United PanAm Financial Announces 1999 Third Quarter and Nine Month Results
18 October 1999
United PanAm Financial Announces 1999 Third Quarter and Nine Month Results
SAN MATEO, Calif.--Oct. 18, 1999--United PanAm Financial Corp. today announced results for its third quarter and nine months ended September 30, 1999.The company reported a net loss of $1.8 million, or $0.11 per share for the third quarter of 1999, compared with net income of $4.7 million, or $0.26 per diluted share for the same period a year ago. Net interest income for the third quarter of 1999 rose to $8.6 million from $7.0 million a year ago, and non-interest income (consisting primarily of cash gains on sales of whole loans from the company's mortgage finance operations) was $3.7 million in the third quarter of 1999 compared with $17.3 million, in the corresponding period last year.
The third quarter loss was primarily attributable to a significantly lower volume of mortgage loan sales as a result of the company's decision to defer the closing of its $233 million loan securitization to October 1999. "While the loan securitization could have been completed at the end of the third quarter of 1999, we made the decision to close in October to take advantage of more favorable economics," said Lawrence J. Grill, president and chief executive officer. "We completed the loan securitization on October 12, 1999 and we are expecting to report a gross sales price of approximately 104.25 percent on the transaction."
Grill added, "Our mortgage operations showed continuing improvement during the quarter by reducing origination costs while maintaining consistent production levels and better product quality. However, the impact of industry-wide pressures on loan sale prices, instability in interest rates and our production levels, focused on quality, are impacting our ability to return our mortgage operations to profitability."
For the nine months ended September 30, 1999, the company reported a net loss of $528,000, or $0.03 per share. This compares with net income of $10.3 million, or $0.67 per diluted share, for the comparable period a year ago. Net interest income for the first nine months of 1999 increased to $24.0 million from $19.2 million a year ago and non-interest income was $22.0 million compared with $44.9 million, in the corresponding period last year.
During the 1999 third quarter, the company sold $130.6 million in whole loans or 52.4 percent of its mortgage loan production, compared with $347.9 million or 97.0 percent of mortgage production, during the same quarter a year ago. The company's third quarter loan sale gains were generated primarily through non-recourse whole loan sales for cash. Gains on sales of mortgage loans were $3.5 million during the third quarter of 1999 compared with $17.1 million in the comparable period a year ago. The decline was due primarily to the lower volume of loan sales and a decrease in the company's weighted average loan sales price from 105.2 percent during the third quarter of 1998 to 103.4 percent in the third quarter of 1999.
Net interest income was $8.6 million in the third quarter of 1999 compared with $7.0 million in the same quarter a year ago, while the company's net interest margin improved to 7.86 percent in the third quarter of 1999 from 6.34 percent in the same quarter a year ago. The improvement in net interest margin continues to reflect the increase in higher yielding loans in the company's held for investment portfolio primarily due to an increase in automobile installment contracts. Net automobile contracts outstanding were $97.6 million at September 30, 1999 with 19 branches operating in nine states.
Non-interest expense was $13.6 million in the third quarter of 1999 compared with $15.6 million in the same quarter a year ago. The decline reflects lower cost levels on loans originated and a lower volume of mortgage loan originations offset somewhat by the opening of five new automobile finance branch offices.
During the third quarter of 1999, the company, through its subsidiaries and divisions, originated $249.4 million in mortgage loans, $24.5 million in insurance premium finance loans and purchased gross auto contracts totaling $33.7 million. This compares with originations of $254.7 million, $27.3 million, and $30.4 million, respectively, during the second quarter of 1999, and $358.6 million, $35.4 million, and $23.0 million, respectively, during the same quarter last year.
The company increased its provision for loan losses in the third quarter of 1999 to $1.8 million compared with $661,000, in the same quarter a year ago. The provision for losses in the third quarter of 1999 represents the company's estimate of loan losses based on current loan production levels, prior loss experience, aging of loans in the portfolio and other factors. Since the third quarter of 1998, the company has continued to build its loan loss allowances, but at a lessening rate, through provisions for losses of $4.1 million, $2.6 million, $1.4 million and $1.8 million in each of the four quarters ending December 31, 1998 through September 30, 1999, respectively. At September 30, 1999, the allowance for credit losses was 8.46 percent of total loans compared with 4.73 percent at September 30, 1998.
"The company's strong capital to assets ratio and its ability to expand its liquidity position through deposits, mortgage warehouse lines and additional borrowing capacity from federal banking agencies gives United PanAm Financial unique flexibility to adapt to a variety of market conditions or opportunities for the funding of its operations," Grill said.
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 markets to customers who generally cannot obtain financing from traditional lenders. 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 $298.0 million in deposits at September 30, 1999; the mortgage division with 12 retail branches and five wholesale centers serving 44 states; the insurance premium finance division, which through a joint venture is the largest non-insurance provider of financing for consumer automobile insurance premiums in California; and United Auto Credit Corporation, with 19 branch offices in California, Arizona, Colorado, Florida, Georgia, North Carolina, Oregon, Utah, and Washington.
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 estimates, 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, rapid growth of the company's businesses, 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, general economic conditions, risks relating to Year 2000 and other risks, certain of which are detailed from time to time in the company's filings with the United States Securities and Exchange Commission.
Editors Note: Three pages of selected financial data follows.
United PanAm Financial Corp. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1999 1998 1999 1998
Interest Income
Loans $13,112 $11,617 $36,304 $32,786
Short term investments 269 353 1,224 819
------- ------- ------- -------
Total interest income 13,381 11,970 37,528 33,605
------- ------- ------- -------
Interest Expense
Deposits 3,642 4,063 11,423 11,186
Warehouse lines of credit 1,108 652 1,889 2,118
Federal Home Loan Bank
advances -- 114 -- 659
Notes payable 37 145 248 485
------- ------- ------- -------
Total interest expense 4,787 4,974 13,560 14,448
------- ------- ------- -------
Net interest income 8,594 6,996 23,968 19,157
Provision for loan losses 1,826 661 5,898 1,784
------- ------- ------- -------
------- ------- ------- -------
Net interest income after
provision for loan losses 6,768 6,335 18,070 17,373
------- ------- ------- -------
Non-interest Income
Gain on sale of loans, net 3,469 17,071 21,175 44,262
Loan related charges and fees 49 33 130 105
Service charges and fees 173 173 551 478
Other income 30 33 103 96
------- ------- ------- -------
Total non-interest income 3,721 17,310 21,959 44,941
------- ------- ------- -------
Non-interest Expense
Compensation and benefits 7,777 9,961 24,157 28,733
Occupancy 1,517 1,458 4,481 3,936
Other 4,322 4,223 12,315 11,737
------- ------- ------- -------
Total non-interest expense 13,616 15,642 40,953 44,406
------- ------- ------- -------
Income (loss) before
income taxes (3,127) 8,003 (924) 17,908
Income taxes (benefit) (1,303) 3,333 (396) 7,572
------- ------- -------- -------
Net income (loss) $(1,824) $4,670 $(528) $10,336
======= ======= ======= =======
Earnings (loss)
per share-basic $(0.11) $0.27 $(0.03) $0.71
======= ======= ======= =======
Earnings (loss)
per share-diluted $(0.11) $0.26 $(0.03) $0.67
======= ======= ======= =======
Weighted average
shares outstanding-basic 16,706 17,275 16,965 14,565
======= ======= ======= =======
Weighted average
shares outstanding-diluted 17,080 18,021 17,356 15,359
======= ======= ======= =======
United PanAm Financial Corp. and Subsidiaries
Consolidated Statements of Financial Condition
(Unaudited)
(Dollars in thousands Sept. 30, Dec. 31,
except per share data) 1999 1998
-------- --------
Assets
Cash and due from banks $ 6,774 $ 5,211
Short term investments 30,500 47,000
-------- --------
Cash and cash equivalents 37,274 52,211
Residual interests
in securitizations,
at fair value 11,968 --
Loans, net 159,207 133,718
Loans held for sale 314,184 214,406
Premises and equipment, net 4,060 4,803
Federal Home Loan Bank stock, at cost 2,471 2,120
Accrued interest receivable 3,371 2,034
Real estate owned, net 3,254 1,877
Goodwill and other intangible assets 1,886 2,349
Other assets 12,417 12,041
-------- --------
Total assets $550,092 $425,559
======== ========
Liabilities and Shareholders' Equity
Deposits $297,995 $321,668
Notes payable -- 10,930
Warehouse lines of credit 159,342 --
Accrued expenses and
other liabilities 13,265 10,048
-------- --------
Total liabilities 470,602 342,646
-------- --------
Common stock (no par value):
Authorized, 20,000,000 shares
Issued and outstanding,
16,594,250 and 17,375,000 shares
at September 30, 1999 and
December 31, 1998, respectively 65,482 68,378
Retained earnings 14,008 14,535
-------- --------
Total shareholders' equity 79,490 82,913
-------- --------
Total liabilities
and shareholders' equity $550,092 $425,559
======== ========
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
---------------------- ----------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1999 1998 1999 1998
--------- --------- --------- ---------
Return on
average assets(1) (1.53)% 3.89% (0.15)% 3.22%
Return on average
shareholders'
equity (1)(2) (8.96)% 22.57% (0.86)% 28.96%
Net interest margin 7.86% 6.34% 7.60% 6.29%
Subprime Mortgage
Finance Data
Loan origination
activities:
Wholesale
originations $206,737 $241,113 $572,448 $633,962
Retail
originations 42,646 117,454 139,301 323,421
-------- -------- -------- --------
Total loan
originations 249,383 358,567 711,749 957,383
Average principal
balance per loan 111 100 111 98
Loans securitized
or sold through
whole loan
transactions 130,625 347,930 579,779 886,352
Percentage of loans
sold or securitized
to loans originated 52.4% 97.0% 81.5% 92.6%
Insurance Premium
Finance Data
Loans originated $24,519 $35,387 $85,351 $123,192
Loans outstanding
at period end 34,576 51,487 34,576 51,487
Annualized net
charge-offs to
average loans(1) 0.61% 0.37% 0.97% 0.44%
Automobile
Finance Data
Gross contracts
purchased $33,655 $23,044 $92,156 $60,669
Net contracts
outstanding 97,565 56,602 97,565 56,602
Annualized net
charge-offs to
average contracts(1) 3.70% 4.49% 3.89% 4.74%
Delinquencies
(% of net contracts)
31-60 days 0.37% 0.38% 0.37% 0.38%
61-90 days 0.11% 0.20% 0.11% 0.20%
90+ days 0.04% 0.09% 0.04% 0.09%
Other Data
Retail deposits $271,427 $234,220 $271,427 $234,220
Wholesale deposits 26,568 83,122 26,568 83,122
Weighted average
interest rate on
deposits 4.77% 5.19% 4.77% 5.19%
Allowance for credit
losses to total
loans 8.46% 4.73% 8.46% 4.73%
Consolidated capital
to assets ratio 14.45% 19.83% 14.45% 19.83%
Pan American Bank
capital ratios:
Tangible 8.55% 7.73% 8.55% 7.73%
Core 8.55% 7.73% 8.55% 7.73%
Risk-based 10.19% 12.50% 10.19% 12.50%
(1) Quarterly information is annualized for comparability with full
year information.
(2) Reflects proceeds received of approximately $65 million from
the Company's initial public offering completed in April 1998.