,487 47,287 51,487 47,287
Annualized net charge-offs
to average loans 0.37% 0.17% 0.44% 0.27%
Automobile Finance Data
Gross contracts purchased $ 23,044 $ 12,407 $ 60,669 $ 29,814
Net contracts outstanding 56,602 23,227 56,602 23,227
Annualized net charge-offs
to average contracts 4.49% 4.83% 4.74% 4.96%
Delinquencies (% of net contracts)
31-60 days 0.38% 0.66% 0.38% 0.66%
61-90 days 0.20% 0.11% 0.20% 0.11%
90+ days 0.09% 0.30% 0.09% 0.30%
Other Data
Retail deposits $234,220 $174,308 $234,220 $174,308
Wholesale deposits 83,122 36,475 83,122 36,475
Weighted average interest
rate on deposits 5.19% 5.20% 5.19% 5.20%
Mortgage loans delinquent
more than 90 days $ 15,828 $ 3,950 $ 15,828 $ 3,950
Allowance for credit losses
to total loans 4.73% 4.07% 4.73% 4.07%
Pan American Bank capital
ratios:
Tangible 7.73% 7.06% 7.73% 7.06%
Core 7.73% 7.06% 7.73% 7.06%
Risk-based 12.50% 13.20% 12.50% 13.20%
(1) Reflects proceeds received of approximately $65 million from the
Company's initial public offering completed in April 1998.