UPFC United Panam Financial (MM)

United PanAm Financial Corp. (Nasdaq:UPFC) today announced results for its second quarter ended June 30, 2007. For the quarter ended June 30, 2007, UPFC reported income of $4.6 million from continuing operations, compared with income of $6.7 million for the same period a year ago. Interest income increased 18% to $57.1 million for the quarter ended June 30, 2007 from $48.2 million for the same period a year ago. UPFC reported income of $0.28 per diluted share from continuing operations for the quarter ended June 30, 2007 compared to $0.35 per diluted share for the same period a year ago. For the six months ended June 30, 2007, UPFC reported income of $7.7 million from continuing operations, compared to income of $13.5 million for the same period a year ago. Interest income increased 20% to $110.3 million for the six months ended June 30, 2007 from $92.3 million for the same period a year ago. UPFC reported income of $0.46 per diluted share from continuing operations for the six months ended June 30, 2007 compared to $0.71 per diluted share for the same period a year ago. UPFC purchased $167.8 million of automobile contracts during the second quarter of 2007, compared with $148.5 million during the same period a year ago, representing a 13% increase. Automobile contracts outstanding totaled $918.6 million at June 30, 2007, compared with $768.0 million at June 30, 2006, representing a 20% increase. During the second quarter of 2007, UPFC opened 7 new auto finance branches bringing its total to 144 branches in 35 states. UPFC began to originate and service loans during the second quarter of 2007 into the states of West Virginia and Connecticut from the newly created Business Operations Unit in Dallas, Texas. The plan is to eventually expand operations into additional three states of Arkansas, Nebraska and Maine through the Business Operations Unit. UPFC currently has no branch presence in these five states. The decrease in income from continuing operations for the second quarter of 2007 compared to the second quarter of 2006 primarily reflects the following: Interest income increased 18% to $57.1 million from $48.2 million due primarily to the increase in average loans of $150.5 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 38% to $11.6 million from $8.4 million primarily due to the growth in the loan portfolio and higher market interest rates, coupled with the pay down of lower priced securitizations. As a result, net interest margin decreased from 82.6% for the quarter ended June 30, 2006 to 79.7% for the quarter ended June 30, 2007. Provision for loan losses increased during the quarter due to a larger loan portfolio and an increase in the annualized charge-off rate to 5.04% from 3.94% for the same period a year ago. The two major factors that have impacted our charge-off rate are the change in the bankruptcy law which took effect in late 2005 and elevated gasoline prices. Non-interest expense as a percentage of average loans increased to 10.87% from 10.27% for the same period a year ago primarily as a result of higher costs associated with collection activity and continued investment in infrastructure. During the quarter ended June 30, 2007, UPFC repurchased 281,815 shares of its common stock under its publicly announced share repurchase program at an average price of $13.95 per share for an aggregate purchase price of $3.9 million. The share repurchase program has reduced the percentage of outstanding shares by 5.9% to 15,732,192 at June 30, 2007 from 16,713,838 at December 31, 2006. Securitizations On June 14, 2007, the Company completed its 2007A securitization for $250 million. The securitization had three sequential pay tranches as follows: $54,000,000 Class A-1 5.33%, $97,000,000 Class A-2 5.53%, and $99,000,000 Class A-3 5.95%. The following table lists each of UPFC�s securitizations as of June 30, 2007: Issue Number Issuance Date Maturity Date(1) Original Balance Remaining Balance at June 30, 2007 (Dollars in thousands) 2004A September 22, 2004 September 2010 $ 420,000 $ 41,956 2005A April 14, 2005 December 2010 $ 195,000 $ 48,186 2005B November 10, 2005 August 2011 $ 225,000 $ 87,397 2006A June 15, 2006 May 2012 $ 242,000 $ 142,394 2006B December 14, 2006 August 2012 $ 250,000 $ 191,662 2007A June 14, 2007 July 2013 $ 250,000 $ 250,000 Total $ 1,582,000 $ 761,595 � (1) Contractual maturity of the last maturity class of notes issued by the related securitization owner trust. 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 144 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. Editors Note: Four pages of selected financial data follow. United PanAm Financial Corp. and Subsidiaries Consolidated Statements of Financial Condition � June 30,2007 December 31,2006 (Dollars in thousands) Assets Cash $ 9,370 $ 8,389 Short term investments 5,619 � 19,905 � Cash and cash equivalents 14,989 28,294 Restricted cash 80,814 67,987 Loans 873,561 774,075 Allowance for loan losses (41,713 ) (36,037 ) Loans, net 831,848 738,038 Premises and equipment, net 6,583 5,034 Interest receivable 9,475 9,018 Other assets 29,149 � 31,118 � Total assets $ 972,858 � $ 879,489 � � � Liabilities and Shareholders� Equity Securitization notes payable $ 761,595 $ 698,337 Warehouse line of credit 28,518 � Accrued expenses and other liabilities 11,464 10,977 Junior subordinated debentures 10,310 10,310 Residual line of credit 5,183 � � � Total liabilities 817,070 � 719,624 � � � Preferred stock (no par value): Authorized, 2,000,000 shares; no shares issued and outstanding at June 30, 2007 and December 31, 2006 � � Common stock (no par value): Authorized, 30,000,000 shares; 15,732,192 and 16,713,838 shares issued and outstanding at June 30, 2007 and December 31, 2006, respectively 48,874 60,614 Retained earnings 106,914 � 99,251 � � Total shareholders� equity 155,788 � 159,865 � � � Total liabilities and shareholders� equity $ 972,858 � $ 879,489 � United PanAm Financial Corp. and Subsidiaries Consolidated Statements of Income � (In thousands, except per share data) Three Months Ended June 30, Six Months Ended June 30, 2007 2006 2007 2006 Interest Income Loans $ 56,019 $ 47,514 $ 108,298 $ 91,032 Short term investments and restricted cash 1,036 711 1,981 1,297 � Total interest income 57,055 48,225 110,279 92,329 � Interest Expense Securitization notes payable 8,551 5,695 17,751 11,632 Warehouse line of credit 2,763 2,488 3,866 3,882 Other interest expense 288 205 498 396 � Total interest expense 11,602 8,388 22,115 15,910 � Net interest income 45,453 39,837 88,164 76,419 Provision for loan losses 14,024 9,741 28,505 16,539 � Net interest income after provision for loan losses 31,429 30,096 59,659 59,880 � � Non-interest Income Redemption of preferred stock-investment in AirTime Technologies, Inc. � � � 520 Other non-interest income 500 284 847 548 � Total non-interest income 500 284 847 1,068 � � Non-interest Expense Compensation and benefits 15,594 12,470 30,933 24,694 Occupancy 2,263 1,787 4,446 3,464 Other non-interest expense 6,345 4,761 12,356 10,139 � Total non-interest expense 24,202 19,018 47,735 38,297 � � Income from continuing operations before income taxes 7,727 11,362 12,771 22,651 Income taxes 3,090 4,652 5,108 9,168 � Income from continuing operations 4,637 6,710 7,663 13,483 Loss from discontinued operations, net of tax � � � (684 ) Net income $ 4,637 $ 6,710 $ 7,663 $ 12,799 � Earnings (loss) per share-basic: Continuing operations $ 0.29 $ 0.38 $ 0.48 $ 0.77 Discontinued operations � � � (0.04 ) Net income $ 0.29 $ 0.38 $ 0.48 0.73 � Weighted average basic shares outstanding 15,803 17,797 16,121 17,479 � Earnings (loss) per share-diluted: Continuing operations $ 0.28 $ 0.35 $ 0.46 $ 0.71 Discontinued operations � � � (0.04 ) Net income $ 0.28 $ 0.35 $ 0.46 $ 0.67 � Weighted average diluted shares outstanding 16,494 19,283 16,766 19,119 � 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 � � 7,663 7,663 Exercise of stock options, net 31,567 143 � 143 Tax effect of exercised stock options � 112 � 112 Repurchase of common stock (1,013,213 ) (13,188 ) � (13,188 ) Stock-based compensation expense � 1,193 � 1,193 � Balance, June 30, 2007 15,732,192 � $ 48,874 � $ 106,914 $ 155,788 � United PanAm Financial Corp. and Subsidiaries Selected Financial Data � (Dollars and shares in thousands) At or For the Three Months Ended At or For the Six Months Ended June 30, 2007 June 30, 2006 June 30, 2007 June 30, 2006 � Operating Data Contracts purchased $ 167,807 $ 148,515 $ 335,447 $ 294,309 Contracts outstanding $ 918,638 $ 767,961 $ 918,638 $ 767,961 Unearned acquisition discounts $ (45,077 ) $ (37,969 ) $ (45,077 ) $ (37,969 ) Average loan balance $ 893,174 $ 742,711 $ 865,254 $ 715,667 Unearned acquisition discounts to gross loans 4.91 % 4.94 % 4.91 % 4.94 % Average percentage rate to borrowers 22.62 % 22.70 % 22.62 % 22.70 % � Loan Quality Data Allowance for loan losses $ (41,713 ) $ (30,652 ) $ (41,713 ) $ (30,652 ) Allowance for loan losses to gross loans net of unearned acquisition discounts 4.78 % 4.20 % 4.78 % 4.20 % Delinquencies (% of net contracts) 31-60 days 0.53 % 0.54 % 0.53 % 0.54 % 61-90 days 0.20 % 0.19 % 0.20 % 0.19 % 90+ days 0.07 % 0.09 % 0.07 % 0.09 % Total 0.80 % 0.82 % 0.80 % 0.82 % Repossessions over 30 days past due (% of net contracts) 0.54 % 0.44 % 0.54 % 0.44 % Annualized net charge-offs to average loans(1) 5.04 % 3.94 % 5.32 % 4.23 % � Other Data Number of branches 144 119 144 119 Interest Income $ 57,055 $ 48,225 $ 110,279 $ 92,329 Interest Expense $ 11,602 $ 8,388 $ 22,115 $ 15,910 Net interest margin $ 45,453 $ 39,837 $ 88,164 $ 76,419 Net interest margin as a percentage of interest income 79.67 % 82.61 % 79.95 % 82.77 % Net interest margin as a percentage of average loans (1) 20.41 % 21.51 % 20.55 % 21.53 % Non-interest expense to average loans (1) 10.87 % 10.27 % 11.13 % 10.79 % Return on average assets from continuing operations (1) 1.97 % 3.39 % 1.68 % 3.56 % Return on average shareholders� equity 12.04 % 15.99 % 9.89 % 16.62 % Consolidated capital to assets ratio 16.01 % 20.79 % 16.01 % 20.79 % � (1) Quarterly and six month information is annualized for comparability with full year information.