UPFC United Panam Financial (MM)

United PanAm Financial Corp. (Nasdaq:UPFC) today announced results for its fourth quarter and year ended December 31, 2007. For the quarter ended December 31, 2007, UPFC reported income of $365,000 from continuing operations, compared to income of $1.8 million for the same period a year ago. Interest income increased 14.2% to $59.5 million for the quarter ended December 31, 2007 from $52.1 million for the same period a year ago. UPFC reported income of $0.02 per diluted share from continuing operations for the quarter ended December 31, 2007 compared to $0.10 per diluted share for the same period a year ago. For the year ended December 31, 2007, UPFC reported income of $10.6 million from continuing operations, compared to income of $19.7 million for the same period a year ago. Interest income increased 17.5% to $229.5 million for the year ended December 31, 2007 from $195.3 million for the same period a year ago. UPFC reported income of $0.65 per diluted share from continuing operations for the year ended December 31, 2007 compared to $1.06 per diluted share for the same period a year ago. UPFC purchased $106.0 million of automobile contracts during the fourth quarter of 2007, compared with $116.6 million during the same period a year ago, representing a 9.1% decrease. This decrease was the result of UPFC�s focus on tighter underwriting criteria and slower branch expansion in anticipation of a slowdown in the economy and potential for further employment contraction in 2008. Contracts outstanding totaled $926.4 million at December 31, 2007, compared with $813.5 million at December 31, 2006, representing a 13.9% increase. The increase was the result of additional automobile contracts purchased in existing and new markets during 2007. In 2007, UPFC opened 15 new auto finance branches and closed 4 underperforming branches. In January 2008, UPFC closed an additional 6 branches. These closed branches represent less than 1% of the overall portfolio balance and will provide UPFC approximately $3.4 million in cost savings and improvement in operating leverage for 2008. The portfolio of these branches will continue to be serviced by other branches within the same market. The impairment charge for the costs associated with the closure of these branches did not have a material impact on UPFC�s financial statements. The decrease in income from continuing operations for the quarter ended December 31, 2007 compared to the same period a year ago primarily reflects the following: Interest income increased 14.2% to $59.5 million from $52.1 million due primarily to the increase in average loans of $128.2 million as a result of the purchase of additional automobile contracts. Interest expense increased 25.5% to $12.8 million from $10.2 million primarily due to higher market interest rates, the growth in the loan portfolio, and the pay down of lower priced securitizations of prior years. As a result, net interest margin decreased from 80.4% for the quarter ended December 31, 2006 to 78.5% for the quarter ended December 31, 2007. Provision for loan losses increased due to an increase in the annualized charge-off rate to 7.99% for the quarter ended December 31, 2007 from 6.91% for the same period a year ago and a larger loan portfolio. The two major factors that continue to impact our charge-off rate are increase in gasoline prices and increase in unemployment; primarily in key states such as California, Florida, Illinois and Michigan. Non-interest expense increased to $25.2 million from $22.0 million during 2007 as branches require additional personal as they mature. Non-interest expense as a percentage of average loans, however, decreased to 10.67% from 10.75%. On October 18, 2007, UPFC executed a twelve month extension of its existing $300 million warehouse facility with Deutsche Bank. Securitizations On November 8, 2007, the Company completed its 2007B securitization for $250 million. The securitization had three sequential pay tranches as follows: $58,000,000 Class A-1 4.98685%, $93,000,000 Class A-2 5.75%, and $99,000,000 Class A-3 6.15%. The following table lists each of UPFC�s securitizations as of December 31, 2007: Issue Number � Issuance Date � Maturity Date(1) � Original Balance � Remaining Balance at December 31, 2007 (Dollars in thousands) � 2004A September 22, 2004 September 2010 $ 420,000 $ � 2005A April 14, 2005 December 2010 $ 195,000 $ 29,713 2005B November 10, 2005 August 2011 $ 225,000 $ 58,785 2006A June 15, 2006 May 2012 $ 242,000 $ 100,796 2006B December 14, 2006 August 2012 $ 250,000 $ 142,543 2007A June 14, 2007 July 2013 $ 250,000 $ 193,103 2007B November 8, 2007 July 2014 $ 250,000 $ 237,305 Total $ 1,832,000 $ 762,245 � (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 branch offices in 39 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 � � December 31,2007 December 31,2006 (Dollars in thousands) Assets Cash $ 9,909 $ 8,389 Short term investments � 7,332 � � 19,905 � Cash and cash equivalents 17,241 28,294 Restricted cash 73,633 67,987 Loans 882,651 774,075 Allowance for loan losses � (48,386 ) � (36,037 ) Loans, net 834,265 738,038 Premises and equipment, net 6,799 5,034 Interest receivable 10,424 9,018 Other assets � 34,819 � � 31,118 � Total assets $ 977,181 � $ 879,489 � � Liabilities and Shareholders� Equity Securitization notes payable $ 762,245 $ 698,337 Warehouse line of credit 35,625 � Accrued expenses and other liabilities 9,660 10,977 Junior subordinated debentures � 10,310 � � 10,310 � Total liabilities � 817,840 � � 719,624 � � Preferred stock (no par value): Authorized, 2,000,000 shares; no shares issued and outstanding at December 31, 2007 and 2006 � � Common stock (no par value): Authorized, 30,000,000 shares; 15,737,399 and 16,713,838 shares issued and outstanding at December 31, 2007 and 2006, respectively 49,504 60,614 Retained earnings � 109,837 � � 99,251 � Total shareholders� equity � 159,341 � � 159,865 � � Total liabilities and shareholders� equity $ 977,181 � $ 879,489 � United PanAm Financial Corp. and Subsidiaries Consolidated Statements of Income � � � (In thousands, except per share data) Three Months Ended December 31, Twelve Months Ended December 31, 2007 � � 2006 � 2007 � � 2006 � Interest Income Loans $ 58,461 $ 51,157 $ 225,427 $ 192,156 Short term investments and restricted cash � 992 � 969 � 4,031 � 3,114 � Total interest income � 59,453 � 52,126 � 229,458 � 195,270 � Interest Expense Securitization notes payable 10,799 7,416 38,721 26,954 Warehouse line of credit 1,758 2,576 7,682 8,007 Other interest expense � 245 � 215 � 1,046 � 830 � Total interest expense � 12,802 � 10,207 � 47,449 � 35,791 � Net interest income 46,651 41,919 182,009 159,479 Provision for loan losses � 21,228 � 17,245 � 69,764 � 46,800 � Net interest income after provision for loan losses � 25,423 � 24,674 � 112,245 � 112,679 � � Non-interest Income Redemption of preferred stock-investment in AirTime Technologies, Inc. � � � 520 Other non-interest income � 414 � 349 � 1,730 � 1,217 � Total non-interest income � 414 � 349 � 1,730 � 1,737 � � Non-interest Expense Compensation and benefits 16,182 14,064 62,169 51,905 Occupancy 2,518 1,995 9,336 7,360 Other non-interest expense � 6,542 � 5,901 � 25,201 � 21,844 � Total non-interest expense � 25,242 � 21,960 � 96,706 � 81,109 � � Income from continuing operations before income taxes 595 3,063 17,269 33,307 Income taxes � 230 � 1,303 � 6,683 � 13,562 � Income from continuing operations 365 1,760 10,586 19,745 Loss from discontinued operations, net of tax � � � 8 � � � (676 ) Net income $ 365 $ 1,768 $ 10,586 $ 19,069 � Earnings (loss) per share-basic: Continuing operations $ 0.02 $ 0.11 $ 0.66 $ 1.13 Discontinued operations � � � � � � � (0.04 ) Net income $ 0.02 $ 0.11 $ 0.66 $ 1.09 � Weighted average basic shares outstanding � 15,734 � 16,771 � 15,926 � 17,444 � Earnings (loss) per share-diluted: Continuing operations $ 0.02 $ 0.10 $ 0.65 $ 1.06 Discontinued operations � � � � � � � (0.04 ) Net income $ 0.02 $ 0.10 $ 0.65 $ 1.02 � Weighted average diluted shares outstanding � 15,927 � 17,378 � 16,357 � 18,699 � 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 � � 10,586 10,586 Exercise of stock options, net 36,774 166 � 166 Tax effect of exercised stock options � 112 � 112 Repurchase of common stock (1,013,213 ) (13,188 ) � (13,188 ) Stock-based compensation expense � 1,800 � 1,800 Balance, December 31, 2007 15,737,399 � $ 49,504 � $ 109,837 $ 159,341 � United PanAm Financial Corp. and Subsidiaries Selected Financial Data � � � � (Dollars in thousands) At or For the Three Months Ended � At or For the Twelve Months Ended December 31, 2007 � December 31, 2006 � December 31, 2007 � December 31, 2006 � Operating Data Contracts purchased $ 106,026 $ 116,637 $ 590,767 $ 550,563 Contracts outstanding $ 926,350 $ 813,524 $ 926,350 $ 813,524 Unearned acquisition discounts $ (43,699 ) $ (39,449 ) $ (43,699 ) $ (39,449 ) Average loan balance $ 938,421 $ 810,229 $ 898,851 $ 755,881 Unearned acquisition discounts to gross loans 4.72 % 4.85 % 4.72 % 4.85 % Average percentage rate to borrowers 22.64 % 22.66 % 22.64 % 22.66 % � Adjusted EBITDA (1) Income from continuing operations $ 365 $ 1,760 $ 10,586 $ 19,745 Add interest expense 12,802 10,207 47,449 35,791 Add income taxes 230 1,303 6,683 13,562 Add depreciation and amortization 606 560 2,385 1,963 Add option expense 400 720 1,800 2,474 Add provision for loan losses 21,228 17,245 69,764 46,800 Subtract charge-offs � 18,892 � � 14,113 � � 57,415 � 39,873 � Adjusted EBITDA $ 16,739 $ 17,682 $ 81,252 $ 80,462 � Loan Quality Data Allowance for loan losses $ (48,386 ) $ (36,037 ) $ (48,386 ) $ (36,037 ) Allowance for loan losses to gross loans net ofunearned acquisition discounts 5.48 % 4.66 % 5.48 % 4.66 % Delinquencies (% of net contracts) 31-60 days 0.78 % 0.60 % 0.78 % 0.60 % 61-90 days 0.30 % 0.21 % 0.30 % 0.21 % 90+ days � 0.16 % � 0.12 % � 0.16 % 0.12 % Total 1.24 % 0.93 % 1.24 % 0.93 % Repossessions over 30 days past due (% of net contracts) 0.89 % 0.56 % 0.89 % 0.56 % Annualized net charge-offs to average loans (2) 7.99 % 6.91 % 6.39 % 5.22 % � Other Data Number of branches 142 131 142 131 Number of employees 1,147 954 1,147 954 Interest income $ 59,453 $ 52,126 $ 229,458 $ 195,270 Interest expense $ 12,802 $ 10,207 $ 47,449 $ 35,791 Interest margin $ 46,651 $ 41,919 $ 182,009 $ 159,479 Net interest margin as a percentage of interest income 78.47 % 80.42 % 79.32 % 81.67 % Net interest margin as a percentage of average loans (2) 19.72 % 20.53 % 20.25 % 21.10 % Non-interest expense to average loans (2) 10.67 % 10.75 % 10.76 % 10.73 % Return on average assets from continuing operations (2) 0.15 % 0.81 % 1.11 % 2.44 % Return on average shareholders� equity (2) 0.91 % 4.37 % 6.74 % 12.44 % Consolidated capital to assets ratio 16.31 % 18.18 % 16.31 % 18.18 % � � (1) Adjusted EBITDA is defined as earnings before interest expense, income taxes, depreciation and amortization. In addition, it is adjusted to exclude certain non-cash items such as provision expense and option expense but includes actual credit losses. Adjusted EBITDA is used by management to evaluate the operating performance of our businesses for comparable periods. Adjusted EBITDA should not be used by investors or other third parties as the sole basis for formulating investment decisions as it excludes a number of important cash and non-cash items. Management compensates for this limitation by using GAAP financial measures as well in managing our businesses. � (2) Quarterly information is annualized for comparability with full year information.