UPFC United Panam Financial (MM)

United PanAm Financial Corp. (Nasdaq:UPFC) today announced results for its first quarter ended March 31, 2007. For the quarter ended March 31, 2007, UPFC reported income of $3.0 million from continuing operations, compared with income of $6.8 million for the same period a year ago. Interest income increased 21% to $53.2 million for the quarter ended March 31, 2007 from $44.1 million for the same period a year ago. UPFC reported income of $0.18 per diluted share from continuing operations for the quarter ended March 31, 2007 compared to $0.36 per diluted share for the same period a year ago. UPFC purchased $167.6 million of automobile contracts during the first quarter of 2007, compared with $145.8 million during the same period a year ago, representing a 15% increase. Automobile contracts outstanding totaled $866.9 million at March 31, 2007, compared with $716.9 million at March 31, 2006, representing a 21% increase. During the first quarter of 2007, UPFC opened 6 new auto finance branches bringing its total to 137 branches in 35 states. The two major factors affecting the Company�s earnings for the quarter ended March 31, 2007 continue to be the increase in provision for loan losses and interest expense. The increase in the provision for loan losses for the quarter ended March 31, 2007 was the result of increased loan balance and defaults due to the slowing consumer finance sector resulting in increased losses. The Company�s annualized net charge-offs increased to 5.62% for the three months ended March 31, 2007 from 4.53% for the same period a year ago. The increase in interest expense in 2007 was the result of higher market interest rates, coupled with the pay down of lower priced securitizations. The decrease in income from continuing operations for the first quarter of 2007 compared to the first quarter of 2006 primarily reflects the following: Interest income increased approximately $9.1 million or 21% to $53.2 million from $44.1 million due primarily to the increase in average loans of $148.8 million as a result of the purchase of additional automobile contracts in existing and new markets consistent with the planned growth of these operations. Interest expense increased 40% to $10.5 million from $7.5 million primarily due to the growth in the loan portfolio, higher market interest rates, coupled with the pay down of lower priced securitizations. As a result, net interest margin decreased from 82.9% for the quarter ended March 31, 2006 to 80.3% for the quarter ended March 31, 2007. Provision for loan losses increased during the quarter due to a $148.8 million increase in average loans and an increase in the annualized charge-off rate of 5.62% for the quarter ended March 31, 2007 compared with 4.53% for the same period a year ago. Non-interest expense as a percentage of average loans increased to 11.39% from 11.35% primarily as a result of investment in corporate accounting, human resources, training and information technology to support continued branch expansion and higher collection costs. In response to current trends in the economy, UPFC has continued to tighten its underwriting criteria and strengthen its collection policies to better manage the loan portfolio, which has resulted in decreased delinquency from 0.93% at December 31, 2006 to 0.55% at March 31, 2007. During the quarter ended March 31, 2007, UPFC repurchased 731,398 shares of its common stock under its publicly announced share repurchase program at an average price of $12.61 per share for an aggregate purchase price of $9.2 million. The share repurchase program has reduced the percentage of outstanding shares by 4% to 16,009,186 at March 31, 2007 from 16,713,838 at December 31, 2006. "First quarter showed continued controlled growth of 21% in both automobile contracts outstanding and interest income," said Guillermo Bron, Chairman. �In response to the slowing of the consumer finance sector we have tightened our underwriting and collection policies to maintain the quality of our portfolio.� Securitizations The following table lists each of UPFC�s securitizations as of March 31, 2007: Issue Number Issuance Date Maturity Date (1) Original Balance Remaining Balance at March 31, 2007 � (Dollars in thousands) � 2004A September 2004 September 2010 $420,000� $55,283� 2005A April 2005 December 2010 $195,000� $59,325� 2005B November 2005 August 2011 $225,000� $103,618� 2006A June 2006 May 2012 $242,000� $163,509� 2006B December 2006 August 2012 $250,000� $221,552� $1,332,000� $603,287� (1) Contractual maturity of the last maturity class of notes issued by the related securitization owner trust. The average monthly borrowing balance on the Company�s warehouse facility was $66.0 million for the quarter ended March 31, 2007. Financial Outlook For the full year 2007, UPFC projects its diluted earnings per share from continuing operations to range from $1.05 to $1.15. This projection assumes opening an additional 18 to 20 branches, a constant interest rate environment and annualized charge-offs as a percentage of average loans of 5.45% for the remainder of 2007. United PanAm Financial Corp. UPFC is a specialty finance company engaged in automobile finance, which includes the purchasing, warehousing, securitizing and servicing of automobile installment sales contracts originated by independent and franchised dealers of used automobiles. UPFC conducts its automobile finance business through its wholly-owned subsidiary, United Auto Credit Corporation, with 137 branch offices in 35 states. Forward-Looking Statements 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, intentions and projections. Generally, the words �believe,� �expect,� �intend,� �estimate,� �anticipate,� �project,� �realize,� �will� and similar expressions identify forward-looking statements, which generally are not historical in nature. 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 our recent shift of the funding source of our business; 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 pressures which we face; rapid growth of our business; fluctuations in market rates of interest; general economic conditions; the effects of accounting changes; and other risks discussed in our Company�s filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K, which filings are available from the SEC. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. UPFC undertakes no obligation to publicly update or revise any forward-looking statements. United PanAm Financial Corp. and Subsidiaries Consolidated Statements of Financial Condition � March 31, December 31, (Dollars in thousands) 2007� 2006� � Assets � Cash $ 7,623� $ 8,389� Short term investments 5,646� 19,905� Cash and cash equivalents 13,269� 28,294� Restricted cash 79,444� 67,987� Loans 824,253� 774,075� Allowance for loan losses (38,907) (36,037) Loans, net 785,346� 738,038� Premises and equipment, net 5,148� 5,034� Interest receivable 9,003� 9,018� Other assets 28,447� 31,118� Total assets $ 920,657� $ 879,489� � Liabilities and Shareholders� Equity � Securitization notes payable $ 603,287� $ 698,337� Warehouse line of credit 141,757� ---� Accrued expenses and other liabilities 10,947� 10,977� Junior subordinated debentures 10,310� 10,310� Total liabilities 766,301� 719,624� � Preferred Stock (no par value): Authorized, 2,000,000 shares; no shares issued and outstanding at March 31, 2007 and December 31, 2006 ---� ---� Common stock (no par value): Authorized, 30,000,000 shares; 16,009,186 and 16,713,838 shares issued and outstanding at March 31, 2007 and December 31, 2006, respectively 52,079� 60,614� Retained earnings 102,277� 99,251� Total shareholders� equity 154,356� 159,865� � Total liabilities and shareholders� equity $ 920,657� $ 879,489� United PanAm Financial Corp. and Subsidiaries Consolidated Statements of Income � (In thousands, except per share data) Three Months Ended March 31, 2007� 2006� Interest Income Loans $ 52,279� $ 43,518� Short term investments and restricted cash 945� 586� Total interest income 53,224� 44,104� Interest Expense Securitization notes payable 9,200� 5,937� Warehouse line of credit 1,103� 1,394� Other interest expense 210� 191� Total interest expense 10,513� 7,522� Net interest income 42,711� 36,582� Provision for loan losses 14,481� 6,798� Net interest income after provision for loan losses 28,230� 29,784� � Non-interest Income Redemption of preferred stock-investment in AirTime Technologies, Inc. ---� 520� Other non-interest income 347� 264� Total non-interest income 347� 784� � Non-interest Expense Compensation and benefits 15,339� 12,224� Occupancy 2,183� 1,677� Other non-interest expense 6,011� 5,378� Total non-interest expense 23,533� 19,279� � Income from continuing operations before income taxes 5,044� 11,289� Income taxes 2,018� 4,516� Income from continuing operations 3,026� 6,773� Loss from discontinued operations, net of tax ---� (684) Net income $ 3,026� $ 6,089� Earnings (loss) per share-basic: Continuing operations $ 0.18� $ 0.39� Discontinued operations 0.00� (0.04) Net income $ 0.18� $ 0.35� Weighted average basic shares outstanding 16,441� 17,179� Earnings (loss) per share-diluted: Continuing operations $ 0.18� $ 0.36� Discontinued operations 0.00� (0.04) Net income $ 0.18� $ 0.32� Weighted average diluted shares outstanding 17,041� 18,963� United PanAm Financial Corp. and Subsidiaries Consolidated Statement of Changes in Shareholders� Equity � Numberof Shares CommonStock RetainedEarnings TotalShareholders�Equity (Dollars in thousands) Balance, December 31, 2006 16,713,838� $ 60,614� $ 99,251� $ 159,865� Net income �� �� 3,026� 3,026� Exercise of stock options, net 26,746� 144� �� 144� Repurchase of common stock (731,398) (9,249) �� (9,249) Stock-based compensation expense �� 570� �� 570� � Balance, March 31, 2007 16,009,186� $ 52,079� $ 102,277� $ 154,356� United PanAm Financial Corp. and Subsidiaries Selected Financial Data � (Dollars in thousands) At or For the Three Months Ended March 31, 2007 March 31,2006 � Operating Data Contracts purchased $ 167,640� $ 145,794� Contracts outstanding $ 866,937� $ 716,940� Unearned acquisition discounts $ (42,684) $ (35,475) Unearned acquisition discounts to gross loans 4.92% 4.95% Average percentage rate to customers 22.64% 22.72% � Loan Quality Data Allowance for loan losses $ (38,907) $ (28,204) Allowance for loan losses to gross loans net ofunearned acquisition discounts 4.72% 4.14% Delinquencies (% of net contracts) 31-60 days 0.36% 0.39% 61-90 days 0.11% 0.15% 90+ days 0.08% 0.08% Total 0.55% 0.62% Repossessions over 30 days past due (% of net contracts) 0.44% 0.37% Annualized net charge-offs to average loans(1) 5.62% 4.53% � Other Data Number of branches at the end of period 137� 113� Interest Income $ 53,224� $ 44,104� Interest Expense $ 10,513� $ 7,522� Net interest margin $ 42,711� $ 36,582� Net interest margin as a percentage of interest income 80.25% 82.94% Net interest margin as a percentage of average loans (1) 20.68% 21.53% Non-interest expense to average loans (1) 11.39% 11.35% Return on average assets from continuing operations (1) 1.37% 3.74% Return on average shareholders� equity (1) 7.79% 17.25% Consolidated capital to assets ratio 16.77% 18.18% (1) Quarterly information is annualized for comparability with full year information.