UPFC United Panam Financial (MM)

United PanAm Financial Corp. (Nasdaq:UPFC) today announced results for its first quarter ended March 31, 2008. For the quarter ended March 31, 2008, UPFC reported net income of $1.3 million, compared to income of $3.0 million for the same period a year ago. Interest income increased 10.0% to $58.5 million for the quarter ended March 31, 2008 from $53.2 million for the same period a year ago. UPFC reported net income of $0.08 per diluted share for the quarter ended March 31, 2008 compared to $0.18 per diluted share for the same period a year ago. The reported income for the quarter ended March 31, 2008 also includes an after tax charge of $634,000 or $0.04 per diluted share for restructuring charges associated with the closure of 14 branches. During the quarter ended March 31, 2008, UPFC closed 14 branches. Subsequent to the quarter end, UPFC closed an additional 14 branches increasing the total number of closures to 28 branches. There were 114 branches in operation as of April 24, 2008. The majority of closures were from the consolidation of unprofitable smaller branches within the same market. The loan portfolios of the closed branches represented less than 10% of the overall portfolio balance and will continue to be serviced by other branches within the same market or by UPFC�s Business Operation Unit in Texas. The closures resulted in a decrease in the number of employees of approximately 150 or 15% of the work force. These closures are expected to result in cost savings, including operating expenses, of $8.0 million to $9.0 million annually. The closures will improve operating leverage and allow UPFC to remain profitable at lower total origination levels. These branch closures have been achieved with no deterioration in servicing quality. The delinquencies over 30 days have dropped to .88% at March 31, 2008 from 1.24% at December 31, 2007 and charge-offs for the first quarter decreased to 7.14% from 7.99% in the fourth quarter of 2007. We do not expect to open any new branches in 2008 and we will continue to consider additional branch closures as appropriate. UPFC purchased $129.9 million of automobile contracts during the first quarter of 2008, compared with $167.6 million during the same period a year ago, representing a 22.5% decrease. This decrease was the result of the slowdown in the economy and current market conditions, in addition to UPFC�s focus on tighter underwriting criteria. Contracts outstanding totaled $932.3 million at March 31, 2008, compared with $866.9 million at March 31, 2007, representing a 7.5% increase. The decrease in net income for the quarter ended March 31, 2008 compared to the same period a year ago primarily reflects the following: Interest income increased 10.0% to $58.5 million from $53.2 million due primarily to the increase in average loans of $90.2 million as a result of the purchase of additional automobile contracts. Interest expense increased 20.0% to $12.6 million from $10.5 million primarily due to higher market interest rates, the growth in the loan portfolio, and the pay down of lower priced securitizations. As a result, net interest margin decreased from 80.3% for the quarter ended March 31, 2007 to 78.4% for the quarter ended March 31, 2008. Provision for loan losses increased due to an increase in the annualized charge-off rate to 7.14% for the quarter ended March 31, 2008 from 5.62% for the same period a year ago. The major factors that continue to impact our charge-off rate are the overall deteriorating economic environment and increasing gasoline prices. Non-interest expense increased to $26.6 million from $23.5 million for the same period a year ago. The increase in non-interest expense was due to the increase in total average number of branches in Q1 2008 versus Q1 2007. Non-interest expense, excluding the restructuring charges associated with branch closures, as a percentage of average loans dropped to 11.09% from 11.39% for the same period a year ago. A pretax restructuring charge of $1.0 million was recorded for costs associated with closure of branches in the quarter ended March 31, 2008 which included severance, fixed asset write-offs and post-closure costs. The restructuring charge included a $450,000 reserve for estimated future lease obligations. 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 branch offices in 38 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 31,2008 December 31,2007 (Dollars in thousands) Assets Cash $ 8,845 $ 9,909 Short term investments � 4,831 � � 7,332 � Cash and cash equivalents 13,676 17,241 Restricted cash 79,716 73,633 Loans 888,981 882,651 Allowance for loan losses � (49,552 ) � (48,386 ) Loans, net 839,429 834,265 Premises and equipment, net 6,554 6,799 Interest receivable 10,201 10,424 Other assets � 33,149 � � 34,819 � Total assets $ 982,725 � $ 977,181 � � � Liabilities and Shareholders� Equity Securitization notes payable $ 647,216 $ 762,245 Warehouse line of credit 154,350 35,625 Accrued expenses and other liabilities 9,906 9,660 Junior subordinated debentures � 10,310 � � 10,310 � Total liabilities � 821,782 � � 817,840 � � � Common stock (no par value): Authorized, 30,000,000 shares; 15,737,399 shares issued and outstanding at March 31, 2008 and December 31, 2007 49,832 49,504 Retained earnings � 111,111 � � 109,837 � � Total shareholders� equity � 160,943 � � 159,341 � � � Total liabilities and shareholders� equity $ 982,725 � $ 977,181 � United PanAm Financial Corp. and Subsidiaries Consolidated Statements of Income � (In thousands, except per share data) Three Months Ended March 31, 2008 � 2007 Interest Income Loans $ 57,707 $ 52,279 Short term investments and restricted cash � 763 � 945 Total interest income � 58,470 � 53,224 Interest Expense Securitization notes payable 10,888 9,200 Warehouse line of credit 1,525 1,103 Other interest expense � 193 � 210 Total interest expense � 12,606 � 10,513 Net interest income 45,864 42,711 Provision for loan losses � 17,642 � 14,481 Net interest income after provision for loan losses � 28,222 � 28,230 � Non-interest Income 471 347 � Non-interest Expense Compensation and benefits 16,915 15,339 Occupancy 2,464 2,183 Other non-interest expense 6,201 6,011 Restructuring charges � 1,034 � � Total non-interest expense � 26,614 � 23,533 � Income before income taxes 2,079 5,044 Income taxes � 805 � 2,018 Net income $ 1,274 $ 3,026 Earnings per share-basic: � � Net income $ 0.08 $ 0.18 Weighted average basic shares outstanding � 15,737 � 16,441 Earnings per share-diluted: � � Net income $ 0.08 $ 0.18 Weighted average diluted shares outstanding � 15,775 � 17,041 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, 2007 15,737,399 $ 49,504 $ 109,837 $ 159,341 Net income � � 1,274 1,274 Stock-based compensation expense � � 328 � � � 328 � � � � Balance, March 31, 2008 15,737,399 $ 49,832 $ 111,111 $ 160,943 United PanAm Financial Corp. and Subsidiaries Selected Financial Data � (Dollars in thousands) At or For the Three Months Ended March 31, 2008 � March 31, 2007 � Operating Data Contracts purchased $ 129,930 $ 167,640 Contracts outstanding $ 932,291 $ 866,937 Unearned acquisition discounts $ (43,310 ) $ (42,684 ) Average loan balance $ 927,918 $ 837,755 Unearned acquisition discounts to gross loans 4.65 % 4.92 % Average percentage rate to borrowers 22.69 % 22.64 % � Loan Quality Data Allowance for loan losses $ (49,552 ) $ (38,907 ) Allowance for loan losses to gross loans net ofunearned acquisition discounts 5.57 % 4.72 % Delinquencies (% of net contracts) 31-60 days 0.57 % 0.36 % 61-90 days 0.19 % 0.11 % 90+ days � 0.12 % � 0.08 % Total 0.88 % 0.55 % Repossessions over 30 days past due (% of net contracts) 0.73 % 0.44 % Annualized net charge-offs to average loans (1) 7.14 % 5.62 % � Other Data Number of branches 128 137 Number of employees 1,055 1,002 Interest income $ 58,470 $ 53,224 Interest expense $ 12,606 $ 10,513 Interest margin $ 45,864 $ 42,711 Net interest margin as a percentage of interest income 78.44 % 80.25 % Net interest margin as a percentage of average loans (1) 19.88 % 20.68 % Non-interest expense to average loans (1) 11.54 % 11.39 % Non-interest expense to average loans (2) 11.09 % 11.39 % Return on average assets (1) 0.52 % 1.37 % Return on average shareholders� equity (1) 3.21 % 7.79 % Consolidated capital to assets ratio 16.38 % 16.77 % � (1) Quarterly information is annualized for comparability with full year information. � (2) Excluding restructuring charges.